Research, Development and Innovation (RDI) Scheme: Strengthening India’s Innovation Ecosystem

Policy Update
Pritha Chowdhury

Background

Innovation has become a major driver of economic growth and global competitiveness. Countries investing heavily in research and development (R&D), such as the United States, China, South Korea, and Germany, have established leadership in advanced technologies. However, India’s Gross Expenditure on Research and Development (GERD) remains significantly below the global average, with limited private-sector participation. India has also faced structural challenges in translating scientific research into commercially viable technologies. These include limited industry-academia collaboration, inadequate risk capital for high-risk and deep-tech research, and relatively weak private-sector investment in R&D. Although private industry’s contribution to national R&D expenditure has increased substantially, there remains considerable scope to expand industry-led research and strengthen the connection between research institutions and markets. 

To address this challenge, the Union Cabinet approved the Research, Development and Innovation (RDI) Scheme on 1 July 2025 with a total outlay of ₹1 lakh crore over six years. The scheme aims to encourage industries, startups, MSMEs, and research institutions to undertake high-impact research in strategic and sunrise sectors by providing long-term, affordable financing.

Objectives

• Strengthen Private Sector Participation: Encourage greater involvement of private enterprises, startups, and industries in advanced research, development, and innovation through financial and institutional support. 
• Advance Strategic and Emerging Technologies: Promote research in priority sectors that are crucial for India’s long-term growth and global competitiveness. 
• Promote Technological Self-Reliance: Support the development and commercialization of indigenous technologies in strategically important sectors, reinforcing the vision of Atmanirbhar Bharat and enhancing economic and national security. 
• Maintain Flexibility in Funding Priorities: Provide the flexibility to extend support to emerging technologies or sectors of national importance as they evolve, ensuring that the scheme remains responsive to changing public and strategic needs. 

Focus Sectors

• Energy and Climate: Energy security, transition, and climate action projects.
• Deep Tech: Quantum computing, robotics, and space technology.
• Artificial Intelligence: AI applications in agriculture, health, and education.
• Life Sciences: Biotechnology, biomanufacturing, synthetic biology, pharma, and medical devices.
• Digital Economy: Digital agriculture and broader digital infrastructure.
• Strategic Security: Technologies vital for national indigenization, economic security, and Atmanirbharat (self-reliance).

Functioning

The RDI Scheme operates through a two-tier funding mechanism designed to channel public resources towards private-sector research and innovation. At the first level, a Special Purpose Fund (SPF) has been established within the Anusandhan National Research Foundation (ANRF), which serves as the custodian of the ₹1 lakh crore RDI corpus. The SPF does not directly finance individual companies; instead, it provides funds to Second-Level Fund Managers (SLFMs), which may include Alternative Investment Funds (AIFs), Development Finance Institutions (DFIs), NBFCs, and Focused Research Organisations. These fund managers subsequently finance eligible technology entities through long-term, low- or nil-interest loans and equity investments, particularly for startups.

The scheme follows a specialised risk-assessment framework rather than conventional commercial lending criteria. Projects are assessed on factors such as technological innovation, Technology Readiness Level (TRL), commercialisation potential, market opportunities, management capabilities, and expected strategic impact. Financing is primarily intended for transformative R&D projects at TRL 4 and above, helping bridge the gap between research and commercial deployment.

ANRF also plays an important role in the governance, monitoring, and evaluation of the Fund. Its Executive Council oversees the broader governance framework, while the RDIF management structure is responsible for operational management. Monitoring mechanisms are intended to track the financial and technical progress of funded projects and assess their performance against expected outcomes. The framework also places emphasis on indicators such as technological advancement, commercialisation, and the long-term sustainability of supported projects. This structure is intended to ensure that public funding supports high-risk, high-impact and commercially promising innovations, rather than routine or incremental R&D.

Performance

The Research, Development and Innovation (RDI) Scheme remains in its early stage of implementation, having been formally launched in November 2025, with its funding framework operationalised during 2026. Consequently, long-term outcomes such as patents, successful commercialisation, productivity gains, and employment generation are yet to be fully evaluated. However, the initial implementation has already generated significant demand from technology-focused enterprises 

Since the launch of the Scheme, financial assistance of ₹1,000 crore each has been sanctioned to two Focused Research Organisations (FROs), namely the Technology Development Board (TDB) and the Biotechnology Industry Research Assistance Council (BIRAC), aggregating to ₹2,000 crore. Of this, ₹500 crore has been disbursed to TDB in March 2026 for onward financing of eligible technology entities. TDB has, so far, approved 22 projects with a total project cost of ₹4,744 crore, involving RDI Fund support of ₹2,192 crore.

BIRAC has shortlisted 8 projects involving ₹390.35 crore for support under the RDI Scheme. The RDI Scheme does not provide financial grants. (PIB report) Financial assistance under the Scheme is extended primarily through long-term, low-interest loans, equity and equity-linked instruments, in accordance with the approved Scheme framework.

Table 1: Trends in India’s Gross Expenditure on Research and Development (GERD), 2019–20 to 2023–24 

Source: Ministry of Science and Technology

The latest statistics  from the Department  of Science and Technology’s  Research and Development Statistics at a Glance 2025-26 show a shift in both the scale and composition of India’s research expenditure. Earlier the private sector used to contribute much less but now private industry contributed 45.2% of India’s total R&D expenditure, almost matching the combined government sector’s contribution of 48.2%. (The Policy Edge)

This marks a substantial improvement in private-sector participation compared to previous years and reflects increasing industry confidence in research-led growth. While India’s Gross Expenditure on Research and Development (GERD) is projected to increase, it still remains well below the global average and behind leading innovation-driven economies. Despite this progress, industrial R&D expenditure remains concentrated in a few technology-intensive sectors, particularly transport equipment, pharmaceuticals, biotechnology, information technology, and electronics. Furthermore, multinational enterprises account for more than 70% of business R&D expenditure, indicating that domestic firms still have considerable scope to expand their investment in innovation.

Impact

• Economic Impact

The RDI Scheme is expected to support the development and commercialization of indigenous technologies, the scheme is expected to enhance industrial productivity, improve export competitiveness, reduce dependence on imported technologies, and create high-value employment opportunities.

• Impact on Startups and MSMEs

Deep-tech startups and technology-driven MSMEs often struggle to secure long-term financing due to the high risks and long gestation periods associated with research projects. The RDI Scheme addresses this financing gap by providing low-interest loans, refinancing, equity support for startups, and access to a Deep-Tech Fund of Funds. These measures are expected to encourage entrepreneurship, improve the survival rate of technology startups, and accelerate the development of innovative products and services in sectors such as artificial intelligence, biotechnology,  robotics and semiconductors. 

• Strategic and Technological Impact

A major impact of the RDI Scheme will be in strengthening India’s technological self-reliance and strategic capabilities. By promoting indigenous innovation in these areas, the scheme seeks to reduce import dependence, improve supply chain resilience, enhance national security, and position India as a global leader in frontier technologies. These efforts are aligned with the broader vision of Atmanirbhar Bharat and Viksit Bharat 2047.

• Impact on Private Sector Participation

Recent DST data show that private industry now contributes 45.2% of India’s total R&D expenditure, nearly matching the government’s contribution of 48.2%. By providing affordable long-term financing and reducing investment risks, the scheme is expected to further accelerate private-sector investment in research and innovation, making industry a major driver of India’s technological advancement.

Emerging Issues

• Private firms remain reluctant to invest in uncertain, long-term research and development activities.
• Complex administrative procedures often delay project approvals and timely release of financial support.
• Limited partnerships reduce knowledge exchange, innovation, and effective technology transfer between stakeholders.
• Insufficient availability of skilled experts slows research in advanced and emerging technology sectors.
• Research infrastructure remains concentrated, leaving many regions with limited innovation and research opportunities.
• Many research outcomes fail to reach markets due to inadequate commercialization support mechanisms.
• Strong monitoring and evaluation systems are essential for ensuring transparency, accountability, and measurable outcomes.

Way Forward

• Simplify funding and approval procedures to enable faster access to finance, particularly for startups and MSMEs. 
• Strengthen university–industry linkages through Technology Transfer Offices (TTOs) to facilitate patenting, licensing, and commercialisation of research. Existing government technology-transfer institutions demonstrate the value of such mechanisms. 
• Develop regional innovation clusters connecting universities, research institutions, startups, industries, and investors to broaden participation beyond major innovation centres.
• Expand public-private partnerships to leverage additional private capital and technical expertise alongside RDI Fund support.
• Strengthen monitoring and independent impact assessment using indicators such as TRL advancement, patents, technology transfers, private investment mobilised, commercialisation, and employment generation. 

Selected References and Important Links

1. Press Information Bureau. (2025, August 7). Parliament question: R&D investment in India. Ministry of Science & Technology, Government of India.  https://www.pib.gov.in/PressReleasePage.aspx?PRID=2153547&reg=3&lang=2

2. Press Information Bureau. (2026, July 29). Parliament question: Low-interest, long-term loans/financial grants under RDI Scheme. Ministry of Science & Technology, Government of India.  https://www.pib.gov.in/PressReleaseDetail.aspx?PRID=2291143&reg=6&lang=1

3. Department of Science & Technology. (2026). Research, Development and Innovation (RDI) Cell. Government of India. https://dst.gov.in/rdi-scheme/research-development-and-innovation-rdi-cell 

4. Prime Minister’s Office. (2025, July 1). Cabinet approves Research Development and Innovation (RDI) Scheme to scale up research, development and innovation in strategic and sunrise domains. Government of India. https://www.pmindia.gov.in/en/news_updates/cabinet-approves-research-development-and-innovation-rdi-scheme-to-scale-up-research-development-and-innovation-in-strategic-and-sunrise-domains/?utm_source=chatgpt.com

5. Anusandhan National Research Foundation. (2026). Research Development and Innovation Fund (RDIF). Department of Science and Technology, Government of India https://rdifund.anrf.gov.in/

6. Press Information Bureau. (2026, July 30). Parliament question: Expenditure on R&D. Ministry of Science & Technology, Government of India.  https://www.pib.gov.in/PressReleasePage.aspx?PRID=2291780&reg=3&lang=1

7. The Policy Edge. (2026, August 5). Private industry lifts India’s R&D spending as research intensity reaches 0.84%.  https://www.policyedge.in/p/private-industry-lifts-indias-rd-spending-as-research-intensity-reaches-084

About the Contributor

Pritha Choudhury is a postgraduate in Economics from Jadavpur University. Her academic interests include public policy, economic development, innovation policy, and data-driven policy analysis. 

Reviewers: Ameya Satam, Kavin

Disclaimer

The views and opinions expressed in this policy update are those of the author and do not necessarily reflect the official position of IMPRI or any affiliated institution. While every effort has been made to ensure the accuracy of the information and data presented, readers are encouraged to verify facts independently before relying on them for any decision-making purpose.