Rethinking innovation in defence

Revitalising public R&D could transform innovation, and give meaning to our doctrine of strategic autonomy

A recent Parliamentary Standing Committee report says India spends too little on defence research and development (R&D), and draws comparison with the US and other countries. Is that right? And if so, what should we do?  

Start with absolute spending on defence. The US at around $780 billion is 40 per cent of world spending on defence, more than the next 10 countries combined.  China ($250 billion) is 13 per cent, followed by India ($72 billion) at 4 per cent.  Russia, the UK, Saudi Arabia, Germany, France and Japan come next at 2.5 to 3 per cent of world spending each.  Except for the US and China, India spends a reasonable amount on defence R&D (chart  1) and also relative to what we spend on defence equipment (see capex, the real reference point in chart 2).

In absolute terms, though, spending on defence R&D in the US is 30 times India’s $3 billion. The US has a $23-trillion economy, to our $3 trillion.  If India spent as much on defence R&D as the US as a per cent of gross domestic product (0.4 per cent), our budget would quadruple but still leave us at one-seventh the US. So until our economy grows enough to match, first, China (six times our size, with the same population) and then the US (eight times our size, with one-fourth our population), we cannot hope to match them in either defence spending or defence R&D. We have to get more out of the defence R&D than we do now. How?

Funding and doing R&D: In most richer countries, we distinguish between funding and doing R&D.  In the US, public R&D is funded by the federal government but done across private industry, public and private universities, and public research institutes. In India, there is little difference between who funds and who does R&D, with sharp lines between public and private R&D. Publicly funded R&D is done in public R&D institutes. Privately funded R&D is done in private industry. In 2019, the US government spent $140 billion on R&D, but did only $60 billion of it itself.  The US government funded around $50 billion of research in higher education (to our $1 billion) and $30 billion in private industry.  

This also holds for defence R&D. The US Department of Defense (DoD) does under 40 per cent of the R&D it funds in its own R&D laboratories; over 60 per cent is paid for by the DoD but done in private industry and universities.

India is very different (for more please see my recent book, The Struggle and the Promise). Of the 63 per cent of India’s national R&D funded by the Union government, 7 per cent happens in the public higher education system and 56 per cent is done by the government in its own autonomous laboratories. The top agencies funding and doing R&D in India are the Defence Research and Development Organisation (27 per cent of Union government spending on R&D), Department of Space (16 per cent) and the Department of Atomic Energy (9 per cent).

Most observers would conclude that defence research moves slowly in India. Our two largest projects, the main battle tank (Arjun) and the light combat aircraft (Tejas) have been underway for over 40 years.  But both are still far from being our main defence choice. Instead, the great majority of tanks in service in our Army have been imported from Russia, and our Air Force relies overwhelmingly on Russian Sukhois and MiGs. We claim that strategic autonomy is the bedrock of our foreign policy, but I wonder if our choice to abstain in a dozen United Nations votes condemning the Russian invasion of Ukraine might have been different if we had felt less dependent on Russian weapons.

Illustration: Binay Sinha

Fund more, do less: The recent budget announcement of 25 per cent of DRDO funding being “set aside” for higher education and private industry is a big step forward.  Implemented right, it could lead to much more innovation. A more innovative defence industry would be a much stronger defence industry. The DRDO budget this year is Rs 21,000 crore. The R&D performed in all of Indian industry would be around Rs 55,000 crore, and in higher education around Rs 9,000 crore. An extra Rs 5,000 crore of funding from the DRDO for just defence R&D could make a big difference. A scheme, called iDEX, funds defence innovation in start-ups. The numbers, though, are much too small: Around 100 firms and incubators were funded with Rs 70 crore in three years.

Both these measures must be effectively implemented at scale. How? The 25 per cent must be calculated on the full budget of Rs 21,000 crore.  If this would impinge on the salary bill of those employed in DRDO laboratories, then DRDO staff should move with the spending to higher education or industry, or the money must be found elsewhere. The most powerful mechanism would be a competitive process, where firms and universities bid to develop particular defence items or research particular topics, with the R&D funding coming from this budget. The iDEX start-ups could participate too. Success in the form of more rapid innovation should breed ambition, with the share over time being done in private industry growing to well over half of the DRDO budget.

Conclusions: Defence spending worldwide is often somewhat murky.  Defence R&D is even more so, with, for example, spending on nuclear weapons research showing up in departments of energy.  But the sense I get from this brief tour of the data is that our problem in India is not the amount we spend on R&D in defence. It is instead where we do it, which is in autonomous government laboratories. Moving first a quarter and over time a majority of this spending to the private sector, and combining it with private sector production of defence equipment, could transform innovation in India’s defence industry. India could then move on from being the world’s largest importer of weapons. Defence R&D that delivered innovation would lead to more autonomy in defence production. Along the way we might even realise the strategic autonomy we have long claimed for our foreign policy.

ndforbes@forbesmarshall.com. The writer is co-chairman Forbes Marshall, past president CII, Chairman of Centre for Technology Innovation and Economic Research and Ananta Aspen Centre