Time to score own goals: India's GCCs create world-class research, but rarely own the IP that generates future wealth

India's innovation problem does not end with how little its companies spend. It ends with who owns what its researchers create. Much of the current debate asks whether India spends enough on research. An equally important question is whether research performed in India accumulates as an Indian asset.

Research is an activity. IP is an asset. Countries compete not only in performing the first but also in owning the second. The country's largest research ecosystem offers an answer. GCCs, the units MNCs establish in India to carry out their research, engineering and operations, number 2,117, employ 2.36 mn professionals, and generate $98.4 bn in revenue. The optimism rests on flows: captive exports of $164 bn in FY26; industry projections of value addition rising from $68 bn to $199 bn by FY30.

Not one figure measures what accumulates, or to whom. Business services, with R&D the fastest-growing element, make up 29.4% of services exports, up from 19% in FY14. When research is an export line item, India is, by definition, selling the research. The buyer keeps what the research produces. The patent and product settle on the purchasing balance sheet, and the export receipt is the full and final discharge of India's claim.


Consider the mechanics of a typical captive R&D centre. It bills its parent on a cost-plus basis agreed upon with tax authorities, typically in the mid-teens. The invoice records a service transaction. IP generated through that work is owned by the parent company, which captures future commercial returns. Mercedes-Benz Research & Development India (MBRDI), with more than 8,500 engineers, is among the largest examples of the model. India's claim ends with the service invoice.

The settlement repeats at every level. The engineer's claim on the invention is discharged by salary and a one-time patent bonus, since royalties are rare and contracts exclude revenue-sharing on assigned patents. The Indian entity's claim is discharged by the cost-plus invoice. The country's claim is discharged by the export receipt. India's Patents (Amendment) Rules of 2024 give the arrangement statutory form with unintended candour, awarding the inventor a Certificate of Inventorship, while title vests in the assignee abroad. The certificate stays, the title leaves.

The arrangement has a fixed-income character. India collects the coupon without default, while the principal compounds abroad. Hosted research pays wages. Owned research creates the asset that finances the next round of research. Both are growth. Only one compounds.

The pull has a push from within. The Patents Act excludes computer programs per se from patentability, and the tax treatment of India-domiciled intangibles makes first filing at home unattractive where it remains possible. The door out is held open from abroad. The door in is locked at home.

OECD data show China approaching US levels of research spending at PPP, with much of that spending undertaken on domestic balance sheets rather than through captive subsidiaries. India's gross expenditure on R&D stands near 0.64% of GDP, and the private sector contributes around 36% of it, against more than 70% in the US, China and South Korea.

The gap is not a talent gap. The corporate research India performs in abundance is performed for foreign principals. So, it never enters the owned column. China built labs it owns. India staffs labs it hosts. The owned column is, thus, emptied from both directions. Domestic capital declines to build the asset. Foreign capital builds it and books it abroad.

Dadabhai Naoroji described the huge unilateral transfer under British colonial rule of India's resources and capital to Britain, without any equivalent economic, commercial or material compensation, as a 'drain of wealth'. The modern arrangement is more refined.

The distinction is not between exploitation and fairness. Every participant in the chain receives the consideration contracted for. The missing asset is not income but ownership, and future income accrues where IP resides. A consumption economy grows around the salaries, and the growth is real. What it does not do is leave behind an asset that earns after the work stops.

Industry has begun conceding the point, talking of a 'reverse IP migration', a phrase that inverts its own meaning, since the invention migrates in while the title migrates out. Nasscom's GCC Council acknowledges that legal ownership typically rests with the parent, which retains oversight of filing, and that core product definition remains guarded at HQs. Strategy can be reassigned by the next board. Title cannot.

FY30 projections never ask whether hosting converts into owning. South Korea converted through conglomerates that moved from assembly to ownership of design. Taiwan's foundries moved from manufacturing capacity to ownership of process technology. China spent on its own account. India's precedent is its IT services industry, which converted hosted work into owned companies, but never into owned product.

A coupon can be re-sourced by the payer. A principal, once built, stays with the builder. The capability centre stays. The patent migrates. The value compounds with the parent. The next decade's question is not how large India's GCC coupon becomes, but whether India ever comes to own the bond.