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16 January 2015, Gateway House

Is India losing the tech race to China?

Economic development and increments in scientific knowledge and technology, which in turn rest on R&D, are interconnected. India is falling behind and must allocate a greater share to R&D, while China must elevate the efficiency of its research expenditure—this focus will allow the two countries to continue to grow

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On 18 December 2014, India launched its largest rocket to date, the GSLV Mk III; China will launch its Long March 5 rocket sometime in 2015. In both countries, competing to unveil the next-generation heavy-lift launch system, the progress made on space technology draws much public attention. It impacts national pride, reflects the overall technological advancements in the two fast-developing economies, and foretells their long-term economic development prospects.

Increments in scientific knowledge and technology, and economic development, are positively co-related. Technological advancement can bring about more efficient use of resources, which can help reduce poverty and expand economic output by shifting the production possibility curve outwards.

China today is no longer technologically frail in comparison to developed economies. In 2006, China surpassed Japan as the world’s second largest investor in research and development (R&D) across all sectors. China’s spending on R&D is ramping up at an unprecedented annual growth rate of 19% since 1991, [1] reaching 1.97% of GDP in 2012. [2] According to the OECD, the majority of the spending stemmed from the business sector (93%), followed by the government (5%) and foreign funding (1%). [3]

The R&D expenditure for India was approximately $40 billion in 2014, or 0.9% of GDP. [4] This still falls short of the Indian government’s target of 2 % of GDP, a figure that was first announced in 2010 and then reaffirmed in 2012. India’s R&D spending, according to the World Bank database,  as a share of GDP has never exceeded 1% for almost two decades despite several official declarations of doubling that amount.

China, in contrast, has had noticeable success in restructuring its economy from labour-intensive manufacturing into one that is knowledge-based and innovative. Therefore, it is likely that China’s investment in R&D and science and technology (S&T) will increase and the capital input gap of technological advancement between the two countries will enlarge in China’s favour.


Figure 1


Figure 1: R&D expenditure as a percentage of GDP in China and India

In addition to financial and capital inputs, highly educated and skilled persons who can be the creators and promoters of emerging technologies, are equally important.

India produced 7,982 science and engineering (S&E) doctorates in 2006, as compared with China’s 22,953 in 2006 and 31,410 in 2012 (Figure 2).

When almost all major economies, including China, have been experiencing faster human resources’ growth for S&E vis-à-vis the country’s total employment growth, India’s S&E talent pool has shrunk by approximately 0.5% at a time when the total employment rate grew at 2% between 2000 and 2006. [5]

More importantly, China has intensified the internationalisation of its R&D efforts by forging extensive academic collaborations with global technological power houses such as the EU, the U.S., and Japan. [6]  The volume of scientific and technical papers published by Chinese researchers in partnership with foreign colleagues and institutions surged from 3,699 to 31,081 between 1997 and 2012.

Not surprisingly, China trumps India on a series of major S&T parameters, both approximate and direct ones—not only the publications of S&E journal articles, but also patents filed by residents, and high-technology export as a percentage of total manufactured goods. Therefore, on the aggregate level, China is deemed to be more technologically advanced.


Figure 2

Figure 2: Growth in the number of S&E doctorates and share in all doctoral degrees

In fact, China has started to experience a reverse “brain drain”, largely from the U.S. and the UK, as a growing number of  people of China choose to return (Figure 3) to their home country. In 2013 alone, more than 350,000 returned to China. A lot of the returnees are young professionals and post-graduates with limited work experience, but their exposure to foreign social and educational systems brings wider global knowledge back to China (and MBA students bring back state-of-the-art managerial know-how to the vast Chinese market).

Moreover, as a result of a 15-year “Medium- to Long-Term Plan for the Development of Science and Technology” started in 2006, and various associated incentive programmes, an ever-increasing share of experienced professionals are returning to China from renowned research institutes and high technology firms in the West.

India, on the other hand, serves as a major supplier of skilled young workers to the IT, health, and agriculture sector of EU countries, including UK and Italy. [7] According to Eurostat, in 2012, 64416 Indian nationals migrated to the EU—taking the total number of Indian residents in the EU to 650710. These talented Indian migrants and seasonal workers tend to seek permanent resident status in their host countries.

But even if India is trailing China in this context, it also has distinctive advantages: for example,  a quarter of Indian engineers, largely due to their hands-on experiences and English proficiency, are employable, while only 10% of Chinese engineers are similarly employable, according to the McKinsey Global Institute survey of 2005.   [8]

Figure 3

Figure 3: Reverse “brain drain” in China since 2000

On the World Bank’s Knowledge Economy Index, which characterises the entire innovation and technology ecosystem that enables an economy to thrive, India scored 3.57 in 1995 and 3.06 in 2012, while China’s score rose from 3.99 to 4.37. An analysis of the index shows that the India’s information and communication technology sector is primarily responsible for India’s dip in the ranking—although India is well known for IT outsourcing, its domestic use of ICT lags behind China’s. Similarly, China ranks 29 out of 143 economies as opposed to India’s ranking of 76 in The Global Innovation Index 2014.


Figure 4

Figure 5

Figure 4: How China and India compare on S&T indicators

Technology and economic development are interconnected. On the efforts of R&D rest much of the future of economic growth in India and China. The comparative advantage of the two countries in labour costs will not be hold up the two giants’ emerging economic stature, unless they also sustain an ability to produce new technologies with a global appeal.

The path of technological advancement in India and China must be specific to each country. If India is able to invest a greater share of its economic output into R&D, overcome institutional conundrums deterring FDI, and climb up the global value chain, the country can advance technologically and develop its economy further.

China, on the other hand, must pay more attention to allocating, managing, and monitoring R&D spending, [9] elevating the cost-effectiveness and efficiency of R&D expenditure, and the convertibility of basic scientific progress to applied technology—this will benefit consumers as well as improve China’s competitiveness in an increasingly contested global market.

Ji Xianbai is a PhD candidate at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore, on the prestigious Nanyang President’s Graduate Scholarship (NPGS).

Ying Pei is a Research Assistant at the Centre on Asia and Globalisation, Lee Kuan Yew School of Public Policy, National University of Singapore.

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[1] Organisation for Economic Co-operation and Development and Ministry of Science and Technology, China, OECD Reviews of Innovation Policy—China Synthesis Report, 2007, <>

[2] The World Bank, World Development Indicators: Science and technology—China, 2014, <>

[3] Organisation for Economic Co-operation and Development, OECD Stats Extracts,  <>

[4] Doshi, Vikram and Vijay Gilda, ’Budget 2014: Govt should extend incentive to boost R&D activity in India’, Business Today, 2014, < >

[5] Wolf, Charles, China and India, 2025: a comparative assessment, National Defense Research Institute, 2011, < > pp. 59

[6] Guruswamy, Mohan and Singh, Zorawar Daulet, Chasing the Dragon: Will India Catch Up with China?,(Delhi: Pearson Education, 2010)

[7] Gupta, Pralok, Facilitating Migration between India and the EU: A Policy Perspective, Robert Schuman Centre for Advanced Studies, 2013, <> pp. 7

[8] McKinsey Global Institute, The Emerging Global Labor Market: Part II—The Supply of Offshore Talent in Services, June 2005, < file:///C:/Users/dollma-cont/Downloads/MGI_Supply_of_offshore_talent_full_report.pdf> pp. 67

[9] Dahlman, Carl, ’China and India: Emerging Technological Powers’,  <>