Union Budget should set the policy direction
This article is authored by Sabyasachi Saha, associate professor, RIS, New Delhi.
India’s post-Covid 19 pandemic recovery and sustained economic growth is direct outcome of a set of public policies pursued in recent years. These include high capital expenditure by the government, banking sector resilience and healthy credit uptake, government final consumption expenditure, transfer payments and stable governance. These are good foundations for sustaining economic growth in India despite global headwinds. However, there are major concerns with rising environmental costs on development and hence re-working resources and their devolution. Due to structural bottlenecks, India’s growth potential remains confined to a few sectors within services and in the industry. Therefore, structural and environmental factors need to be comprehensively accounted for in preparedness for Viksit Bharat 2047. India needs to best leverage its human resource dividend and harness innovations to go past such constraints. I discuss the big picture on how India can harness its innovation potential both existing and prospective to ensure economic growth, supply chain resilience as well as social welfare which remains the bedrock of its democracy. The forthcoming Union Budget may lay out a vision and strategy in that regard by advocating for needs-based allocation and stronger outcome monitoring. We note that India has witnessed a significant jump in its Global Innovation Index (GII) ranking from 81st in the year 2015 to 39th in 2024 among 133 economies of the world.

Unlike many high-income and early industrialised countries in Europe or technologically advanced nations like Japan, India is many times bigger in population and geographical size. Resource constraints for a prolonged period of time meant science and technology (S&T) was centralised for optimal resource use – a not so well-defined National Innovation System emerged with limited presence and contribution of the private sector particularly in the post-liberalisation era with very weak links among the agents involved. Therefore, the public sector remained overwhelmingly important for the innovation landscape in India. Regional or Sectoral Innovation Systems could have made more impact particularly in India, but institutional framework and attitude at the national and the state level were found lacking giving rise to deep regional disparities on capabilities. Overall, India paid scant attention to monitoring of the outcomes in a systematic way and hence pace of progress remained slow. Incubation and start-ups are relatively recent phenomenon which receives substantial policy attention nowadays and for those to evolve as mature bases for a significantly expanded national economy in the coming years, a bigger push may be required to create a innovation pipeline effect across sectors aligned with India’s dramatic needs of the future.
As often suggested, high-end segment of the Indian industry remained skill intensive rather than knowledge intensive. However, the next phase of expansion may not come from skills alone and premium derived from knowledge would be crucial. In any case, the need for harnessing knowledge and innovations goes far beyond industrial or service sector growth but is imminently important for fundamental human security in several ways. While GERD is a key measure of resource allocation which has remained stable, India’s commendable mission-oriented programmes on futuristic domains like Quantum Computing and Artificial Intelligence must emerge as game changers for new partnerships for revolutionizing the innovation landscape in India. In areas where private sector is expected to take the lead encouraged through generous financial support from the government like India Semiconductor Mission or National Green Hydrogen Mission, national and international partnerships for technology development and commercialisation would be key. Driven by performance-linked incentives and new investments by the private sector progress on expanding innovation capacities and manufacturing in the area of energy storage has been steady. As per estimates, 911 top listed companies invested a total of ₹66,664 crore in research and development (R&D) activities in FY 2022-23.
Globally, the United States’ dominance on technology would continue for years to come. This includes infinite influence of Big Tech and Defense Tech companies. China has overtaken in a major way all that is understood as Clean Tech and races ahead in Artificial Intelligence (AI). India with its years of S&T infrastructure, considerably matured among developing countries have not been able to keep pace due to weak preparedness or foresight which is lamentable and therefore, this major constraint is partly self-imposed. The options for India given its vast population and market lies in creating the right demand side conditions through citizen centric approaches, sustainable development and one-health, future designs of urbanisation and mobility, circular economy and also disaster preparedness. This would require new forms of public funding and entrepreneurship. It has to be understood that challenges facing humanity and India are far greater and complex than what present cohort of technologies can resolve. In some cases, for example, Clean Tech has high material footprint and hence unsustainable.
While India’s uniquely strong workforce of engineers remains the best bet in this transformation, skill mismatch beyond digital sectors means the present cohort is not equipped or trained to handle futuristic problems. Meeting this skill gap require effective public-private partnership including attracting talent and ensuring brain gain in the short to medium term. While research funding is expected to rise driven by the public sector, problem-solving and risk-taking capacities need to go up in the private sector dotted by billionaire entrepreneurs and venture capitalists whose numbers have sharply risen in recent years. The private sector, however, is expected to continue to respond to market forces and push availability of existing technologies worsening dependencies on other countries. The situation may not change immediately, but the narrative on demand side of the innovation outcomes driven by necessities (as opposed to comfort or luxury) can go a long way to strengthen the ecosystem in less than a decade time to enable take-off for a new cohort of emerging technologies.
The Union Budget can have direct influence on redirecting attention from dependencies to long term assessment of necessities not only by creating capacities but also sending out clear signals on policy reforms and monitoring beyond direct interventions as is usually subscribed in addressing market failures. New markets would be created and possibly already emerging with cheaper costs of renewable energy but lacking in customized technologies that are close to our needs. India’s health care sector and innovations with some maturity, need to enter new and complex domains with greater R&D investments, supported by ethically benchmarked regulations and meaningful stakeholder participation. Similarly, sustainable lifestyles of citizens cannot be resolved through technological determinism but appropriate cost-effective innovations for mass adoption where even technologically advanced nations are faltering. Based on future needs, the role of public policy and to some extent foreign policy of India would assume immense significance for facilitating reforms and aggressive partnerships involving networks across countries that envision a needs-based approach and are in the process of adopting unconventional pathways to innovation ecosystems to overcome dependencies and future risks to their populations.
This article is authored by Sabyasachi Saha, associate professor, RIS, New Delhi.
