Encouraging India’s Private Sector to Embrace Innovation

Encouraging India's Private Sector to Embrace Innovation

Encouraging India’s Private Sector to Embrace Innovation


The National Research Foundation (NRF) Bill, 2023, which is slated to be presented in the current monsoon session of the Indian Parliament. The NRF aims to create a centralized body for funding research in India, with a substantial budget of ₹50,000 crore over the next five years.


GS-02, GS-03 (Government Policies and Intervention) (Growth and Development)


  • The National Research Foundation (NRF) Bill

Mains Question:

  • Discuss the challenges and potential strategies to encourage India’s private sector to play a more significant role in funding research and development, with a focus on fostering a culture of invention and proprietary technology.

Dimensions of the Article:

  • Lagging Research Expenditure
  • Untangling the Web of Private Sector Contributions
  • Fostering a Culture of Innovation

Lagging Research Expenditure:

  • The National Research Foundation (NRF) Bill, 2023, is poised to be a game-changer in the Indian legislative landscape.
  • Paving the way for a centralized research funding body with a massive ₹50,000 crore budget over the next five years, the NRF draws inspiration from successful models like the United States’ National Science Foundation and the European Research Council.
  • However, its ambitious plan to secure a whopping ₹36,000 crore from the private sector must not be underestimated.
  • The backdrop of this proposal lies in India’s historical struggle to allocate adequate resources to research, consistently lingering at a modest 0.6%-0.8% of GDP.
  • Unlike countries like China, the U.S., and Israel, where the private sector contributes around 70% of research expenditure, India’s private sector only accounted for approximately 36% (roughly ₹1.2 lakh crore) in 2019-20.
  • The NRF contends that to invigorate university research in India, a magnetizing pull for private investments is indispensable. Admirable as it may seem, the intricate execution of such a vision remains shrouded in ambiguity.

Untangling the Web of Private Sector Contributions

  • To entice the private sector into funding research, some have suggested tapping into the Corporate Social Responsibility (CSR) obligations of companies. A closer inspection of CSR trends from FY-2022 reveals that companies allocated a substantial ₹14,588 crore towards this cause.
  • However, nearly 70% of these funds were channeled into education, healthcare, and sanitation projects within their immediate communities. The government’s influence over such funds’ allocation remains tenuous, rendering the task of redirecting them towards the NRF a formidable challenge.
  •  It remains uncertain whether the government can employ force or devise attractive tax benefits to sway these funds in the desired direction.

Fostering a Culture of Innovation

  • The driving force behind the relatively higher private sector contribution to research in certain countries lies in their unwavering government support to universities and research institutions.
  • These conducive environments have nurtured a plethora of individuals who eventually founded companies and institutions with a keen focus on investing in research and development.
  • However, India faces a distinctive hurdle – while it boasts some innovative companies, they are few and far between. The NRF, thus, shoulders the responsibility of creating a climate that entices private sector entities to embrace innovation and proprietary technology.
  • Relying solely on philanthropy as a panacea may prove impractical, necessitating a holistic approach.

Way Forward

  • To propel India’s private sector towards funding research and development, multifaceted strategies must be adopted. First and foremost, the NRF needs to design policies that incentivize the establishment of private sector organizations committed to fostering innovation. Encouragingly, sustained government support to universities and research institutions can be a pivotal catalyst in this endeavor.
  • Moreover, creating a conducive ecosystem for research-driven companies to thrive necessitates a delicate balance of economic and regulatory measures. Tax benefits, grants, and partnerships with established academic institutions could prove instrumental in enticing private players to actively participate in the research landscape.


While the National Research Foundation’s vision to tap into the private sector for research funding is commendable, navigating this intricate path demands strategic planning and innovative policies. Merely relying on CSR obligations or philanthropy would likely fall short of the desired impact. To realize the dream of a vibrant research ecosystem, India must foster an environment that celebrates invention and proprietary technology, attracting private sector investment like never before.