U.S. tariffs are not what is holding back Indian research, Pg8

Key Highlights:

• The article argues that U.S. tariffs are not the primary factor hindering Indian research and development (R&D).
• India's R&D spending, particularly in traditional manufacturing sectors like metals and auto parts, is significantly lower than global averages.
• Indian research efforts are largely concentrated in pharmaceuticals and automobiles, with other sectors showing minimal R&D investment.
• The government launched the ₹1 lakh crore Research, Development and Innovation scheme to boost R&D in sunrise and strategic areas.
• The real challenge for India is its overall low R&D expenditure as a percentage of output and the private sector's limited contribution.

US Tariffs.jpg

Detailed Insights:

• While U.S. tariffs on some Indian goods have eased, the article contends that sectors exposed to these tariffs historically have low R&D spending.
• For instance, Indian metals firms spend about 0.4% of sales on R&D compared to a 1.6% global average.
• Auto and parts makers spend a little over 2% on R&D, whereas the global average is 5%.
• The article highlights that pharmaceuticals secured an exemption in recent trade deals, but the automobile sector still faces a 25% U.S. duty on auto parts.
• India's private industry R&D tends to focus on routine development and testing rather than creating new products.
• The Research, Development and Innovation scheme targets frontier technologies like AI, semiconductors, quantum technology, and biotechnology.
• The scheme may not directly benefit older, exposed industries that need to move up the value chain through increased R&D.
• The article suggests that trade shocks could be an opportunity to incentivize exposed industries to invest in differentiated products through research.
• Improved measurement of R&D spending, linking it to exports, is crucial for effective policymaking.

Key Concepts Involved:

• Tariff: A tax or duty imposed by a government on imported or exported goods.
• Research and Development (R&D): Activities undertaken by companies or governments to innovate and introduce new products, services, or processes.
• Value Chain: The full range of activities that firms and workers perform to bring a product from its conception to its end use.
• Sunrise Sectors: Emerging industries that are expected to grow rapidly and become significant contributors to the economy.