Re-booting India via technology

  • Business
  • Saturday, 06 Feb 2016

The country, with the world’s second largest mobile network, is ripe for change

THE New Year has got off to such a depressing start, with markets shaking at the prospects of China’s slowdown that I want to talk about some good news – India.

I spent most of December last year in Kerala, southern India, one of the most literate states of the Indian Union and an important juncture of the Maritime Silk Road.

Visitors to Borobodur in Java and Angkor Wat in Cambodia would know how Hinduism and Buddhism influenced their history and culture through the maritime trade.

But Tamil influence in South-East Asia was reinforced by the Cholan invasion of South-East Asia in the 11th century under the Southern Indian Cholan conqueror Rajendra Chola I, who at his peak conquered Sri Lanka and defeated Srivijaya, then the greatest South-East Asian power based in Palembang, Sumatra.

But more recent Indian influence came when the British imported large numbers of South Indian Tamil workers to provide labour in their railways and rubber estates in Malaya.

In the meantime, Indian traders, goldsmiths and money-lenders were active in all the free ports established by the British throughout Asia and Africa, including Hong Kong. Until the rise of Silicon Valley and London, Hong Kong hosted one of the richest Indian diaspora community.

India’s growth story is impeccable in terms of timing. She has already overtaken China as the fastest growing economy with 7.3% growth in 2015 and an expected 7.5% in 2016. India is a major beneficiary of low oil and commodity import prices, and because exports comprise only 16.5% of GDP, she is also less vulnerable to external demand slowdown.

In a world looking for new growth markets, India is looking better and better as a destination for foreign investment mainly because of her large domestic market, cheap labour, reputation for being technology-savvy, and reasonable macro-economic policy framework.

Unlike China and Asean, the constraints to growth in India lie in her lack of high quality infrastructure and the famous “licence raj”, the complex bureaucratic regulations and legal issues that make it difficult for businesses to navigate.

On the plus side, the Indian growth story is founded on two major factors – the first is that it is benefiting from good demographics, since the median Indian is only 25 years old, considerably less than that for the average Chinese (37) and Japanese (45).

The second is a British colonial legacy – the English language, common law and British governance skills. The West sees India as the only billion-class population giant in the 21st century that can be an ally and counter-weight to the other billion-class giant, China.

Visitors to both China and India contrast the differences in the quality of the infrastructure. Building world class infrastructure is now the mantra of the Modi government.

Foreign investors to India are often attracted by the large growing middle-class, increasingly willing to buy the best and latest fashions of the West.

But getting permissions to operate have to go through the most complex of bureaucracies, run by an elite Indian Administrative Service, but manned by officials that are very local and bureaucratic minded.

It was famously said that the Indian revolution in information technology services, which occurred under the assassinated Indian Premier Rajiv Gandhi, would not have succeeded if the Indian bureaucrats had understood technology. Today, with the Internet and information and communications technology taking off with financialisation and globalisation, the highly English-educated elites are benefiting hugely from connectivity to Silicon Valley.

There are two distinctive features of India’s thrust into the 21st century.

The first is a bottom-up approach, with an obsession that no development is possible without improving the villages that form the core of Indian society, although the country is also beginning to urbanise. The second is the willingness to use technology to enable India to leap-frog the conventional trajectory of other emerging markets.

When Prime Minister Narendra Modi assumed office in 2014, one of the first acts was to axe the Planning Commission, which was in the midst of designing India’s 12th Five Year Plan (2012-2017), comparable to the Chinese Thirteenth Five Year Plan (2016-2020).

He replaced it with the NITI Aayog or National Institute for Transforming India, by first co-opting the state governments to join the “re-imagining India” process.

But its most remarkable innovation was to re-think development as a bottom-up drive for changing India through innovation and entrepreneurship.

The SETU (Self Employed and Talent Utilisation) programme involves the use of technology, finance, incubation and facilitation to support start-ups and self-employment business in all areas, including rural and primary industries, through the application of technology.

India is already famous for “frugal innovation” – the ability to deliver products and services both cheaply and for the poor.

As described by the new Indian bestseller, “Re-booting India” by former co-founder and CEO of Infosys, Nandan Nilekani and Viral Shah, India is ripe for change because it has the second largest mobile network in the world (900 million users) and third largest Internet user base.

Instead of trying to transform government conventionally, technology is able to maximise citizen convenience in the provision of government and business services, with transparency and ease of entry and with the aim of inclusion as the driver.

Nilekani is also the founding chairman of the Unique Identification Authority of India, which gives each Indian a unique social identity number called Aadhar. Combined with the increasing use of Global Legal Entity Identifier (LEI) and blockchain technology, India would be able to deliver electronic services with trust, speed and scale, thus leap-frogging many of the problems of service delivery by both government, businesses and social enterprises in a large country.

Whatever the strengths, we need to be realistic that India still faces huge developmental problems.

By comparison, with a GDP of US$2.2 trillion in 2015, China is still larger at US$10.3 trillion, whilst Asean, with half the population at 600 million, has a combined GDP of US$2.5 trillion.

There is no doubt in my mind that the world’s fastest growing region in the next decade will not be Chindia, but ‘Chindasean’ (China+India+Asean). The competition as well as the potential trade and investment within ‘Chindasean’ will define global growth.

Tan Sri Andrew Sheng writes on Asian and global affairs.

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