India’s spending on R&D activities has been far less than 1% of the GDP for years.

The Union government has decided to allow corporate India to use their mandatory corporate social responsibility spending on publicly-funded incubators and contribute to research efforts in science, technology, medicine and engineering at major institutions and bodies.

Union Finance Minister Nirmala Sitharaman said the rules governing the Corporate Social Responsibility (CSR) spending norms have been amended to pave the way for greater investment into research – a parameter the country fares poorly globally.

India’s spending on Research and Development (R&D) activities has been far less than 1% of the GDP for years, with the private sector chipping in less than half of investments. The Companies Act requires firms with a net worth of ₹500 crore, turnover of ₹1,000 crore or net profit of ₹5 crore or more to set aside 2% of their average net profits over the last three years towards ‘approved’ CSR activities.

Ms Sitharaman said:

“Now this CSR 2% fund can be spent on incubators funded by Central or State governments or any agency of a Central or State public sector undertaking.

“They can also make contributions to public funded universities, IITs, national laboratories and autonomous bodies [established under the auspices of ICAR, ICMR, CSIR, DAE, DRDO, DST and Ministry of Electronics and Information Technology].

“The government can fund research and is doing so, and will also increasingly do more. But today, there is need for large investments and large pools of capital to be given to R&D. We are opening up the CSR window also.”

When asked if the government was drawing on CSR funds, she said that was not the case. “IIT receives funds from the government but is not a government institution as such. It is an autonomous institution for engineering and technology. If science and tech-related research is being done there, CSR money can also go there,” she explained.

Revenue Secretary Ajay Bhushan Pandey said this would enable a private pharmaceutical company, for instance, to undertake research in pharmaceuticals in conjunction with a publicly funded institution like an IIT or the ICMR and derive benefit from it.