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

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  • Sunil Mani

    (Centre for Development Studies)

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 wrt 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 quesion

Suggested Citation

  • Sunil Mani, 2008. "Financing of industrial innovations in India How effective are tax incentives for R & D?," Centre for Development Studies, Trivendrum Working Papers 405, Centre for Development Studies, Trivendrum, India.
    • Handle: RePEc:ind:cdswpp:405
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    References listed on IDEAS

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    1. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    2. Vinoj Abraham, 2008. "Employment growth in rural India: Distress driven?," Centre for Development Studies, Trivendrum Working Papers 404, Centre for Development Studies, Trivendrum, India.
    3. Özçelik, Emre & Taymaz, Erol, 2008. "R&D support programs in developing countries: The Turkish experience," Research Policy, Elsevier, vol. 37(2), pages 258-275, March.
    4. Pierre Mohnen, 1999. "Tax Incentives: Issue and Evidence," CIRANO Working Papers 99s-32, CIRANO.
    5. Hall, Bronwyn & Van Reenen, John, 2000. "How effective are fiscal incentives for R&D? A review of the evidence," Research Policy, Elsevier, vol. 29(4-5), pages 449-469, April.
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    Cited by:

    1. 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.
    2. Sasidharan, Subash & Jijo Lukose, P.J. & Komera, Surenderrao, 2015. "Financing constraints and investments in R&D: Evidence from Indian manufacturing firms," The Quarterly Review of Economics and Finance, Elsevier, vol. 55(C), pages 28-39.
    3. Sukhdeep Singh & Indrani Chakraborty, 2021. "Growth of the Firms and Investments in Innovations: An Empirical Investigation of the Indian Manufacturing Industry," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 19(1), pages 87-122, March.
    4. 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.
    5. 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.
    6. Arup Mitra & Amit Jha, 2015. "Innovation and employment: a firm level study of Indian industries," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(1), pages 45-71, June.

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    More about this item

    Keywords

    Public R&D support; R&D investment; Evaluation; Tax foregone; Innovation policy; R&D policy; R&D investment; Innovation; India;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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