August 6, 2008
As the celebrations of India @60 wind down and as the national attention is consumed with problems of the moment—price of energy, inflation, debt relief to farmers, political realignment in the states—it is hard to focus attention on the future of India. The urgent is likely to drive out the important. Moreover, it is easy to get carried away by growth statistics of the past five years and feel “we have arrived”.Leadership, however, is about the future, about hope and change. Leaders must elevate the national debate and focus on the potential of India. A shared view of India@75, for example, can provide a framework for building a multi-stakeholder consensus and making choices that are directionally consistent with that goal. Unless we are clear about the potential, it is very difficult to undertake an arduous journey.
I believe that India has the potential to actively participate in shaping the emerging world order. This demands that India must acquire enough economic strength, technological vitality and moral leadership to do so. Just economic strength and technological maturity is not enough. We know that the Soviet Union and Nazi Germany had economic and technological muscle. They failed. Morality is an integral part of leadership. We should emphasise all three dimensions, in equal measure, in India’s march to Her destiny.
The potential of India
Let us imagine the potential of India without constraining ourselves by the record of India during the first 60 years of independence. In an important sense, India got her second freedom.the freedom to grow only during the early 1990s. Let us also not constrain our thinking by the problems of the present. Let us first imagine this future.
Can we do this?
I would agree that the goals for India@75 are very ambitious. Therefore, it is easy to dismiss them as impractical. Yet, consider India’s struggle for freedom. In 1929, when Congress declared Poorna Swaraj as the goal, did it seem likely? Could anyone at that time have articulated the details of how it can be accomplished? The key was that it was a worthy goal. All Indians could relate to it. But the means had to be discovered. If one had applied the test of availability of resources and the record of the previous two hundred years of British ascendency, including the results of the first War of Independence in 1857, the goal would have looked impractical.
The successes of India in food production—the Green revolution, the White (milk) revolution—and the development of space technology are all worthy of note. The Club of Rome in their Limits to Growth predicted that “catastrophic” food shortages in India and Africa may turn into “apocalyptic” famines by 2010. The green revolution made India self-sufficient in food.
Underinvestment in agriculture for over a decade has resulted in current food problems all of which are reversible. India today is the largest producer of raw milk. Did anyone believe in 1980s that India would be a credible player in space and launch 11 satellites simultaneously?Let us look at India’s gains during the last 15 years. I can relate to these changes at a very personal level. When in 1994, I suggested to a select group of CEOs that they must build multinational firms from India (Indian MNCs) rather than be paralysed by the entry of multinationals in the Indian market, it looked far fetched. Very few, if any Indian, CEOs thought it was possible at that time. Today, Indian MNCs are a reality.
Similarly, 10 per cent growth and 10 million new jobs per year (10/10 programme) looked impossible in 2000. The idea was ridiculed. One was reminded of the traditional Hindu rate of growth of 3-5 per cent. But India is growing at close to10 per cent; some states are growing at 15 per cent plus. India is yet to generate 10 million new jobs a year. But that can happen if we put our mind to it.
The poor of India were seen as a burden. Converting the poor into micro-consumers and micro-producers—recognising the fortune at the bottom of the pyramid—has changed the character of the economy. Yes, there are still 200 million Indians who live in abject poverty. But the cell phone revolution, two-wheelers, consumer finance, and consumer goods of all kinds are fuelling the economy and changing peoples’ lives. Cell phones have shown that there is a huge untapped market. Amul, ITC eChoupal, Jaipur rugs, EID Parry and Reliance Fresh are showing us that we can creatively connect subsistence farmers to regional and national markets. Micro-producers can get a chance to improve their livelihoods.
It was just 10 years ago that most managers and politicians had declared manufacturing in India as a dead end. “We have no hope against China” they said. Today, manufacturing is alive and well and growing rapidly. India is becoming a manufacturing hub. Exports of manufactured goods are at $91 billion (Apr. ’07-Feb. ’08) and growing at more than 15 per cent. Others are taking note. Investments by Hyundai, Nissan, Ford, and Nokia are a small indication that not just Indians but others also believe that India can build excellence in manufacturing.
India was not known for its quality. Today, many Indian firms have demonstrated that they do not lag behind anyone in quality—be it in software development, manufacturing fine chemicals for pharmaceutical industry or in automotive component manufacturing.
These examples of extraordinary accomplishments suggest that India can change its developmental trajectory. These accomplishments also allow us to extract principles behind these accomplishments against all odds and conventional wisdom. What are the principles of “game changing accomplishments”?
1. Focus on the future and not on the past, or on the trajectory of the past: Building Indian MNCs or developing private sector solutions to alleviate poverty are clear departures from the past. Decide on the desired outcome, put a stake in the ground and then develop the means to get there. Start with a clear goal and focus on discovering the means. We don’t have to know the details of “how to” before we commit to these goals. It is enough if we can identify key milestones. This process is not about becoming more efficient but becoming different.
2. Aspirations must exceed resources: Entrepreneurship and innovation are the key elements behind every one of the accomplishments described above. The goals must, by design, exceed resources. This mismatch, by design, is at the heart of innovation. Therefore, the often-asked question: do we have the resources that are inappropriate? The questions should be: how do we accumulate resources rapidly? How do we learn at low cost? How do we leverage available resources? And most importantly, how do we change the game to our favour?
3. Imagination is more important than analysis: We tend to analyse and often use past data to justify future direction. But imagination is about amplifying weak signals, connecting the dots, and seeing a new pattern of opportunity emerge. We have to imagine a new India; India@75 that is not just continuation of the developmental path that got us to India@60. What data analysis could have led us to believe that India could boast of MNCs or that we would have 300 million cell phone users?
India has one further advantage. All the problems that India faces—in primary health, education, farming, water, pollution, corruption, or in infrastructure— are very well researched and documented. India can, therefore, focus on finding creative solutions. We have to move away from, “We have all these problems and, therefore, we can’t accomplish these stretch goals” to a mindset that says, “We know all our problems, therefore, we can solve them”.
Nobody starts with a clean sheet of paper. Neither does India. The innovations that are required for reaching the potential of India@75 must be undertaken within the socio-political system that exists today. We have to isolate the critical principles that define the context and to which we can all subscribe. We must then embrace them as constraints within which we have to operate. Innovation, in India’s development, must be “innovation within broad constraints”.
Let us understand what these are:1. Not poverty but inequality: Rapid economic development can get people out of abject poverty fast. However, the economic benefits of rapid growth are spread unevenly. The educated IT workers get the benefits of rapid growth. However, the uneducated— rural and urban—may not participate equally in the benefits of growth in the short term. Inequality of opportunity, incomes, and social and economic mobility is a consequence. Inequalities can create social tensions. Therefore, the first constraint that development must take into account is the need to moderate inequalities. Inclusive growth should not just be a slogan but an important operating principle for entrepreneurs, politicians and bureaucrats.
2. Changing the price-performance envelope: Inclusive growth requires that we pay attention to building awareness of products and services, creating access for all, ensuring affordability, and continuous availability. The 4As of emerging consumer markets is fundamental to building the economic strength of a country such as India. This means that western models do not easily fit with the needs of Indian markets; especially as we focus on straddling the economic pyramid. The challenge is to build “world class products and services” at a new price-performance level (new value equation) that has never been tried before by established MNCs. India has a very large number of examples—$30 cataract surgery (Aravind Eye hospital), $2,500 car (Tata Nano), $0.01 cell phone minute (Airtel), $0.01 shampoo in a sachet (Hindustan Unilever), or $25 micro loans. Many such experiments demonstrate that we can straddle the pyramid and that this can be done commercially. We can “do good and do well”. This approach and mindset is critical to converting India’s demographic liability (large and poor population) into a demographic dividend. Micro-producers and micro-consumers that can fuel the economy cannot be built unless we build business models that dramatically alter the price-performance equation.3. Universal access to high technology solutions: Focus on reducing inequality and making participation universal by straddling the pyramid requires that we focus on high technology solutions. Whether it is biotechnology to improve the productivity of subsistence farmers, or helping rural poor get world class healthcare through telemedicine, or improving the farm-city logistics with RFID tags and advanced IT systems, a critical ingredient is to harness the benefits of modern technology. We must start with the view that India should not replicate the development process of the West or China. India must leapfrog. Simply stated: avoid land lines, go wireless; avoid paper ballots, go electronic; avoid bank branches, go mobile and digital. We already have experienced the ability of technology to make progress inclusive.
4. Economic growth and ecological vitality: Imagine a billion people consuming products and services at a minimum level of quality—be it milk, fruits and vegetables, or fish. Similarly, a billion people living in homes with electricity, sewage system, TVs, and hopefully PCs and other such devices. A billion people who move around. The production and consumption of an economy of this magnitude will put enormous pressures on all ecosystems— water, waste management, pollution and resource use. Ecological vitality is already being compromised— be it deforestation, pollution of waterways and rivers and cities. Innovations are required to provide this economic growth and at the same time avoid harming the environment beyond repair. Alternate sources of energy, new modes of transportation, building of hundreds of self-contained cities to cope with rural-urban migration, better traffic management and healthcare will all be needed. Ecological issues will be of paramount importance. Ecological sensitivity is needed in conjunction with increasing consumption and production. It should not be “either-or”; it must be rapid economic growth and ecological stewardship.5. Focus on governance: India as a country has deteriorated in its governance capabilities. Corruption is endemic. An analysis of data from 175 countries around the world comparing per capita income (World Bank), human development index (UNDP) and corruption index (Transparency International) confirms our intuition. There is a very high degree of correlation between income, corruption and human development. Simply stated:
a) No country that does not develop its people is rich;
b) No country that is corrupt is rich;
c) No country that is corrupt develops its human capital.
This should give us a cause for concern. India is at the low end of all these three measures; in per capita income, 117 among 177 countries (in Human Development Report 2007/2008), 128 in human development among 177 countries (in Human Development Report 2007/2008) and ranks 72 among 180 nations in corruption (as per Transparency International’s report). No major country occupies this undesirable position. We can estimate the cost of corruption to the economy—delays, poor quality, underdeveloped infrastructure, misallocation of resources, low productivity of public services— in the region of purchasing power parity of $10-15 trillion. The country cannot afford to pay this price.
We have to start with the potential of India. India@75 is a perspective on the potential. It denotes a level of economic, social and intellectual vitality that is a quantum jump from where India is today and where the current trajectory will take us. That requires a “quantum jump”—in our ambitions, capabilities, and capacity to innovate. Secondly, this calls for a quiet confidence in the indigenous capacity to “leapfrog” current best practices and create next practices; to turn conventional wisdom on its head.
Then we have to focus on the socio-political context within which we have to innovate. I like to think of the constraints outlined above as “non-negotiable”. We cannot ruin the environment, and neither can we tolerate poor governance that slows the country down.
Inequalities are unacceptable. We have assumed, implicitly, that if we have to straddle the pyramid, by definition Indian firms must achieve global scale. The same is implied in suggesting that India will be home to 30 of the Fortune 100 firms. We have also assumed that we will primarily use market mechanisms—transparency, the rule of law, and recognition of the true economic costs of all activities. Government’s primary role is regulating economic activities and providing good governance. We can, therefore, visually capture the opportunity in the form of a sandbox: As long as our march to India@75 is based on innovations within these constraints, we would have built a fundamentally new model of development on a scale never before witnessed. It would also be an alternative to the much-touted “Chinese model”.
India stands at an inflection point. The last 15 years have given India the confidence that it can “play in the major league”. India must put its development on a different trajectory. India@75 is an approach to this very desirable end. India can do this if we start with imagination, courage, passion, empathy for fellow Indians across the socio-economic spectrum and humility. Analysis of the past will not get us there. India has the opportunity to build a socially equitable, diverse culture that can be the beacon to the whole world. This is the opportunity. At midnight on August 15, 1947, Jawaharlal Nehru asked the members of the Constituent Assembly to take a pledge:
“At this solemn moment when the people of India, through suffering and sacrifice, have secured freedom, I—a member of the Constituent Assembly of India, do dedicate myself in all humility to the service of India and her people to the end that this ancient land attain her rightful place in the world and make her full and willing contribution to the promotion of world peace and the welfare of mankind.”
Let us imagine a billion people taking this pledge. India@75 will be a reality.