How does the multi-tier structure of the Research Development and Innovation Scheme try to correct the low private-sector share in India's R&D spending? Discuss its limitations.

India spends well below 1% of GDP on R&D, and private industry only recently came to fund about half of the national total (GERD) [4]. The ₹1 lakh crore RDI Scheme, approved by the Cabinet on 1 July 2025, tries to raise this share. It does not hand out grants. It routes patient risk capital to firms through a layered structure [1].

How the multi-tier design attracts private R&D

• Tier 1, the corpus: a Special Purpose Fund within ANRF holds the money as custodian. This keeps long-term capital apart from yearly spending cycles [1].
• Tier 2, the specialist managers: Second-Level Fund Managers choose and finance the firms. TDB handles deep-tech and BIRAC handles biotech, so each sector gets experienced appraisers [3].
• Cheaper, longer finance: the Scheme offers long-tenor loans at low or nil interest and supports a Deep-Tech Fund of Funds. Private venture capital usually avoids this kind of slow, high-risk work [1].
• Funding the "valley of death": the money targets higher TRLs. In Project VeerAI, TDB gave ₹130 crore of a ₹260 crore AI-chip project as Optional Convertible Debt to take it from TRL-5 to TRL-9. Private funds cover the other half [2].

Limitations

• Approvals are ahead of the cash: TDB has approved 22 projects with ₹2,192 crore of RDI support but has received only ₹500 crore [3].
• Debt strain on young firms: loans must be repaid before products earn revenue. The terms (interest rate, moratorium, conversion) are not made public [2].
• Additionality is unproven: private R&D's share was already rising [4]. No data shows that RDI money brings in new private investment instead of replacing it.
• Ministries work separately: MeitY's DLI Scheme caps chip-design support at ₹15 crore per application [5], and RDI money comes through DST. There is no clear path from one to the other, and no check against funding the same costs twice.
• Narrow base and dual role: only two managers exist so far, and each both appraises projects and invests in them [3].

The RDI Scheme moves India from grant-led to co-investment-led innovation finance. To work, it needs assured release of money from the Special Purpose Fund, published data on how much private money each project attracts, repayment schedules matched to TRL milestones, and more fund managers. With these, the Scheme can grow private R&D and advance SDG 9 and the goal of Viksit Bharat.