India should significantly enhance its investment in research and development from the current level of 0.64% to at least 2% of GDP in the next four to five years to strengthen the country’s R&D ecosystem, Niti Aayog said on Monday.
The Aayog, in a report titled Ease of Doing Research & Development in India – Removing Obstacles, Promoting Enablers, said the government should consider restoring a 5% GST slab for R&D procurement.
“To strengthen India’s R&D (research and development) ecosystem, there is an urgent need to significantly enhance the national investment in R&D, from the current level of 0.64% to at least 2% of GDP in the next four to five years,” it noted.
The report also suggested that India needs to introduce time-bound, incremental fiscal incentives to boost private sector investment in R&D.
According to the report, adding the reporting head of R&D expenditure under Schedule III (Balance Sheet & Statement of Profit & Loss) of the Companies Act 2013, Section 129, can provide for better data about private sector investment in R&D and also sensitise them to consider higher investments.
To meet the requirement of a higher fund availability for R&D, the report recommended that a more bold and forward-looking approach is required to attract philanthropic support for research and development
“This, in turn, calls for strengthening and effectively leveraging CSR provisions under the Companies Act, as well as providing higher deduction (say at least 125 per cent) for individual contributions to funds supporting R&D, under Sec. 133 (Deduction in respect of donations to certain funds, charitable institutions, etc.) of the Income Tax Act 2025,” it said.
It is necessary to create an inter-departmental committee within the Ministry of Science & Technology, which meets at regular intervals, to target synergy and complementarity of schemes and calls across constituent departments and funding agencies, and ensure avoiding or minimising duplication of schemes across departments, according to the report.
