Nandan Nilekani: This is the year of network power

Written by Sunil Jain | Updated: Dec 31 2013, 05:42am hrs
DigitalGoing digital also plays very well into the mobility of Indians (Reuters)
Indias bad macros are well known, but what makes me bullish is all the stuff thats happening under the hood, the creation of networks and platforms which are critical if we want to fix Indias problems fix the high-frequency, low-value transactions that affect millions, and youve fixed India.

Networks and platforms neednt necessarily be an IT thing, they could be rural roads India has built 3.5 lakh km of rural roads in the last decade that help people move to other areas to get jobs, to sell their goods and services. The fact that we have 600 million people with mobile phones helps people to sell their wares.

An ICRIER study found that states with a 10% higher mobile phone penetration had, on average, a 1.2% higher GDP growth; another found every 10% hike in internet and broadband penetration raised GDP by 1.08%.

Take Aadhaar, another great example of networks and platforms. We gave out the first Aadhaar on September 29, 2010, we had 21 crore enrolments in November 2012 and we have 51 crore today we will be at 60 crore by June. LPG was the proof of concept. Over 1.8 crore people in 184 districts have been given Rs 2,000 crore of LPG subsidies since June thats 16 crore annual transactions that can be done since nine cylinders are to be subsidised, and weve just covered 10-15% of LPG users. This is the tipping point, and we havent touched other transactions yet.

Look at the spinoffs. Once you extend this to all LPG, you can get a Shell or an RIL back into LPG distribution. Do this for diesel and kerosene and, suddenly, while people continue to get subsidised, the entire market is freed up and you have private sector players making investments in the production and distribution networks that the PSUs alone cannot possibly handle.

You dont notice these changes every day, but suddenly they become so big, the network impact becomes large. A mobile internet user base of 30-40 million a year is one thing, but when you reach 140-200 million users as we have now, the impact is very different. Thats when the laws of increasing return kick in the more people with cell phones, the cheaper it becomes to contact someone; the more Aadhaar numbers you have, the easier it becomes to transfer money using Aadhaar numbers.

Going digital also plays very well into the mobility of Indians. In the old days, the system was geared towards lack of mobility. You lived in one place so you had one fixed line, you had one job so your EPFO account was linked to that, you got your rations from one ration shop, your health records were with your GP, your bank account was in the neighbourhood

The mobile phone liberated people from their location, the NPS will change the face of old age in India since your pensions will follow you. Aadhaar-based transfers mean you will get your PDS wherever you live...

Since all these changes are about convenience, they lower transaction costs you dont spend a day trying to find out if your pension has arrived. Make a billion people more productive, and the jump in GDP growth is obvious. This is the year of fixing low-value-high-frequency transactions. Fix this, and youve fixed India. Problem-solving is relevant only if you have scale, and scale happens with simplicity complexity creates lead feet.

This brings me to the next critical part, that of creating platforms. Whether it is the internet or GPS, these were built with public money this is the platform on which you have Google and Facebook. Thats what weve done with Aadhaar we already have people developing micro-ATMs that use Aadhaar or scanners for as little as Rs 2,000, once again based on Aadhaar. The iPhone 5C, for instance, has a fingerprint scanner... It is just a matter of time before there are apps for this on other phones.

Or take Akshay Patra, which provides 13 lakh meals a day to children in 9,000 schools across nine states from 20 centralised kitchens. The innovation lies in the use of machinery to make food, in the hub-and-spoke approach to distribution and, most important, the model is completely replicable and scalable.

2014 is the year of network power, whether in election campaigning/funding or elsewhere, and the good news is that weve reached tipping point.