Firm-level R&D activities in the Indian Organised Manufacturing : Evidence from the Annual Survey of Industries

In this paper, we investigate expenditure on R&D activities and its determinants in the organised manufacturing sector. We use balanced panel data drawn from the Indian Annual Survey of Industries (ASI) for the years 2015-16 to 2017-18 that has information on firms’ major characteristics and also has details on the R&D activities of the firms. We estimate the number of units engaged in the R&D activity as well as the status of R&D units and expenditure on R&D activities by broad industry group and firm size. The analysis points towards a weak R&D performance in India's organised manufacturing. We model the firm-specific determinants of R&D activities using a random-effects version of Cragg's double-hurdle model. Our analysis suggests that firm-specific determinants of R&D decisions are a two-step process determining the probability of performing R&D and the extent of R&D expenditure among the firms that report R&D activities