Consumer companies score low on R&D spending amid innovation chorus
Indian consumer firms are asserting their commitment to technology and innovation, yet their investment in research and development (R&D) remains unremarkably low. Analysis reveals that R&D spending barely rose to an average of 0.9% of sales, with...
India’s consumer companies raised average R&D spending to 0.9% of sales in FY26 from 0.5% five years ago.
Kolkata: India’s consumer companies are increasingly emphasising their commitment to technological advancement, localisation and innovation, but their actual research and development (R&D) spending remains low.
An ET analysis of 20 large companies across the fast-moving consumer goods, automobiles and electronics sectors showed that average R&D spending rose to 0.9% of sales in 2025-26 from 0.5% five years ago, with much of the increase coming from automobile and electronics makers. Experts termed the increase modest given the country’s push to rapidly move beyond manufacturing and build worldclass products, technologies and intellectual property.
“There is no doubt that spending on R&D has to increase as India as a nation and industry has to evolve into a products nation at a time when exports are increasing,” said Sunil Vachani, executive chairman of Dixon Technologies, one of India’s largest home-grown electronics manufacturing services providers.
Data was sourced from annual reports and regulatory filings with the Registrar of Companies. R&D spending includes research expenses as well as capital expenditure incurred for research activities. Vachani said the country is in transition, with manufacturing capacity having expanded significantly under the government’s ‘Make in India’ initiative.
It was followed by efforts to build a domestic component ecosystem, and a design-led ecosystem which could develop over the next two-three years, he said. “It is also not always correct to compare spending on R&D as a percentage of turnover, as a lot of turnover is ultimately a pass-through,” he said.
At the same time, companies faced higher expenses over the past five years due to geopolitical disruptions — first the Russia-Ukraine war and more recently the West Asia crisis — which drove up raw material costs and contributed to rupee depreciation. This inflation also compressed profit margins.
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Even so, many leading companies either kept their R&D investment steady or scaled it back during the five-year period. At ITC, R&D spending fell to 0.2% of sales in 2025-26 from 0.3% in 2020-21, despite an R&D budget of Rs 213 crore last fiscal. Britannia continued to spend around 0.26-0.27% of sales on R&D, while Tata Consumer Products’ spending was stagnant at about 0.25% and Asian Paints’ at around 0.4% during this period.
The gap was more pronounced among some Indian subsidiaries of overseas firms, with much of the core product development remaining concentrated at parent companies.
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Samsung Electronics India spent just Rs 37 crore on R&D in 2025-26 against sales of Rs 1.12 lakh crore. LG Electronics India incurred R&D expenditure of Rs 125 crore against a revenue of Rs 24,605 crore, while Hyundai Motor India expended only Rs 68 crore against sales of Rs 68,990 crore. Hindustan Unilever spent Rs 164 crore on R&D against a revenue of more than Rs 61,975 crore.
A senior executive of a leading global electronics company said most product development is still undertaken overseas, while the India unit largely focuses on localisation and software development. Besides, software development in India is mostly handled by separate subsidiaries of the parent companies, as is the case with Sony and Samsung; consequently, development costs are not accounted for under the flagship local units.
“The parent wants higher profits from India to boost their earnings instead of spending high on new product development,” the executive said on condition of anonymity.
The gulf between India’s R&D intensity and that of global peers is particularly stark in consumer electronics. A recent BCG-CII report on consumer durables said deeper localisation would require more than capacity additions, with stronger R&D, product innovation and artificial intelligence-led productivity needed to move up the value chain. India’s top 10 listed consumer durables companies invest less than 1% of revenue in R&D, compared with 1-4% among global peers, according to the report. This restricts the shift from manufacturing scale to technological leadership, it said.
The government is seeking to close part of the broader funding gap through the Rs 1 lakh crore Research, Development and Innovation Fund, aimed at catalysing private-sector R&D and deep-tech development. The government has also set an objective of raising India’s overall R&D spending to more than 1% of gross domestic product from around 0.65%.
