The ₹1 trillion innovation fund announced by finance minister Nirmala Sitharaman in the interim budget on Thursday is expected to give a big boost to local technology development and manufacturing, and help India move beyond providing high-tech services towards development of products, experts said.
In her interim budget speech on Thursday, Sitharaman said the fund would provide 50-year loans with low or nil interest rates to private-sector companies to scale up research and innovation in sunrise sectors. “For our tech-savvy youth, this will be a golden era,” she said. “We need to have programmes that combine the powers of our youth and technology.”
Detailing how the fund will work, union IT minister Ashwini Vaishnaw said, “The fund will enable startups to create products. The contours of this entire corpus, and how it’ll work, will come out in detail in the coming days. The focus will be on selecting certain projects to begin with, and then moving on to a proposal-based system through which products and technologies can be selected.” Vaishnaw added that the fund will define clear goals and deliverables for projects funded through it.
Experts said the fund would bridge a crucial gap in terms of access to capital for R&D in emerging technologies, and help make India a manufacturing hub for products such as semiconductors, high-energy density batteries, and electric vehicles, among other things. The long tenor and low interest rates promised by the finance minister will ensure commercial viability of companies availing these loans.
“In high-tech manufacturing, India needs to move on from services to high value-added products in semiconductors, electronics, drones, med-tech, and even the space industry,” said Ajai Chowdhry, co-founder, HCL Technologies, and chairman, Epic Foundation. “The Centre’s ₹1 trillion fund will enable deep research and development in these sectors and will help take India towards the trajectory of becoming a product nation—not just services.”
“The infusion of capital will not only empower the sector to attract and retain top-tier talent, but will also provide the impetus for the creation of cutting-edge courses that align with the demands of a rapidly evolving technological landscape,” said Sanjay Lodha, the CMD of Netweb Technologies, a high-end computing solutions (HCS) provider.
Rahul Guha, director, Crisil Ratings Ltd., said the fund would “help reduce entrepreneurs’ reliance on high-cost equity funding, while building investor confidence and conventional lender comfort”.
Another beneficiary from the innovation fund is likely to be the renewable energy sector, experts said. Innovation in green power generation and storage, as well as less emission-intensive technologies, can help speed up India’s transition to a net-zero economy.
Citing the model of developed markets, Jayanth Kolla, co-founder and partner, Convergence Catalyst, a global research and advisory firm, said the government should use this fund to make the public sector one of the first customers for tech companies working in fields such as artificial intelligence.
“If you look at the US and the European Union, early innovation in technology always happens with the government as the early customer—be it in defence contracts, space missions as seen with Nasa, and so on,” he said. “In India, the government should also play such a role. This will provide the young startup ecosystem a government-driven client base to start with,” he added.y
Experts said the creation of such an innovation fund could also have a knock-on effect on the broader economy, as it fosters a culture of innovation. Leveraging these advanced technologies is also anticipated to impart greater efficiency to the economy, helping extract more value from limited resources.
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Published: 01 Feb 2024, 11:54 PM IST