Public Policy and Changing Pattern of Industrial R&D System in India: A Comparative Analysis of Pre- and Post-reform Periods

Abstract

This article is an attempt to examine the trends of industrial R&D expenditure by the private sector and public sector during pre-reform (1980–1992) and post-reform period (1993–2010). The agenda of economic reform is to liberalise the industrial sector and make it more competitive in the global scenario. The analysis indicates that in the post-reform period, the percentage share of R&D expenditure drastically shifted from public sector to private sector. The major share of R&D expenditure remained in capital goods manufacturing sector. R&D expenditure is highly concentrated in the capital goods sector by public and private sectors. Second, preferential sector in terms of share of R&D expenditure has been intermediate sector by the public sector and consumer non-durables by the private sector overtime. Consumer durables sector is a completely ignored sector across the board. R&D intensity has been in the range of low and medium across industry groups and time. It may be argued that industries might not be enabling to realise spillovers from the transfer of technology and also would be fragile to enhance its ability to make product and process innovations of its own. The changing pattern of R&D expenditure by the industrial sector confirms the supremacy and autonomy of the market. These are the areas where R&D expenditure is required to gain technological capabilities and absorptive capacity for a low R&D intensity country like India. The article argues that technological and industrial policies should be taken into consideration with respect to the demand and production processes. Especially since the Indian economy is a low-income country with a massive agrarian and rural labour force, it needs to transform technological capabilities and organisation of industrialisation according to the indigenous and categorised necessities by both the public and the private sectors.