PLI scheme in R&D needed to make India global innovation hub: Deloitte

The Budget 2025-26 should announce a PLI scheme for R&D to attract foreign companies and make India a global hub for innovation, said Deloitte India Partner (Direct Tax) Rohinton Sidhwa.

He said the government has been pursuing a policy wherein tax holidays are less and more focus is on Production Linked Incentive (PLI) or other schemes which promote investment and employment.

"We need to push India as the R&D lab of the world and if there can be such a policy which stimulates that, like PLI for R&D which includes foreign companies, that could be a game changer," Sidhwa told PTI in an interview.

The Budget for 2025-26 will be presented in Parliament on February 1.

Sidhwa said that one area which the government needs to look at is how to stimulate innovation and reward R&D spending and that would happen only when the country is able to attract global R&D centres into India.

"If we can develop our own R&D, we are less reliant on developed world for technology and that is also import substitution. Something around innovation and R&D is definitely called for and I'm hoping that the government will look at rolling out a PLI for R&D," he said.

Sidhwa said if the Budget can announce a policy that specifically rewards global companies to come to India, that will boost FDI. India is a service economy and if that is nurtured, it can be a significant forex earner, he said.

Finance Minister Nirmala Sitharaman in the Interim Budget for 2024-25 on February 1, 2024, announced setting up a mechanism for spurring private sector-driven research and innovation at commercial scale with a financing pool of Rs 1 lakh crore.

The government is working on how to structure the fund and how to operationalise it and has had discussions with people in the financial technology sector as well as people in the industry.

R&D investment by the private sector has not picked up despite giving tax exemption for R&D and hence the government has decided to be a partner in R&D and nudge the private sector to take the risk.