By Dr Pavan Soni
There are typically two drivers of innovation: aspiration and desperation. Both call for a stretch between the current state and the desired, and consequently have different energies. The scientific exploits of the WW-I and WW-II and not to forget the Cold War benefited humanity, beyond the shores of the fighting nations. It was the sanction-led desperation that propelled Japan to an economic super-power, the dire scarcity of resources the catapulted Singapore from a third-world country to first in a matter of a single generation, and the constant thrust of survival that keeps Israel the quintessential Startup Nation. As for aspiration, we have India’s very ISRO, the fledging IT industry and the dynamic startup ecosystem that doesn’t cease to surprise the domestic market and international competition. But the story pretty much ends here. I am falling short of instances where India has demonstrated its innovation prowess beyond bringing down the costs at scale or localizing a contraption. And that is just about to change.
Donald Trump, in his second coming, is visibly busy, for he knows the importance of the second life that he is enjoying post the failed assassination attempt of July 13, 2024. He is a man on mission and the global leaders and investors are swinging to every of his moves. The recently imposed tariffs have sent the S&P tumbling and dollar experiencing one of its worst falls ever. Notwithstanding the hardships in order for the European Union and the usual trade partners of the USA, chiefly China and Japan, the move precipitates a death knell for countries like Vietnam and Taiwan. India, with a 26 percent tariff, as of now, sits pretty in the middle of the stack, much thanks to its improved geo-political ties with the White House and a burgeoning domestic market. But this can be a watershed event for Indian innovation scene, if only we absorb the shock instead of being dismissive about it.
India could benefit from the Trump administration in two fundamental ways. Firstly, with the homecoming of working executives and students to India, better be termed as ‘Brain Gain’, we now have a greater access to deep and diverse expertise. Secondly, akin to how the post-war American sanctions metered to Japan and Germany catalysed their domestic competitiveness, in India we can strive to make our products better and services more aspirational. Both ways, India could double down on the China plus One strategy as steep tariff would mean a reconfiguration of global supply chains, much on the lines of how South Korea emerged as a Japan plus One destination for electronic goods.
At present there are over 300,000 Indian students getting educated in the USA. Not only that the Indian diaspora is the biggest but also has grown by 23 percent over the last year alone, contributing over $8 billion to the American economy. In comparison, there are about 130,000 of Indian students in the UK; 123,000 in Australia; 43,000 in Germany; 30,000 in France; 10,000 in Italy and a similar number in Singapore. Clearly USA, for its diversity of disciplines, pedigree of institutions, and robustness of economy, remains a magnet, regardless of the recent headwinds experienced at various campuses. Add to this the over 200,000 Indian tech professionals working in the USA, and several more in hi-tech-space donning a US citizenship. Such has been the success of the Indian talent that over 10 percent of Fortune 500 CEOs are of Indian origin!
What happens when this pedigree of talent returns home – willingly or otherwise? Firstly, it will result into an economic inflation on the supply side of the high-end talent. It means a commensurate escalation of salaries, perks and work profile. Such a talent demands work that’s non-routine, cutting-edge and more daring—what they have been used to. Over time, market of lemons would give way to a more competitive landscape on both task and the talent sides, and this would certainly catapult India on the innovation landscape. A similar scene transpired when in 1991, foreign multinationals, like American Express and General Electric, arrived in India pushing up the technology appetite and birthing the now $100 billion plus IT industry.
An additional upside would be the fillip in order for the startup ecosystem. Several veterans of the tech industry, who have spent years in the Valley or thereabout came back to India to kick-start their dream projects. Subroto Bagchi returned to start Mindtree, Sridhar Vembu got on with Zoho, and these are two of the most celebrated examples. A lot many are bringing their tenacity, expertise, network and pedigree to tap the world of possibilities in India. With a maturing investment ecosystem, experimentative customers, and conducive government policies, its attractive to be a first-class citizen in a third-world country than being a second-class citizen in a first world country.
The chief imports of USA from Germany are automobiles, automobile parts, machinery and pharmaceuticals; from Japan are machinery, chemicals, and transport equipments; and from China are computers, smart phones, and batteries. Together with the neighbouring Canada and Mexico, China, Japan and Germany comprise almost 54 percent of US imports. Why does USA import goods from equally developed countries like Japan and Germany? Because they are competitive, and not just cost competitive. Can the same be said for India? The chief exports from India to the superpower are pearls, precious stones, metals, coins, electrical machinery and equipment, and pharmaceutical products. The underlying attribute in all such export is natural resources – either mined and processed or human labour.
A higher tariff would naturally erode that cost arbitrage that’s dominantly owing to a cheaper and sumptuous workforce. If India could innovate, by moving up the value chain – as in the branded pharma from the generics, IP-based products from fast commoditizing IT services, and processed goods from raw materials—we would have taken the whip in the right spirit. Japan graduated from shipping sub-standard electrical products to world-class electronics and automobile; China from dishing out toys to smart phones and computers; and Taiwan came from nowhere to become the world’s foundry. What’s stopping us?
I would profoundly thank Trump for creating the perfect storm for India to get its innovation mojo back and roar once again. It’s the whip that wakes up an elephant. I hope we deliver on the seeming desperation by creating a native aspiration.
The writer is the bestselling author of the books Design Your Thinking and Design Your Career.
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