Indian automotive sector held back by lack of R&D spending: Niti Aayog report

India’s growth of becoming a global powerhouse in the automobile industry is being slowed down by a lack of innovation, according to a new report by NITI Aayog.
The report further noted that this drawback was mainly due to inadequate infrastructure in research and development as India's spending on the sector remains among the lowest in the world, especially when compared to leading automotive nations like Germany, Japan, and the United States.
“One of the most critical barriers to India’s growth in the global automotive sector is the lack of innovation, largely driven by inadequate Research and Development (R&D) infrastructure,” the report noted.
The report added "This underinvestment severely limits the country's ability to compete in emerging technologies such as EVs, autonomous driving, and smart mobility solutions".
While Indian manufacturers are known for their efficiency in producing low-cost, high-volume vehicles, the absence of a strong innovation culture is preventing them from moving up the value chain.
According to the report, this lack of advanced, differentiated products makes it difficult for Indian brands to stand out in the fiercely competitive global market.
A major concern raised by NITI Aayog is the lack of collaboration between the automotive industry, academic institutions, and research bodies. This disconnect is hampering the flow of ideas and innovation essential for developing next-generation solutions.
As a consequence, Indian firms often rely on imported technologies, driving up production costs and diminishing the ability to manufacture cutting-edge vehicles locally. The report highlights India’s lag in crucial domains such as battery technology, Advanced Driver Assistance Systems (ADAS), and AI-based manufacturing — all of which are becoming cornerstones of the future auto industry.
“To remain competitive and achieve long-term growth, India must significantly increase its R&D expenditure and build a robust ecosystem that fosters innovation and technological advancement,” the report stressed.
NITI Aayog also called for the creation of a strong innovation ecosystem, one that encourages collaboration, supports home-grown research, and enables Indian carmakers to be at par with their global counterparts.