NEW DELHI: The Indo-American Chamber of Commerce (IACC) has asked the Central Government to roll over the research and revelopment (R&D) expenditure benefit to companies under the Income-tax Rules for another ten years.

With India's gross domestic product (GDP) growing at almost 9 per cent per annum, it has become imperative to raise the amount committed for research and development, Deepak Pahwa, National President, IACC, said, adding that, "R&D is the key driver to growth, which enables corporations to achieve core competence and derive economies of scale to globalise their operations."

He pointed out that investment in R&D by industry as a whole had been low, only around 0.6 per cent of the annual turnover.

As compared to other developed nations, this amount was very low and would further be affected if the government withdrew the weighted deduction of R&D expenditure.

Organisations in India have started recognising the importance of research and development and have started spending anything between two per cent and four per cent of their sales on R&D. Especially this has become prevalent in sectors like pharma, energy, telecom and IT.

"To sustain such expenditure and help them stay competitive in the global environment the government needs to rollover the policy of offering incentives to organisations on R&D," Mr. Pahwa said. He said there was need for a right climate, which would induce greater industry R&D investment, as the share of expenditure by the private sector and the government was around 28 per cent and 72 per cent respectively.

This calls for urgent measures to reverse the trend. The private sector should be encouraged to invest in R&D, where the gestation period for accrual of benefits is long. A greater partnership between the industry and the labs is required to sustain the growth and development in India.

R&D needed to be supported by policy initiatives such as an investment inducing climate, innovation incentives, infrastructure, competitive capacity of the entrepreneurs and the quality of demand, the chamber said.

India's significantly lower operating cost, relatively strong research infrastructure and large reservoir of technocrats were proving to be an attractive mix for a growing number of major global contract research organizations to relocate their operations in India.

This was an emerging area that India could build on and consolidate to transform itself from a technology acquirer to a supplier, underlined Mr. Pahwa, adding that the "innovative ability of an economy ultimately determines its future and one of the best ways to start in both economic development and innovation is to have others do their research on your shores."

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