Indian companies that consistently increased research and development spending have significantly outperformed the broader stock market over the past five years. According to an analysis by Monarch AIF, the 130 companies that expanded R&D expenditure at a compound annual growth rate (CAGR) of over 20% between FY21 and FY26 delivered an average stock-price CAGR of 23.5% from April 2021 to September 2026 — nearly 10 percentage points above the 13.7% returned by the NSE 500 Total Return Index. A smaller subset of 27 companies that also maintained R&D spending above 2% of sales over three years posted an average CAGR of 32.5%, more than double the benchmark index performance.
Despite the outperformance of R&D-focused companies, the broader corporate picture remains weak in terms of research investment. As reported by The Hindu BusinessLine, only 28 of more than 2,000 listed Indian companies spend more than 5% of sales on R&D, and just 59 exceed the 3% mark. At the national level, India's Gross Expenditure on Research and Development stood at ₹2.45 lakh crore in FY24, equivalent to 0.84% of GDP — a figure that has remained broadly stagnant for two decades. Within India's listed corporate sector, average R&D expenditure as a share of sales actually declined from 0.64% in FY16 to 0.56% in FY26, even as absolute spending rose.
The contrast with international peers is stark in terms of research investment commitment. According to the analysis, China raised its R&D spending from 1.2% of GDP in 2004 to 2.7% in 2024, while the US stands at 3.4%, Germany at 3.1%, and Israel at 6.8%. Abhisar Jain, Head and Fund Manager at Monarch AIF, emphasized that India needs to raise R&D spending to approximately 2% of GDP to support its ambition of becoming a developed economy by 2047. He added that cutting research budgets to protect near-term earnings does not necessarily benefit shareholders over time.
