Does India Need a Radically Different Approach For Rapid Growth?
Business Magazine Politics
India recently went through major upheaval when the government launched a sudden demonetization exercise last November and overnight rendered Rs500 ($7.40) and Rs1,000 notes as illegal currency. The move was aimed at curtailing tax evasion, counterfeiting, terrorism and corruption in the country. This, in turn, is expected to stimulate long-term economic growth. But not everyone is convinced, and strong camps have emerged in favor of and against the move. The effectiveness of demonetization remains to be seen.
Meanwhile, India’s successful transformation into a 21st century knowledge economy will depend on how well it performs in diverse areas such as technology, education, health care, urbanization, innovation, manufacturing, entrepreneurship, skill development and job creation. At the 2017 One Globe Forum in New Delhi, experts tried to zero in on actionable insights which could help overcome India’s myriad challenges and boost the country’s journey towards becoming a knowledge economy. “We are running out of time. We need to address our challenges boldly and decisively if we do not want to fritter away opportunities that come rarely in the life of a nation,” said Major Dalbir Singh, chairman — organizing committee, One Globe Forum.
Take manufacturing. The government’s ‘Make in India’ initiative launched in September 2014 aims to take manufacturing to 25% of the country’s gross domestic product (GDP) by 2025 from around 17% at present and create 100 million jobs. There have been similar efforts earlier. In 2004, for instance, the government set up the National Manufacturing Competitiveness Council. Two years later, this council came out with a national strategy for manufacturing with an objective to raise the share of manufacturing in GDP to 30%-35% by 2015. The needle is yet to move.
Mahendra Bapna, senior advisor at the Indian Institute of Technology (IIT) Jodhpur, observed that for manufacturing to take off, India needs to “move beyond rhetoric and create a clear strategy and favorable policy environment and improve the ease of doing business.” He listed five important steps for the government: stop “tax terrorism,” improve infrastructure, reform labor laws, invest in technology education and skills development, and ease land acquisition. According to Bapna, the sectors of defense, electronics hardware, construction, health care and agro industries need to be topmost priority for policy makers.
Building on this, Makarand Chipalkatti, managing director of Dr. Chips Consulting, added that it is critical to also improve the ease of starting and closing a business. “This helps to de-risk decisions and results in faster setting up of manufacturing units.” According to C.V.R. Murty, president of IIT Jodhpur, a strong technical education system is an absolute imperative to boost manufacturing. “It needs to be run professionally and has to be student-centric and outcome-based, and not the current faculty-centric model,” he said.
Ashok Atluri, chairman and managing director of defense industry technology firm Zen Technologies, gave a different perspective. Citing the example of Apple’s iPhone, he pointed out that the value of any intellectually intense product is in its design and development, and not in its manufacturing. Atluri noted: “Unless we move up the value chain and focus on design and development, we will be in trouble. Our policies need to be driven towards encouraging companies to focus on these two aspects.”
Vikram Chachra, CEO and managing director of investment firm Eight Capital, cautioned that as AI and robotics enter manufacturing, there will be a major impact on jobs. “The blue collar jobs will be the first to go,” he said. In the future, even India’s IT services industry could be at risk, he added. “At the end of the day, you are using a lot of logic to write code, so if AI becomes smart enough, then it can easily replace all these people [in the IT services industry]. One could see many different jobs across industries completely wiped out.”
Through a New Lens
Urbanization is another area which needs strategic rethinking. In 2008, around 340 million people were living in Indian cities. This number is expected to grow to 600 million by 2030. How can Indian cities equip themselves to meet the demands of such rapid urbanization, especially given the current dismal state of urban infrastructure?
Raghav Chandra, former chairman of National Highways Authority of India and currently secretary of the National Commission for Scheduled Tribes, pointed out that in India the focus has primarily been on developing rural areas. As a result, cites have largely been neglected; there is inadequate governance and short-term master planning. Chandra said: “Master planning is done at the whims and fancies of political masters, whereas it is such a technical task that it requires a fulltime, dedicated authority which will look at all technical parameters and all aspects of master planning purely on merit.” Chandra also noted that historically the country’s education system has been focused more on architects and not on planners. This needs to change. “We require many more planners, and we also need schools for project management,” he added.
In the area of public health care, experts suggested that even as India builds its capabilities in curative care, it needs to focus more on basic hygiene and preventive care. Vidur Mahajan, associate director of Mahajan Imaging, pointed out: “We put in a lot of money into the latest technologies and treatments and training, but all this is negated by open defecation.”
Mahajan argued that India must start using artificial intelligence-based technology in health care. According to him, around 20% to 30% of the work that a general physician does can be easily done by robots. “Why not look at health kiosks run by robots and trained community health workers, especially in rural areas where there is an acute lack of general physicians?” he asked.
Harpal Singh, mentor and chairman emeritus of Fortis Healthcare, a chain of specialty hospitals in India, noted that public health goes beyond just health issues and needs to be viewed in terms of livelihood and productivity. He suggested that the government think of “public wellbeing” as a completely separate area. This must include aspects such as sanitation and waste management, city planning, transportation, etcetera. “The skills needed for this are beyond what is taught in medical schools. There is a total lack of experts who understand the various aspects of public wellbeing. We need to build both the requisite skills and also the political will to bring about this transformation.”
New Business Models
Som Mittal, former president and chairman of industry association NASSCOM, stressed that with rapid changes in technology like digital, Internet of Things, artificial intelligence, automation and robotics, and also the protectionist measures being adopted by the U.S., Indian IT firms need to rethink their business models. “If we stick to the same models that made us successful earlier, we will be in big trouble,” he cautioned
Jagdish Mitra, chief strategy and marketing officer at IT firm Tech Mahindra, pointed out that with technology being all pervasive, there is a paradigm shift in the way clients are buying IT services. “The biggest challenge is that the buyers have changed. We no longer sell to the CIOs (chief information officers) and the CTOs (chief technology officers) of the world. We now talk to chief marketing officers, chief product officers, chief commercial officers and so on. This requires completely different strategy and skills.” He added that there is another big change that the Indian IT services industry needs to make, and that is in terms of its brand positioning. “Our current brand positioning is one of being execution-oriented. We are seen as being very good at following [instructions]. We need to change this. We need to position ourselves as problem solvers, as people who can predict the future.”
Ashok Trivedi, managing partner at Swat Capital and cofounder of iGate Corporation and Mastech Corporation, said that in the next 15 to 20 years there will be more innovation in the world than what has happened in the past 100 years. Pointing out that there are many new technologies like genomics which are on the cusp of becoming great industries, he said: “Given India’s strength in knowledge-based sectors, I think India can take a lead in genomics in the same way in which it did in the IT industry.”
Another big challenge for India is in the field of education. How can the country prepare its children for the rapidly changing 21st century? What should new-age education comprise?
Manit Jain, co-founder and director of The Heritage Group of Schools, which emphasizes experiential learning, said that educators need to “focus on developing social intelligence and creative intelligence and not so much on content intelligence and narrow intellectual intelligence that has been the focus traditionally.” Jain listed empathy, ability to reconcile differences, perceptiveness and understanding cultural differences as important qualities.
Children, he added, need to be exposed not just to the latest technologies but also to the large underprivileged population in order to “build the level of social intelligence that will enable them to solve real problems.” Developing creative intelligence, he said, would require deeper levels of engagement than our traditional model of education allows. “It is not possible for children to develop original thinking when they are being constantly bombarded with content and are constantly being tested. This model does not give them any time to develop their own perspectives,” he noted.
Amitabh Kant, CEO of NITI Aayog (National Institution for Transforming India), said that if India has to reap the advantage of its demographic dividend (72% of its population is below the age of 32) and transform itself into a 21st century knowledge economy, it is imperative to grow at 9% to 10% per annum, year after year, for a three-decade period. Pointing out that over the past six decades since independence, India has made itself a very complicated place for doing business, Kant said that the country “needs to dismantle a lot of this regulatory framework” and make it easy and simple for people and businesses to create wealth. “One of the key things is that we must have policies that enable us to have consistency and predictability over a long period of time.”
Kant listed some other critical steps that India must undertake: open up its economy in a big way and become an integral part of the global supply chain, strengthen its position as a center for global innovation, create jobs-led growth through entrepreneurship and manufacturing, invest in urbanization and use technology to leapfrog in various sectors. “For India to grow rapidly, it needs radical transformation. And it needs political and administrative will to enable this. A status quo approach will not work.”