India needs mandatory R&D disclosure standard to boost innovation and market discipline
India's corporate R&D intensity, at just 0.23% of GDP, lags global peers due to information asymmetry and undervaluation of innovation in capital markets. To address this, a mandatory R&D and Technology Disclosure Standard is proposed under SEBI's LODR Regulations. This standard would require listed entities to disclose innovation metrics across five critical dimensions: R&D expenditure, patent activity, technology workforce composition, Technology Readiness Level (TRL) status, and innovation turnover. Such disclosures are expected to reduce information asymmetry, lower capital costs, strengthen market discipline, improve innovation productivity, and act as a non-distortionary policy instrument, fostering a more robust innovation ecosystem in India.
Key Points
- India's corporate R&D intensity is significantly lower than global peers, partly due to a lack of transparent information in capital markets.
- A mandatory R&D and Technology Disclosure Standard is proposed under SEBI's LODR Regulations to address this information asymmetry.
- The standard would require disclosure of five key innovation metrics: R&D expenditure, patent activity, technology workforce, TRL status, and innovation turnover.
- Implementing this standard is expected to lower the cost of capital, enhance market discipline, and improve innovation efficiency and productivity.
- The proposal suggests a voluntary phase for two years before making the disclosure mandatory to allow firms to familiarise and build data quality.
Exam Facts
- India's corporate R&D intensity stagnates at 0.23% of GDP.
- The proposed standard would fall under SEBI's Listing Obligations and Disclosure Requirements Regulations (LODR) 2015.
- The OECD's 2021 Intangibles Report highlights that compulsory innovation reporting leads to more patents and better commercial outcomes.
- The standard aims to disclose metrics across five critical dimensions, including Technology Readiness Level (TRL).
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