If govt’s mega plans like Digital India are efficiently implemented, we can reach 10%-plus growth. But we have to involve the private sector in a competitive mode
Reforms formally started in India with a statement in Parliament. Its main features were opening up to the private sector, de-licensing most industries, a liberal FDI policy, devaluation of the rupee, and a movement to market-determined exchange rates. It led to entrepreneurs playing a much larger role in our development path. It also encouraged them to take own decisions regarding setting up new industries rather than wait for the government to set up core industries and then to go for quotas and licences to start their own industry, as was in the permit-licence raj. Entrepreneurs started finding India interesting to contribute to and started investing; they also came from other countries. GDP growth rate quickly exceeded the Hindu rate of growth.
But there were other reforms no one had planned for. They came on their own due to an enabling environment created by many around this period and later, and these informal reforms changed India forever. Let us recall.
The first I call the Jack Welch effect, who came to India in 1989. In his words reproduced from his book Straight from the Gut: “I saw India as a huge market, with a rapidly growing middle class of 100-plus million people out of an 800 million population. The Indian people were highly educated, they spoke English, and the country had lots of entrepreneurs trying to break the shackles of government bureaucracy. Highly developed from an intellectual standpoint, India was an underdeveloped country from an infrastructure perspective. I thought the bureaucracy would fix the infrastructure problems and loosen some of the red tape. I was dead wrong … I was also dead right. The real benefit of India turned out to be its vast intellectual capability and the enthusiasm of its people. We found terrific scientific, engineering and administrative talent that today serves almost every business at GE. The symbolism of these moves shocked the system. Suddenly we heard people say: They really mean it. Globalisation is for real. The numbers would prove it. Our global sales went from $9 billion in 1987 or 19% of total revenue to $53 billion or over 40% of our total revenues today.”
This increased the profits of GE and led to a win-win model of outsourcing; it changed India too. Yet when Jagdish Bhagwati praises globalisation, there is very little endorsement from people in India, and the polity gets lost in uneducated debate. These efforts started the BPO/software/call centre revolution in the 1990s, increasing the share of IT in Indian GDP to 8% from almost ‘nil’ at its beginning. I dare make a statement that the environment today would not have resulted in this model, with everyone trying to impose usurious charges on this connectivity.
The second reform came ten years later, when India started supplying what the world was looking for. No one planned for it. The world looked for engineers and companies to analyse whether the computers were post-2000 compatible. Before anyone knew, Indian companies and engineers sorted out the problem for all companies, in an interconnected world, and gave India the label—have any software problems, Indians will fix it.
The third was even more interesting. The Indian state had a monopoly over media, particularly TV. The Gulf War led to the Indian interest in watching CNN. And there was always an interest in watching other entertainment channels.
Some entrepreneurs found this was possible as there was no government regulation banning this feed to be downlinked from other countries and distributed over cable. Before the government could react, we had a fully developed cable industry. The absence of regulation led to interesting developments. Today we have 80 million cable connections and only 26 million fixed-line telephones. The cable TV has empowered the Indian consumer in voicing her concerns through the large private news channels. Gone are the days that the government or even the judiciary could be irrational. The Right to Information Act is a step in the same direction and has strengthened the middle class to express their views based on authentic information; it has contributed to the Indian confidence and our growth story. The cable TV revolution has provided entertainment to entertainment-starved Indians living in rural areas, and equal access to information available to city dwellers and the educated.
The next change was the 2003 UASL which grew mobile telephony 100-fold in a few years and brought tariffs down 50 times. This was not a carefully-designed reform, but the result of an enabling regulation and the mighty competition between private and public operators.
Mangalyaan was a surprise. It was also not planned with the grandiose of its vision, but by a few people running an impossible mission with meagre resources. It suddenly made India big in the league of satellite nations. The country started adventuring in space and bringing unbelievable benefits to the economy. It has been accepted by analysts globally a very big reform that would keep impacting satellite and communication sector.
The next generation of reforms in India should lead to the reforms the world (all the disruptive technologies are the same in the interconnected world) is planning for today, and some coming out of nowhere, as earlier. But we have to create an enabling environment, which is not there.
The likely new identified technologies/innovations that have the ability to change the world were identified by McKinsey recently in a study. The question is, are we in India compatible with the development of these technologies? Let us examine.
* Mobile internet. With very large mobile connectivity in India, the sector only has to upgrade and establish a business case. Today, growth has been suboptimal due to poor implementation of the National Optical Fibre Network (NOFN) project, and would lead to failure of the Digital India initiative.
* Automation of knowledge work. With our track-record, we can contribute to the world effort bringing the next generation of the web by just writing some more logarithms. The government has to facilitate the same.
* Internet of Things. With India’s experience in Y2K and the development of BPOs and software, India can immensely contribute.
* Cloud technology. Hardware and software to be delivered on the net. New stations have to be set up in India. We have a lot of experience in the field.
* Advanced robotics. The Mangalyaan proves that India can be a huge source of this.
* Autonomous and near-autonomous vehicles. These are already being developed and, with a huge automobile production base in India, can multiply manifold.
* Next generation genomics. This involves fast, low-cost gene sequencing, big data analysis with the help of supercomputers and synthetic biology (writing DNA). This is a technology to deal with diagnosis of medical conditions and pinpointing cures. India has got comparative advantage and market in diagnostics and computer systems.
* Energy storage devices. India has a huge market, particularly when launching a non-conventional energy programme, which can be exploited for manufacturing.
* 3D printing. It is an additive manufacturing technology which can be developed further.
* Advanced materials. Advances in material science to develop materials having superior characteristics, and have led to nano-technology.
* Advanced oil & gas exploration and recovery of unconventional oil and gas.
* Non-conventional energy with reduced climate impact.
Digitisation is the common thread running through a majority of technology disruptions across the world. And India seems to be an ideal recipient for investments because the country is going digital in many areas especially by launching ambitious programmes such as Make in India, Digital India, Smart Cities, and also in non-conventional energy, Internet of Things, medical diagnostics, cloud technology etc. Further, there is Prime Minister’s interest in supporting the launch of an Indian Google and an emphasis on R&D.
If these initiatives are efficiently implemented, we can reach 10%-plus growth. But we have to involve the private sector in a competitive mode, and not implement these initiatives in the monopoly public sector mode—a sure remedy for failure, which has already being witnessed in the NOFN.
The author is former chairman, the Telecom Regulatory Authority of India