India's private sector under-invests in R&D. Examine how the ₹1 lakh crore RDI Scheme seeks to address this, and assess its two-tier funding design.

India's Gross Expenditure on R&D is only about 0.64% of GDP. Private firms fund roughly 36% of it, against over 70% in China, South Korea and the US [2]. The ₹1 lakh crore Research, Development and Innovation (RDI) Scheme (2025) addresses this by making private research cheaper to finance, without paying for it outright [1].

How the Scheme Addresses Private Under-investment

• Patient capital: support comes as long-term loans at low or nil interest, equity and a Deep-Tech Fund of Funds over six years. Grants and short-term loans are excluded [2]. This is the long-gestation finance that banks avoid.
• Co-investment, not substitution: because the scheme gives no grants [5], firms put their own money at risk. Fund managers are expected to raise private money alongside the RDI capital [4].
• Scale-up focus: only projects at TRL 4 and above (proven in the lab) qualify. This bridges the "valley of death" between lab and market [4].
• Strategic sectors: energy security, climate action, quantum, AI and biotech [2]. Advanced chemicals, petrochemicals and materials were added from 8 October 2026 [6].

₹1 lakh crore corpus
      ↓
Special Purpose Fund (within ANRF) – does not invest directly
      ↓
Second-Level Fund Managers (AIFs, DFIs, NBFCs, FROs)
      ↓
Technology enterprises (TRL 4+)

Fig: Two-tier RDI fund flow [1][3]

Assessing the Two-tier Design

Strengths

• Arm's-length selection: the SPF does not invest directly. Professional managers pick projects [3], which reduces bureaucratic and political bias.
• Leverage and expertise: the first cohort of 19 managers (14 AIFs and 5 Focused Research Organisations) brings ₹7,131 crore of commitments and sector skills [4].
• Oversight: an Empowered Group of Secretaries under the Cabinet Secretary approves sectors and managers [1].

Concerns

• Slow deployment: about ₹7,131 crore is committed through the cohort [4] and about ₹2,192 crore through TDB's 22 projects [5]. Together this is under a tenth of the corpus.
• Risk aversion: managers who lend may prefer safe projects that are close to market. Early-stage science below TRL 4 still depends on grants.
• Crowding out: cheap credit may reach large firms that would have invested anyway. The extra intermediary layer also adds fees and reduces transparency.

The RDI Scheme rightly changes the state's role from giving grants to sharing risk. Its two-tier design gains professional discipline but loses speed. Faster onboarding of managers, public sector-wise data and reserved windows for MSMEs and green technology can make "Ease of Doing Research" [6] real, advancing SDG 9 and Atmanirbhar Bharat.