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What Is Happening to India’s R&D Funding?
India’s science and technology policies advocate increased investment in research and development. However, in 2017–18, the tax incentive for company expenditure on R&D was reduced. This is likely to have major ramifications for R&D at a time when India’s domestic research effort is already in decline.
The relationship between investment in research and development (R&D) and sustained economic growth is well established. Almost all developed economies have high investment in R&D. Over the years, India’s science and technology policies have focused on increasing investment in R&D. Quite recently, the government put in place a very generous tax incentive scheme to incentivise investment in R&D, especially at the level of business enterprises.
In April 2010, when India introduced a weighted tax deduction of 200% on company expenditure on inhouse research and development, it became one of only 16 countries to offer this kind of “super deduction,” defined as a tax incentive exceeding 100% of a firm’s expenditure on research. However, in 2017–18, a new fiscal policy comes into force, which considerably reduces the size of this tax rebate.
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