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New RDI Scheme: A Strategic Catalyst or A Repackaged Initiative?
New RDI Scheme: A Strategic Catalyst or A Repackaged Initiative?

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On July 1, 2025, the union cabinet approved the Research Development and Innovation (RDI) Scheme worth a corpus of Rs 1 trillion (~US $12 billion). The new Scheme outlines the Indian government’s intent to catalyze private sector research and development (R&D) and deep-tech innovation.

The move to catalyze R&D efforts by the private sector has been undertaken primarily owing to its meagre contribution to R&D in India. Currently, the government accounts for over 50% of India’s R&D expenditure while the private sector accounts for over 30%, a ratio that needs to be reversed to promote greater innovation. Further, the Indian private sector accounts for over 70% of R&D spending in leading economies like the U.S., Japan, and China, while lagging in national R&D expenditure. The result is a persistent input-output gap in innovation, fewer patents, limited scientific publications, and negligible deep-tech breakthroughs.

The government has undertaken numerous efforts to promote R&D by the private sector in the past too, however several challenges and implementation bottlenecks have hampered sufficient R&D efforts in India through these initiatives.

While the intent of the RDI Scheme seems to be hitting the nail at the right spot, a look at the potential challenges that have acted as bottlenecks in the previous schemes and whether the RDI Scheme could succeed in addressing these…..

Key features of the RDI Scheme

  • The scheme comprises a corpus of Rs 1 trillion, structured as a 50-year interest free loan to the Anusandhan National Research Foundation (ANRF), chaired by the Prime Minister.
  • The Department of Science & Technology acts as the nodal for the Scheme. Further, strategic oversight via a governing board chaired by the Prime Minister, an ANRF Executive Council and an Empowered Group of Secretaries (EGoS) has been devised to ensure inter-agency coordination and incentivize private sector participation in core research. 
  • Sunrise sectors such as semiconductors, artificial intelligence (AI) and quantum technologies, robotics, space, biotech, green hydrogen, and defence electronics have been identified as priority sectors.
  • A two-tiered funding mechanism has been established:
    • Tier 1: A Special Purpose Fund (SPF) under ANRF holds the capital.
    • Tier 2: Second level fund managers (e.g. alternate investment funds (AIFs), non-banking financial companies (NBFCs), development finance institutions (DFIs)) disburse long-term concessional loans or equity to startups, MSMEs, and projects having high technology readiness level (TRL). Further, a deep-tech fund of funds will be established to channel capital into frontier technologies.
  • Scaling private-sector RDI, facilitating technology acquisition, supporting projects with high technology readiness levels (TRL) closer to commercialization, and promoting self-reliance in strategic technologies are the key objectives outlined in the Scheme.

Older R&D initiatives and their associated challenges

In the past, the government has undertaken numerous initiatives to promote R&D. However, these have had their share of challenges, owing to which newer Schemes like the RDI have been launched. Some of these challenges have been:

  • Higher focus on scientific output with lower private sector and commercial linkages: Traditional R&D initiatives undertaken by the Council of Scientific and Industrial Research (CSIR), Defence Research and Development Organization (DRDO) and Indian Space Research Organization (ISRO) have had high scientific output but weak private and commercial sector linkages.
  • Funding bottlenecks, limited reach associated with the Startup India Fund of Funds initiative: While the Startup India Fund of Funds initiative began with a lot of vigor, it struggled with limited outreach, funding only a few hundred startups, mostly restricted to metro cities. It also favored safer, later-stage investments, keeping deep-tech and high TRL projects out of ambit or underfunded.
  • Slow fund disbursements under PLI Schemes: The ambitious PLI Schemes initiated across 14 key sectors have struggled to provide timely disbursement of funds, leading to incentive payouts to the tune of only 1.5-5% of the total outlay. These delays pertain to stringent investment criteria, domestic value addition (DVA) thresholds, complex compliance and documentation requirements and bureaucratic bottlenecks hampering R&D efforts.
  • Resource limitations and inconsistent mentorship issues related to incubation partnerships: Incubation partnerships initiated between startups, private players and IITs and other academic institutions face issues such as limited resource availability, inconsistent mentorship, poorly aligned program design or weak post-program support thereby hampering efforts towards R&D.   

An amalgamation of all these challenges leads to low R&D spends in India. India's gross expenditure on R&D (GERD) remains around 0.64% of its gross domestic product (GDP), with less than half coming from the private sector. As per the latest Economic Survey 2025, GERD in India has risen from approximately Rs 60,196 crore in FY11 to Rs 127,381 crore in FY21-22.

The Survey also states that in most developed and emerging economies, business enterprises contribute over 50% to GERD. In countries like China, Japan, South Korea, and the USA, this share exceeds 70 per cent. In the USA, the private sector leads, with companies like Google and Amazon accounting for about 70% of R&D spending.

Source: Economic Survey 2024-25

Is the RDI Scheme different?

At the outset, the RDI Scheme aims to address the long-standing issues that have long deterred private enterprise in investing in R&D. To this end, the Scheme reduces the financial risk burden on companies. Further, it aims to change the private sector’s perception of R&D as a cost instead of investment by offering government-backed financing. The involvement of the ANRF is also a novel move as the newly created organization is meant to be equivalent to having a single-window clearance mechanism for funding R&D.

However, there are certain issues that will persist if the government does not prioritize stringent implementation. In the past, favouritism overpowered funding and limited benefits to a few startups. While the funding mechanism grants second-level fund managers the independence to allocate money as they deem appropriate, the type of projects that they can invest in and the scope of this investment remain subject to government approval. This means that some pre-approved projects can be funded in a faster, decentralized fashion, however, the more crucial projects that seek to develop new technologies/platforms need another layer of approvals from the government. This again opens the decision-making process to bureaucratic delays related to fund approvals and curtails the independence of second-level fund managers while deciding to fun critical new projects.

Another unique challenge under RDI scheme is that only projects that have reached TRL-4 are eligible. In total, there are nine TRL levels, with TRL-1 representing basic level of research and TRL-9 a state of advanced readiness. The choice of TRL-4 appears to be an arbitrary decision to support any promising research that has progressed halfway.

Coordination among multiple stakeholders like the ANRF, DST, EGoS, and multiple fund managers could also slow deployment.

Wait and watch, the best way forward

With the RDI Scheme announcement just three weeks afresh, and complete Scheme details still pending, the final call about whether the Scheme will prove to be a strategic catalyst or a repackaged version of older R&D efforts, being driven solely by the government, remains to be seen. In this regard, timely implementation checks, establishing key milestones to be achieved within limited timeframes and undertaking an unbiased approach that solely focuses on the intent behind its launch will be crucial.


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Kuhu Singh
Manager, Research

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