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Germany spearheads EU R&D spending growth with ~36 percent share in Europe, sparking unparalleled future opportunities for Indian Engineering R&D GCCs and service provider ecosystem: Deloitte - Nasscom report

  • About 428 of 2,000 of the largest R&D spenders are headquartered in Europe.
  • The German constitutes nearly 36 percent of the European R&D spend, with the automobiles and parts sector leading these ER&D investments in Europe.
  • While the strategy of focusing on the domestic market (localisation) continues to thrive, ER&D centres in India are blending this with the “India for the world” approach, underscoring the country’s role as a trusted ER&D and innovation driver for global enterprises.
  • India boasts 91 unicorns and a growing tech start-up community of over 31,000, making its entrepreneurial ecosystem vital to its expanding ER&D influence.
     

Media contact
Pallavi Das
Deloitte Shared Services India LLP
Mobile: +91 9910982782
Email: paldas@deloitte.com

National, 27 January 2025: As global businesses navigate a rapidly evolving geopolitical and economic landscape, India has emerged as a critical hub for Engineering Research and Development (ER&D). A joint report by Deloitte and NASSCOM, titled “Spotlight on Germany’s evolving ER&D operating model strategy: Tapping into India advantage,” highlights India’s growing role in shaping the future of global ER&D. With a growing GCC workforce focused on ER&D services, India is transitioning from traditional support functions to becoming key drivers of digital transformation and innovation across industries worldwide.

As Europe emerges as a key contributor to global R&D spend—accounting for 24 percent in FY23—Germany leads the charge with 36 percent of the region’s R&D investments. The report reveals how German companies, particularly in sectors such as automobiles and industrial engineering, are increasingly turning to India’s mature ER&D ecosystem to boost product innovation, resilience and speed to market. The collaboration between Germany’s engineering expertise and India’s digitally skilled workforce underscores a growing interdependence aimed at addressing global challenges and driving innovation.

India continues to build a strong ecosystem to further strengthen its position as a global leader in ER&D. The country commands a significant share of the GCC market and hosts over 1,700 operational GCCs, of which more than 1,680 house ER&D services. A sizeable percent of the global top 50 engineering service providers is headquartered in India. Home to 91 active unicorns and a burgeoning tech start-up community of 31,000+, India is also advancing cutting-edge technologies such as GenAI, spatial computing and industrial metaverse. Initiatives such as MeghrajAI and IndiaAI, combined with academic partnerships with institutions such as IIT Bombay and IISc Bangalore, further strengthen India’s stature as a global innovation hub and a strategic partner for businesses shaping the future of ER&D.

Keerthi Kumar, Partner, Deloitte India, said, “India’s Engineering R&D segment has come a long way bolstered through a robust ecosystem comprising the world’s largest GCC base, leading Engineering Service Providers (ESPs), third-largest and burgeoning start-up community and globally renowned academic institutions. These forces have consistently been moving the needle for the ecosystem from being a doer and collaborator to becoming a creator and owner, primarily around market-shaping dimensions such as digital engineering, autonomous and connected systems and more importantly, sustainability. This is naturally reflected in the 8 percent CAGR over the past four years for India’s ER&D segment, the fastest-growing and the second-largest segment in the Indian tech industry and more noticeably, the 55.4 percent growth contribution for the net tech exports the country witnessed between 2023 and 2024.”

India’s abundant talent pool, skilled in traditional and emerging technologies, combined with favourable government policies and a robust ecosystem of academia and start-ups, has made the country a preferred destination for MNCs and their GCCs. This conducive environment enables organisations to scale rapidly, diversify operations and enhance risk mitigation and business continuity efforts.

Siva Polimetla, Head – Engineering R&D, NASSCOM, said, “India’s rapid emergence as a global ER&D leader is being driven by its unmatched talent pool and its ability to spearhead cutting-edge innovations. The growing synergy between GCCs, ESPs and start-ups in India is fuelling growth in high-impact sectors such as AI, the metaverse and spatial computing. These areas are not only shaping the future of product development but are also strengthening India’s position as the go-to destination for digital engineering and innovation—an invaluable partner for global companies, particularly those in Europe, looking to stay ahead of the curve in today’s technology-driven world.”

With advancements in AI, digital engineering and sustainability, India’s GCCs are shaping the future of global ER&D, using the country’s robust infrastructure, talent pool and innovative ecosystem to maintain its competitiveness on the global stage.

Notes to the editor (for reference purposes only)

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organisation”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more.

This press release has been issued by Deloitte Touche Tohmatsu India LLP.

 

About NASSCOM

NASSCOM represents the voice of the $250 billion+ technology industry in India with the vision to establish the nation as the world’s leading technology ecosystem. Boasting a diverse and influential community of over 3000 member companies our network spans the entire spectrum of the industry from DeepTech and AI start-ups to multinationals and from products to services, Global Capability Centres to Engineering firms. Guided by our vision, our strategic imperatives are to accelerate skilling at scale for future-ready talent, strengthen the innovation quotient across industry verticals, create new market opportunities - both international and domestic, drive policy advocacy to advance innovation and ease of doing business, and build the industry narrative with a focus on Trust, and Innovation. And, in everything we do, we will continue to champion the need for diversity and equal opportunity.

Nasscom Insights is the in-house research and analytics arm of nasscom generating insights and driving thought leadership for today’s business leaders and entrepreneurs to strengthen India’s position as a hub for digital technologies and innovation.

 

About ‘Spotlight on Germany's evolving ER&D operating model strategy: Tapping into India advantage’

The report provides an in-depth analysis of the evolving Engineering Research and Development landscape in Germany and its implications for Europe. It highlights Germany as a pivotal market, serving as a barometer for broader regional trends. The report examines key themes, including investment priorities, sectoral trends and the adoption of emerging technologies, such as digitalisation, autonomous systems and sustainability-driven innovations.

This comprehensive study synthesizes insights from 30 primary interviews with senior ER&D stakeholders, including global ER&D leaders, GCC executives, and External Service Providers (ESPs). It also includes secondary research analysing over 2,500 companies globally, which represent ~80 percent of worldwide R&D expenditure. The research includes data from sources such as the Industrial Research and Innovation dataset and detailed financial analyses from FY23.

All sources mentioned above are from the above-mentioned report.

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