India’s Big Bet On Innovation: Is The RDI Fund A Panacea? Not Quite

India’s ₹1 lakh crore (~$12 bn) Research, Development and Innovation (RDI) fund, announced earlier this month, could be a defining moment for the country's economic and technological future. Framed as a bold investment in “sovereign technology” across critical and sunrise sectors, it is not just a financial commitment. It is a bet on India’s ability to become a first-mover in global innovation.

Spearheaded by the Anusandhan National Research Foundation (ANRF) under the Department of Science and Technology, the RDI scheme offers long-term, low-interest capital to support private sector R&D and deep-tech entrepreneurship. From semiconductors to AI and quantum computing, the scheme aims to bridge the country’s R&D gap, reduce IP dependence, and unlock the commercial value of Indian science.

But money alone will not guarantee outcomes. As the global economy enters a phase where tech wars now shape trade wars, India must confront not only funding gaps but also institutional constraints, structural inefficiencies, and tensions between inclusion and meritocracy that affect how innovation is nurtured.

A Promising Rise, But Still Under-Resourced

India’s innovation capacity is steadily improving. The country now ranks 40th on the Global Innovation Index, up from 81st in 2015. In FY23, over 80,000 patent applications were filed, 55% of them by Indian residents, which is a significant milestone. Institutions like IIT Madras, IISc, and DRDO are leading from the front. IIT Madras alone filed over 250 patents in 2022 and hosts one of India’s most successful research parks.

India's start-up ecosystem has also matured, with more than 100,000 registered ventures, many in deep-tech, and 50% emerging from Tier-2 and Tier-3 cities. Women-led start-ups are on the rise, adding to the diversity of innovation.

Yet India still spends only around 0.65% of its GDP on R&D, compared to 2.4% in China and 3.4% in the US. The private sector contributes less than 40% of this, far below the global average of 70% in developed economies. Public labs continue to dominate GERD (Gross Expenditure on R&D), but with limited accountability for commercialisation or tech transfer.

What is holding back the Indian private sector? Is it talent, business strategy, or better incentives? In an era of technology-led disruption it is bewildering that large enterprises, even in the technology domain, are short of ideas. The reason is that we are content to build services rather than take the risk of building a winning product.

Capital Meets Constraint: Innovation and Institutional Rigidities

The RDI fund is designed to address these gaps. It introduces mechanisms like a Deep-Tech Fund of Funds, IP-linked risk capital, and incentives for academia–industry partnerships. If implemented effectively, it could increase India’s Gross Expenditure on R&D (GERD) to 1.2% of GDP by 2030, potentially adding $50–60 billion to annual economic output. As per OECD estimates, every 1% increase in R&D intensity yields a 0.4–0.5% uplift in GDP over the medium term.

However, capital infusion must be accompanied by institutional reform. Today, much of India’s research infrastructure is held back by outdated incentive models, bureaucratic fragmentation, and limited autonomy in recruitment or project design.

One particularly sensitive but crucial dimension is the impact of reservation policies on merit-based excellence in elite research institutions.

Inclusion vs Innovation? Rethinking the Balance

India’s commitment to affirmative action through caste-based quotas in education and public employment is morally and constitutionally sound. However, its expansion into premier R&D institutions, including faculty hiring, doctoral fellowships, and scientific recruitment, demands urgent re-examination.

Innovation is inherently competitive. It thrives in institutions where performance, autonomy, and peer benchmarking shape outcomes. Rigid quotas, applied uniformly across roles requiring high specialisation, can affect the institutional agility required for global R&D collaboration and technology leadership.

This is not a call to roll back reservation. Rather, it is an appeal to recalibrate it: strengthen early-stage access and capability pipelines through preparatory programmes, scholarships, and mentorship. But when it comes to top-tier research roles, merit, excellence, and institutional independence should lead.

The Global Stakes Are Higher Than Ever

Across the world, countries are trying to de-risk critical technology supply chains. Trade wars are increasingly becoming tech wars. National security is now measured in chip fabs, AI models, and genomic databases. In this world, India has a narrow window to position itself as a trusted, innovation-first partner.

The RDI scheme is a bold first step. But for India to lead, not just catch up, it must be willing to have the harder conversation. Who gets to invent? Who gets funded? And what are we optimising for?

The future of Indian innovation may well depend on how honestly it answers those questions.

Making RDI Deliver: A Five-Point Roadmap

To truly transform India's innovation landscape, the RDI scheme must align money with measurable, market-linked outcomes.

Build Public–Private Co-Innovation Clusters
Create national technology missions around semiconductors, green hydrogen, and AI with academia–industry–start-up–VCs collaboration.

Translate IP into GDP
Scale up technology transfer offices (TTOs) and allow patents as collateral. Fund translational research, not just publications. IP professionals are also required for this.

Expand Private Sector Participation
Use blended finance to crowd in corporate R&D and incentivise export-oriented innovation. Offer tax credits for additional spend on R&D tied with outcomes, without being onerous.

Reward Institutions for Outcomes, Not Inputs
Link future RDI disbursements to metrics like patents licensed, products commercialised, and jobs created. Track performance via an Innovation Commercialisation Index that scores institutions and states on R&D to revenue conversion, not just paper publication.

Balance Equity with Excellence
Build inclusive innovation pipelines from school to lab, while ensuring autonomy and excellence at the apex. Offer tax-free grants or net-of-tax stipends to scholars. India underestimates the lack of talent, the ability to take risks, build products, manufacture, and generate great ideas. The incentives have to be stellar.

A Rare Window

India’s opportunity is real. With global supply chains being reimagined and digital sovereignty rising as a national priority, the RDI scheme positions India to take a strategic leap. But capital without capability, and equity without performance, will not deliver the outcomes this moment demands.

If India can balance inclusion with competitiveness, and reform how its institutions reward talent and risk, it has the potential not just to Make in India, but to Invent in India, Lead from India, and Export Ideas to the World.