Moving from grant-based to finance-based support for R&D carries both promise and risk. Critically analyse in the Indian context.

India spends only about 0.64% of GDP on R&D (GERD), and private firms fund roughly 36% of it. In leading innovation economies, private firms fund more than 70% [3]. The ₹1 lakh crore RDI Scheme, approved in July 2025, responds with long-term loans and refinancing at low or nil interest instead of grants [1]. This shift is a promising way to draw in private capital, but it needs safeguards.

Promise of finance-based support

• Crowding-in: support is capped at 50% of project cost, so firms must put in their own money [2].
• Self-renewing corpus: repaid loans can fund new projects. A two-tier structure routes money from a Special Purpose Fund within ANRF to professional fund managers, which keeps the government at arm's length from individual investment decisions [1].
• Bridging the "valley of death": the scheme funds projects at TRL 4 and above, which is the costly stage of moving a lab-proven idea to market [2].
• Strategic flexibility: new sectors can be added, such as advanced chemicals, petrochemicals and materials in October 2026, to cut import dependence [5].

Risks and limitations

• Penalty on failure: research often fails, and a loan must be repaid even when it does. The scheme provides no grants [2], so firms may prefer safe, near-market projects.
• Exclusion of small firms: MSMEs and startups may not be able to raise the matching 50% share.
• Basic research left out: ideas at TRL 1–3 are not eligible, so they still depend on scarce public grants.
• Slow uptake: of ₹2,000 crore sanctioned to TDB and BIRAC, only ₹500 crore had been paid out by March 2026 [4]. That is about 0.5% of the corpus.
• Crowding out: large firms may use cheap public loans to replace R&D spending they would have done anyway.

Way forward

• Build a continuum: ANRF grants for early-stage research, and RDI loans for scale-up.
• Offer equity or first-loss cover for startups, and appoint sector-specialist fund managers.
• Publish sector-wise disbursal data to make the scheme accountable.

Overall, finance-based support suits technologies close to market, while grants remain essential for high-risk basic science. A hybrid model that ties loans to additional private spending and pairs them with grants can raise private R&D. That would advance SDG 9 (industry, innovation and infrastructure) and the goal of a self-reliant, research-led Viksit Bharat.