True Innovation-Led Economy

India has demonstrated strong policy intent to become an innovation-driven economy through significant funding commitments, regulatory reforms, and institutional support. However, despite this momentum, the country continues to face structural challenges that limit its ability to convert scientific potential into global technological leadership. The core issue is not a lack of ambition, but a persistent gap between policy design and effective execution.

1. Growing Policy Momentum in Innovation

India has recently strengthened its innovation ecosystem through several major initiatives.

The government has announced the ₹1,00,000 crore Research, Development, and Innovation (RDI) Fund, aimed at enhancing the country’s technological capabilities. Additionally, the 2026 Union Budget introduced a ₹20,000 crore corpus for deep-tech startups, along with expanded tax incentives and investments in digital infrastructure.

Programs such as the expansion of Atal Tinkering Labs, with funding increased from ₹500 crore to ₹3,200 crore, reflect a long-term commitment to strengthening STEM education and nurturing young innovators.

On the regulatory side, reforms such as the removal of the three-year existence requirement for startups under the Industrial R&D Promotion Programme have reduced barriers to entry. Similarly, the SHANTI Act, 2025 has opened new opportunities for private participation in nuclear and radiation-based technologies.

2. Persistent Structural Weaknesses in the Innovation Ecosystem

Despite these efforts, India continues to lag in core innovation indicators.

India’s R&D intensity remains low, and the overall spending on research is significantly below that of advanced economies and leading emerging countries. A major concern is that the public sector dominates R&D spending, while private industry participation remains limited.

Patent output further highlights the gap. While countries like China and the United States generate millions of patent applications, India’s numbers remain comparatively modest. Even in Patent Cooperation Treaty (PCT) filings, India registered 4,547 applications in 2024, which, although growing, still reflects a scale disadvantage.

3. Human Capital and Talent-Related Challenges

Innovation systems depend heavily on skilled human capital, but India faces notable gaps in this area.

According to the Global Innovation Index 2025, India performs poorly in areas such as the number of full-time researchers and employment in knowledge-intensive sectors. These gaps restrict the country’s ability to produce consistent high-quality research outcomes.

Gender inclusion is another concern. India has low representation of women with advanced degrees in science and technology fields, despite strong evidence that diverse research teams produce better innovation outcomes.

Although initiatives such as WIDUSHI and WISE-KIRAN aim to address this gap, their long-term impact is still evolving.

4. The Missing Link: From Research to Commercialisation

One of the most critical weaknesses in India’s innovation system is the poor transition from research to market applications.

Although universities and public institutions produce increasing amounts of scientific research, there is limited infrastructure for:

• Technology transfer

• Startup incubation

• Venture creation

• Risk capital support

As a result, many innovations fail to reach commercial scale. Successful innovation ecosystems globally depend on strong collaboration between universities, industry, and financial institutions, enabling research to evolve into market-ready technologies.

5. The Crucial Role of the Private Sector

The private sector is essential for transforming India into a global innovation leader.

While the government provides funding and policy support, sustainable innovation depends on industry-led research and development. Businesses must invest in long-term, high-risk innovation, particularly in deep-tech sectors such as artificial intelligence, space technology, advanced communications, and 6G technologies.

India’s emerging commercial space ecosystem demonstrates the potential of private-sector innovation when supported by enabling policies.

The success of the RDI Fund will depend significantly on whether industry actively participates in long-term research partnerships.

Conclusion

India stands at a critical stage in its innovation journey. Strong government initiatives, increasing funding, and regulatory reforms have created a supportive foundation for technological growth. However, structural challenges such as low R&D spending, weak industry participation, limited human capital depth, and poor commercialization mechanisms continue to restrict progress.