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ER&D Sector To Grow About $3.3tn By 2030: NASSCOM-BCG Report

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The joint report, ‘Seizing the ER&D Advantage – Frontiers for 2030,’ delves deep into the factors influencing the ER&D sector’s path to 2030. It highlights five key trends propelling its growth: Digital Engineering, Climate & Sustainability, AI Augmentation, Service Orientation, and Population and Skill Inversion.

In the face of significant technological shifts in critical industries, investment in Engineering, Research and development (ER&D) has become essential.

The global ER&D sector is on track for major growth, with projections showing an increase from roughly USD 1.5-1.8 trillion in 2023 to USD 2.5-3.3 trillion by 2030. This represents a strong compound annual growth rate (CAGR) of 8-9%. India, a leading hub for ER&D outsourcing, spent around USD 44-45 billion in 2023 and is predicted to continue its dominance, with spending expected to hit between USD 130 billion and USD 170 billion by 2030.

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The ER&D sector’s opportunities and challenges are ever-changing. Currently, the emphasis on ER&D is not just a preference but a requirement. The surge in global ER&D spending is influenced by factors such as global talent accessibility, the quest for greater agility and scalability, and cost-saving measures. This growth presents numerous opportunities for industries and economies globally.

A joint report by NASSCOM and BCG, named ‘Seizing the ER&D Advantage – Frontiers for 2030,’ deeply explores the forces moulding the ER&D sector’s future. The report covers global ER&D spending, influential trends, leading growth sectors, and more.

The report also emphasizes India’s potential to become a global ER&D powerhouse. Insights from a survey of over 280 executives across nine sectors reveal perspectives on ER&D intensity, preferred outsourcing locations, challenges in outsourcing ER&D, and in-demand skills for the next 5-7 years.

A central theme of the report is India’s role in the Business ER&D sourcing market by 2030. India’s vast engineering talent and established relationships through prior engagements position it for a promising future in this domain.

By 2030, India is expected to increase its Global ER&D sourcing market share to 22%, up from 17% in 2023. This growth is attributed to factors like favourable demographics and the need for India to promote its ER&D capabilities. The nation that can adapt and enhance its services, such as upskilling in digital engineering or acquiring specialized skills like electric vehicle platform development, will secure a larger share of future investments.

Key Findings:

  • Post-pandemic, global ER&D spending has seen a CAGR of 7%-8% from 2020 to 2023.
  • Trends like Digital Engineering, Climate & Sustainability, AI Augmentation, Service Orientation, and Population and Skill Inversion drive growth.
  • The leading sectors for this growth are automotive, healthcare and medical devices, and energy, utilities, oil, and gas.
  • By 2030, healthcare and medical devices, automotive, and telecommunications are expected to account for about 50% of global ER&D spending.
  • Besides the US, significant ER&D spending regions in 2023 include Japan, South Korea, Germany, France, the UK, and the Nordics.
  • Total ER&D Sourcing is anticipated to grow from USD 210 billion-280 billion in 2023 to USD 600 billion-770 billion in 2030, driven by the need for cost-effective talent and scalability.
  • India’s ER&D sourcing spending was USD 44 billion in 2023, with projections of USD 130 billion in 2030. However, countries like Thailand, Malaysia, Poland, Colombia, and Bulgaria are emerging as competitors.
  • For India to succeed, a detailed strategy is required, including infrastructure and policy support, branding and promotion, and a focus on skilling and research.
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Aryaman Raghuvanshi
Aryaman Raghuvanshi
Aryaman Raghuvanshi is a Journalist at EFY. His passion is to explore the future of mobility, which gets him to cover latest technologies shaping the future of automobiles and EVs. But, at times he writes on broader technologies too. LinkedIn: https://www.linkedin.com/in/aryaman-raghuvanshi-2431b7153

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