Indian Firms Don't Invest in R&D Because of Assured Profit Pools: Surjit Bhalla

Indian firms don’t invest in R&D as they get protection from global competition in form of tariff and non-tariff barriers and hence, assured profit pools, said Surjit Bhalla, former executive director for India at the International Monetary Fund. He was speaking at the Outlook Planet’s C3 Summit and Awards on Monday.

He said that competition gets hampered with the level of protection that Indian firms currently have.

“They (Indian firms) become very comfortable with high rates of protection,” he said.

Bhalla said that companies have profits but don’t put that money into innovation as it requires investment.

“Competition brings accountability. In order to survive, you have to compete,” he said.

The economist asked for India to its cut tariff and non-tariff barriers to encourage innovation and competition.

“A big problem in India is not just the tariff barriers, which are the highest in the world, but also the non-tariff barriers. That is when you see innovation. That is what affects profits and investment.”

Touching on the issue of US President Donald Trump’s tariff war with other countries, Bhalla said, “We are not talking about whether what US is doing is good or bad. My concentration is India and India should definitely cut import taxes.”

He also said that small and medium industries of the country should be given an environment to compete at the global level.

“We have to give them best environment possible and compete at the global level,” he said.

Bhalla said innovation and competition would help India to grow at a rate of 7.5 percent and more.

“We should facilitate innovation and competition to become a developed country and to grow 7.5 percent or more.”