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India’s ER&D Revolution: Engineering the Future of Innovation

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The Engineering Research & Development (ER&D) sector is emerging as a powerhouse in India’s economic and technological growth. With a robust talent pool, cutting-edge innovation, and strong government support, India is rapidly positioning itself as a global leader in ER&D, attracting significant investments from multinational corporations. As companies across industries embrace digital transformation, India is becoming the go-to destination for ER&D services, driving breakthroughs in AI, automation, semiconductors, and sustainable technology.

In the latest edition of “The People Weekly”, we delve into the rapid growth of India’s E&R&D sector, its vast opportunities, and the future trajectory that will define its global impact. Whether you are an industry expert, an investor, or an aspiring engineer, understanding this evolution is crucial to staying ahead in the world of innovation. Let’s explore!

ER & D Growth 

Global Growth

According to industry reports, the global ER&D market has seen a 7-8% CAGR post-pandemic and is expected to reach $2 trillion by 2025. EU-based companies have significantly increased their E&R&D investments, recording a 9.8% growth. Meanwhile, China is gradually closing the gap with the U.S., which continues to dominate the global E&R&D market. Despite a slowdown in global R&D growth, the world’s top 2,000 R&D-investing companies allocated 1,304.80 billion USD to R&D in 2023.

Some of the countries who are into major investments in the ER & D space are USA, Canada, France, Germany, the UK, South Korea, and Japan. 

Amongst the major sectors in the ER & D space, Software and Computer Services received the highest investment with pharma & biotechnology, Technology Hardware & Equipment, and Automobiles and parts in the second, third, and fourth position in terms of investment.

Image Courtesy: EU Science Hub

A study conducted by NASSCOM in collaboration with BCG has found that despite economic uncertainties almost 70% of Industry leaders want to either increase the ERR & D spend or at least maintain the current spend. Amongst the sectors that invest majorly in ER & D, by 2030, Automotive, Software, and Healthcare & Medical Devices will contribute almost 50% of the total global investment in ER & D.

India’s ER & D Growth

India’s ER&D sector has grown at a CAGR of 12-14% over the past few years, with an increasing number of global firms setting up innovation centers in the country. Companies such as Tata Consultancy Services (TCS), Infosys, Wipro, and HCL Technologies are leading the charge, alongside global tech giants like Google, Microsoft, and Tesla, which have expanded their R&D operations in India.

Global technology research and advisory firm ISG’s Index Insider said that the annual annual contract value of engineering contracts is up 33%

 Some of the top engineering services deals provided by Indian Engineering Services in 2024 are

Key Drivers of Growth of Indian ER & D space

One of the key factors driving E&R&D growth in India is its cost advantage. The country offers a highly skilled talent pool and lower infrastructure costs compared to other global locations, making it an attractive destination for R&D investments. This coupled with government initiatives to boost the ER & D industry helps this space to accelerate the growth. The union budget 2025-26 has allocated a hefty ₹20,000 crore to boost India’s ER & D sector.  

An interesting article that featured pointed to India becoming the ER & D hub for Europe, especially in the scenario where more and more GCCs are opening their shops in India. To point out a specific case, Germany, which is leading in investment in ER & D, is increasingly turning to India’s already mature ER & D space especially for automotive and industrial engineering sectors. Out of almost 1700 GCCs in India, almost 1680 have ER & D services. Also India’s shift towards EV is also a big catalyst for the growth of the ER & D sector.

Cleantech, Sustainability and AI, particularly GenAI growth, have also contributed to the R & D sector growth in the country. Digital India, Make in India and GOI’s push for more semiconductor manufacturing units in a bid to make India the semiconductor powerhouse of the world are other reasons. 

The Economic Impact of ER&D Growth

The rapid expansion of India’s ER&D sector is contributing significantly to the economy by generating employment, fostering innovation, and enhancing the country’s global competitiveness. Some key economic benefits include:

  1. Job Creation: The ER&D sector is expected to create over 500,000 new jobs by 2025, spanning software engineering, AI, chip design, and automation.

  2. Boosting Foreign Direct Investment (FDI): India has seen increased FDI inflows in the ER&D sector, reinforcing its status as a global R&D hub.

  3. Strengthening the Startup Ecosystem: India’s vibrant startup culture thrives due to ER&D advancements, and deep-tech startups attract billions in funding.

  4. Advancing Digital Infrastructure: India’s focus on AI, cloud computing, and next-generation technologies is strengthening its digital economy.

Hiring For ER & D Industry

There are 3 main parameters that influence hiring the right talent in the ER & D space. They are 

  • The evolving nature of ER & D space which will lead to access specialized skills globally and restructure the team accordingly. This could mean outsourcing certain tasks, leveraging global engineering centers, or collaborating with external research institutions.

  • High Demand for multidisciplinary talent with digital skills

  • Cost efficiency 

In fact, the Engineering, Research, and Development (E&R&D) sector is experiencing a surge in demand for highly skilled professionals across domains like AI, IoT, automotive, aerospace, and semiconductors. Companies are actively seeking talent with expertise in advanced engineering, software development, and digital transformation. There is a growing demand for niche skills – AI, machine learning, cloud computing, and embedded systems. When it comes to global talent, India remains a hotspot due to its cost-effective and high-quality workforce. 

However challenges remain as India needs to develop a skill centric ecosystem where it identifies skill sets required in ER & D space and develops the workforce accordingly. Some other regions like Poland, Mexico, Bulgaria, Thailand, Malaysia etc are also top contenders for skilled workforce in the ER & D space. 

PeopleLogic Opinion

India’s Engineering, Research, and Development (E&R&D) sector is at a pivotal moment, rapidly evolving into a global powerhouse for innovation and technological advancements. With a strong talent pool, cost advantages, and increasing government and corporate investments, the country is solidifying its position as a preferred destination for cutting-edge R&D.

As industries worldwide continue to embrace digital transformation, AI, automation, and sustainable technologies, India’s role in shaping the future of automotive, semiconductors, healthcare, and software engineering will only expand. However, to maintain this momentum, a skilled workforce, policy support, and deeper industry-academia collaboration will be critical.

With global giants and emerging startups alike betting big on India’s ER&D capabilities, the future looks promising, competitive, and innovation-driven. As the sector grows, it is set to not only drive India’s economic progress but also redefine its position on the global technology map.

 
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