Sadak To Internet: Divert some or most of incremental investment into digital

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December 18, 2020 7:00 AM

There is a need to reroute some of the investment going to physical infrastructure into digital infrastructure

We have the digital foundations to execute this. What is required is bold, innovative thinking, reprioritising and even more critically important execution.We have the digital foundations to execute this. What is required is bold, innovative thinking, reprioritising and even more critically important execution.

By Harish HV

Bijli, sadak, paani (BSP) is a common term used in elections in the Hindi-speaking belt. India should consider pivoting from BSP to BIP (bijli, internet, paani) to create a new paradigm of development and leapfrog to an advanced economy by transferring some of the resources meant for sadak to the internet. India should try to create a digitally-driven economic development model rather than play catchup on physical transport infrastructure. It is important to emphasise that the argument is not whether we should stop investment in physical infrastructure but, keeping in mind the pandemic-driven changes, divert some or most of the incremental investment into digital.

This model can deliver economic growth, prosperity and ease of living, in line with the thinking of our PM, to the large population using technology as the path to create a new India, which is a true vishwaguru in thinking and execution.

The pandemic has resulted in the following changes, some of which were already inherent and some are new.

Reduction in the rate of growth of our urban megalopolises as people return to hometowns and more people work from home. Consequently, incremental demand for urban infrastructure would reduce, particularly in the megapolis.

So, our assumptions of rapid urbanisation and infrastructure needs of large cities need to be reviewed.
Reduction in demand for intracity transport as several people work from home. There would also be a preference for personal rather than public transport. Again travel for education, healthcare and shopping is slowly reducing, and that trend can be enhanced if we build better digital infrastructure and provide access to the internet at low cost.

Intercity travel for business would see a significant and non-recoverable dip as people learn how to function effectively without travelling.

Tourist travel can also expect strong dips as VR and AR solutions are expected to create experience centres locally through which one can get the full experience of being in other cities and places, including experiencing the climate.

We are seeing the impact of climate change in front of our eyes and building physical infrastructure of significant magnitude will only worsen the situation.

Sadak or roads are typically used for two purposes, human and physical transportation. If we look at the lessons learnt from the pandemic and also look at the power of digital the need for transportation could be reduced by leveraging digital and that premise should drive national focus over the next few years.

Estimating the ratio of usage of roads for goods and passenger is difficult in the absence of detailed statistics, but one could use proxies. The total number of transport vehicles as of March 2017 (road transport yearbook) was 22.5 million, of which goods transport vehicles were about 11.6 million. Therefore, the usage of roads by goods vehicles was about 50% and presuming higher utilisation of goods vis-a-vis passenger that ratio could be 60% to 65%. So the proposition is to project the need for transportation primarily to cater to the needs of goods transport and presume a relative reduction of human transport. This would reduce the investment projected for the transport sector. The resources released can then be utilised in other sectors, whilst the rest of the world worries about utilising its surplus infrastructure.

Investments of Rs 15 lakh crore are being proposed till 2024 in the road sector alone. If there will be a lesser movement of human beings, we should recalibrate our investment plans. We should leverage the above trends, and to become truly digital, pivot our strategy to focus on information highways than physical highways to make our data movement the best in the world and at the lowest cost.

The new highways can be used for providing essential services and take India higher on the Human Development Index, thereby democratising development. We have the advantage of being global pioneers and have the key building blocks in the form of India Stack—Aadhaar, UPI, etc. High-speed information highways can focus on education, healthcare, financial services, agritech, 3D manufacturing and delivering government processes and benefits to reduce friction and corruption.

The first three are well known and have the necessary foundations, but need more investment on digital infrastructure. India is fairly ahead in terms of start-ups in these fields. This pivot will enable several of these companies to go global by helping them create significant scale in India.

The agriculture sector can leverage technology to deliver the knowledge, inputs, resources and technology and market support, especially the disintermediation that is required, in a cost-effective manner. Can we deliver free data and information to the sector rather than the free power, water, and other subsidies? That would be far more valuable and provide more value to farmers to plan their crops, grow them well and obtain fair prices for their products.

India must focus on 3D (additive) manufacturing, robotics and automation. India is at the leading edge of IT. It also has a good base of advanced manufacturing and thereby has the platform to become a leader in this space globally. Whilst China became the global leader in mass manufacturing, India can become the world leader in 3D manufacturing.

We must also leverage our AI/ML capabilities to drive more government processes online. At the same time, efforts must be made to provide service centres for senior citizens and other technologically challenged people.

But if we do all this, how will we generate employment. Jobs will get created in the services area (for servicing the last mile in education, healthcare and financial services), construction of homes, support services for the technology infrastructure, agriculture and its supply chains, goods and services to cater to the increasing income of the population, e-commerce, logistics and several other areas, service centres for engaging with government.

We have the digital foundations to execute this. What is required is bold, innovative thinking, reprioritising and even more critically important execution. Then we will have a truly Digital India, which can be a global leader and can leverage its latecomer advantage. We were able to have a telecom revolution at lower cost by being a latecomer.

 

Managing partner at ECube Investment Advisors. Views are personal

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