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Generally, innovation is promoted by research and development of technologies that are intended at increasing the competitive capability of manufacturing concerns. Largely speaking, manufacturing-related R&D covers improvements in existing methods or processes, or wholly new processes, machines, or systems. Research and development expenditure is the money spent on creative work undertaken on a systematic basis to increase the storage of knowledge and the use of this knowledge to develop new appliances. Business firms usually incur research & development expenses in the development of new products or services. R & D expenses include patents, trademarks, intellectual property, and technological systems. From the corporate history of India, it was observed that business houses failed to accept newness or offer new innovative ideas, products, or services to customers and gradually disappeared from the market. For example Bajaj scooter, HMT clock, and Royal Enfield. This was due to a lack of innovation in the product and a lack of investment in Research and Development. At the same time, countries having heavy research & development expenses are considered as developed economies due to new products, new services, new ideas, and developed or high growth rate of the economy. Thus, innovation is required to accelerate the development of the manufacturing industries in India. R&D is the investment into an organization’s future, and this asset needs to be safeguarded. Thus companies have to be innovative in order to have sustainable development. So there is an urgent need to strengthen India's manufacturing sector by focusing more on Research & Development activity.

Yuko Aoyama and Balaji Parthasarathy(2012) provided a theoretical framework that India’s sole mixture of market assets has played an important role in making it possible MNEs to advance their functions. This study recommended that India is budding as a key R&D location for BOP-oriented products, particularly for MNEs. In the course of this study, it contributes to the literature on the globalization of R&D facilities, and on the role of developing countries as locations for cultivating the BOP market.

Xavier Cirera, and Leonard Sabetti (2019) analyzed empirically the impact of firm-level innovation on employment. It studied that product innovation, when successful in getting additional sales to the firm, has a positive direct impact on employment in the short run. The empirical estimates recommended that in lower- and middle-income countries, particularly in Africa, where innovations are more incremental and there may be fewer efficiency gains due to the innovation, the employment growth related to a dollar increase in sales from innovative products is larger than in middle- and high-income countries. Moreover, it observed that for most countries if all products could be replaced by new or advanced products, the overall level of employment of the firm would be higher than the previous level. Conversely, for high-income countries, new sales attributable to innovation create new employment but at lower rates, as the new or upgraded products are more efficient in the use of labor than old products, thus generating some labor displacement. It studied product innovation as the main channel of employment creation.

Ganguli, S.(2009) analyzed the data of 10 sectors of Indian manufacturing industry for the period of 11 years from 1995-96 to 2005-06 by using correlation and multiple regression analysis method. It provided a result that in the base metals sector, R&D activities affect sales growth, which can be due to the innovations required for the companies in this sector for long-term growth. And in the chemicals sector, both marketing performance and R&D activities affect sales growth. On the other hand, this study found that R&D and marketing do not affect the sales growth in certain industrial sectors in India like Electronics, nonelectrical machinery, textiles, nonmetallic mineral products, food products, beverages and tobacco, and plastics and rubbers, even though above 5 percentage sales growth rate had been made known in these sectors for 11 years period and also considerable amounts of R&D and marketing had been spent by the companies in these sectors. Thus, this study analyzed that neither marketing nor R&D activities is significantly contributing to sales growth in most of the industrial sectors in India.

Das, P., & Das, S. (2015) analyzed 43 drugs and pharmaceutical companies consisting of large-scale firms, medium-scale firms, and small-scale firms in the Indian Pharmaceutical industry for the period of 18 years from 1991 to 2008. For this purpose advanced econometric techniques viz; Panel regression and Vector Auto Regression had been used. It was found that significant determinants of R&D are the last period’s concentration ratio, gross fixed asset, cost margin, and profit margin. The market structure viz; concentration ratio and a gross fixed asset of the last period affect R & D. R&D intensity is positively connected to the last period’s cost margin. Market performance affects R&D intensity and the relationship relies on the size of the firm.

Schimke, A., & Brenner, T. (2014) it concluded that the autocorrelation of growth rates differ with the size of the firm. In view of all firms in the sample of 1,000 firms operating in Europe for the period of 4 years from 2003 to 2006, the firms give you an idea about strong autocorrelation in their year-to-year growth rates. Moreover, it found that this autocorrelation is stronger for larger firms and for small and medium-sized enterprises, there is no significant autocorrelation of growth rates. It studied that there is a strong positive relationship between intangible innovation activity (R&D expenditures) and growth for large firms.

Gupta A. (2019) it scrutinized the relationship between ownership structure, capital structure, and R&D expenditure for 212 Indian manufacturing companies for the period of 5 years from 2011 to 2015. The outcomes pointed out that there is a positive relationship between R&D intensity and leverage of a firm implying that an Indian firm with high leverage does invest in R&D activities. Moreover, it found that there is a positive impact of foreign institutional ownership on R&D spending. It recommended that these investors encourage R&D spending in Indian firms. Thus, investments by foreign investors are supposed to boost the image of Indian companies and they are in a better position to raise funds from the capital markets. It also demonstrates the long-term interests of foreign investors which is excellent for the Indian stock markets and for the growth and development of the Indian economy.

Global R&D (Research & Development) Scenario

Scenario analysis allows us to anticipate future developments, and to evaluate strategies for responding to these events or conditions through an exploration of alternative futures. These scenarios help us to prepare for the different futures that may unfold. The following table shows share of Global R&D(Research & Development) Spending.

Table- 2.1: R&D Spending as % of GDP:

(Source: Statistical yearbook. (n.d.). Retrieved July 08, 2022, from https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS?most_recent_value_desc=fals)

Table 2.1 shows the share of global R & D is the lowest compared to other countries like China, US, France, Germany & Japan. It is the lowest among the key competing nations like China & US, While Japan is the Largest global spender on R & D expenditure from 2009 to 2018. From this, we can see that India’s average spending on R & D for the last 10 years is the lowest at 0.720% compared to other countries like China, US, France, Germany & Japan. On average, it is the lowest at 0.720% among the key competing nations like China at 1.950% and the US at 2.794%. While Japan is the largest global spender on R & D expenditure from 2009 to 2018.

Currently, India’s spending on R & D is only 0.655% of GDP in 2018. It is the lowest among the key competing nations like China & US. China & US spending on R & D are 2.140% & 3.000% respectively. While India’s spending on R & D is well below 2-3% of spending on R & D of developed countries like the US, France, Germany, and Japan. In India it derives minimum growth & sustainability of R & D, its R & D fundamentals have to be strong & excellent. India’s spindling on R & D Expenditure is the lowest compared to China, the US, and other developed countries. Though the major MNCs have considered India as a favorable destination, India needs to have wider policies to attract more investments in this area.

The present study deals with the Research & Development activity prevalent in the manufacturing industries in India.

Importance of Research and Development Expenditures

One of the important contributors to the economy of any country is research and development expenses and therefore growth and sustainability of R&D are essential in the economy. Since the rapidity of technology is going faster, and new technologies and processes are fetching important, R&D is a vital factor in success of the companies and economies in a globalised and competitive world. Manufacturing companies that constantly and tirelessly spend on R&D do better than others. Though R&D is generally undertaken by industry and academia, the government plays a key role in developing policies that foster R&D and its sustainability. The innovation may lead to cost reduction of products and process for society.

Need for Research and Development Expenditures in the Indian Manufacturing Industry

The most common problems in manufacturing industries these days are Lack of investment in the Research and Developing section, global competitiveness with low-price manufacturers like china, lack of potential buyers for high-price products, lack of adaptability in industries, lack of experience of Indian industry in manufacturing, lack of initiation from the Government, etc. To overcome these problems, innovation is required to accelerate the development of the manufacturing industries in India. It is no need to say we have a very big firm in manufacturing but when it comes to investment for research for new products or technology, investors’ interest always seems low. Thus research and development activity is the most contemporary issue in Indian manufacturing industries. Therefore, there is an urgent need for India to strengthen the competitiveness of the manufacturing industries in order to develop into a manufacturing and export base in the world.

R & D is recognized as an important factor in economic growth and balance. R & D can easily lead to highly valued technologies, strategies, and designs for your company that could be the origin of potential value when considering sustaining a competitive advantage. Manufacturing R&D is conducted in a wide array of industries and businesses of all sizes. The heaviest R&D expenditures take place in computers and electronics, transportation equipment, and chemicals (primarily pharmaceuticals.)

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