Private Sector R&D Remains a Focus of FM Sitharaman’s Budget

Finance Minister Nirmala Sitharaman has proposed setting up a Nuclear Energy Mission for research and development (R&D) with an investment worth Rs 20,000 crore in the union budget 2025-26 on February 1. The mission will mainly focus on small modular reactors (SMRs).  

During her budget speech, Sitharaman announced that the government has planned to explore a fund of funds to boost the Startup ecosystem with a fresh investment of Rs 10,000 crore. Additionally, the government has proposed an Alternate Investment Funds (AIFs) for Startups. 

“Now, a new Fund of Funds, with expanded scope and a fresh contribution of another 10,000 crore will be set up,” said FM Sitharaman. 

To promote global capability centres (GCCs) ecosystem, particularly in emerging tier 2 cities, the government has proposed setting up a national framework to guide states. The government’s framework will focus mainly on enhancing the availability of skilled resources and infrastructure, and regulatory reforms. 

The proposals have come at a time when R&D spending, particularly by the private sector, has been a central concern flagged in the recently released Economic Survey 2025. During a press conference, the Chief Economic Advisor (CEA) V Anantha Nageswaran, said private sector’s expenditure on R&D is very low despite a lot of incentive schemes provided by the government. The government contributes 50% of the total R&D spending in the country whereas the business enterprises' spending accounts for only 41%, he added. Nageswaran also raised concerns regarding sector-centered investments on R&D by the private sector. He highlighted R&D is one area where the private sector should make improvements. 

“Only 41% R&D investment happens from the private enterprises... This is one area where the private sector can contribute...whatever R&D happens in the private sector is not only low but is also sectorally concentrated, that is one area of improvement,” said CEA, during a press conference on January 31.