Answer: Knowledge economy refers to an economic system where the generation, dissemination, and application of knowledge play a central role in driving economic growth and competitiveness.

• Human capital development: R&D activities contribute to the development of human capital by fostering a culture of learning, critical thinking, and problem-solving.
• Economic competitiveness: By investing in R&D, nations can develop cutting-edge technologies, acquire intellectual property rights, and create unique products and services that differentiate them from competitors.
• For example, Satellite Launching services at affordable rates is the strength of ISRO.
• Knowledge spillover effects: R&D generates knowledge spillover effects, wherein advancements made in one field can benefit other sectors and industries.
• For example, Cryogenic engines used in GSLV can be used in missile technology as well.
• Resilience and adaptability: R&D helps businesses and industries stay ahead of market trends, technological disruptions, and global challenges.
• For example, investment in R&D in new emerging technologies like AI, Internet of things etc. can prepare digital companies to remain competitive in future.

• Funding constraints: The expenditure on R&D as a percentage of GDP has remained relatively low. Limited funding restricts the availability of resources, affects infrastructure development, and hampers the scale and quality of research.
• For example, in 2019-2020, India's R&D expenditure accounted for around 0.7% of its GDP, significantly lower than the global average of 1.7%. (Economic Survey)
• Brain drains: The migration of skilled individuals leads to a loss of talent, intellectual capital, and innovation potential for the Indian research ecosystem.
• For example, according to a report by the Ministry of External Affairs, around 17,000 Indian students pursued higher education abroad in 2018.
• Limited industry-academia collaboration: Limited knowledge exchange, technology transfer, and commercialization of research outcomes hinder the ability to address real-world challenges and capitalise on research potential.
• For example, the share of the private sector in R&D in India is merely 35% (in the USA it is around 70%).
• Lack of Diversification: The research ecosystem is dominated mainly by the Central government in India only in certain specific sectors.
• For example, more than half of the amount is spent on Defense and Space.
• Regulatory complexities: Lengthy approval processes, unclear regulations, and administrative red tape can discourage researchers and hinder the implementation of research initiatives.
• For example, A study conducted by the Indian Council of Social Science Research (ICSSR) found that the administrative processes involved in grant approvals and research permissions were perceived as time-consuming and burdensome by researchers.

Sustained government commitment, stakeholder collaboration, and long-term planning, can contribute to the establishment of a sound research ecosystem in India.