It is a pleasure to introduce the third edition of the CTIER Handbook. As with the first edition four years ago, our objective remains to provide the most useful and up-to-date data on technology and innovation in India. We seek to bring technical capability and innovation to the forefront of policy discussion, and base it on data. We seek relevant comparative data so our own thinking can benefit from the experience of other countries. And each edition picks up some new themes that matter to our discourse on how best to build technical capability.

India must greatly expand its investment in technology. To me, the numbers five and eight sum-up our immediate scaling challenge. Indian industry must increase inhouse R&D from 0.3 percent of GDP by five times to 1.5 percent. And public research done within the higher education system must scale by eight, to raise its share in GDP from 0.05 percent in India to the world average of 0.4 percent. Indian industry must see R&D as its way of building a future based on proprietary technology. And a much more research-focused higher education system will supply the quality of talent industry needs to do just that.

If this direction is increasingly clear and resonant across policy circles, how do we get there? This edition of the CTIER Handbook points us in several fruitful directions.

Start with in-house R&D. Why does Indian industry lag so far behind the world in inhouse investment? Where do the opportunities lie? As the Handbook shows (indicator 6.4), the top 2,500 firms investing in R&D worldwide account for around 90 percent of all industrial R&D, and the top ten sectors account for close to 80 percent. India has no firms in the top 2,500 in five of these sectors, and just one firm each in two more. Only in pharmaceuticals and auto do we have a reasonable presence. Within some sectors, we are much less R&D intensive: our software firms, large by world standards of profitability, are small in R&D, investing around 1 percent of turnover on average to a world average of 12 percent (and a Chinese average of 10 percent). And we are simply missing any giant investors in R&D. The world’s 26th largest investor in R&D, Bosch, invests more than all of Indian industry combined. Our ten most profitable non-financial firms invest 2 percent of profit in R&D; the same number for the US, China, Germany and Japan ranges between 29 and 55 percent.

So for Indian industry to get much more serious about R&D, we must simultaneously be present in more technology-intensive sectors, invest closer to the world average within the sectors where we are already present, and see the emergence of some giant investors in R&D among our most profitable firms. And the wide availability of technical talent in India means we can use this key resource to build long term success - if we choose to.

My second magic number eight relates to public research. The Indian government spends a reasonable amount on publicly funded R&D, around 0.4 percent of GDP to a world average of 0.5 percent, but it does so in the wrong place. Over 85 percent of publicly funded R&D is done by the state itself in autonomous government laboratories. World over, almost without exception, when the state funds R&D, it does scientific research in the higher education sector and technological research (especially for defence) in industry. Public research worldwide also allocates much greater priority to health-related research among various heads – it comes first in most countries, usually above defence, typically accounting for over a quarter of all public funding. In India, public R&D on health is in fifth place, after defence, atomic energy, space and general scientific funding, and accounts for under a twentieth of all public funding.

Much can be gained, then, by following the world and shifting the lion’s share of publicly funded research to the higher education sector. And by prioritising the health sector, we would also be focusing public R&D in precisely the area where our industry is itself relatively R&D intensive.

Finally, a section on China in this volume prompts sobering comparisons. In the last twenty years, China has emerged as a giant investor in both in-house R&D and scientific research. The Eurostat data for 2014 showed that India had 26 firms in the top 2,500 R&D spenders to China’s 301. The latest data, for 2021, shows that China now has 678 firms to our 24; China’s lead has more than doubled. Long derided as a maker of cheap products based on imported technology, in sector after sector we see the emergence of world-leading Chinese innovators. In sectors such as electric vehicles, solar power, construction and material science, China is today the clear world-leader. In pharmaceuticals, our own industry says that from a position in 2000 where India was ten years ahead, China has invested so much in industry, and public research in related scientific fields, that it is today ten years ahead. In overall spending, and scientific research and publications, China has nearly caught up with the US and left Japan, Germany and South Korea far behind. Understanding China’s rise, and seeing it as a positive prompt to do a lot more ourselves, is perhaps our greatest lesson to take away from the third edition of this Handbook.

This Handbook is the product of a dedicated and talented young team at CTIER. As with every edition, the team has introduced new indicators that include women in STEM, CSR spending on technology incubators and public research institutions, and expenditure by state governments on R&D. Led by Janak Nabar, they do us a great service with each edition of this invaluable publication, rich as always in data and perspective. I hope you enjoy this third edition as much as I have.