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Financing of industrial innovations in India: how effective are tax incentives for R&D?

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  • Sunil Mani

Abstract

The paper surveys the instruments that are available for innovation financing in India. It identifies three such instruments, namely research grants and loans, venture capital and tax incentives. The effectiveness of all these instruments are then examined in some general fashion, but one of the instruments, namely tax incentives are subject to a detailed empirical scrutiny in terms of its effectiveness. We have constructed a dataset containing firm belonging to four different industries which have claimed these tax incentives. For these firms we estimated the elasticity of R&D expenditure with respect to tax foregone. The resulting analysis showed that while the instruments have been targeted well at the right sort of industries its effect in spurring additional investments in R&D is open to question.

Suggested Citation

  • Sunil Mani, 2010. "Financing of industrial innovations in India: how effective are tax incentives for R&D?," International Journal of Technological Learning, Innovation and Development, Inderscience Enterprises Ltd, vol. 3(2), pages 109-131.
  • Handle: RePEc:ids:ijtlid:v:3:y:2010:i:2:p:109-131
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    Citations

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    Cited by:

    1. Saibal Ghosh, 2012. "Does R&D intensity influence leverage? Evidence from Indian firm-level data," Journal of International Entrepreneurship, Springer, vol. 10(2), pages 158-175, June.
    2. Basant, Rakesh & Mani, Sunil, 2012. "Foreign R&D Centres in India: An Analysis of their Size, Structure and Implications," IIMA Working Papers WP2012-01-06, Indian Institute of Management Ahmedabad, Research and Publication Department.
    3. Sunil Mani, 2009. "Has India become more innovative since 1991? Analysis of the evidence and some disquieting features," Centre for Development Studies, Trivendrum Working Papers 415, Centre for Development Studies, Trivendrum, India.
    4. K.C. Zachariah & S.Irudaya Rajan, 2008. "Costs of basic services in Kerala, 2007: Education, health, childbirth and finance (Loans)," Centre for Development Studies, Trivendrum Working Papers 406, Centre for Development Studies, Trivendrum, India.

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