The power of imagination

India’s legacy and the path to the Future

Dr.C.K.Prahlad

 

INTRODUCTION

It is a great honor and privilege to deliver the 22nd Vikram Sarabhai Memorial Lecture.

As Students here at the IIM, in its formative years. We had a chance to see him and talk to see him and talk to him. He was my hero then. Over the years, his role in building a modern India continues to amaze me.

When one reflects on his legacy, a central theme stands out. He was not constrained by what India was. He was concerned about what India could become. He imagined a new India, and an India that was world class. PRL, Space Agencies. The Atomic Energy Commission, ATIRA, IIMA and host of other world-class institutions are part of his legacy and gift to India. These institutions have endured and prospered. He not only imagined a new India but also understood how build institutions in India to support and develop that vision. He was preeminent scientist, institution builder, visionary, global citizen, bridge builder, and a social reformer.

It is fitting that I use this forum to share my dream for India in the next millennium.

I believe that India’s opportunities today are not limited by her resources but by her imagination. We have to dream, think big and think world class. We must act. Bias and courage for action comes learning. We have to learn from our past. We have to be bold and experiment. We have to be bold and experiment. We have to create our future.

WHERE DO WE START?

Imagining India in the next millennium does not appear to be a popular activity. Politicians, Managers, and academics – all seem to shy away from the debate about the future of India. I see my very little written or discussed on the nature of India’s opportunity much less on how to realize that opportunity. The one exception is the book “India 2020 “ by Dr. A.P.J.Abdul Kalam and Y.S.Rajan. The technology vision for India, outlined in this book is fascinating. I wonder how much discussion this book has generated among the young in India?

My dream for India starts from a different vantage. I start with the obligations that educated Indians have. The obligations are clear. We need to confront ourselves with five simple but difficult questions: 

1.      Do I as a representative of a billion people, have the right and an obligation to influence that pattern of development of the global economy in the next millennium?

2.      Do I accept the responsibility for changing the social power structure in India for the benefit of broader good or do I support the status quo?

3.      Has the economic debate in India become elitist? Can we exclude the poor from this debate, especially when the implications of economic choices made so profoundly affect then? How do we broaden the debate about vision methods, and involvement as we did during he freedom struggle?

4.      Why is the mood not optimistic? Why don’t we believe that India is full of opportunities?

5.      Why is India defensive about global trade? About MNCs? Why aren’t we discussing how to develop our own MNCs?

Answers to these questions will determine how India moves forward and the progress she can make to join the unique club of the top five or six nations of the world. Making a significant break from India’s immediate past requires that we recognize that policies during the first fifty years of independence have delivered the results that were expected. We have to recognize that we have problem.

 The Reality

      The reality of India as we enter 1999 is well known to all of you optimist and I do not like to dwell on failures for too long. But recognition of failure is critical to gain the courage to make a radical departure. We need to recognize the burning platform I see five main failures:

1.      Stagnation. We have had nothing more than patchy and slow progress on all fronts- population, health, literacy, income distribution, infrastructure, pollution, judiciary, or crime. Further, there is also enormous variation in the quality of improvements in various parts of India. It is difficult, for anybody studying the variance in the progress that has been made by states, to think the variance in the progress that t has been made by states demonstrates the variance. The same patterns emerge if we look all literacy, population growth and infrastructure. Why?

2.      Lack of Aspiration to be World Class: World-class accomplishments seem to evade the Indian psyche. The litany is obvious. In sports, in science, in industry and in exports, India is not a force to recon with. With one of the largest pool of scientists and engineers, one may wonder why we have so few that blaze new trails? With so many people why do we not win any gold medals in the Olympics? Are we easily satisfied with the progress we have made with respect to our past rather than compare and bench mark ourselves with the worlds best? Don’t’ we want to “Swim with the sharks”?

3.      A Sense of Collective paralysis: It appears that “the system” is the cause for most of the problems facing India. If the “system” is the cause, then we must have an approach to changing it. Most thoughtful people have resigned themselves to state of helplessness in the context of massive problems facing India

4.      No Vision. In no of endeavour do we see a shared vision of what India can accomplish. Space and atomic energy may be exceptions. For a country that was totally energized by vision during the first half of this century, the second half has been singularly devoid of a shared national agenda.

5.        Looking to the West for Validation: There is an increasing feeling that most educated Indians look for validation of their ideas from the west. We were so captivated by the British that we wanted to convert all Indians into “brown Sahebs” It is now a fascination with the USA. Are there lessons to be learned from Japan, China, S.Korea, Malaysia, Chile or Brazil? How much do we discuss, for example, Chinese economic strategy and the lessons for India?

 These developments have taken their toll. India has to regain its pride and self-confidence. To imagine a new India, we must start with confidence.

THE PARADOX THAT IS INDIA

      India is blessed with billion people. But we often see it as a problem. Poverty in India, it appears, is not a problem to be solved. It is seen as a condition that India cannot escape from. Poverty may have become a constituency. If India can find a way of converting the poor- the 700 million at the bottom of the economic pyramid- into active consumers million at the bottom of the economic pyramid- into active consumers, then we will have one of the largest markets in the world. Why is there so much national discussion about poverty and so little intellectual and managerial energy focused on creating consumers out of the poor? The bottom of the economic pyramid represents an enormous latent opportunity.

The bottom of the pyramid cannot be served without recourse to state of the art technology solutions- be it genetically altered seeds to grow more food inexpensively or the sue of new materials for providing housing. India provides a great test case for sustainable development. Products and services developed for the affluent are resource and pollution intensive. India is a unique market place for the development of products that are biodegradable, and are efficient in the use of energy and water. India can be a leader in low cost, sustainable development oriented products and services in the World. We have the market and the need.

India has a problem to be solved; serving the bottom of the economic pyramid. The solution represents a profitable business opportunity. There is no alternative. India cannot progress without creating a consumer class out the poor.

PROOF OF CONCEPT

I recognize that many of you are likely to ask; is there a real opportunity here? Have I subjected this notion of a great opportunity in serving the poor to a proof of concept test? I propose that we consider two well-known examples. They provide important lessons.

1.      Operation Flood

2.      C-Dot and the spread of the Telecom infrastructure.

Operation Flood

India has emerged as the largest producer of milk in the world. Dr.V.Kurein and his vision created the basic framework for the revolution in milk production. The Anand Model as it is now known is indigenous. The business model was built around the reality of India, as it existed. Therefore, it had to be creative. For example, origination of milk takes place in a highly decentralized fashion in villages. 53,000 villages and 6.3 million farmers (70% of them marginal farmers) with two or three cows or buffaloes form the production backbone of the system. An integral part of Anand Model was introduction of hybrid animals to increase milk yields. The milk is processed and distributed using state of the art technology. What started in Gujarat has spread to 22 states. NDDB now handles more than 10,900 metric tons of milk a day. It is estimated that Operation Flood increased milk a day. It is estimated that Operation Flood increased milk production, during the period 1974-94, by 44 million metric tons per year. The entire operation is run on commercial basis. Out of the 72,000-village level of commercial basis. Out of the 72,000 village level cooperatives, milk was collected only 53,000. The rest of them were considered commercially not viable, the initiative has brought economic independence, better health and education opportunities to the villagers and particularly women. It is estimated that this initiative alone is responsible for more than a billion dollars of rural income. Here is an indigenous initiative that converted the poor into consumers. More importantly, it has created 6 million entrepreneurs in India’s villages.

C-Dot

In less than ten years, India has created a telecom infrastructure that is quite unique. Instead of worrying about telephone density measured as telephones per 1000 people – a measure of telephone ownership, C-Dot concerned itself with access to telephones. Under the visionary leadership of Dr.Sam Pitroda, C-Dot was involved in the design and development of a family of modular products the heart of which was the 128 line rural switch (and a 128 line PBX for business). The basic module was built into 512-line central exchange and was exchange and was expected to move up to 64,000-line urban switch. Again, the idea was indigenous. Digital technology was the choice, not analog. The goal was to build robust, rural switches that could stand harsh conditions in the villages. The rural switches had to withstand dust and heat of the Indian villages and were not airconditioned. Many innovations were incorporated in the design, manufacturing and installation. The usage of telephones in India was also different; about 36 calls per hour/line at peak times compared to 10-12 calls/line per hour in the USA. C-DoT had an initial budget of $36 million dollars over a three-year period. It started with 425 young Indian engineers and the average age of the team was 25. Today, there are 600,000 STD booths, and more than 2 million digital C-DoT lines which supports STD. These developments are providing access to a telephone to the urban ad the rural poor. Access to a telephone is changing the patterns of interaction and trade between villages and small towns and small towns and big cities. Many of these STD booths, that dot the country, have added other services-fax and e-mail. This is possible because, India made a choice to go with digital technology or go with digital technology for switching and transmission (when there was a lot of opposition within the country). Internet access, on the same basis as the telephone, cannot be far behind. There are about one million Internet connections. But each connection may serve 20-25 people. Today the discussion is about information technology backbone is unique. Local entrepreneurs-women-help provide the infrastructure.

WHAT ARE THE LESSONS

The lessons from both these two success stories are similar. They are:

1.      Imagination is a prerequisite for coping with apparent resource constraints. We have to think “outside the box” breaking both the conventional wisdom with India as well as the existing business models from elsewhere. Strategy here is about discovery and innovation.

2.       The business models that work in India are indigenously developed.

3.      Strong leadership-knowledge, persistence, belief, and commitment-pay off.

4.      Entrepreneurship is well and alive among the poorest. Government intervention, subsidies, and policies are not capable of accomplishing what millions of entrepreneurs can.

5.      The appropriate technology was the state of art technology that was creatively adapted to Indian conditions. The task of deployment of the technology required as much innovation as the technology per se.

6.      New organizational models are critical for India’s development.

7.      All transactions must be based on commercial considerations.

8.      Accountability and transparency to performance is a prerequisite.

9.      Indian operations can be world class: in fact it must strive to set global standards.

10.  All useful initiatives will upset the existing power structure. Leaders must recognize that major innovations will meet with enormous resistance up front.

The success of these efforts provides us with an understanding of how to transform the problem of the poor in India to the opportunity of a mass market.

 STEPS IN CREATING A MASS MARKET IN INDIA

I believe that a mass market is ready to be created in India. I am not focused on the Tier # 2 and # 3 markets but the market that can evolve out of the bottom of the economic pyramid. I believe that we have to come to terms with the following:

1.      Creating Access to Credit: Access to credit must become a birth right just as freedom is. Credit is critical to bring the poor into a monetized economy. The daily payments for milk collected in Operation Flood, and the availability of cash collected from telephone users, create access to cash and credit. Grameen Bank’s experience in Bangladesh also proves the importance of credit. Surprisingly the poor need very little help to escape the cycle of poverty. Grameen Bank has 3 million customers with an average of $ 15 loan. The default rate is less than 1 %. This is a commercial operation not a subsidy.

2.      Creating Sustainable Development: The bottom of the pyramid cannot be served by fine tuning current products and services. For example India is very short of potable water. One of the targets of the technology missions was 40 liters/person/day. To put this in perspective, on an average, a urban, well to do Indian uses 500-600 liters/day (Good estimates are hard to come by). In the USA the average is 4,000 liters/person/day. Most of the poor do with as little as 20 liters/person/day. Further, every kilogram of grain can be converted into its water equivalents. The water needs of this country cannot be met unless we develop unique technologies for reducing pollution of our rivers, desalination, closed loop water management systems for homes and institutions, better agricultural methods and novel approaches to washing and personal hygiene. It is believed that a significant portion of India will come under enormous water stress and that can exacerbate the current water disputes within the country and Bangladesh and Pakistan. This problem is universal. India must deal with this problem. Solutions that are developed in India, will not only benefit India but would be globally relevant. Water is just one item in sustainable development.

3.      Distribution and Communication: The efficiencies in distribution must be dramatically altered. For example, an estimate of the loss from the “farm to the plate” is 10% for India. India cannot afford this waste. Food preservation, storage and transportation needs are obvious. An effective market for food cannot evolve without adequate information flow on availability and prices. The development of a telecom infrastructure can significantly add to India’s ability to create markets. Indian firms have been very reluctant to incorporate the power of IT to dramatically alter the capital needs of the business. For example, Indian managed firms have on an average working capital needs of 200 plus days. MNCs operating in India seem to get along with about half that. Hindustan Lever boasts zero net working capital. Capital that can be released by managers through distribution efficiencies are staggering.

4.      Relieving Choke Points: India is low wage country but not low cost country. Even in milk production, while Indian milk is cheaper than milk in world markets, milk powder ad butter are expensive by at least 10-20%. Understanding the productivity levels along the value chain are critical for us to understand the choke points in the system and to identify opportunities for fully exploiting India’s vast resources.

5.      Private Enterprise as the key to Development: For too long public policy in India was driven by government undertaking the role of producer and marketer. Government was involved in market development. We have learned that does not work. The lessons from Operation Flood and C-DoT are that private enterprise is alive and active in India. There is a role for government in creating infrastructure capabilities such as education and health. Even in these spheres, public policy in India has failed. Government cannot do more than act as an enabler in areas of development. It is about time that we entrusted our development efforts to private efforts to private enterprise: both indigenous and MNC based.

6.      Scale is important: It is important to recognize that in a country of India’s proportions that entrepreneurs think of scale as an integral part of their efforts. Many an NGO does provide an excellent and creative effort to improve that lot of the pyramid. However, they do no ask themselves how they could scale up their efforts to cover a vast country such as India, much less how to export that knowledge to other parts of the world. The choice of technology, the business model, and the managerial skills must become a part of he total effort to scale up, when an experiment succeeds.

7.      State of Art Technology solutions are critical: For too long. Indian efforts at development have focused on “appropriate technology” meaning dated and old technology. We have to move towards solutions that are at the state of the art. Solving the problem of poverty should not mean that India resorts to old solutions. For example transportation is not about making bullock cart more efficient but asking ourselves why are still dependent on bullock carts. We have to leap frog and invent solutions that are unique and new. The bottom of the pyramid as a market will force us to innovate.

Conclusion

The opportunity for innovation and world class efforts in India are numerous. We need to start imagining a new India. I have less difficulty in convincing managers in MNCs in the West about the opportunities in India than I have convincing Indians in India. Let me quote a view of India’s potential from Dr. Larry Summers, The Deputy Secretary of Treasury of the USA:

 Twenty five years from now, we could be reading very different media portraits of India at 75 than we have seen during her 50th With 25 years of 9 percent average growth behind it, India would be firmly on the way to becoming one of the world’s new economic superpowers. Per capita income would be 450 per cent higher than today. The “Hindu rate of growth “ would be a point of pride not frustration…. Vanity Fair would be declaring Bombay, not London, as “the World’s coolest city”…..Elsewhere in Asia there would be gripes about the “Bollywooodization” of the domestic movie industry and the flood of Indian soaps filling the domestic screens.

Yes, he is right . Everyone, outside India, sees India’s potential. They all recognize the need for 9-10% growth per year for an extended period of time –say 20 years, to make a significant change to India’s fortunes and its influence in the world economy. China has shown that it can be done. Why not India?

Of course, we should all understand that recognizing potential is not the same as accomplishment. Identifying the potential and being energized by it are critical. But doing it is different. Accomplishment needs teamwork. This is critical missing ingredient in India. Sam Parody summed it up nicely. He says; One Indian =10 Japanese; 10 Indians = 1 Japanese. We just seem to have lost out ability to work tighter and accomplish goals bigger than anyone of us.

I am not given to nostalgia. I leave it to others. But on this occasion let me indulge. Look at what India of the past stood for. The great Brihadeshwar or the Meenakshi temple or Dilwara were built at the same time the great cathedrals in Europe were built. In sheer conception, scale and aesthetics, India matched and challenged the best. Tipu Sultans army was the first to use rockets. Dr. Kalam tells the story, in half jest and half pain, that the British learned about accurate rocket propulsion from Tipu Sultans armory. We did not improve on what they knew. The British did and they have accurate records. Very few, even from Maharashtra know that the Maratha held the British at bay for a long time. The Maratha navy was a strong fighting force. More recently India’s fight for freedom. Of all the great initiatives in India’s freedom struggle, the salt satyagraha remains the most innovative. Think of Gandhi, for a moment, as a strategist. He had to fight the British Empire. He understood his competition. He was resource constrained, if we consider military or financial resources. He needed a cause to unite people- the rich and the poor. He needed a public demonstration of defiance. He did not want a defiance that would   involve any technological requirements.  Salt was it. It unified all castes and economic levels. Salt is God’s gift. Salt water and the Indian sun could do the trick. The Dandi march and the crowds in the beaches attracted more people. The British learned for the second time not to underestimate the power of common symbols – tea in Boston and Salt in Dandi.

Pandit Jawaharlal Nehru, on behalf of all Indians, made a tryst with destiny on her Independence fifty – one years ago. He said:

The service  of India means the service of the millions whom suffer it means ending of poverty and ignorance and disease and inequality of opportunity. The ambitions of the greatest man of our time has been to wipe every tear form every eye….Those dreams are for India for India, but they are also for the world, for all nations, and peoples are too closely knit today for any one of them to imagine that it can live apart . Peace has been said to be indivisible; so is freedom so is prosperity now, and so is disaster in this One World that can no longer be split into isolated fragments.

The legacy that we can leave our children is of great importance: especially in India- both because of its hoary traditions and its growing pains as a democracy. If we do not make a change, we will leave behind a legacy of moral indifference, apathy, increasing intolerance and violence. That is what I see in India today. We may want to go back to the legacy that Dr. Vikram Sarabhai left for us:

.   Building institutions of excellence with resource constraints
.   Innovation and not imitation
.
 Focus and determination, not defeatism
.
 Faith in India ‘s future, not fatalism

This is the legacy that makes sense. I remember one scene from the movie Gandhi where all around Gandhi where all around Gandhi are discussing the fact that people will be jailed and killed for civil disobedience. His response was “we cannot lose, we simply cannot.” That kind of confidence is needed now.

I still have a dream for a great and prosperous India. But where have all the dreams gone?