India Inc Didn't Slow Down On R&D Spends During Covid Pandemic: RBI Paper

The Covid pandemic did not lead to a curtailment on research and development expenditure by India Inc, an analysis by RBI officials has revealed.

After analysing data and disclosures from 1,161 companies, the paper by Siddhartha Nath, Shruti Joshi and Sadhan Kumar Chattopadhyay said that the likelihood of companies engaging in R&D (research and development) activities remained broadly unchanged in the immediate aftermath of Covid-induced economic slowdown.

"The resilience of R&D activities in the wake of a global shock (COVID-19) augurs well for sustained innovation and productivity growth for Indian companies over the long term during the post-COVID period," the paper said.

The paper, which does not represent the institutional views of the RBI, analysed the spends between March 2017 and March 2021 to arrive at the conclusions.

"Our findings suggest that the R&D activities by companies operating in India was broadly resilient to the economic shock induced by COVID-19 pandemic," the paper said.

It said that there was no significant impact of COVID-19 pandemic on the likelihood of company-level R&D activities in India, even after considering their differences based on size, access to digitalization, promotional expenses, and age.

The paper said that no such efforts have been undertaken to analyse the impact of the pandemic specifically on R&D spends in India, and cited an earlier paper which argues that investment in knowledge-based intangible capital, including R&D, is generally resilient to an economic crisis due to their large sunk costs borne at the initial stages of the investment.