Foreign direct investment in R&D in India

This article presents an overview of the investments made by the multinational companies (MNCs) for research and development (R&D) in India during 2003-2009. It focuses on some salient features of foreign direct investment (FDI) in R&D in India and makes a preliminary assessment of the gains from the R&D initiatives of MNCs in India. It presents the flow of FDI for R&D in the context of total FDI inflow and gives details of the sector and cluster preferences for the investments. It is observed that FDI inflow for R&D is insignificant in comparison to the total FDI flowing into the country. The patent behaviour indicates that the R&D activities by MNCs in India do not reflect much importance of their Indian set-up, or their interest in high-end R&D initiatives. Sector-based classification of investment showed that major part of the FDI in R&D was flowing to software and IT sector, auto industry being a poor second, closely followed by pharma and biotechnology sector. The rest of the sectors had insignificant FDI in R&D.