Patient capital rather than grants: evaluate the shift in India's innovation-financing philosophy under the RDI Scheme.

India's gross expenditure on R&D (GERD) was only 0.64% of GDP in 2020-21, and private firms contributed just 36% of it [5]. The ₹1 lakh crore Research, Development and Innovation (RDI) Scheme responds with patient capital: long-tenor, low- or nil-interest loans and equity rather than non-repayable grants [2][3]. The shift is sound, but it can only complement grants, not replace them.

Nature of the Shift

• Two-tier fund-of-funds: a Special Purpose Fund within ANRF finances Second Level Fund Managers (SLFMs), who in turn finance firms [2].
• The first cohort has 19 SLFMs (14 AIFs and 5 Focused Research Organisations), with ₹7,131 crore committed [1].

Merits

• Revolving corpus: loans are repaid rather than spent, so the real cost to the exchequer is well below ₹1 lakh crore [3].
• Crowding-in: SLFMs must raise private capital equal to the RDIF contribution [1]. This gives investors a stake in the outcome.
• Bridging the "valley of death": the scheme funds TRL 4+ projects [1], a stage that grants rarely reach and that banks avoid because there is no collateral.
• Market discipline: professional fund managers, not ministries, choose the firms. Funding is aimed at sunrise and strategic sectors such as AI, quantum and energy security, which supports technological sovereignty [2].

Limitations

• Basic research left out: TRL 1–3 work gets nothing from the fund. Meanwhile, the NRF allocation fell from ₹2,000 crore (BE) to ₹259 crore (RE) in 2023-24 [5].
• Thin project pipeline: India has about 260 researchers per million people, against 1,602 in China [5]. Cheap capital still needs fundable projects.
• Weak corporate appetite: private firms spent only 1.46% of sales on R&D [5]. Support is capped at 50% of project cost [4], so firms must find the other half themselves.
• Additionality and delay: nothing tests whether the funded R&D would have happened anyway. Layered approvals (Expert Advisory Committee → ANRF Executive Council → EGoS) slow deployment [1].
• Commitment is not disbursement: DST and DBT have historically spent less than their budget estimates [5].

On balance, patient capital fills a real mid-TRL financing gap that grants never served, so the shift is a welcome step. Its success depends on three things: publishing data on money actually paid out, judging SLFMs by the private capital they raise, and protecting ANRF grants for basic research. If it complements grant funding rather than replacing it, the RDI Scheme can move India towards the long-missed 2% GERD target of the 2013 STI Policy [5] and towards Viksit Bharat 2047.