Innovation not priority, firms spare little for R&D

Written by Pradip Kumar Dey | Mumbai, Sep 22 | Updated: Sep 23 2007, 07:34am hrs
India Inc has continued to cut down on research and development (R&D) spending despite the potential benefits from it and the well-predicted threat from liberalisation. While spreading wings globally and getting the multinational stamp is now the in thing for many Indian companies, R&D spendings by industry, as a whole, grew slower than the sales amount. In fact, R&D spending as a percentage of net sales continued to shrink.

In 2006-07, 251 big companies ratio of R&D to net sales was down to 0.66%, from 0.68 % in the previous year. In absolute terms, aggregate net sales income of 251 companies, however, rose 25.4% from Rs 7,51,722 crore in 2005-06 to Rs 9,42,659 crore in 2006-07. R&D expenditure rose 21%, from Rs 5,129 crore in 2005-06 to Rs 6,206 crore in 2006-07.

Automobile major Tata Motors led the pack in R&D spending with Rs 796.86 crore, as it forged ahead with new strategy of designing and developing its own vehicle brands.

After Tata Motors, in the top 10 were Ranbaxy Labs (Rs 483.82 crore), Dr Reddys Labs (Rs 292.80 crore), BHEL (Rs 253 crore), Sun Pharma (Rs 188.27 crore), Cipla (Rs 175.73 crore), Mahindra and Mahindra (Rs 170 crore), Infosys Techno (Rs 167 crore), Ashok Leyland (Rs 156.40 crore) and Cadila Health (Rs 156 crore).

As expected, companies in knowledge-based sectors such as pharmaceuticals and IT spent the largest share of their net sales on R&D. Six of the 10 companies with the highest R&D to net sales ratio are from the pharmaceuticals sector. The remaining companies in the list consists of players from the new economy-software, other chemical and biotechnology companies.

Among the sectors analysed, the significant increase in

R&D expenditure during 2006-07 was registered by textiles (192.1%), electric equipment (75.9%), paper (55%), fertilizers (49.4%), automobiles (48.5%), pesticides (34.7%) , steel (29.5%), IT (21.6%) and Pharmaceuticals (9.9%).

The total R&D expenditure of 37 pharmaceutical companies increased from Rs 2,226 crore in 2005-06 to Rs 2,447 crore in 2006-07.

On the other hand a decline in R & D expenditure was seen in the case of food & products (-48.1%), personal care(-23.7%), telecommunications(-16.8%), auto ancillaries(-8.5%) and refineries (-8%).