As India embarks on the journey to be a USD 5 trillion economy by 2024 (from USD 2.8 trillion in 2018), we need to think through how we drive the double-digit growth that this will require. It is not just about the growth rate, but also the quality of the growth that will be important. Let us examine a few basic issues:
As part of the economic policy, the focus must be on identifying the problems we intend to solve. While the West is focused on solving problems for convenience/cost, given their small population base, India needs to focus on creating employment and managing scarce resources such as land, water and energy needs. Primarily the focus must be on employment generation and creating a large manufacturing base.
In the West the “use and throw” business models for most goods, such as plastics, furniture, clothing, packaging material works because of low population densities and because the developed countries have an ecosystem in place for collection and reuse of the thrown away products. In India, we moved from recyclable bags (jute, cloth, paper) to plastics w/o the ecosystem to collect and reprocess the plastics. Many of these “use & throw” products we are adopting fast due to discounted pricing by players funded well (and hence selling below cost) are creating ecosystems that are generating waste which is harmful, both to the society and to the environment.
The business models that India needs must promote employment, reduce waste and encourage recycling waste/products. India has the 2nd largest population in the working age (15-64 years) in the world and will soon overtake China to have the largest working population in the next 10 years. 25 million Indians every year are getting to working age and we will need at least 15 million new jobs every year to accommodate this number (after moving the voluntary non-participants which is about 40% of the population).
The Indian start-ups ecosystem is generally inspired by the developed world where such start ups have created huge valuations. We need to consider whether the problems the start ups in India are trying to solve pertain to the burning issues that India is facing. For example, Uber/Ola, no doubt have eased travel, especially in cities where our taxi/auto systems were not efficient. However, the real need for Indian cities is the investment in large scale and efficient public transport like the metro rails.
The West is focussed on automation because of high manpower costs. In India, manpower costs are comparatively lower and the unemployment rate is very high. Hence, automation does not have the same salience in India as it does in the West and India must hence look into “people based services” which can be very economical. For example, the local ‘kirana’ did household delivery w/o charge well before the e-Grocers came! As the Indian economy gets increasingly digitalised, the focus of the same needs to be on improving productivity and efficiency, and not necessary to replace humans from the workforce. No large economy, especially with a large population, can grow without a large industrial/manufacturing sector. For example, in China, industry contributes to 40% of the nations GDP. In India, industries contribution to GDP is below 30%. In the developed world, US, Germany and Japan continue to lead as they still have a very large share of manufacturing unlike France/UK/Italy that systematically moved to services and slowly killed their manufacturing base. India thus needs to increase its manufacturing base.
We need business models that inherently lead to higher employment, to ensure equitable distribution of wealth in the long run. It is in this context that the debate for self-driven cars vs. human-driven cars must be viewed. We need policies and interventions that are suited for the needs of the Indian people. The challenges are indeed immense, but only if we look at the situation in its totality, will we be able to move in the right direction. This is not to decry automation or advancements in technology which too is essential and must move alongside in certain specified spheres. But we must not lose sight of what sort of society we wish to be. Some aspects which need consideration are:
• How do we make handicrafts competitive versus industrialised plastics/synthetics?
• How do we systematically encourage businesses and models that create more jobs even as we push for productivity within those jobs?
• Do we import business models (as start-up ideas) that solve for problems of the West and that are valued highly in West, or do we encourage business models that solve for the problems we face, solve them in a manner that plays to our strengths and see how some of these can be exported to the West (as with our scale we can make them economical)? As an example, for health, is yoga & herbal ingredient based industry more economical and efficient to create than the Western high-end gyms & Pharma industry based industry? Or is a recyclable clothing/furniture industry better than the “use and throw” western model? Or, for interaction/engagement (receptionists, hotel staff, etc), is a human based model more suited for India or “Alexa/Siri” based digital model?
Ultimately, for the Indian condition, we need Indian solutions. Let us look at what we need, rather than ape the West in our search for solutions.
AS PART OF THE ECONOMIC POLICY, THE FOCUS MUST BE ON IDENTIFYING THE PROBLEMS WE INTEND TO SOLVE. WHILE THE WEST IS FOCUSED ON SOLVING PROBLEMS FOR CONVENIENCE/ COST, GIVEN THEIR SMALL POPULATION BASE, INDIA NEEDS TO FOCUS ON CREATING EMPLOYMENT AND MANAGING SCARCE RESOURCES SUCH AS LAND, WATER AND ENERGY NEEDS.
THE WEST IS FOCUSSED ON AUTOMATION BECAUSE OF HIGH MANPOWER COSTS. IN INDIA, MANPOWER COSTS ARE COMPARATIVELY LOWER AND THE UNEMPLOYMENT RATE IS VERY HIGH. HENCE, AUTOMATION DOES NOT HAVE THE SAME SALIENCE IN INDIA AS IT DOES IN THE WEST AND INDIA MUST HENCE LOOK INTO “PEOPLE BASED SERVICES” WHICH CAN BE VERY ECONOMICAL.