India should increase investment in R&D to 2 per cent of GDP: Niti Aayog

Niti Aayog released a report titled "Ease of Doing Research & Development in India — Removing Obstacles, Promoting Enablers," recommending that India raise i...

What Happened

Niti Aayog released a report titled "Ease of Doing Research & Development in India — Removing Obstacles, Promoting Enablers," recommending that India raise its Gross Expenditure on Research and Development (GERD) from the current 0.64% of GDP to at least 2% within four to five years.
The report recommends restoring a 5% GST slab for R&D procurement, which was removed in an earlier revision that placed many R&D inputs in the 12%–18% bracket.
Niti Aayog calls for time-bound, incremental fiscal incentives to boost private sector R&D investment, noting that India's private sector contributes only ~36%–41% of GERD versus 70%+ in China, South Korea, and the United States.
Strengthening Corporate Social Responsibility (CSR) provisions and expanding tax deductions for donations to R&D institutions are among the recommended levers.
The report is framed against India's Viksit Bharat 2047 vision and the need to build a domestic innovation ecosystem.

Static Topic Bridges

Gross Expenditure on Research and Development (GERD) — India's R&D Landscape

GERD is the standard international metric for measuring total domestic R&D expenditure, encompassing spending by government, business enterprises, higher education institutions, and non-profit organisations. India's GERD stood at 0.64% of GDP for 2020-21, substantially below the global average of ~1.8% and far below innovation-leading nations (South Korea: 4.9%, Israel: 5.4%, China: 2.4%). The government sector accounts for approximately 55–60% of India's GERD, with public research institutions (DRDO, CSIR, ICMR, DAE, DST) being the primary funders. In contrast, in advanced economies, private sector R&D exceeds 70% of GERD.

India's GERD (2020-21): 0.64% of GDP
India's absolute GERD growth: ₹60,197 crore (2010-11) → ₹1,27,381 crore (2020-21) — more than doubled in a decade
Global average GERD: ~1.8% of GDP
Niti Aayog target: 2% of GDP within 4–5 years
Private sector share of India's GERD: ~36–41% vs. 70%+ in China, South Korea, USA
DSIR, DST, DRDO, ICMR, DAE are major public R&D funders

Connection to this news: The Niti Aayog report directly addresses the gap between India's 0.64% GERD and the 2% target, pinpointing the low private sector contribution as the structural bottleneck requiring fiscal incentives to correct.

Science and Technology Policy Architecture — Scientific Policy Resolution to Anusandhan NRF

India's science and technology policy has evolved from the Scientific Policy Resolution of 1958 (emphasis on public sector science) through the Technology Policy Statement of 1983, the Science and Technology Policy of 2003, and the Science, Technology and Innovation Policy (STIP) of 2013 and 2020 (draft). The National Research Foundation (NRF), now called Anusandhan National Research Foundation (ANRF), was established by Parliament in 2023 under the Anusandhan National Research Foundation Act, 2023, with a proposed outlay of ₹50,000 crore over five years (FY2024-FY2028), of which ₹36,000 crore is to come from the private sector. ANRF is designed to seed, grow, and promote R&D and foster a culture of research across universities, colleges, and industry.

Anusandhan NRF Act: 2023; outlay ₹50,000 crore over 5 years (FY2024–FY2028)
Private sector contribution to ANRF: ₹36,000 crore (72% of total)
Scientific Policy Resolution: 1958 — first national science policy
STIP 2020 (draft): envisions India's R&D expenditure reaching 2% of GDP
Government's RDI (Research, Development and Innovation) Scheme Fund: launched November 2025, outlay ₹1 lakh crore, focused on industry-led R&D

Connection to this news: The Niti Aayog report's 2% GERD target aligns directly with the objectives of ANRF and the RDI Scheme Fund, and its fiscal recommendations (GST restoration, CSR strengthening, tax deductions) are implementation-level tools to mobilise private sector participation pledged under ANRF's financing model.

GST and R&D Procurement — Fiscal Friction in Research

The Goods and Services Tax (GST), introduced on July 1, 2017, subsumed most central and state indirect taxes. R&D institutions previously benefited from lower excise/service tax concidences for research inputs. Under GST, many R&D procurements (specialised equipment, reagents, software) attract 12%–18% rates, raising the effective cost of domestic research relative to imports (which may be exempt under advance authorisation or project import norms). Restoring a 5% GST slab for R&D procurement would reduce input cost for universities, research institutions, and private R&D labs, functioning as a targeted indirect subsidy to the innovation ecosystem.

GST introduction date: July 1, 2017
Current GST slabs: 0%, 5%, 12%, 18%, 28%
Niti Aayog recommendation: Restore 5% GST slab for R&D procurement
This measure would lower input costs for public and private research institutions
Section 35(1)(ii) and (iii) of the Income Tax Act, 1961: allow weighted deduction for contributions to approved scientific research institutions [Niti Aayog recommends expanding/strengthening these]

Connection to this news: The GST restoration recommendation is a direct fiscal lever to reduce the cost of doing R&D in India, addressing a structural disincentive that emerged post-2017 when the concessional tax treatment for research inputs was not fully preserved under the GST framework.

Section 135 of the Companies Act, 2013, mandates that companies meeting specified thresholds (net worth ≥ ₹500 crore or turnover ≥ ₹1,000 crore or net profit ≥ ₹5 crore) spend 2% of average net profits of the preceding three years on CSR activities. Schedule VII of the Act lists eligible CSR activities and includes promotion of education and vocational skills. Niti Aayog recommends that contributions to R&D institutions be explicitly included and strengthened as eligible CSR activities, creating a pipeline of industry funding to research beyond the ANRF framework.

CSR mandate: Section 135, Companies Act, 2013
CSR spend threshold: 2% of average 3-year net profit
Eligibility threshold: net worth ≥ ₹500 crore OR turnover ≥ ₹1,000 crore OR net profit ≥ ₹5 crore
Schedule VII currently allows: education, vocational skills, technology incubators — Niti Aayog recommends adding explicit R&D donations
Total CSR spending (FY2022-23): approximately ₹26,000 crore [Unverified for FY2025-26]

Connection to this news: By strengthening CSR provisions for R&D, the report seeks to channel the mandated 2% corporate spend toward innovation, effectively creating a private-sector tax on profits that partially funds public research goods — a model used in several OECD countries.

Key Facts & Data

India's GERD (2020-21): 0.64% of GDP
Niti Aayog target: 2% of GDP within 4–5 years
Private sector share of India's GERD: ~36–41% (vs. 70%+ in China, South Korea, USA)
Global average GERD: ~1.8% of GDP
India's GERD in absolute terms (2020-21): ₹1,27,381 crore
Anusandhan NRF (ANRF) outlay: ₹50,000 crore (FY2024–FY2028); private share: ₹36,000 crore
RDI Scheme Fund (launched Nov 2025): ₹1 lakh crore for industry-led R&D
CSR mandate: 2% of average 3-year net profit under Section 135, Companies Act, 2013
GST recommendation: restore 5% slab for R&D procurement
Report title: "Ease of Doing Research & Development in India — Removing Obstacles, Promoting Enablers"