Viksit Bharat by 2047 goal: Are we on track for tech advancement?

Public support for innovation must shift towards radical improvements in higher education and financial support for startups and new innovators

India wants to move from being a lower middle-income country to a high-income developed nation by 2047 — the target year for Viksit Bharat. To achieve this, and to avoid the middle-income trap, technological dynamism and an improved quality of its workforce will be crucial. It is not just factor accumulation, but factor productivity — driven by technological advancement — that will matter most for sustained growth performance.

 

One can attribute improvements in capital quality and factor productivity to advances in technology. According to the reliable KLEMS  (capital, labour, energy, materials, and services) calculation of total factor productivity (TFP), the sum of improvements in capital quality and TFP value growth from 1990-91 to 2022-23 averaged just 0.9 per cent per year for the economy. For manufacturing, the average was zero per cent per year. Clearly, we are not on track when it comes to technological advancement in our production systems. 

 

When it comes to support for technology development in India, the striking feature is the low percentage of Research & Development (R&D) expenditure in gross domestic product (GDP). According to World Bank data, the share of R&D in GDP in India was 0.64 per cent in 1996, rose to 0.86 per cent by 2008, and has steadily fallen since, reaching 0.65 per cent in 2020.

 

The same database shows a steady rise in China —from 0.56 per cent of GDP in 1996 to 2.56 per cent in 2022.  The Viksit Bharat aim requires that India’s GDP growth rate average 8 per cent for the 25 years to 2047 to reach just the base level of the high-income category. Its R&D expenditure would need to reach at least 3 per cent of GDP, which would require an annual growth rate in R&D spending of 16 per cent.

 

But despite its low level of R&D spending, there are some signs of significant technological progress in recent years. The World Intellectual Property Organization’s Global Innovation Index of 2024 has placed India at 39th globally out of the 133 countries rated, a significant improvement in its earlier standing.  There is a 2025 index about performance on five technologies critical for future development — artificial intelligence, semiconductors, biotech, space, and quantum technology where it is placed 10th. While this is well below the US and China, India ranks only slightly below developed countries like Japan, Britain, France, and Germany, though much lower than South Korea and Taiwan in semiconductors. These positive signs are essentially the result of talented individuals and research units. 

 

Have our corporations played a useful role in promoting new technologies?  In 2020-21, they accounted for 36.4 per cent of the total R&D expenditure.  If one includes the public sector corporations, the share goes up to 40.8 per cent. The Central and state governments, along with higher education institutions generally funded by them, account for the rest of the R&D expenditure.

 

Corporations in India do not appear to treat R&D as a major factor in their advancement. A detailed 2024 study on R&D by the 1,000 largest listed companies, conducted by the Office of the Principal Scientific Adviser to the Government, offers revealing insights.  According to this report, in 2022–23, R&D spending amounted to over 6 per cent of turnover in defence and pharmaceutical companies, around 3–4 per cent in automobiles and healthcare, marginally over 1 per cent in auto-components and heavy electrical equipment, and well below 1 per cent in the remaining 24 sectors covered in the study.

 

This consistently low level of R&D spending by most large corporations reflects the low priority given to technology development in Indian industry and commercial services as a tool for corporate growth, and this is despite the availability of 100 per cent (and, in some cases, 200 per cent) tax concessions for R&D expenditure.  The government has now announced a scheme to support R&D in the private sector, with a provision of ₹20,000 crore in the current Budget. The inadequate technology development results, except in sectors like pharmaceuticals, suggest that R&D spending may be overstated by companies because of the tax advantages. The private sector  must undertake much higher and more productive R&D effort as a basis for growth or even survival, and the government must use its resources not for established corporations, but for more direct support of basic research and for backing young innovators and startups that cannot rely on the commercial finance market.

 

The promotion of technological advancement as a major driving force for rapid growth cannot rely solely on R&D-linked fiscal concessions and government subsidies to the private sector. It must rest on opening up the industrial  and perhaps even the commercial services sectors of the Indian economy to the global market. Stronger global competition, for exports or competing with imports, will do more to stimulate more effective action by corporations on technology R&D. 

 

Let us learn a broader lesson from two major success stories of technology-based economic development in India —the rise of the country as a major global source of infotech services, and the successful, rapid spread of the digital transaction system.

 

The foundational base of the spread of export-oriented infotech services and the rapid increase in global capability centres is the low cost and substantial availability of technically qualified personnel. This was the result of the substantial development of higher education in engineering, particularly in the south and west of India. Learning from this, the government must support a quantum leap in the quality of higher education in universities and high schools — not just in engineering but also in other areas. Learn from the experience of China: Their higher research and teaching institutions account for 8 out of 10 in a ranking prepared by Nature, a scientific publisher, on the basis of contributions to 145 journals. The government must also recognise the importance of ensuring freedom in the management of universities and high schools, and of maintaining their separation from political control.

 

An additional example of successful technological advance is the dramatic growth of digital transactions, particularly through unified payments interface (UPI). This success involved the effective absorption of foreign technologies and their adaptation to suit Indian transaction conditions. The rapid spread of digital transactions did involve many startups, particularly for UPI services, and a forceful pressure on established large companies like the banks to join in with the startups. 

 

These two examples of successful technological advancement suggest that government financial support should be refocused on new startups and enterprising individual innovators — as happened during Silicon Valley’s expansion in computer-related technologies, when the US federal government provided early funding to some of today’s tech giants.

 

To summarise the argument — technological advancement for reaching high-income status requires:

 

Rapidly raising the quality of education, particularly at the university and high-school level; opening up of the economy, particularly the established corporate sector, to global trade and finance; combining technology import with technology development;  focusing government financial support more on startups and new innovators rather than on established companies.

 

desaind@icloud.com