How do we go from here?

I read Atanu Dey’s take on Innovation and Entrepreneurship in India in response to a question put forward by Sramana Mitra on her blog Why is the entrepreneurial ecosystem in India not coming together as well as it needs to?

Atanu makes a strong pitch for leveraging existing solutions for development, reasoning that India has not yet reached a stage where we need “cutting edge research and development.” It is sufficient to implement known innovations, he conjectures. A compelling argument but I feel there are a lot of points that need to be bought out in this respect.

To start with, let us understand that we are talking about two things “Does India need (more) innovation?” and “Why does India not innovate as much as it needs to?” And, in my opinion, the answer to the latter does not lie in the former.

Coming to the first question, India does need more innovation, in fact it needs lots of that. Why? A few reasons:

1. India cannot simply follow the development process that US followed. It can take cues but trying to imitate exactly the same cycle will lead to half baked results. To be sure, innovation does not necessarily imply high technology. It also implies a technology/concept that apart from being “innovative” is implement-able too. We did not have to go through the “pager usage phase” to reach “cell phone mobility” even though we did try that. Lets take up rural innovation. We need to innovate and find out ways to increase yields on small land holdings. We need to innovate when it comes to connecting villages to the national mainstream using IT and Internet. Innovation not just in terms of technology but in terms of pricing, marketing, sales & distribution. Isn’t the Amul cooperative model innovative? Ecoflo from Bhinge Brothers[PDF] is one such innovation in rural technology.

2. India needs scale. Incidentally while attending a class at CSIM, Chennai on Saturday, I had stated the same point. India cannot blatantly import models of growth or innovation from developed countries because of its sheer size. Being a democracy makes the task even more challenging. Taking cues from countries like Brazil seems more pertinent especially when it comes to designing solutions for the masses. Dr K L Srivastava at CSIM Chennai made a point in the class, that scale is not always the case – citing disability related issues as an example. In my opinion, looking at absolute numbers the “niche” in India dwarfs similar numbers in US. Scalable solutions are really important.

3. India is a unique country. When I say this, my point is not to allude towards our rich culture and the related. I am trying to draw attention to myriad languages, populations, cultural differences, attitudes, motivations. Even solutions customized for India may not necessarily work for the entire country. Regional innovation is also important. To give you an example, an Internet based micro lending organization like Rang De faces a lot of initial skepticism from lenders because of the non-profitable NGO thinking that social development is generally associated with.

4. India needs to leverage the technology to create more technology. The “low hanging fruits” of existing innovation may have either gone bad or may not even suit my palate. But I can use the seeds of these fruits to create hybrid varieties which I may be able to consume.

Coming to Sramana’s question of why are we not as innovative as we need to, a lot of answers have already been put on her blog. However, innovation is an exponential function. And the required start has been made. Readers can read this blog to find out innovations being undertaken in the social development sector. Not to mention, the Indian solutions like Tata Ace and Nano, Bajaj’s experiment with fuel efficiency. Aravind Eye Care may be cited as an exception that proves the rule – innovation is to be expected from the youth. But, nevertheless, it does prove that innovation can come from any field/age. We have organizations like RIN (Rural Innovations Network) and SRISTI which are fostering and encouraging innovation. One field that is seeing considerable traction is financial inclusion and for the right reasons, of course. I am hoping to see more progress in this one field which in turn will be one of the catalysts for more innovation.

I have been amazed at the optimism we share at TC-I, but it should not be mistaken for foolhardiness. It may be because we have the right balance in terms of experience and intellect.

Is Urbanization Really The Answer?

Atanu Dey’s article and analysis on the Urbanization and Development of India lends itself to interesting opinions and conclusions on an important topic that encompasses many cross-cutting issues. Dey follows the model of linear development in his conclusion:

Therefore the rural people have to be urbanized for India’s development and growth. Every economy has followed that path which begins with agriculture being the main source of income for the majority of the population and ends with agricultural employment being a very small fraction of the total labor force.

While the general tone of development in countries across the world is centered around cities, I wonder if such a model is healthy for a place like India, where most of its population lies in rural areas. The implications of the migration shift could be destructive, from family issues to shifts in labor markets to environmental impacts.

Another surprising aspect of the article is that Dey asserts that people actually prefer to live in urban slums:

Most Indians living in villages would welcome the chance of living in well-designed efficient cities. They are already doing so as is evidenced by the fact that tens of millions of rural people migrate to cities – often choosing to live in urban slums. They are voting with their feet saying that life in an urban slum is preferable to life in a village.

Perhaps the issue is more about the lack of economic opportunity in villages – given good employment prospects and the availability of basic services in rural areas, I’d venture to say that more people would opt to stay in a place where they have stake over the land and the possibility of a higher standard of living.

Although I believe his conclusion is arguable, the question Dey sets out to answer is a valuable one: is urbanization really the answer? Should India focus more on creating these “mega-cities” rather than developing rural infrastructure?

The Talent Vacuum

Many of our prior posts have spoken to the urgent need to overhaul, or at the least, significantly revamp the education system in India, as evidenced by the massive rise in demand for both primary and higher education institutions in relation to dwindling supply (not to mention the relatively low quality of instruction/infrastructure at pre-existing schools, particularly those in rural areas). The following except from Ramesh Menon’s, “The Talent Crunch” speaks to the gravity of this problem in explicit (and horrifying) detail:

Sam Pitroda, chairman of the National Knowledge Commission says that of the 90,000 MBAs that come out every year, only around 10,000 are worth employing. Kiran Karnik, former NASSCOM president, puts the blame at the door of India’s education system, saying that only 25 per cent of the country’s engineering graduates deserve jobs. No wonder companies today have to invest heavily in training fresh graduates, helping them to unlearn and pick up skills. As there are dramatic changes in politics and business as well as international scenarios, there is a need to keep updating the syllabus almost every year. Manohar Chellani, Secretary General, Education Promotion Society for India, New Delhi, points out that there is tremendous scope for improving the quality of education in India, and delay in doing it will cost us heavily.

The National Knowledge Commission has said that India will have to bring in education reforms if it has to emerge as the workforce of the world. India today needs at least 1,500 universities, but has only 370. There are more than 550 million young people in need of education but do not have educational institutes to go to. India also needs around 1,500 IITs, 1,500 management institutes, and 1,500 medical schools. A million good schools are also required. All that the present education minister, Arjun Singh, has done in his tenure is to fool around with reservations and suggest that Rahul Gandhi be made prime minister.

Though the IT industry needs 3.5 lakh engineers a year, only 1.5 lakh are available. This could lead to a shortage of over five lakh engineers in the next few years. A recent Nasscom-Crisil report says that the IT industry is expected to create about 11 million jobs by 2010. In another two years, the II sector would need half a million professionals. Presently, it employs over 350,000 but is short of around 90,000 workers. In another year, the shortfall is expected to cross 200,000. In 2007, the job market was vibrant. 2008 promises to be better as India goes on to vitalise its various sectors, which require over 1,000 CEOs across industries.

Are you alarmed yet? If you’re not, well, you should be. Continue reading

Evening News Feed

  • Clearly Reservations in India is making big news after the landmark Supreme Court Judgement on reservations. Atanu Dey has a great (but long) analysis of reservations in the Indian Education System (Part 1 of a multi-part series). If you want to learn more, I also recommend this for a detailed history of affirmative-action in India

  • Doug from India Development Blog reports that IFMR Trust, BISWA, and Grameen Capital India Complete First of Its Kind Microfinance Loan Portfolio Restructuring. The complete post here
  • In what seems like a fairly progressive move, The TamilNadu Governments is establishing a special welfare board for transgender individuals [via Chennai Online]. Of course, a Tamil Language cable TV channel recently launched Ippadikku Rose (Yours, Rose) the first TV show in the country to be hosted by a transgender individual.

$13 billion annually for education outsourcing?

A study recently released by the Hindustan Times estimated that $13 billion a year are spent by Indian students abroad for higher education. Atanu Dey tried to frame this number into more tangible terms.

Let’s pause for a moment and figure. $13 billion every year. Or in the last 10 years, about $100 billion. Imagine what you could buy for that money. How about 100 colleges with first class infrastructure with housing, classrooms, labs? Each year India could have an additional capacity for 10,000 college students and in 10 years you could have 100,000 additional capacity. Imagine the multiplier effect of that spending — in construction, in salaries to teaching and non-teaching staff. Imagine the boost to the industry from creating human capital. The imagination boggles at the sheer waste.

The issues here are complex, but the article highlights that over 90% of people rejected at an IIT is due to capacity considerations. Moreover, higher education in India is subsidized while students are forced to pay full market prices when they study abroad. The article suggested deregulation as a potential solution.

Deregulation of higher education in the country will result in creating annual revenues of 50-100 billion dollars, besides providing 10-20 million additional jobs in the field of education alone, the chamber said. India has only 27,000 foreign students, as compared to four lakh in Australia.

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Some things unfortunately never change…

Atanu Dey discusses a NY Times article on the discouraging state of illiteracy in India. According to the article, over 300,000,000 people are illiterate in India and there does not appear to be an coordinated effort to address it.

There can be no question that … education in India has largely failed because … education has been made far too much a question simply of intellect . . . one of the most pressing needs of India is to foster more widely in schools and colleges, those ideas of duty and discipline, of common responsibility and civic obligation on which a sound political life depends.

But this is not even the worst part. The worst part is the fact that this NY Times article was actually published in 1918! Even worse, today the stat is up to 400,000,000 people without the ability to read. Dey concludes something more cynical than this author is willing to accept, but nevertheless the absolute failure of the government to educate its citizenry does question its true intentions.

India’s greatest problem is this: the government has been doing its best to keep the population uneducated and illiterate. Public funds for education are channeled in only such ways so that it is least capable of delivering education. Corruption and inefficiency collude to keep the funds from actually educating anyone.

For the country’s sake let us hope that Dey is wrong.

Farmers’ Suicides Revisited for a Third Time: An Economic Analysis

Atanu Dey writes on his blog an interesting economic analysis for the reason behind the continuing practice of farmers committing suicide. He likens the phenomenon to that of a parent repeatedly tying his child’s shoe only for it to become untied again.

He had correctly identified the superficial problem: kid running around with untied shoelaces is likely to trip and go for a toss. But he had no idea of what the deeper problem was, and that he was indeed the cause of the problem. In fact, his actions merely intensified the problem. He was mechanically reacting to the untied laces without stopping to figure out why they were coming untied. He did not realize that they were coming untied because the kid was untying them and why.

The man would sit the kid down on the seat and, while continuing to talk to his friend, use all his adult strength to tighten the laces. Then, and out of sight of his father, the kid would untie them because they were uncomfortably tight. The next round the father would tie them even tighter and the pattern was repeated. If only the man had had enough sense to figure out the problem, he would have tied the laces lightly. The kid, busy in his play, would not have even have noticed that he was wearing shoes.

Dey continues on to talk about how the current means to alleviate famers’ burdens are similar in that they only address the superficial issues facing the Indian agrarian and that unless these are addressed the suicides will continue.

The farmers’ face a chronic problem and therefore an acute short-term solution is inappropriate because it will merely postpone the actual solution and thus set the stage for intensified and more wide-ranging problems.

The biggest problem India faces is the inability–and I think more unfortunately  the unwillingness–of its policymakers to understand what the basic problem is. They routinely try to apply band-aid solutions to systemic problems.  That’s our greatest challenge.

The economic analysis is after the jump.

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