Govt to Monitor R&D and Tech Spending in Formal Manufacturing Firms Through ASI 2024-25

In a significant move to better understand the innovation dynamics of India’s formal manufacturing sector, the Ministry of Statistics and Programme Implementation (MoSPI) is set to revamp the Annual Survey of Industries (ASI) for 2024-25. The updated survey will include separate modules for tracking spending on research and development (R&D), software, and information and communication technology (ICT) — a departure from the current model where such data is collected under a single consolidated head.

This refined categorisation is aimed at offering a granular view of innovation-related spending, and it will mark a step forward in policymaking by allowing analysts and government bodies to disaggregate capital expenditure across digital tools, physical machinery, and technological software.

Why This Change Is Significant

The formal manufacturing sector forms the backbone of India’s industrial output, and with the rise of Industry 4.0, digital transformation, and AI-driven production models, there's a growing need to understand how Indian firms are evolving.

Until now, R&D and technology-related expenditures were grouped together in the ASI under a general capital expenditure head, limiting the ability of the government to:

• Identify which firms are truly innovation-driven

• Map regional trends in technology adoption

• Understand the employment impact of digital transformation

By adding discrete modules for R&D, software, and ICT, policymakers can now assess how technology is reshaping India's industrial landscape.

Geographic and Sectoral Trends in Innovation

One of the primary objectives of the revamped survey is to identify location-specific and sector-specific patterns in innovation spending. For example:

• Do states like Tamil Nadu or Karnataka, with relatively advanced industrial bases, spend more on R&D than others like Bihar or Jharkhand?

• Are automobile manufacturers investing more in automation software and robotics, whereas textile firms are still lagging behind?

The new data architecture will help answer these pressing questions.

This is essential for targeted industrial policy formulation. If certain regions are found to be lagging in tech adoption, specific interventions or fiscal incentives could be introduced to support digital transformation and skill development in those areas.

Impact on Employment Patterns

One of the most important insights the government hopes to extract is the relationship between innovation and employment.

While automation, digital tools, and smart manufacturing may increase productivity, they can also displace traditional labour, especially in roles that are repetitive and low-skilled.

The updated ASI survey seeks to:

• Track investment in technology by sector

• Compare it with labour force data from the same units

• Assess whether high-tech sectors are experiencing greater job losses

This information will enable policymakers to balance innovation with inclusive employment growth, potentially by investing more in reskilling initiatives in sectors vulnerable to job displacement.

Ministry’s Vision: Modernising Data to Inform Better Policy

A source familiar with the matter told Moneycontrol that the ministry's primary aim is to "adapt the survey to recent times."

India is currently one of the fastest-growing digital economies, and its formal manufacturing firms are at various stages of adopting:

• Enterprise software solutions

• Smart factory technologies

• Cloud-based analytics

• AI and machine learning applications

However, there is no systematic dataset to measure how much firms are investing in these tools.

By revamping the ASI survey, the MoSPI is hoping to:

• Develop an evidence-backed approach to industrial policy

• Provide data for programs like ‘Make in India’ and ‘Digital India’

• Help state governments understand their industrial tech-readiness

Breaking Down the New ASI Modules

Here is a likely structure for the newly proposed modules in ASI 2024-25:

1. R&D Spending Module

   • In-house R&D facility expenditure

   • Collaboration with academic institutions or foreign partners

   • Patents filed and innovations developed

2. Software Expenditure Module

   • Capital spent on proprietary software

   • Subscription to cloud services and platforms

   • Expenditure on IT training for staff

3. ICT Infrastructure Module

   • Investment in IT hardware

   • Networking infrastructure

   • Cybersecurity tools and systems

Each module is designed to allow cross-comparison across states, sectors, and firm sizes.

Data Collection and Validation Challenges

While the idea is progressive, there will be operational challenges in data collection:

• Smaller firms may not have a clear break-up of tech expenditures

• Some firms may underreport innovation spending for fear of additional compliance scrutiny

• There may be discrepancies in categorisation between what counts as software vs ICT investment

To address these, the ministry may:

• Digitally assist firms in filling up the forms

• Issue clear guidelines and examples

• Conduct workshops and awareness campaigns for plant managers and finance teams

How Policymakers and Economists Will Use This Data

Once the survey is completed and processed, the disaggregated data can serve multiple purposes:

• State governments can use it to benchmark their industrial performance

• Ministries like Commerce and Industry or MSME can offer targeted subsidies

• Economists can model the impact of innovation on job creation or losses

• Investors may use the data to identify high-growth tech-oriented clusters

This aligns with global trends, where countries like Germany, South Korea, and China regularly track and incentivise firm-level innovation investments.

International Comparison: India Joining Global Best Practices

Globally, many countries have modernised their industry surveys to track innovation-related metrics:

• The EU’s Community Innovation Survey does a similar job for member countries

• The US Bureau of Economic Analysis tracks ICT spending separately for industrial firms

• OECD has recommended separating R&D and tech investment as a key input for productivity growth

By adopting a similar approach, India will:

• Gain international credibility in policy reporting

• Allow comparative studies with global industrial peers

• Attract foreign investors by showcasing tech-readiness of Indian manufacturing

Conclusion: A Strategic Step Towards Data-Driven Innovation Policy

The government’s decision to upgrade the ASI survey to track R&D, software, and ICT spending separately is a critical step toward creating a more data-informed industrial strategy.

It acknowledges that innovation is no longer an optional investment—it is now core to economic competitiveness, job creation, and sustainable development.

The ability to measure and compare tech adoption across sectors and geographies will help India:

• Accelerate its digital transformation

• Shape future-ready policies

• Build a more resilient and modernised manufacturing ecosystem

This could well be a game changer for India’s journey toward becoming a global tech-manufacturing hub in the 21st century.

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