The not-so-evident truth about R & D

Research by private companies has not grown in proportion with economic liberalisation because of a lack of innovative character.

By Anupam Goswami
Published: Saturday 04 July 2015

THE BELIEF that economic liberalisation and competition will motivate India's industry to upgrade its research and development has become almost axiomatic. However, a study of private sector R&D, carried out by the Delhi-based Centre for Technology Services (CTS) and sponsored by the department of science and technology (DST), shows this is true only in a restricted sense.

CTS analysed the "R&D profiles" of 195 private companies between 1985-86 and 1990-91. CTS director Ghayur Alam explains the period was chosen because "several technology and industrial policies that were precursors to the present era of economic globalisation were introduced during 1985-87." The study concludes though the proportion of firms with in-house R&D increased during the period, their technological goals "remain very limited in scope".

The adverse conclusion raised eyebrows at DST, where many officials consider it to be an unwarranted indictment of the government's policies. Comments a top DST official, "How can you draw such a sweeping judgement from a survey of 195 companies?"

Nebulous understanding
Alam admits he is aware of the reaction and points out he is against reverting to "the restrictive policy regime of the past". He emphasises, "Our understanding of how an open economy affects R&D remains nebulous." Alam also defended the scope of the study: "All scientific surveys depend on a representative sample. There is no study that has covered all the firms in India."

CTS sent questionnaires to 2,000 companies, of which only 200 replied. "It is logical to presume that those who replied are representative of companies interested in R&D," claims Alam. Forty-five of the respondents had annual sales worth more than Rs 100 crore.

According to the CTS report, "The average 'R&D intensity' of the firms surveyed was 0.77 per cent." In other words, they spent 0.77 per cent of their sales on R&D. In comparison, R&D intensity in so-called Asian tigers such as South Korea and Taiwan is reported to be between 3 and 5 per cent and upto 9 per cent in Organisation for Economic Cooperation and Development member-countries.

The study notes R&D facilities acquired by Indian firms since the mid-1980s were "predominantly associated with the import of technology", which prompted them to set up "limited materials testing facilities". Later, the R&D units were expanded to work towards modifying imported technologies to suit Indian conditions. But very few companies "deepened" in-house research towards new products and processes. And, they showed almost no change in R&D intensity.

Interestingly, many firms listed product development and quality improvement as the most important R&D objectives (See table). This, says Alam, was a change from the early 1980s, when indigenisation of technology was the primary aim. Improving energy efficiency or reducing environmental impact is still unimportant for private sector R&D.

However, the survey revealed actual product development was of a very small order and almost always involved modifications of products made with imported technology, involving low R&D expenditure. An indicator of this, according to Alam, was the fact that only 17 per cent of the firms took out patents.

The survey points out this trend reflects how firms limit their R&D to adapting imported technology to Indian conditions, but "did not enable them to carry out further developments". Alam says this indicates the lack of "innovative or inventive" character and a continuous dependence by firms on foreign countries for major technological collaborations.

Indian industry representatives admit the validity of the report. Says Pravir Das, a Confederation of Indian Industries spokesperson, "Industry has had difficulty in developing R&D in direct proportion to liberalisation." He feels it will be some time before industrial R&D in India is directed to substantial innovation and global competitiveness.

An interesting point, totally contrary to common perception, was that 35 per cent of the firms reported universities and the Indian Institutes of Technology as important sources of technology. In comparison, government laboratories were reported to play only a small role as suppliers of technology.

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