FDI in R&D: An Introspection

Of late, India has emerged as an attractive destination of foreign direct investment (FDI). Along with it, multinationals have been investing significantly in research and development in India. In this context, this paper makes an attempt to analyze salient features of FDI in R&D and makes an assessment of the gains from R&D initiatives of MNCs in India. To be specific, the paper attempts to demystify the FDI flows in R&D with a view to understand whether this type of flows would help in raising the innovation potential of India. We find that there has been a rise FDI in R&D in India. However, the rise has not been commensurate only with rise in Core R&D activities. Rather, more than 50% of the inflows in R&D by MNCs have come for non-core R&D activities. This will not help in promoting innovation culture in India and make India a global manufacturing hub.