One of the ambitious promotions of Government of India is ‘Make in India.’ Simply put, the idea is to become the next China, a manufacturing powerhouse. With all our constraints, we have been in pursuit of this goal for a quarter century now. All governments since 1991 have pursued a policy to attract FDI in multiple sectors and reforms cannot be reforms without the magic words ‘Foreign Direct Investment.’ In itself, this is not a bad thing. On the other hand, in itself, this is not the magic bullet to cure all our economic ills.
In the current push towards manufacturing, more resources – political and economic capital – is spent, rightly so towards manufacturing.
However, there is one Indian Tiger which can be uncaged and will be on the prowl with minimum legal framework – Technology.
There are two major impediments to Make in India.
- It is a long cycle and high investment game. S&P has said today (2nd August, 2016) that India’s poor infrastructure is the biggest roadblock to this promotion. And we know that fixing infrastructure cannot be achieved in a day or in our context, even a decade. Will global capital wait?
- Global Over Supply, especially from China. In other words, the world has more factories than it needs. And those factories are producing cheap goods and dumping in rest of the world. How many corporations will be willing to invest heavily in India when there is a supply glut in China? Thus, our performance will not reflect our potential.
It is in this context, with questionable outcome, Technology sector has to be let go.
Against the backdrop of overcapacity in china we need to see our ability to create assets for productivity. The first of it is fixed or infrastructure. How long does it take to construct a road in India? This is symptomatic of larger malaise in the rent seeking nature of babudom. Capital will not wait for years together to make India prosperous. Exhibits: Tata at Singur and Posco. There can be many examples but the simple fact is that we are not smart and our systems complicated in a race to build infra, be it public or private.
Next asset – people. It had been repeated time and again that most graduates are unemployable or lack basic skills or both. Given this, where we have excelled is the rudimentary, mundane and highly generalized ITES sector. After this, we have excelled at our traditional sectors – jewellery, handloom and textiles, leather and to some certain extent fisheries. Traditional sectors come with ancient knowledge. Between these two and outside of these two blocks, lie the world and the growth that we seek now.
Given these two constrains which are not abstract in nature – like democracy, demographic dividend, plurality etc.- but real, we need to approach technology.
In the realm of ideas, to products or services, the current model of regulations and laws in India are outdated. These constrain than enable citizenry to take advantage that this narrow window of opportunity that is present. Consider the fact: For every original tech service or product there is an alternative or replica present in China.
Our laws and regulations regarding entry, operational and exit are not suitable for technology industry.
If you don’t like something, don’t complain, build. This is how technology is changing lives across and this is how innovators change our lives. Uber to bitcoin to Tesla are testimonials of this change.
What are required?
- Define what is technology – service and product.
- Change entry laws
- IPR, now! And accepted by world
- Remove labour laws
- Enable closure of firms at the earliest.
But why should we relax such things which will remove all security and stability that current laws provide?
Unlike traditional industries, most technology services don’t require land. Labour can be across the world with collaboration from home or garage and Capital in initial days are less required for an idea to come to market. Therein goes our old variables of economy. What lies is the knowledge and skill, entirely within individuals.
Next, like all products, technology is also experimentation. Many will fail but few will succeed, creating values unknown to us presently but will create unthought-of of and unimagined products or services.
This is a highly specialized industry. And people who enter this sector enter with knowing all risks. Though there can always be a question of exploitation, that is a bogeyman. The basic assumption is that people enter knowing that jobs are not secure, income is not secure, future is volatile. These are the people who take risks. Since everything ancient appeals to us nowadays, these people are our new age navgiths, navigators in search of a land of prosperity. If we do not allow such people, most people will go where such opportunities exist.
Industrial revelotion was completely destroyed during second world war. It took 50 years for western Europe and Japan to become manufacturing powerhouse. But technology grew faster. From a room sized transistor to our smartphones, we have come a long way and faster than any other sector. If we do not grab the opportunity now, we will never be a technology powerhouse. But how long do we have? It’s hard to predict but I don’t have a reputation to lose so my calculated guess is 20 year window of unknown but glorious opportunities.
The importance of failure cannot be overstated. What we need to do as a society to appreciate failure is for another day. But law can and should enable failure. Failure cannot lead to locked in capital and decades of restructuring. If the failure is non-criminal and due to business risks, closure must take from few weeks to few months and no more than a year. India has a new bankruptcy law aimed at this direction. But it is grossly inadequate for small technological enterprises. Ideate, open, operate, fail, close, open again. This will be the cycle for most of the tech firms. Can 20 something in India open a firm, operate and close it successfully without getting lost in our cumbersome bureaucracy and web of laws? NO. And these are the people who will create our next industrial revolution. It is these ideas that we are blocking. To put it poetically, we are killing the unborn. Many entrepreneurs are not afraid of failure. But almost all are terror-stricken by our bureaucracy.
It will take decades to change the society to embrace failure and respect it. But since we love successes, law alone can help failures thereby making them models for others, commoners.
In an era of hyper nationalism, it is pertinent to quote another benefit of technology.
We realized late in 1960s that food security is important and we cannot be dependent on others. That was late. Same goes about manufacturing for defence in India. We have just now realizing its importance, a little too late. Next dimension of our security is information security. Anything connected to network is under threat. Imagine a large scale breakdown of a central grid. Imagine stuxnet like attack on our nuclear reactors. Imagine a day without telecommunication.
We cannot buy our way to future security, forever threatened by our relationships with foreign powers. Only domestic and indigenous capabilities will secure us with stability.
Embrace technological entrepreneurs. Enable them to take risks. Lose government control on labour in such industries. Enable them to shut shops easily. We can have more silicon valleys.
Most of this were written during morning traffic jam on the way to office.
“Far better is it to dare mighty things, to win glorious triumphs, even though checkered by failure… than to rank with those poor spirits who neither enjoy nor suffer much, because they live in a gray twilight that knows not victory nor defeat.”