India’s ER&D market expected to reach $170 bn by 2030: Report

India is likely to contribute 22% to the global engineering research and development (ER&D) sourcing market by FY30, according to a report released on Thursday. The report by Nasscom in partnership with consulting major Boston Consulting Group (BCG) further predicted a significant jump in India's share of the global ER&D sourcing market, which is projected to grow from $44-45 billion in 2023 to $130-170 billion by FY30. 

Software, automotive, and semiconductor sectors are expected to contribute more than 60% of India's ER&D sourcing by FY30, the report said, adding that semiconductor ER&D sourcing share is expected to see the highest jump from 9% share in FY23 to 12% share, becoming the third highest contributing sector by FY30. 

“India's position in the global ER&D sourcing arena is truly unique, driven by our remarkable combination of ER&D innovation expertise and ability to provide scalable talent,” said KS Viswanathan, Vice President (Industry Initiative) at Nasscom. Overall, business ER&D spending has experienced a 7-8% CAGR from 2020 to 2023, and is expected to grow at an 8-9% CAGR from 2023 to 2030. 

The market is projected to reach $1.8 trillion, driven by renewed interest in the segment, demand for digital products and services, and the adoption of new technologies, according to the report. 

“Prominence of digital in engineering will continue to increase, contributing 48% of all ER&D spend by 2030 and driving the convergence of software and traditional engineering stack,” said Amit Kumar, Managing Director and Partner at BCG. 

The automotive, software, healthcare, and medical device sectors are expected to be the primary drivers of ER&D spending growth by 2030. 

The semiconductor industry is also expected to play a major role, driven by increasing demand and investment. 

Digital engineering is expected to be the primary driving force behind the accelerating ER&D spending, accounting for approximately 65% in 2030, up from 45% in 2023. 

To be sure, a report published on 3 October by consulting firm Zinnov India, also emphasized on India’s digital engineering growth India, with its rich talent pool, well-established Global Capability Center (GCC) ecosystem, flourishing partner economy, and robust government support, provides an unrivaled environment for organisations looking to thrive in the DE domain.  

The success of these ER&D centers is evident in the products and services that they have developed, said Zinnov. For example, Google’s ER&D centers in India have developed new features for its search engine, such as the ability to understand natural language queries. Microsoft’s ER&D centers in India have developed new security features for its Cloud Computing platform, Azure and Amazon’s ER&D centers in India have developed new ways to make shopping on its website more convenient and efficient. 

There are over 1440 ER&D centers in India that caters to multiple segments from industrial, software, BFSI, and automotive industries, making India a hotspot for global organizations looking to build new products and services.