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Sitharaman Urges Private Sector to Lead Investment and R&D
Confirmed
In Short: She highlighted the importance of raising both the scale of investment and private sector participation to enhance the country's innovation capacity.
Finance Minister Nirmala Sitharaman called for greater private investment and spending on research and development (R&D) at the Kautilya Economic Conclave, organized by the Ministry of Finance.
She highlighted the importance of raising both the scale of investment and private sector participation to enhance the country's innovation capacity.
In the interim Budget for 2024-25, the government announced a ₹1 trillion Research, Development, and Innovation (RDI) fund to encourage private sector involvement in R&D.
Sitharaman noted that India's R&D expenditure currently stands at 0.83% of GDP, compared to 2.7% in OECD economies, with the private sector accounting for only 36% of total R&D expenditure.
Sitharaman also emphasized the importance of maintaining global economic openness, advocating for dialogue and negotiated agreements rather than allowing geopolitical differences to hinder trade and investment.
Sitharaman said the next challenge for India is to convert the capacities built over the past decade into higher productivity, better employment, and wider economic opportunities.
India's GDP grew at an unexpectedly fast rate of 7.8% in the April-June quarter, aided by a sharp 11.9% growth in Gross Fixed Capital Formation (GFCF), a proxy for investments.
What this adds
Recent economic data has led economists to point out that private investment has begun to take hold.
Background
The flash S&P Global US Composite Purchasing Managers Index (PMI) rose to 58.4 in September from 56 in August, signaling a marked acceleration in private-sector activity.
What's confirmed
- “Raising both the scale of investment and private sector participation is essential to strengthening our innovation capacity,” she said.
What's still developing
- Also Read Capex slows in Q2 as new project announcements, completions lose pace premium Two trade bodies meet FM, withdraw from No UPI Day protest on October 2 TDB pauses accepting applications under RDI fund amid capital constraints premium Sitharaman discusses BIT, FTA, UPI expansion with Qatar during Doha visit FM Sitharaman to launch ₹1 trn Rayalaseema horticulture hub this Friday The scheme aims to support a shift from “Made in India” to “Imagined and Made in India”, the minister said.
- Sitharaman said the coming years would require India to strengthen the foundations of resilience built over the past decade while preparing for newer sources of global uncertainty.
- “Uncertainty is now a standing condition of the global economy, and policy must be designed around it,” she said, adding that building resilience was not a one-time exercise.
- Growth remains resilience Sitharaman said India has come through the shocks of the past four years with its economic fundamentals intact and strengthening.
- India’s resilience had been built through a combination of household-level measures, access to finance, banking reforms, infrastructure creation, economic reforms, price stability and fiscal prudence, Sitharaman said.
- At the same time, Sitharaman stressed that greater strategic resilience should not come at the expense of global economic openness.
- Go Ad Lite Home india Global uncertainty now a standing condition, must keep building resilience: FM Nirmala Sitharaman Listing out priorities for India amidst the global uncertainty, Sitharaman said it is now time for the private sector to lead investments, including in R&D.
- Referring to Kautilya’s Arthashastra – Sitharaman was speaking on the first day of Kautilya Economic Conclave, organised by the Institute of Economic Growth and the Ministry of Finance – the finance minister said the book places the treasury at the base of statecraft, with the lesson being that a state that “guards its finances in calm years retains the freedom to act when conditions turn”.
- Apart from private sector leading investments, Sitharaman also said there were several other priorities to prepare for the coming years.
- Further, global openness remains important, Sitharaman said, adding that a more resilient global economy will need countries to diversify partnerships, keep markets open, honour commitments, and work together to keep trade stable and predictable to the extent possible.
- “Equally important, the global financial architecture must reflect the economies where growth now lies,” she said, arguing for the work on reforming multilateral development banks to be taken forward and be translated into “larger, faster and more predictable long-term finance for developing economies”.
- The Finance Minister’s comments assume importance as recent economic data has led economists to point out that private investment has begun to take hold.