Budget 2024: FM announces £1 trillion easy financing for emerging sectors

Finance Minister Nirmala Sitharaman announced the formation of the Government of India ₹A $1 trillion corpus to encourage innovation and research in emerging fields. The fund will provide interest-free loans for 50 years and provide long-term financing and refinancing for long periods at low or zero interest rates, Sitharaman said in her budget speech.

“This will encourage the private sector to significantly scale up research and innovation in emerging fields,” Sitharaman explained.

“We need to have programs that combine the power of our youth and technology,” Sitharaman added. She also said that they would support research on advanced technologies for defense purposes, which would also increase self-reliance.

This comes at a time when many large economies, including the United States, have committed more resources to funding research and innovation. Countries have raced to make breakthroughs in high-tech fields, particularly in areas such as semiconductor development and artificial intelligence (AI).

However, India’s R&D spending lags significantly behind other major economies. Although India is among the top 10 global R&D spenders, its total spending lags behind smaller economies such as South Korea and France. Research and development spending as a percentage of GDP was also lower than in other economies such as South Korea, Israel, Switzerland and Sweden.

Meanwhile, the Indian government has committed to increasing spending in this area. “The Government of India has set a target to increase the country’s R&D spending to 2% of GDP, up from the current level of around 0.7%,” NITI Aayog said in a 2023 report.

“The Government of India has also introduced several policies to enhance the country’s R&D capacity, including tax incentives for companies engaged in R&D activities and the establishment of several innovation and research parks across the country,” the report said.

Sitharaman’s announcement of a new sunrise domain research corps is intended to catalyze increased allocations for this purpose.