India needs mandatory R&D disclosure to boost innovation and market efficiency
India's corporate R&D intensity stagnates at 0.23% of GDP, significantly below global peers, due to firms' risk aversion and lack of information in capital markets. This undervalues innovation, leading to underproduction and a lack of mechanisms to filter out low-quality projects. A Mandatory R&D and Technology Disclosure Standard under SEBI's LODR Regulations is proposed to correct this. Such disclosures, covering R&D expenditure, patent activity, workforce composition, Technology Readiness Level, and innovation turnover, would reduce information asymmetry, lower capital costs, strengthen market discipline, and improve innovation productivity, ultimately fostering a more robust innovation ecosystem.
Key Points
- India's R&D intensity is low (0.23% of GDP) due to information asymmetry and undervaluation of innovation in capital markets.
- A mandatory R&D and Technology Disclosure Standard is proposed under SEBI's LODR Regulations to address this issue.
- The standard would require disclosure of five key innovation metrics, including R&D expenditure, patent activity, and Technology Readiness Level (TRL).
- Such disclosures are expected to reduce information asymmetry, lower capital costs, and enhance market discipline and innovation efficiency.
- The proposal suggests a voluntary phase for two years before making the disclosure mandatory.
Exam Facts
- India's corporate R&D intensity is 0.23% of GDP.
- The proposed standard would be under SEBI's Listing Obligations and Disclosure Requirements Regulations (LODR) 2015.
- The OECD's 2021 Intangibles Report highlights that countries with compulsory innovation reporting get more patents.
- The framework suggests disclosing five critical dimensions: R&D expenditure, patent activity, technology workforce composition, Technology Readiness Level (TRL) status, and innovation turnover.
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