Overcoming India's technological cowardice

How can we learn to invent tomorrow?

The Problem of Cowardice

In 2025, nearly 78 years after we gained our independence in 1947, India remains a poor country because our elites are cowards.

In private industry, academia, and government, the people with the money and power in our great nation are too afraid to take technical risks – they refuse to invest deeply and patiently in research & development in fields like biotechnology, chemistry, materials science, electronics, semiconductors, and even, despite our vaunted software industry, computer science, to allow us to originate first-in-the-world and best-in-the-world products of the kind that would generate huge, irreplaceable exports to fuel rapid and durable economic growth.

Just as in South Korea, with their famous chaebols (Samsung, SK, Hyundai..), and in Japan, with their keiretsu (Mitsubishi, Toyota, Nissan..), Indian khandani conglomerates such as the Tata Group, Reliance, Aditya Birla Group, Adani Group, and Bharti Telecom dominate our economy – as of 2021, those 5 groups alone controlled 18% of all hard assets and about 12% of total revenue, and things have likely only gotten more concentrated since then.

Unlike in South Korea and Japan, however, our conglomerates don’t make most of their revenue exporting. Exports matter a great deal to poor countries – they bring in net new money that creates new jobs, which then expand the consuming class domestically, in turn growing the domestic market, creating a virtuous cycle of accelerated economic growth.

Our khandani conglomerates aren’t primarily focused on exports. Reliance, for example, earns about a third of its revenue from exports, mostly from petroleum products. The Tata Group has complex international operations, with the Tata-owned Jaguar Land Rover generating ~$35 billion in revenue but manufacturing almost nothing in India – its main source of true export revenue is Tata Consultancy Services, which specializes in IT and business process outsourcing, and represents 18% of the group’s consolidated revenue. Adani, the newest and fastest growing of these groups, exports a tiny amount compared to its overall revenue, expanding from its legacy coal trading business to ports, airports, and other large-scale domestic infrastructure projects.

Contrast that with South Korea, where Samsung makes something like 90% of its revenue through a variety of exports, or Japan, where Toyota derives over 50% of its revenue from exports. It isn’t just the numbers that are staggeringly different – it’s the product mix as well. A good chunk of chaebol revenue is derived from best-in-class products for which there are few, if any alternatives, including leading-edge memory chips, a product category where it has 65% of global market share, and latest-generation smartphone displays, in particular AMOLED. This category dominance is downstream of massive investment in R&D by these chaebols over many decades across multiple categories, from automotive engineering to specialty chemicals to semiconductors.

In 1960, South Korea was at a GDP per capita of $100, not too far from India’s $82 at the same time. By 1980, they were at $1700, a vertiginous trajectory that became known as the Miracle on the Han River, while India was only at $270. This initial growth was driven by heavy industry, most prominently exporting ships and steel, but by the late 1980s, they had begun to invest heavily in R&D. By the late 1990s, they had begun to reach the technological frontier across a range of industries, and by the 2000s, they began to advance the frontier themselves.

The Korean automotive industry is an excellent example of this progression. The Korean government began a policy of encouraging automotive manufacturing in the 1960s, supporting multiple ‘national champions’ with protectionist policies including a prohibition on foreign car companies operating independently in the country and, later, substantial tariff barriers. By the 1970s, these companies were exporting their cars in large quantities to other developing markets in South America, and by the 1980s, to the US, with Hyundai crossing 1 million cars exported to the US by 1990. While there were initial quality hiccups, Hyundai today is one of the best-known car brands in the world, with the third-highest number of vehicles sold each year by volume across 200 countries. In order to successfully sell in places where the best cars from across the world are readily available, Hyundai has had no choice but to improve the underlying technology, build quality, and reliability of its cars to match or surpass what global automakers are selling at a similar price point.

India, meanwhile, has been making cars since the 1940s – well before any of the South Korean companies – and we didn’t suffer the disadvantage of having our industry blown to dust in the Korean War. We have several billion-dollar domestic car companies, including Tata Motors, which itself dates back to the 1940s, the Suzuki-owned Maruti, and the more recently homegrown Mahindra & Mahindra, but even now, almost 80 years later, we export relatively few cars, and almost none to high-value markets like the US and Europe. Our carmakers are simply unwilling to meet the standards that would allow them to sell at a premium in richer countries. While the Korean, Taiwanese, and Chinese governments have conditioned ongoing support and subsidies on export volume, successive Indian governments have, historically, been focused on import substitution, and even the recent Make in India push has not promoted substantial increases in good exports, with perhaps the singular exception of the Apple iPhone, which is a foreign product built from foreign components that is merely assembled in India, and has not substantially advanced internal technical competence and capabilities.

Too scared of R&D risk and actual competition to develop products that can go toe-to-toe with the best of the best from around the world in high-income markets, despite the huge financial rewards on offer, our cash-rich incurious billionaires and their captive policymakers have blown opportunity after opportunity to take Indian exports to the world, content to fatten themselves up on the domestic market by putting up both de jure trade barriers such as tariffs, as high as 100% on many cars, and even more damaging patronage-based unwritten barriers to entry that prevent all but the favoured few from doing anything at scale. This means that these companies have no impetus to innovate, or even to catch up fast enough to deliver something that is equivalent to what the global market leaders are selling and, lo and behold, they don’t! Even China, which developed a domestic automotive industry relatively late, has now exploded past us in car manufacturing and exports, with BYD now the leading global electric car manufacturer.

This is true in cars, in chemicals, and in semiconductors. That last one is a particularly bitter cautionary tale. The Indian government had begun investing in semiconductors in the late 1970s, with the establishment of the Semi-Conductor Laboratory (SCL) in Mohali, which by the mid-1980s was just one node behind the state of the art. After a mysterious fire gutted the facility in 1989, it took almost a decade for it to be rebuilt, with neither the government nor private industry in India willing to invest in it. Meanwhile, in 1987, the Taiwanese government recruited the Texas Instruments veteran Morris Chang to start, in partnership with Philips, the Taiwan Semiconductor Manufacturing Company (TSMC), now indisputably the world’s largest and most advanced semiconductor manufacturer, and at $800 billion in market cap, one of 10 most valuable companies in the world. TSMC pioneered the pure-play semiconductor fabrication business model, and was focused on exporting chips across the world from day 1.

TSMC’s dominance is based on the investment of 10s of billions of dollars in R&D and 100+ billion dollars in capital expenditure over the 37 years of its existence. In comparison, the Indian government had invested only ~$100 million in SCL until 2023. Taiwan built internal capabilities to advance semiconductor fabrication technology, including the Industrial Technology Research Institute, which laid the foundations for TSMC, and investment in institutions to support semiconductor R&D continues to this day – in 2019, the government created the Taiwan Semiconductor Research Institute by merging two smaller R&D labs with a view toward driving the next generation of semiconductor technologies. India, by contrast, has only just begun to wake up to the need to do semiconductor R&D. Our private players do almost no R&D themselves, leaving it to the government, which also spends very little on research; we spend less than 1% of GDP on R&D, compared to Israel at over 6%, South Korea at 5%, and China at nearly 3% and rising.

The results of these divergent strategies are stunning to behold – tiny Taiwan, which with a population of 24 million has less people than my hometown Mumbai metropolitan area, runs a trade surplus in excess of $100 billion each year. It is not a stretch to say that TSMC was the decisive factor in making Taiwan rich, and China’s dependence on Taiwan’s chips has likely been part of what has kept them from overt takeover attempts so far, though that peace looks increasingly fragile. India, meanwhile, manufactures no semiconductors at all as of today.

Today, South Korea and Taiwan both have per capita GDPs of around $33,000, firmly in the middle of the high-income country pack, after starting in the $100-150 range in 1960. China, following a variant of the South Korean and Taiwanese strategy, has managed to go from a GDP per capita in the $80 range in 1960 to nearly $14,000 today. Taiwan aside, China and South Korea also have large trade surpluses with the rest of the world – they all export far more than they import. India, which was in that same $80 range in 1960, languishes at just under $2500 and, not coincidentally, runs a yearly trade deficit of ~$100 billion.

If we are to get rich before we grow old and squander our much-discussed demographic dividend, we must rapidly pivot onto a path that increases our exports. Unfortunately for us, the world is changing – history has begun again, and the mass-manufacturing path to middle-income status, wide open for the past few decades in an era of unimpeded globalization and falling trade barriers, stands threatened by the shattering of the longtime global consensus on free trade by the new US administration. Even our smartphone exports, the one recent success story I previously mentioned, and at $24 billion per year now India’s largest export commodity by value, stand directly threatened by recent statements and characteristically pugilistic tweets from the US President exhorting Apple to stop building in India.

Meanwhile, the rise of machine learning-enabled Artificial Intelligence in the form of large language models and their offshoots threatens our service export giants, including Infosys, TCS, and HCL. We may also have missed the labour-intensive high-volume export boat due to the rise of highly-capable robotic systems that these new technologies have begun to enable.

So what do we do? In a deglobalizing world, the only kind of trade that one can count on is that of products for which there are no alternatives: first-in-the world and best-in-the-world products.

We must develop products that are so good, and so clearly better than what came before, that the world will have no choice but to buy them, tariffs or no tariffs. Taiwan is the perfect example of this – TSMC is the only place in the world that can supply leading-edge chips using a 2nm process at the moment, with Samsung in Korea close behind. Intel in the US has had serious issues with these latest-generation processes, and doesn’t make either the ARM-architecture processors that have become standard for smartphones and other mobile devices, or top-end GPUs for machine learning, so the US has no choice but to buy products from Taiwan and Korea if it doesn’t want to be stuck with older computing technology, and fall behind in the all-important race to Artificial General Intelligence.

The same is increasingly true of Chinese biotech. Despite their geopolitical rivalry with the US and the looming potential passage of the Biosecure Act, intended to restrict US commercial engagements with biotechnology companies in China, in the US Congress, American pharmaceutical companies have been falling over themselves to license novel therapeutics from Chinese companies. Why? Simply because they’re globally best-in-class, and could make tens of billions of dollars a year for the companies that bring them to market in the US. Consider Summit Therapeutics, a publicly traded $18B+ market cap US pharma company that is essentially just a thin wrapper around an exclusive global license (excluding China) for Ivonescimab, a cancer immunotherapy developed by the 2012-founded Chinese biotech Akeso Therapeutics that has shown itself to be more efficacious than Merck’s Pembrolizumab, better known as Keytruda, in treating advanced non-small cell lung cancer. Keytruda is the world’s largest selling drug, and generates an obscene amount of revenue for Merck – ~$30 billion in 2024 alone. Trade war or no trade war, companies are highly motivated to work with you when that scale of money is at stake.

Here in India, we were ahead of China in the development of biomedicines until about 15 years ago, thanks to our now 30+ year history of vaccine development and manufacturing – Shantha Biotechnics, right here in Hyderabad, developed the first recombinant vaccine in Asia in the 1990s – and early bets on biosimilars of monoclonal antibodies in the 2000s. Unfortunately, we completely gave up that lead, with neither government nor industry particularly interested in investing in novel R&D in these areas over the past two decades, and now China is far ahead – pharmaceuticals developed by Chinese biotech companies accounted for over 30% of major global licensing deals in 2024, up from only 10% just a few years ago, in comparison for approximately 0% for India. That gap is widening at an accelerating pace as China pours more and more R&D funding into both their universities and their biotech companies, while the Indian bio R&D spending, especially in academia, has declined in real terms over the past decade.

The prize we’d be giving up if we don’t bridge this gap is massive. The ~$60 billion 2024 revenue of a single R&D-driven US pharma major, Pfizer, was larger than the total revenue of the entire Indian pharmaceutical industry that same year, ~$50 billion. India’s largest pharmaceutical company by revenue, Sun Pharma, made ~$6 billion in FY2024 – that’s less than the ~$6.1 billion of revenue generated by Novartis’ Cosentyx (Secukinumab), an antibody used to treat autoimmune inflammatory conditions like psoriasis. While Cosentyx is a so-called blockbuster drug, it was only the 23rd-best selling pharmaceutical product of 2024.

This mismatch is the result of a deep rot at the heart of Indian biopharma – despite our much-vaunted manufacturing capabilities, large Indian pharma and biotech companies do essentially no original research, choosing instead to pursue generics and biosimilars which, though lower margin than original products, have a far lower failure rate and do not require expensive clinical trials. Even when it comes to vaccines, our companies either use very old technology, such as the inactivated virus platform used by Bharat Biotech for Covaxin, produce close knock-offs of innovator vaccines, or licence products from Western companies and universities, as is the recent modus operandi of the Serum Institute of India and Biological E. These companies have made critical contributions to the cause of global public health by lowering the cost and increasing the supply of essential pharmaceutical products, for which we all owe them a debt of gratitude. They are, however, run by people who do not fundamentally understand what it takes to do novel research and, indeed, are afraid of the high-risk, high-reward, low-hit-rate nature of the beast.

Biotech is particularly close to my heart because I founded and run PopVax, a Gates Foundation, Vitalik Buterin, and US Biomedical Advanced Research and Development Authority (BARDA)-funded Indian full-stack biotech startup developing first-in-class and best-in-class mRNA vaccines and therapeutics using generative AI-enabled computational protein design. We are one of the few companies developing truly novel biomedicines in India, not just biosimilars which are close facsimiles of existing approved pharmaceuticals. No novel Indian-developed biomedicine, not even a vaccine, has ever been approved in the US, the world’s largest pharmaceutical market – we aim to have a PopVax product be the first.

I don’t for a second regret returning from 7 years in the US, where I went to college and grad school and started my first company, a manufacturing software startup backed by Y Combinator, and starting PopVax in India – indeed, I don’t think it would have been feasible for me to start the company in the US even if I’d wanted to, because the cost of doing even minimal wet lab R&D in that country is prohibitively high. I ran PopVax off $30k of my own money for our first 6 months, which would have bought me the ability to produce essentially no usable wet lab data in Cambridge, MA, or even Cambridge, UK, but in Hyderabad, working out a shared lab space we rented from the Centre for Cellular and Molecular Biology (CCMB), we were able to generate data that led to hundreds of thousands and then millions of dollars in research contracts to develop our mRNA-LNP and protein design technologies. We’ve now demonstrated that our vaccine constructs for COVID-19 and influenza show 10-250x greater strain-specific antibody responses and greater breadth of strain coverage than existing approved vaccines in mice, and are on the path to Phase I clinical trials in India and the US over the next 8-12 months.

That was only possible because preclinical work is 5-10x cheaper in India than in the US – from lab space to salaries to the cost of animal experiments. In a world where a new pharmaceutical costs $1 billion to develop, that significantly lower R&D cost structure provides a substantial competitive advantage, especially if we can turn that cost advantage into a speed advantage by trying far more different designs in parallel than an American company can afford to, which is a big part of what has allowed Chinese biotechs to shoot past American biotech startups with unprecedented speed of R&D in a variety of key therapeutic modalities over the past few years.

Our success also demonstrates that, unlike in semiconductor fabrication, we weren’t too far from the research frontier, which has now been redefined by the rise of machine learning-powered computational methods for biomolecular design, to develop something world-leading – it was just that no one had seized that opportunity before.

We stand on the precipice of a massive disruption: the United States, long the world’s largest funder of R&D, is executing the sharpest pullback in funding to the sciences in the last half century, in particular biotech funding via the National Institutes of Health (NIH), and tightening immigration policies, including cancelling a large number of student visas. It is their sovereign right to make those decisions in their wisdom about what will be best for the US, but I believe it is our duty in India to seize this golden opportunity to massively scale up our R&D across many sectors, from materials science to matrix multiplication, leveraging not just our cost and speed advantages, but also the wealth of Indian talent that will doubtless be returning from the United States or, given the circumstances, may choose not to move there in the first place.

Easier said than done, of course. We have a substantial cold start problem: we need to go from not having developed anything that is the best in the world or the first in the world in the past century – and no, UPI doesn’t count, Alipay and WeChat Pay were deployed at population scale in China before UPI even launched – to churning them out and selling them across the world. How can we learn to invent tomorrow?

Intent to Invent

We must begin with the intent to invent: the only way we can succeed is to incentivize and prioritize the development of these first-in-the-world and best-in-the-world products as the prime directive of our policy and technoeconomic culture.

The goal of this R&D cannot be import substitution, which has been a failure every time it has been tried – truly best-in-class products will only be forged in the white-hot fire of global competition. We must look to export these products from day 1, and if we cannot, it is because they aren’t good enough, and we must make them better, not throw up trade barriers to sell something substandard to our own citizens. The interests of our bureaucrats and oligarchs must not be allowed to strangle the infant that is Indian innovation in the crib, as they have done so many times before.

We cannot expect progress to come from continuing to fatten up our old horses, or a few new fast-growing donkeys conceived in their image. Unlike in South Korea or Japan, our so-called national champions, and the current crop of business elites that run them, are too myopic, too averse to technical risk, and too wedded to the easy profits they squeeze from their local monopolies to take the lead in transformative R&D. Even those who built their fortunes on service exports have seemingly no ambition to climb up the value chain, even in software, where we are likely closest to the frontier. Witness Nandan Nilekani, the quintessential grandee of the Bangalore-Delhi corridor, pronouncing that we should “let the big boys in the Valley” build LLMs because it would cost “billions of dollars”, only to have DeepSeek develop a leading-edge model in China for much less than that just a few months later (though probably for much more than their oft-quoted $6 million number). To add insult to injury, DeepSeek isn’t some state-supported Manhattan Project-style effort – it’s basically a side project of the Chinese high-frequency trading firm High-Flyer. Don’t worry though, Nandan was quick to proclaim that “we should not be losing sleep because somebody has not built any AI models,” presumably because we should be spending our time on the far more important problem of jamming OTPs into every human interaction with the outside world until each waking moment of an Indian citizen’s existence is enveloped in a noxious cloud of six-digit codes.

Frontier-expanding innovation in India will come from new businesses built around a culture of R&D from the start – we must put the ball in the hands of a new generation of founders and companies that are genuinely intent on building the future of the world right here in India, and going toe-to-toe with the best and brightest in America, Europe, and Asia, by systematically removing the many obstacles currently placed in their path.

Expanding Capital Availability for Indian R&D

The biggest single barrier to starting a company developing best-in-the-world and first-in-the-world products in India is the absence of deep capital pools willing to back R&D. We must find ways to empower courageous funders, because our current crop of venture capitalists, with a few shining exceptions in smaller funds such as Blume Ventures and Pi Ventures, are also massive cowards, more interested in underwriting catastrophic market risk than well-scoped technical risk of the kind that has built enduring technology companies throughout modern history. No Indian VC that can support a Series A north of $5 million is consistently investing in R&D-driven companies, which is peanuts when considering the cost of, say, a Phase I clinical trial for a new biomedicine, or even non-nuclear prototype of a new nuclear reactor.

In the absence of Indian capital, the Indian government must make peace with the reality that these companies will be funded largely by foreign investors until internal demand builds in Indian capital markets. Pixxel Space, one of the poster children for India’s recent Space Tech boom, raised early funding in the single-digit millions of dollars from the homegrown Blume Ventures and the Indian arm of the global megafund Lightspeed, but subsequent $20+ million rounds were led by external investors, including the Canadian fund Radical Ventures, Google, and Glade Brook Capital, one of the largest investors in the quick commerce unicorn Zepto. Skyroot Aerospace, which is building some of India’s first private sector launch vehicles right here in Hyderabad, raised their ~$11 million series A mostly locally from the founders of the Greenko Group, but their $51 million series B was led by the Singaporean sovereign wealth fund GIC.

Far from decrying and attempting to limit foreign investment in these companies, the government should lay out the red carpet for the foreign VCs willing to take these risks, and demolish the many roadblocks that currently make investing in Indian Private Limited Companies extremely unattractive for most VCs. Serious but navigable irritants include the need for foreign funds to get a PAN card to invest in the dematerialized securities that are now mandated for all Private Limited companies – both of those requirements should be deleted entirely – and the need for Foreign Venture Capital Investor (FVCI) registration in order to not incur double taxation. These are particularly frustrating for funds that have never invested in India, which is true of most specialist deep tech funds in areas such as biotech, collectively delaying deal timelines by months and requiring substantial legwork in India that the fund may not have any understanding of how to accomplish.

Even after all of this, both funds and investee companies are still vulnerable to our tax authorities choosing, entirely at their own discretion, to question the source of funds of both the venture capital firm and its own investors, the limited partners (LPs), whose identities funds typically do not and will not disclose. If they don’t find the answers to these granular inquiries, which are often conducted 4+ years after the actual investment and in which they may go so far as to ask for tax records of specific offshore investors in their home jurisdictions, to be satisfactory, they are empowered under Section 68 of the Income Tax Act to inflict the unkindest cut of all – punitively taxing investment into the startup as revenue in retrospect. The uncertainty created by this framework has been sufficient to scare off many specialist funds from investing in Indian-registered companies entirely – one fund I spoke to in the US that invests in R&D-driven companies all over the world told me that they would never go through the ‘nightmare’ of investing in an Indian Private Limited company again as a direct result of Section 68. Global megafunds like Tiger Global and Softbank (at least in years past), funds with India-specific strategies like Glade Brook Capital, and sovereign funds like GIC that have a single LP may be willing to take on the compliance burden and risk involved in making Indian investments, especially if they’re doing so repeatedly, but foreign specialist VCs taking the first dip in the Indian Ocean of R&D startups, precisely the ones who are most likely to back our deep tech companies when local investors won’t, may find the water boils too hot for comfort.

As long as these issues aren’t resolved, many deep tech companies will find it best to incorporate in jurisdictions without these restrictions on capital inflow, classically the US, as in the case of Pixxel, but also increasingly Singapore, as with Zepto until recently, Ireland, and the UK as well. The problem with that structure, of course, is early backing. Startups working on R&D in India often face a credibility gap with foreign investors until they can show something tangible for their efforts, and local funders in India who are aligned on the mission of building R&D-driven products in India may be their best bet for a first cheque.

Unfortunately, if I were to start an Alternative Investment Fund (AIF), which is what domestic VC funds are classified as, focused on startups doing R&D in India, I would only be able to invest 25% of my corpus in foreign-headquartered startups. This might not only limit my ability to invest in foreign-registered Indian startups in the first place but, even more concerningly, lock me out of the ability to double down on the big winners in my hypothetical portfolio – companies like Pixxel – via pro rata investment in future rounds if they’re foreign-registered, compromising the asymmetric upside that makes the VC business model work. That’s why many ‘Indian’ VC funds are in fact registered abroad, which in turn means their LPs are primarily not Indian residents, who are limited to $250k/year of total overseas spending, including investments, by the Liberalised Remittance Scheme (LRS).

In effect, the AIF & LRS regulations collectively exclude Indian funds and LPs from some of the most promising startups doing R&D in India, and limit the access those startups have to such investors in turn. This is a classic chicken and egg problem – without major Indian investors willing to invest big cheques in Indian R&D startups, those startups will largely choose to incorporate abroad, but if Indian investors aren’t allowed to make substantial investments in those foreign-registered startups, then they will never demonstrate the returns to grow large enough to support a substantial domestic R&D funding ecosystem. There are some options for Indian LPs to invest in foreign-registered startups via funds based in GIFT City (Gujarat) regulated under the new International Financial Services Centre (IFSC) regime, but that is a relatively new option that still has limitations that are less than ideal.

The obvious solution is to crack some eggs and make a tasty omelet of these regulations by allowing both resident Indians and AIFs to invest as much as they’d like into foreign startups that have substantial operations in India, as substantiated by a mechanism such as owning the majority of an operational Indian Private Limited Company. To make this work, this new framework must also be accompanied by a relaxation of onerous round-tripping regulations that make startups registered abroad wary of using Indian investor money on Indian operations. This will ensure that the precious Indian capital the Reserve Bank of India (RBI) is afraid will escape the country is mostly used within India on R&D, and it will give Indian investors the ability to build portfolios of R&D-driven Indian startups wherever they are registered, building up a local investor base with the courage, competence, and conviction to back the next cohort of R&D-driven Indian startups end-to-end from idea to outcome.

Of course, it would be best to eliminate the strict capital controls that straitjacket our economy entirely, but that is a discussion for another day – to advance the cause of R&D in India, this compromise will suffice.

As this new wave of R&D-focused venture capitalists gets off the ground, family offices and institutional investors in India should get off the sidelines and back them with big cheques – I believe that reinvesting some insignificant percentage of their wealth into the technological progress of India, which undergirds our ability to elevate our countrymen out of poverty and into wealth is no less than a moral obligation for our 250+ dollar billionaires, the third-most in the world, and 1000+ hundred-millionaires. If you’re a potential LP looking to back new Indian venture capital firms investing in novel R&D-driven products, reach out to me at soham [at] popvax [dot] com.

Removing Bureaucratic Chokepoints for Startups & Small Businesses

Any soul brave enough to start a new business in India, whether R&D-driven or not, finds themselves in the unwelcome embrace of our suffocating bureaucracy. It is essential that we remove the chokepoints around starting and running a business that drag out timelines for basic operations and enable routine harassment & corruption by government officials. Registering a company in India can take weeks, and sometimes months if the MCA website is cooperating even less than usual, in comparison with the days it usually takes in the US, UK, or Singapore – pointless procedures that drag out these timelines like the name reservation song & dance should be eliminated entirely, and the entire process should take less than 24 hours. Any business importing or exporting materials, as R&D-driven companies will certainly be doing from day 1, requires a Goods & Services Tax (GST) registration regardless of company scale and revenue, but it is an open secret that GST registrations across many states are frequently delayed for months on shaky grounds by officers who often ask for bribes to process them. Many of these delays stem from onerous requirements around the need for a physical address – the applicant must document the entire chain of custody of their office from sublease to lease to ownership, and must display permanent signage with the GST registration number, as well as other paperwork, for inspection at any time by a GST officer. GST officers have the power to not only cancel a company’s GST registration, but to do so retroactively to a prior date, putting at risk the compliance of anyone who has done business with the affected company in that timespan. None of this complexity is necessary – GST registration should come directly with the registration of a Company or LLP with a simple opt-in checkbox, and while enforcement actions, fines, and penalties according to the law should of course be enforced, GST deregistration should not be possible without the consent of the business. For both business registration and GST registration, in an era in which multibillion dollar businesses can and are launched from bedrooms and college hostels, I propose that there should not need to be any permanent physical address for the business until it hits Indian Rupees (INR) 20 crore (~$2.3 million) in turnover. The compliance burden of filing and paying GST each month is also quite substantial given the complexity of the tax law – I propose that both filing and payment be moved to a quarterly schedule for companies below that same INR 20 crore turnover threshold.

Most R&D Must Be Default Allowed

India is a vastly overregulated country, and there are numerous sector-specific regulations that needlessly slow down and inhibit R&D. We need to invert our current ‘who gave you permission?’ approach into a ‘default allowed’ framework. Consider the case of biotech, my field. A startup developing a new therapeutic might start with some early designs of novel molecules which they have a specialized service provider synthesize, then bring those into their own lab, perhaps a shared lab facility to begin with, to test in specific in vitro assays – i.e. in the test tube – for potential utility. The lab would need appropriate environmental clearances for waste disposal from the appropriate local authorities, of course, and these tests would typically need to be considered safe to conduct at Biosafety Level 2 (BSL-2) or below, else further specialized clearances and certifications are (and should be!) required. If those early tests go well, the startup might work with a Contract Research Organization (CRO) to do in vivo studies in animals of the molecules performing best in vitro, which would (and should!) require the formation and approval of an animal ethics committee. In India, you might be able to do all of this for a few crore INR (~a few hundred thousand dollars) depending on the therapeutic you’re developing. If these animal studies go well, you might then raise money to work with a Contract Development and Manufacturing Organization (a CDMO) to manufacture your novel molecule with the appropriate Good Manufacturing Practices (GMP) in a GMP-compliant manufacturing facility for use in a Phase I clinical trial, which can cost INR 10 crore (~$1.2 million) or more. You often have to conduct animal toxicology studies to demonstrate that your molecule is likely to be safe in humans alongside the development of the manufacturing process with a test batch. You’ll then collect all of the data from your in vitro studies, animal studies, and manufacturing run, as well as analytical data about the purity and stability of your molecule, and put that into a dossier to apply for approval to conduct a first-in-human Phase I clinical trial.

In the US, this dossier is called an Investigational New Drug application (IND), and the process I sketched out above is a reasonable guide to how it works. In India, on the other hand, before you’re technically allowed to conduct animal studies that you can include as supporting evidence in your trial application dossier, you need to already have built or have access to a GMP-capable – and therefore expensive! – manufacturing facility to get a ‘test license’ for each product you are developing. No other country requires this, and it flies in the face of how R&D actually happens – you don’t think about manufacturing until you have some early positive data in animals, which you shouldn’t then have to pointlessly redo. We’ve built such a manufacturing facility for a few million dollars at PopVax, and it made sense for us for a variety of reasons, but it isn’t and shouldn’t be the default path for biotech startups developing new therapeutics.

This broken ‘test license’ process suits big companies like the Serum Institute of India just fine, and is not a substantial impediment for small companies trying to make copycat generics and biosimilars, since for them the facility and manufacturing process is the product, but it has been nearly fatal for several biotech startups I’m aware of, delaying their path to clinical trials by several years as they bleed hard-earned funding. Test licenses do not increase public safety and reduce animal suffering – they exist in addition to environmental approvals and ethics committees, and are not a substitute for review of the clinical trial application dossier itself. We must eliminate arbitrary barriers of this kind – and they abound in many critical sectors that should be encouraging innovation – to ensure that there is a real path for capital-constrained R&D-driven startups and small companies to show progress step-by-step without needing to spontaneously manifest the immaculate finished article right upfront.

There are other obstacles in the path of Indian companies trying to develop novel first-in-class and best-in-class vaccines and therapeutics, such as the longer timelines for clinical trial application review compared to the US & China – I intend to suggest specific policy changes to comprehensively remedy these issues in a forthcoming piece.

Reforming Indian Trade Policy

Another constant obstacle in the Indian R&D journey is our restrictive, bureaucratic, and often arbitrary trade policy. Customs duties and tariffs already start at ~10% on critical single-source reagents for biotech research, and even expensive specialized machinery need for R&D and manufacturing, and anti-dumping duties on Chinese imports – everything from 30% on key inputs like bare printed circuit boards to 100%+ on laser cutters – already take a big bite out of the finances of already-undercapitalized R&D startups. Packages imported by individuals, which is how most startup founders would order their parts in the scrappy early days before they incorporate a company, are taxed at an effective flat rate of ~40%+. The cost of the duties aside, the actual machinery of import can be sluggish and opaque – customs can take arbitrarily long to clear packages, especially those involving specialized items that fall into the cracks between specific Harmonized System of Nomenclature (HSN) codes. I’ve heard of customs clearance taking months for simple electronic circuits that are critical for experimental robotics work, for example. In practice, if you want to get things cleared quickly, you need to get an Importer-Exporter Code (IEC) from the government, an AD code from your bank, and a Customs House Agent (CHA), all of which require a fairly substantial amount of paperwork, much of it recurring, which most small firms can’t or don’t know how to do.

On top of all that, tariff policy can change suddenly with absolutely no warning, and often in deeply illogical ways. I experienced this firsthand when the good ship PopVax found itself directly in the path of one such tariff typhoon involving the lab chemicals that fuel our drug discovery engine – on July 23 of last year, the finance ministry announced that as part of the 2024 Budget, the customs duty on lab chemicals imported in small packages (HSN Code 98020000) would be raised from 10% to an astounding 150% literally overnight, with the new rates going into effect the very next day. As far as I have been able to ascertain, no one in the Indian scientific community saw this coming, not even senior government officials in charge of scientific policy and funding whose grantees in both industry and academia now faced the complete annihilation of their research plans, nor trade groups representing the interests of India’s substantial pharmaceutical and contract research companies. One official I spoke to that night was convinced it was a typographical error – “they must have meant 15% and added an extra zero” – that would be fixed rapidly.

As it turned out, it wasn’t a mere typo – the government was concerned that this HSN code was being used to smuggle in small packs of ethanol, which would otherwise attract a 150% duty, and decided to deter this by raising the duty for small packs of lab chemicals in general to the same 150%. Readers familiar with the policymaking prowess of Indian babudom may be well acquainted with this tried-and-true strategy of dynamiting an entire mountain in order to eliminate the terrible threat of a single molehill, but no matter how many times I’ve seen it in action, I always find it truly gobsmacking to behold.

While the government’s stated intention was to deter ethanol smuggling, to many scientists I spoke with, this smelled like yet another attempt to force import substitution in R&D. Unfortunately, there are many, many different specialized reagents required for cutting-edge chemistry, biotechnology, and materials science research that are manufactured only in tiny quantities by a limited number of suppliers across the world – sometimes just a single one. These chemicals are difficult and expensive to develop, and the low aggregate demand for each one individually across the globe, let alone in India specifically, means that Indian manufacturers don’t have strong incentives to produce each and every one of them. In practice, a tariff this high would make it impossible for Indian labs, already poorly funded relative to our global peers, to bring in the chemicals we absolutely need to do almost any frontier research.

To the government’s credit, they partially reversed this decision a few weeks later after universal outcry from scientists, pharma companies, and basically everyone else working with lab chemicals. They introduced an exemption to this 150% tariff, bringing the rate back down to 10% for materials to be used “in laboratories and for research & development purposes” as long as they aren’t “sold or traded after import”. Unfortunately, they imposed their customary bureaucracy on this exemption – it is only available to those willing to certify that the materials will not be further sold or traded via an INR 2500 (~$30) bond on stamp paper for each shipment, and requires that the importing company be accountable to the government about the status of the material until it is fully exhausted. While we at PopVax are able to do this, this tariff-and-exempt approach has made life very difficult for many small-time chemical suppliers and importers who work with small companies that don’t themselves have the direct relationships with foreign vendors that we now do. Two of those small traders helped us navigate the supply ecosystem for several key reagents and extended substantial credit to us in the early days of PopVax, and I suspect we might not be around today without their support. I shudder to think what will happen to small biotech companies if those key local vendors shut down.

In the chaos following the initial announcement, shipments of lab chemicals had almost completely halted, and it wasn’t clear what the path forward would be for us to continue our R&D work in India. This sort of uncertainty can do fatal damage to our fledgling industry before it takes flight, and preventing it should be one of the overriding goals of all policymaking. It should be clear by now that neither the hammer of bureaucratic overreaction nor the false idol of import substitution has ever truly worked for India – indeed, the failure of import substitution is recursive! What we should be doing is encouraging the creation of innovative products that the world will want to buy, and to do that, we need to let our scientists, our engineers, and our entrepreneurs import the materials and machinery they need to invent and develop those products here in India – increasing the pace of Indian innovation requires that we put up less trade barriers, not more.

In this particular case, a few minutes of discussion with any working scientist in Indian academia and industry would, I’m quite sure, have informed whomever made this policy of the cataclysmic blow they were preparing to strike on the fragile firmament of Indian scientific R&D, with the enormity of the potential impact doubtless reinforced by loud swearing and rude hand gestures. The fact that this didn’t happen, and that even senior government officials were unaware of the rationale for this change, underscores the importance of consulting with the people who will be affected by changes like this before making them – the government could and should seek open comment on policies of this nature as a standard practice.

I would be remiss to write about tariffs without acknowledging the American elephant that has recently placed its mighty leg on the throat of global trade. In a previous draft of this piece, I wrote that India should look to the liberal US import regime as an example to emulate, and I believe the American about-face only strengthens the argument to drop our trade barriers: if we can become one of the best places in the world to innovate, and it becomes harder to do so in America because they choose to cut themselves off from the best European and Asian technology, we have a serious shot at reversing the brain drain of the past three decades by convincing the best Indian-origin talent across the world that India is the best place for them to build the future, not the US.

Even exports, which one might rationally expect to be streamlined, need substantial reform – the often byzantine paperwork imposes an excessive burden for a country that is, theoretically, trying to promote export-led growth. Sheer volume of documentation aside, perhaps most damaging of all to companies attempting to build R&D-driven products with long gestation times is the RBI’s rule on advance export payments, which mandates that an exporter must make the shipment of goods within one year from the date of receiving any advance payment. Consider, for example, a hypothetical company developing a novel supersonic passenger aircraft in India, as Boom Supersonic and Astro Mechanica are doing in the US. This rule would prevent them from taking advances from sophisticated risk-taking customers during the lengthy R&D process – Boom, for example, has received advances from large operators like American Airlines despite the production of its passenger jet being years away. R&D aside, even a mature aircraft such as the Boeing 737 typically takes 24-36 months to be manufactured & delivered from the time the customer places the order – if an Indian company were to ever develop, manufacture, and attempt to export such an aircraft, it would have to repeatedly request the RBI for extensions on export timelines, and would remain compliant with the law only if the RBI were to grant said extensions at their own discretion. This arbitrary cap imposed on export timelines should be removed entirely – let companies negotiate whatever contracts the market will bear for advances, which provide critical low-cost financing to develop and produce high-cost products.

Massively Increasing Government Funding for R&D

The foundation of US domination of science and technology innovation in the last century, and the rise of Chinese R&D over the past decade, is massive government funding for scientific research in academia and industry. Prior to the new administration’s cuts, the US spent ~3.5% of its GDP each year on R&D, representing almost $1 trillion as of 2023, of which ~$200 billion was spent by the US government directly, accounting for ~0.72% of GDP on its own. China spends ~2.7% of its GDP, ~$500 billion, on R&D, with the government accounting for ~$164 billion directly, a higher percentage than in the US – given that the cost of R&D in China is much lower than in the US, China is already likely doing considerably more R&D in practice than the US. Smaller countries with a reputation for high-tech global exports spend an even higher percentage of their GDP on R&D, chief among them Israel (~6.3% of GDP), South Korea (~5.2%) and Taiwan (4%). It is by now well known that India substantially underfunds R&D – we spend ~0.6% of our GDP on R&D across government and private funding, around ~$22 billion as of last year, with the government accounting for most of that, ~0.4% of GDP, on its own, largely flowing to government research labs and institutes. We’ve already discussed that Indian companies don’t spend very much on R&D, but here it is in stark relief – total Indian corporate spending on R&D across all industries is around ~$8 billion as of last year, is less than what one single US big pharma company, Pfizer, spends on R&D each year, around ~$11 billion.

These established companies are not likely to change their ways this late in the game, so the government must find a way to fund basic and early translational research in academia that may spark a new wave of innovative companies, then fund translational R&D at those companies until they can stand on their own feet, or at the very least attract substantial outside capital to fund late-stage development. To do this, we need to invest a substantial portion of our GDP directly into R&D via the government, as much as 1-2%, doubling or even quadrupling current government R&D spending to $40-80 billion.

The Indian government must learn to see this money as an investment – high-quality economic estimates of return on R&D spending, such those made a few years ago by the Northwestern economist Benjamin Jones and the former US Treasury Secretary Larry Summers, suggest that every dollar invested by the US government into R&D returns as much as $13 of value to the economy.

Consider, as an illustrative example, our space program – despite the Indian Space Research Organization’s (ISRO) funding in the late 1980s and early 1990s, hovering around ~$500 million per year, paling in comparison with NASA’s ~$12.4 billion budget, ISRO’s Polar Satellite Launch Vehicle (PSLV), first launched in 1993, was at the time the lowest-cost way to get into Low Earth Orbit (LEO), both per kg of payload, and per launch. At ~$4000 per kg into LEO, it was as little as half or one-third the price per kg of its contemporary counterpart rockets in the US, the Delta II and the Atlas II/IIA, with a similar extremely high success rate (>90%). ISRO has made hundreds of millions of dollars launching satellites using the PSLV for commercial customers across the world. From the mid-1990s to the late-2000s, the PSLV was a best-in-class LEO launch product, and almost certainly offered the best value in the global launch market.

This could have been our TSMC – if we’d invested heavily in further cutting launch costs and massively increasing launch frequency, and into the development of next-generation launch vehicles, including reusable ones, we might have been able to become the global launch industry leader. Instead, ISRO’s budget has risen to only $1-1.5 billion over the past quarter century, far trailing Indian GDP growth, and after the PSLV and the Geosynchronous Satellite Launch Vehicle (GSLV), a geosynchronous orbit launcher based partly on the PSLV, entered service within a decade of each other (1993-2001), ISRO hasn’t managed to complete development of a completely new launcher in the past 25 years. ISRO also made no move to transfer their rocket technology to private Indian companies, or even enable private development of new launchers, until the establishment of Indian National Space Promotion and Authorisation Centre (IN-SPACe) in 2020 finally provided a pathway to launches of privately-developed Indian rockets.

In the meantime, SpaceX developed the Falcon 9, a reusable rocket with an even lower cost to deliver mass into LEO at ~$2600 per kg. NASA acted as their first major customer – just months after SpaceX first achieved orbit with the Falcon 1, NASA awarded them 12 cargo resupply flights to the International Space Station for when the still-in-development Falcon 9 was ready to fly, at a total contract value of $1.6 billion, which is marginally higher than ISRO’s budget this year. Elon Musk is on record saying that this contract saved SpaceX, which launched 133 successful Falcon 9 missions in 2024, representing over half of all global orbital launches and totalling ~$4.2 billion in launch revenue. By contrast, ISRO launched into orbit a total of only 6 times in 2024.

Funding ISRO to increase launch cadence and develop new launch vehicles competitive with the Falcon 9, which has been SpaceX’s workhorse for the past 15 years, would undoubtedly have paid for itself manyfold with launch revenue alone, and that’s before accounting for the second order consequences of Indian being a global leader in space launch, including the much earlier development of the private sector space-tech industry. We’re now seeing Skyroot, Agnikul, and other launch companies pick up this torch, and I have no doubt they will be successful, but they’re underdogs fighting for position in an increasingly competitive market which was ours for the taking two decades ago.

I strongly believe that biotech R&D represents another opportunity for deep investment with massive returns that we cannot afford to miss – we’re close enough to the frontier that we can accelerate past it with the right resources. Much more money directed toward academic researchers in this field and others like materials, computer science, and optics is essential, but we must also ensure that this money can actually be used by the people it is directed towards without them drowning in an ocean of paperwork. We must remove the onerous and frankly paranoid restrictions on fund usage that make India one of the hardest places in the world to do good science, including requirements for domestic purchase of materials and equipment – this, of all places, is not where you want to do import substitution! The government must end the proliferation of eldritch bureaucratic horrors like project-specific zero-balance bank accounts – unspent funds at the end of the financial year automatically return to the government, no matter how late they were actually disbursed, and new funds are contingent on obtaining a ‘zero-balance certificate’ of some kind – and the GeM procurement portal – ask for a PCR machine, get a toaster (“it heats up, doesn’t it!”). Instead, the government – and we, the people they represent – must trust scientists to hold and deploy their hard-won research funds as they see fit, with appropriate audit trails available if requested. Science is not linear or predictable, and the path to important work may lead in unexpected directions, so it is essential that our funding agencies allow most reasonable changes to grant scope and no-cost timeline extensions if all monies are not spent by default.

Most importantly, the Indian government must release allocated and awarded funds on time! Grants to academic researchers are frequently delayed by many months post approval, and stipends to PhD students even more so. Just a few days ago, I read a report in The Hindu that PhD students who hold the prestigious INSPIRE Fellowship from India’s Department of Science and Technology (DST), chosen as our top 1000 new doctoral researchers in the sciences each year, haven’t been paid their stipends for almost a year now. Many of these young scientists, who are essential to the project of building the future of shared abundance we all want for our country, and should be treated as the stars in our national firmament that they are, find themselves unable to even pay rent, with their complaints cast aside and ignored. These kinds of delays are fatal not just to the careers of these individuals, but to India’s technoeconomic future. If our government doesn't take this seriously and rectify the situation, not just for now but for the long term, we will be cutting off our scientific and technological ambitions at the knees.

I believe we must make scientific research in India systematically easier and more attractive. With the US government cutting academic research funding, going after prominent universities like Harvard, and, as of yesterday, apparently shutting down all student visa interviews, this is an unmissable opportunity to attract research talent from all over the world to India. We should immediately remove restrictions on Indian universities raising endowment funds from abroad, and allow all universities to set their own R&D agendas as contemplated for the Institutes of Excellence – that whole program should get the chop and all universities should get those rights by default. We should follow China’s lead and set up a Thousand Talents-like program targeting leading Indian-origin scientists who can return on a full-time or part-time basis, as well as a portion of top domestic Indian faculty, with 20 crore INR (~$2.3 million) in guaranteed research funding each over 5 years that they can spend as they see fit without needing to seek project-specific approval.

To capitalize on this boom in academic research, we should ensure that there is a clear pathway for startups to build on this work to develop first-in-the-world and best-in-the-world products. All Indian academic research should be default available on a non-exclusive license with a low-single-digit royalty on net sales to Indian-headquartered companies, who can then work to develop their own unique novel products on top of this foundation.

We should set up a US Defense Advanced Research Projects Agency (DARPA)-style civilian research funding agency within government with a wide mandate to rapidly fund large-scale novel R&D projects in the private sector, similar to the UK’s Advanced Research and Invention Agency (ARIA). The current best example of this in the Indian government is the Biotechnology Industry Research Assistance Council (BIRAC), which was pioneering when it was founded in 2012, offering 50 lakh INR Biotechnology Ignition Grants (BIG), almost ~$100k at the time, to startups to develop proof-of-concept data – this was almost as much as the Phase I of the US Small Business Innovation Research (SBIR) that has funded many deep tech companies in their earliest days. 13 years later, the BIG grant is still 50 lakh INR, which doesn’t go as far these days. Between the early in vitro data the 50 lakh buys you and actually starting a Phase I clinical trial is a deep funding chasm that no Indian VC dares to bridge. BIRAC itself has programs that kick in for later-stage preclinical development, but these require co-funding from the company of 30-50% which, given VC reluctance to fund R&D-driven biotech startups, and the general lack of cheap credit available to small Indian companies without onerous personal guarantees on the part of the founders, severely disadvantages startups. As such, much if not all of the money from these Indian government biotech R&D programs that require substantial co-funding will flow to big companies, or subsidiaries of big companies, that don’t really need the money and will at best do incremental research, but can provide the co-funding amounts from internal funds. Just as the US government has historically done via programs like SBIR, NIH & NSF grants, and DARPA, the Indian government must provide full (100%) funding for R&D at small companies and startups up to at least ~20 crore INR (~$2.3 million) per program, not just in biotech but in other deep tech areas as well, otherwise no transformative R&D will actually happen. These programs should not require co-funding unless the company has more than INR 1000 crore (~$120 million) in turnover.

The government should also consider bringing back tax incentives for R&D, such as tax credits that allow for 200% expensing of R&D against profits up to an INR 1000 crore yearly limit.

The Time Is Now

We in India, at this fleeting moment, are the beneficiaries of an almost unbelievable opportunity – the United States of America, the world’s leading research funder, the gathering place for the world’s greatest scientific talent since the start of World War II, has decided to systematically reduce government funding for scientific R&D, and make it considerably harder for students, scholars, scientists, and technologists of all kinds to move there.

We have a singular, once-in-a-century opportunity to seize the moment and technologically leapfrog the US, China, South Korea, and Israel to become the global leaders in inventing novel R&D-driven first-in-the-world and best-in-the-world products that we can export all over the world for the trillions of dollars we need to lift the people of India out of poverty and into universal abundance. This is the only way to win in this brave new economic world of ours and, as the recent military conflict with Pakistan has demonstrated, we can’t rely on anyone else to hand us the technologies we need to remain safe and free – we’ll have to build them ourselves.

I believe the talent we need is here, or can be brought back, and there are enough current and potential founders bursting with energy to build tomorrow in India. To give them the best chance of success, we must get them the money they need, and remove bureaucratic obstacles from their paths. What I’ve suggested is by no means comprehensive, but it’s a start, and if we follow through, I am certain we will live to witness a new dawn of Indian ingenuity and innovation, where people all over the world rely on Indian products and companies as second nature, such that it would be impossible to contemplate living without them. I intend to be an integral part of helping India and Indians ride that technoeconomic wave to wealth, prosperity, and peace. Into that infinite sunrise, let my people awake!

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I’m Soham Sankaran, the founder & CEO of PopVax, an Indian full-stack biotechnology startup developing novel mRNA vaccines and therapeutics. If you’re interested in talking with me about the ideas in this piece, or if you’re in government and are interested in implementing some of these policy suggestions, feel free to email me at soham [at] soh [dot] am.

You can follow me on Twitter/X @sohamsankaran and on Bluesky @soh.am.