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India is a hot R&D destination

Views 3 Views    Comments 0 Comments    Share Share    Posted by Sasmita 08-01-2009  
NEW DELHI: India emerges as the 2nd largest preferred destination for global R&D and innovation with US$12.9 billion of R&D investment b

eing poured in India by 184 top R&D companies globally, a recent study reveals.

Booz & Company’s fourth annual analysis of the world’s 1,000 largest publicly traded corporate research and development spenders found that companies making global R&D investments in India and China perform better because of the labour cost arbitrage and dominance of talent pools to undertake complex R&D projects.

The study analyses that a large English-speaking talent pool and fast growing auto, computing and electronics, and pharmaceutical markets are the key reasons for India emerging as an Innovation destination.

The study also states the fact that companies that invest more than 10 per cent of their total R&D spend in countries like China and India do better -- 25 per cent better on three-year sales growth, and as much as 67 per cent better on the three-year market cap growth.

“This is mainly because India and China have highly skilled engineers and labour that can be hired at cheaper costs. These skills are imperative for undertaking complex corporate R&D projects,” remarks Vikas Sehgal, Partner, Booz & Co.

The other key finding of the report are as follow:

* Though companies headquartered in China and India contribute 1 per cent of the Global Innovation 1000’s total spending, they increased their R&D spending by more than 25 per cent in 2007, far outspacing the worldwide five-year CAGR of 5.6 per cent.

* As per industry experts, India is poised to become the fifth largest auto market in the world as manufacturing and sale of cars is expected to increase in emerging markets like India and China.

* India is the 3rd largest investment destination for Computing & Electronics (C&E): With investments worth US$6.8 billion in the C&E sector, India is the 3rd largest R&D destination behind China and UK. In addition global majors like HP spend 80 per cent of their R&D budgets in facilities like UK, India, Israel, Russia, China and Japan.

Here are the implications of R&D globalisation:

* India and China are transforming the global economic landscape and are expected to contribute to 50 per cent of growth in world GDP.

* Both India and China are expected to become major players in several industries including automotive, commercial vehicles, aerospace, telecommunications, shipping, construction, etc.

* Increased demand is creating a new R&D imperative for Indian based companies

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