RT team
To establish India as a global innovation powerhouse, Deloitte India Partner Rohinton Sidhwa suggests introducing a Production Linked Incentive (PLI) scheme focused on research and development (R&D) in the upcoming Budget for 2025-26. He observes that the government is shifting from tax holidays to investment and employment-oriented policies, such as PLI initiatives. In this context, broadening PLI to include R&D, specifically inviting foreign companies, could significantly accelerate India’s emergence as a world-class R&D hub.
Set to be unveiled on February 1, the Budget 2025-26 offers an opportunity to incentivize both innovation and R&D spending by attracting global centers to Indian soil. Sidhwa emphasizes that establishing strong domestic research facilities would lessen reliance on advanced economies for technology, while boosting import substitution. A dedicated PLI for R&D, he argues, could spark that transformation.
Additionally, Sidhwa underscores that incentivizing multinational firms to locate their R&D operations in India could spur foreign direct investment (FDI). Given India’s position as a service-driven economy, nurturing such a move would likely yield substantial foreign exchange. This aligns with Finance Minister Nirmala Sitharaman’s announcement in the Interim Budget 2024-25 about forming a large-scale financing pool of Rs 1 lakh crore for private sector-driven research. The government is now determining how best to organize and implement this fund, following discussions with financial technology professionals and industry stakeholders. Because private sector R&D investment remains sluggish despite tax exemptions, the administration hopes to actively partner with and encourage businesses to take on greater R&D risk.
