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India has attracted more foreign R&D projects than the US, UK and China combined

INDIAPOSITIVE

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India has seen a massive increase of FDI into research and development (R&D) in 2022, as multinationals seek to increase their technical talent base and diversify their innovation activities away from China.

In the first ten months of 2022, India attracted 225 FDI projects in R&D activities, up by 152% from the whole of 2021 and higher than any other full-year period on record, according to the latest figures from fDi Markets. These projects had an estimated $14.9bn of announced capital expenditure (capex), which is equivalent to a third of the global total so far in 2022 and more than double the capex announced in the second ranked country Canada.



Kavan Bhandary, the global director of corporate intelligence at consultancy Wavteq, told fDi that the spike in R&D projects demonstrates the shift by multinationals to develop their own engineering R&D divisions in India rather than using third-party providers.

“It's essentially moving from the cost arbitrage model to a model which directly reports to HQ or its R&D team in the HQ country,” he explained.

One prominent example of this is US banking giant JPMorgan Chase, which is set to hire more than 5000 technical staff across its operations in Bangalore, Mumbai and Hyderabad. Meanwhile, US-based software provider R1 RCM opened a new centre in Chennai, which is expected to create 3000 jobs by the end of 2022.

Mr Bhandary notes that for software R&D, which represents the vast majority of the tracked projects, India “provides a labour surplus to many companies in source markets where tech talent is harder to find”.

Western Indian states with well established tech hubs have attracted by far the highest number of foreign R&D investments, according to fDi Markets. The leading state was Karnataka, home to innovation hub Bangalore, has attracted 55 foreign R&D projects worth an estimated $2bn so far in 2022.

The rise in foreign R&D projects in India has come at the expense of several other major destination countries. fDi Markets figures show that so far in 2022, US-based companies have announced 17 R&D projects in China, compared with a whopping 153 such projects in India.

“The increase [of India’s inbound FDI into R&D] reflects some macro trends that continue to reshape the post-pandemic global economic landscape,” said Ravinder Kaur, a professor of Modern South Asian Studies at the University of Copenhagen and author of Brand New Nation, a book about India’s shift from a post colonial nation to an attractive investment destination.

She notes that India has benefitted from an “increasing reluctance to undertake scientific collaborations with China within academia”, which has a bearing on international R&D. An analysis by Nature found that the number of researchers reporting affiliations with both the US and China fell by 20% between 2019 and 2021.



 

my2cents

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India has seen a massive increase of FDI into research and development (R&D) in 2022, as multinationals seek to increase their technical talent base and diversify their innovation activities away from China.

In the first ten months of 2022, India attracted 225 FDI projects in R&D activities, up by 152% from the whole of 2021 and higher than any other full-year period on record, according to the latest figures from fDi Markets. These projects had an estimated $14.9bn of announced capital expenditure (capex), which is equivalent to a third of the global total so far in 2022 and more than double the capex announced in the second ranked country Canada.



Kavan Bhandary, the global director of corporate intelligence at consultancy Wavteq, told fDi that the spike in R&D projects demonstrates the shift by multinationals to develop their own engineering R&D divisions in India rather than using third-party providers.

“It's essentially moving from the cost arbitrage model to a model which directly reports to HQ or its R&D team in the HQ country,” he explained.

One prominent example of this is US banking giant JPMorgan Chase, which is set to hire more than 5000 technical staff across its operations in Bangalore, Mumbai and Hyderabad. Meanwhile, US-based software provider R1 RCM opened a new centre in Chennai, which is expected to create 3000 jobs by the end of 2022.

Mr Bhandary notes that for software R&D, which represents the vast majority of the tracked projects, India “provides a labour surplus to many companies in source markets where tech talent is harder to find”.

Western Indian states with well established tech hubs have attracted by far the highest number of foreign R&D investments, according to fDi Markets. The leading state was Karnataka, home to innovation hub Bangalore, has attracted 55 foreign R&D projects worth an estimated $2bn so far in 2022.

The rise in foreign R&D projects in India has come at the expense of several other major destination countries. fDi Markets figures show that so far in 2022, US-based companies have announced 17 R&D projects in China, compared with a whopping 153 such projects in India.

“The increase [of India’s inbound FDI into R&D] reflects some macro trends that continue to reshape the post-pandemic global economic landscape,” said Ravinder Kaur, a professor of Modern South Asian Studies at the University of Copenhagen and author of Brand New Nation, a book about India’s shift from a post colonial nation to an attractive investment destination.

She notes that India has benefitted from an “increasing reluctance to undertake scientific collaborations with China within academia”, which has a bearing on international R&D. An analysis by Nature found that the number of researchers reporting affiliations with both the US and China fell by 20% between 2019 and 2021.



Where does Japan and South korea stand?
 

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