By Dipak Kurmi
The economic watershed of 1991 is frequently remembered as the moment India broke free from the stagnant growth of its post-independence decades. Yet, a closer examination reveals that the liberalisation of the Indian economy thirty-five years ago was largely a forced choice, a reactionary measure triggered by a harrowing balance-of-payments crisis rather than a proactive leap of imagination. Today, as the nation positions itself on the global stage with ambitions of becoming a developed superpower, it faces an entirely different, internal bottleneck. It is high time that the Indian imagination is liberalised, but this time voluntarily, systematically, and from within the boardrooms of private enterprises rather than through the duress of multilateral lenders. While India rightly celebrates its surging count of startups, tech unicorns, and blockbuster initial public offerings, a structural handicap persists beneath the surface. The country has mastered the art of peripheral innovation—optimising user interfaces, streamlining delivery logistics, and adapting foreign models—while consistently importing the deep technological crux that powers these platforms.
To understand this paradigm shift, one must contrast India’s illustrious past with its highly derivative present. Once upon a time, the Indian subcontinent was the undisputed cradle of global foundational knowledge, gifting the world the concept of zero, advanced astronomy, the intricate techniques of plastic surgery, the holistic philosophy of Yoga, and the empirical medical systems of Ayurveda. In the twenty-first century, however, India has transitioned into a nation that consumes foreign innovation far more than it creates. The hard data reflects this stagnation quite starkly. India currently spends a mere 0.7 per cent of its gross domestic product on research and development, a statistic that has remained virtually unchanged for decades. In sharp contrast, highly innovative, developed economies like Israel and South Korea allocate over 5 per cent of their respective GDPs to research, while global superpowers like the United States and China consistently invest well over 3 per cent. This underinvestment has created a paradoxical identity where India proudly brands itself as a global knowledge economy, yet barely invests in the raw creation of original knowledge itself.
This fiscal conservatism manifests as a glaring deficit in intellectual property and hardware manufacturing. Despite producing millions of highly skilled engineers every single year, India’s patents per million of the population remain remarkably minuscule on a global scale. The nation has earned a well-deserved reputation as the software back-office capital of the world, yet it remains profoundly dependent on external supplies for critical components like hardware, semiconductor chips, and advanced medical devices. This imbalance is further highlighted by the proliferation of Global Capability Centres and international R&D hubs across Indian metropolitan areas. While these state-of-the-art facilities employ thousands of local engineers, they are heavily geared toward servicing the strategic mandates of foreign corporate headquarters rather than nurturing indigenous, groundbreaking innovation that stays within the country.
A dangerous, deeply entrenched notion in the domestic discourse suggests that funding and executing research is the sole responsibility of the state. In highly advanced economies, the financing model looks entirely different, with the business and corporate sectors driving over 60 per cent of all R&D expenditure across nations like the United States, Japan, Germany, and China. In India, the private sector often points fingers at the state whenever research fails to take off, ignoring its own structural apathy. Heavy government spending remains entirely justifiable and necessary in strategic sectors such as defence, nuclear energy, space exploration, Digital Public Infrastructure, and critical minerals. Recent institutional interventions under Prime Minister Narendra Modi, notably the establishment of the Anusandhan National Research Foundation and the specialized Research, Development, and Innovation Fund, signal that the government is serious about creating a baseline infrastructure. However, history demonstrates that transformative innovation is rarely just a state subject; it must fundamentally be market-led.
The most ubiquitous technological revolutions of the modern era corroborate this market-first reality. Neither the smartphone that dictates daily life nor the semiconductor revolution that underpins modern computing was invented by a government ministry, nor were they driven purely by top-down state subsidies. Even the current wave of generative artificial intelligence was not born inside public or bureaucratic laboratories. Across the developed world, private venture capital and corporate treasuries routinely bear high-stakes, long-term risks that public finance simply cannot justify to taxpayers and democratic voters. This brings us to the core paradox of modern Indian capitalism: Corporate India is historically cash-rich but research-poor. India Inc. currently sits on unprecedented, massive cash reserves, yet it demonstrates a highly limited appetite for long-term, uncertain scientific risk. When allocations are made, share buy-backs, lucrative dividends, real-estate expansion, and safe financial engineering are routinely prioritised over deep, foundational research.
This corporate hesitance is not born out of an intellectual deficiency, but rather out of a deeply ingrained economic rationality. In its current avatar, deep tech innovation in India is structurally irrational for a business because true invention requires a combination of high risk, extensive time, and total operational freedom. India’s legacy regulatory culture heavily taxes all three pillars through immense compliance burdens, sluggish bureaucratic approvals, unpredictable policy pivots, and a historic lack of industry-academia collaboration. Consequently, risk-averse firms choose regulatory certainty over scientific curiosity. Why should a corporate board invest millions in an uncertain, decade-long deep tech venture when regulatory arbitrage, absolute market dominance, or clever financial maneuvering can deliver immediate, low-hanging profits? The Indian market actively rewards rapid scale, whereas genuine breakthrough innovation rewards the navigation of uncertainty, and it is obvious which path corporate boards prefer to safeguard short-term shareholder value.
Furthermore, a sobering political reality prevents the state from closing this expenditure gap on its own. In a vibrant, developing democracy, governments face non-negotiable obligations to allocate massive portions of capital toward social welfare, poverty alleviation, disaster management, rural infrastructure, public health, and basic education. Expecting the state to drastically redirect its limited resources toward speculative industrial R&D while balancing these fundamental democratic duties is simply wishful thinking. Innovation cannot be financed solely by taxpayers while major corporations allow vast sums of idle capital to accumulate. India does not have a government spending problem as much as it has a private-sector risk-appetite problem, a reality that directly threatens the long-term realization of a truly developed nation, or Viksit Bharat.
This brings us to a cultural crutch that India must urgently outgrow: the romanticization of frugality, commonly known as *jugaad*. While the country rightly celebrates its capacity for cost optimization, improvisational fixes, and frugal adaptations, frugality must never be conflated with genuine, innovative research. *Jugaad* is inherently reactive, producing incremental efficiency gains within existing frameworks, whereas deep R&D produces technological breakthroughs and genuine technological sovereignty. The nations that actively invent and invest in futuristic fields like quantum computing, advanced semiconductors, renewable energy matrices, and artificial intelligence will inevitably set the rules for global trade, national security, and international geopolitics. The nations that fail to invent will find themselves perpetually borrowing the future from others. The transition from improvisational *jugaad* to rigorous, institutionalized invention is the definitive need of the hour.
The uncomfortable truth is that modern Indian capitalism matured inside a highly protected, cozy ecosystem characterized by high entry barriers, market concentration in key sectors, and comfortable returns in infrastructure, finance, and services. In an environment where market power reduces the existential threat of disruption, the incentive to invest in highly volatile R&D naturally plummets. True competition is what drives innovation, and until intense market competition becomes the prime mover of domestic corporate growth, research will remain a peripheral luxury. To change this trajectory, policymakers must align economic incentives directly with invention. This requires significant paradigm shifts, such as introducing aggressive tax incentives tied strictly to verifiable research outputs, reforming public procurement policies to actively prioritize domestic deep tech innovations, and dramatically accelerating patent processing times along with intellectual property enforcement.
Simultaneously, the broader financial culture must make risk socially and economically acceptable. This involves encouraging robust corporate venture funding for deep tech startups, ensuring that the stock market rewards long-term R&D investments in corporate valuations, and dismantling the bankruptcy stigma associated with honest, failed innovative ventures. Higher education must also be structurally overhauled so that universities become engines of industry, achieved by incentivising industry-funded research chairs, allowing flexible, market-competitive pay structures for top-tier scientists, and building shared laboratories between corporations and universities. Ultimately, sustained prosperity depends on total factor productivity. While India has grown rapidly by expanding its labour pool and capital, growth without innovation has definitive limits. Without genuine invention, incomes eventually stagnate, the demographic dividend fades, and strategic autonomy weakens. Corporate India must finally decide whether it wants to be merely wealthy or truly consequential, because history rarely remembers those who only bought the future.
(The writer can be reached at dipakkurmiglpltd@gmail.com)
