India Inc failed to ramp up R&D spends despite ’90s economic reform push | Specials News

This was as much a macroeconomic failure as it was Indian business’ failure to find a market for their products abroad.

Until 1991, global competitiveness did not figure too high for India Inc. Companies were focussed on maximising their sales in the home market, shielded by high tariff walls, and exports were an afterthought.

The architects of economic liberalisation understood this well. The key thrust of the reforms was to increase the efficiency and competitiveness in a fast-changing global economy.

Since the reforms, there has been a marginal uptick in resea­rch and development (R&D) spending, going by data available since financial year 1998-99 (FY99), with some sectors dominating — especially automotive, pharmaceuticals and central public sector undertakings. However, despite this , Indian companies still lag far behind global competitors, including from China.

Among the top 10 in terms of R&D spending, there were four pharma companies, three automakers and two defence equipment makers, apart from Reliance Industries.

Tech absorption to building new products

In late 1990s and early 2000s, Indian companies’ R&D efforts were focussed on absorption of technologies imported from their foreign partners. In recent years, R&D efforts have largely been focussed on developing new products and solutions.

“We view R&D as a strategic investment that underpins long-term competitiveness, technology leadership and sustainable growth. The focus is on next-generation technologies, software-defined and connected vehicles, advanced safety systems, alternative fuel powertrains as well as enhancing product quality, reliability and customer experience,” a Tata Motors Passenger Vehicles spokesperson said in response to a query from Business Standard on the company’s R&D strategy. Queries sent to other companies remained unanswered till press time.

Most large companies across sectors now have dedicated facilities or campuses for R&D, and disclose their annual spending on such activities in their annual report. The number of listed companies reporting R&D spending has more than tripled in the past three decades from around 150 in FY99 to 471 in FY26.

In all, India’s top listed companies invested around Rs 63,500 crore on R&D in FY26, up 28.6 per cent year-on-year (Y-o-Y) from Rs 49,410 crore a year earlier. The total R&D spending in FY26 was 0.91 per cent of the companies’ combined net sales, up from 0.76 per cent the previous year, and much higher than the 0.36 per cent reported in FY99. However, the FY26 figure was lower than the historic high in the series of 1.15 per cent in FY17.

The data shows R&D spending has seen a compound annual growth rate (CAGR) of 16.8 per cent over the past 27 years. This was faster than the 12.9 per cent CAGR in combined net sales. As a result, there has been a steady rise in the share of revenues that companies spend on R&D.

The total R&D spending by listed companies in the Business Standard sample has risen from Rs 957.8 crore in FY99 to Rs 63,529.2 crore.

R&D spending tracks revenues and profits

Corporate R&D grew at the fastest pace during FY99 to FY09 and there has been a slowdown in every subsequent decade. The CAGR growth in R&D expenses moderated from 21.3 per cent during FY99-09 to 13.8 per cent during FY09-19 and further to 13.4 per cent during FY19-26.

It has mirrored the slowdown in corporate revenue growth. The CAGR in combined net sales in the sample slowed from 15.8 per cent in FY99-09 to 9.8 per cent in FY09-19 and further to 7.5 per cent in FY19-26.

Automakers and pharma companies lead

The corporate R&D in India is led by companies in the automotive and pharma sector, while globally the R&D race continues to be led by companies in newer sectors such as artificial intelligence (AI), information technology (IT), communication technology and computer hardware.

Nearly 60 per cent of the firms that reported any R&D spending in FY26 belonged to five sectors — automotive, pharma, chemicals, IT services, and defence and PSUs.

The passenger vehicle and tractor manufacturer Mahindra & Mahindra was the biggest spender on R&D in the corporate sector in FY26, pumping in Rs 5,691.4 crore in FY26. This represented an 81.1 per cent increase Y-o-Y, and amounted to 3.9 per cent of the company’s standalone net sales in FY26, up sharply from 2.6 per cent the previous year.

Reliance Industries (RIL) was the second biggest spender at Rs 4,682 crore in FY26, up 0.9 per cent Y-o-Y. This was equivalent to just 0.9 per cent of RIL’s standalone net sales in FY26. It was followed by Tata Motors Passenger Vehicles at Rs 2,836 crore in FY26 on a standalone basis, up 35.8 per cent Y-o-Y. It spent 4.9 per cent of its net sales in FY26, up from 4.2 per cent in FY25.

In its annual report for FY26, the company, however, said it spent Rs 34,562 crore on R&D and new product development at the consolidated level, including in subsidiary Jaguar Land Rover. This amounted to 10.3 per cent of consolidated revenues, making it one of the most R&D-intensive companies in the country.

The fighter jet and aerospace manufacturer Hindustan Aeronautics was the fourth biggest spender on R&D in FY26 at Rs 2,794.5 crore, followed by Dr Reddy’s Laboratories at Rs 2,157 crore.

The pharma industry is, however, most R&D-intensive with the listed pharma companies spending 6.2 per cent of their net sales on R&D in FY26, slightly lower than the average of 6.5 per cent in the last 20 years. The R&D spending to net sales ratio is over 10 per cent for top spenders in the industry. For Dr Reddy’s Labs, the ratio stood at 10.5 per cent, followed by Sun Pharma at 10.2 per cent, and Cipla at 8.1 per cent.

In comparison, the IT services sector — which is one of the most profitable segments and the biggest dividend payer — is a laggard in terms of R&D investment. In FY26, the listed IT services companies, including biggies such as Tata Consultancy Services, Infosys, Wipro and HCL Technologies, spent just 0.58 per cent of their total net sales on R&D. The 20 IT companies in the sample together spent just Rs 3,599.6 crore on R&D in FY26, lower than the expenditures of Tata Motors Passenger Vehicles and Mahindra & Mahindra.

The relatively lower R&D spending by IT majors has come under scrutiny as the industry now faces headwinds from advances in artificial intelligence (AI) that threatens to automate many of the functions and processes that these companies used to provide to their corporate clients.

Way behind global competition

Despite these efforts, Indian companies are far behind global peers in terms of innovation. According to the United Nations World Intellectual Property Organization (WIPO) database of 2024, TVS Motors filed the highest number of patents among Indian companies at 283 during the three-year period of 2022-24, followed by Jio Platforms at 202 and UPL Ltd at 63.

In comparison, Huawei Technologies, which topped the global list, filed 20,783 patents, followed by Samsung Electronics at 12,951 patents and Qualcomm Inc at 11,113. Germany’s Robert Bosch Corporation topped the list in automotive space with 3,834 patent filings in the period.

The overall R&D budget of Indian companies remains small compared to the global majors. According to the Organisation for Economic Co-operation and Development (OECD) database, global corporate R&D spending is dominated by multinationals from the United States, Europe, Japan and China.

Alphabet Inc topped the chart with R&D spending of $61 billion in 2025, followed by Meta at $57 billion and Amazon at $55 billion. In China, Huawei topped the list as it spent $25 billion on R&D in 2024.

On the other hand, India Inc’s spending on R&D has grown from around $230 million in FY99, but the cumulative figure was still just around $7.2 billion in FY26.