As global industries embrace digital transformation, Engineering Research and Development (ER&D) is playing a critical role in shaping the future of innovation. A recent joint report by NASSCOM and Deloitte, titled “Spotlight on Germany’s Evolving ER&D Operating Model Strategy: Tapping into India Advantage,” highlights Germany’s leadership in ER&D investments within Europe and India’s rising prominence as a global engineering hub.
Germany continues to be the driving force of ER&D in Europe, which accounts for 24% of the global R&D spend as of FY23. With 36% of Europe’s R&D investment concentrated in Germany, the country remains at the forefront of technological advancements, particularly in automobiles, electronics, software, healthcare, and industrial engineering. However, to maintain its edge, German companies are increasingly turning to India’s strong engineering ecosystem, leveraging the country’s skilled workforce and advanced Global Capability Center (GCC) and Engineering Service Provider (ESP) models.
Germany’s ER&D Priorities: Digitalization, Autonomy, and Sustainability
The report identifies digitalization, autonomy, and sustainability as the key themes driving ER&D investments in Germany. Companies are shifting their focus toward intelligent R&D, digital engineering, and innovation to stay competitive.
Key drivers fueling Germany’s ER&D growth include:
• A strong core engineering talent pool
• Government support for R&D initiatives
• Industry-academia collaboration fostering innovation
• A thriving start-up ecosystem driving cutting-edge solutions
Germany’s ER&D landscape is rapidly evolving, with companies prioritizing time-to-value and digital transformation. To accelerate this shift, many organizations are partnering with India’s engineering talent and technology hubs.
India: A Critical ER&D Hub for Global Innovation
India has emerged as a preferred destination for engineering services, catering to both GCC and ESP-led models. The report highlights India’s increasing influence in the global ER&D landscape, with the country serving as a key supply market for engineering solutions.
India’s ER&D industry by the numbers:
• 24% of the world’s top 50 engineering service providers are based in India • India houses over 1,700 Global Capability Centers (GCCs), with more than 1,680 focused on ER&D services
• ER&D contributes nearly one-fourth of the Indian tech industry’s revenue
• India has 91 active unicorns and over 31,000 start-ups, driving innovation in AI, metaverse, and spatial computing
With its deep engineering expertise, strong digital capabilities, and robust academic partnerships, India has become a strategic partner for German companies aiming to enhance product innovation, resilience, and speed to market.
Industry Experts on India’s ER&D Growth
Keerthi Kumar, Partner, Deloitte India, emphasized India’s transformation from a service provider to a creator and owner in the global ER&D sector. “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), and a globally renowned academic network. These forces have consistently moved 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.”
The report highlights India’s 8% CAGR growth over the past four years, making it the fastest-growing and second-largest segment in the Indian tech industry. Notably, ER&D contributed 55.4% of India’s net tech export growth between 2023 and 2024.
Siva Polimetla, Head – Engineering R&D, NASSCOM, further underlined India’s role in driving next-generation technologies like AI, metaverse, and spatial computing. “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 fueling 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.”
India-Germany Collaboration to Drive Future ER&D Growth
The India-Germany ER&D partnership is becoming a cornerstone of global innovation. With India’s strong talent pool, cutting-edge technology, and growing start-up ecosystem, German companies are looking to deepen their engagement with India to future-proof their R&D operations.
As advancements in AI, digital engineering, and sustainability continue to shape the global ER&D sector, India’s role as a strategic partner for German and European companies is set to expand. The collaboration between Germany’s engineering excellence and India’s digital expertise is expected to drive transformational innovation across industries.
