Tuesday, December 29, 2009

Incredible India, From 2010 to 2020: The Vision of a Welfare State


As India bids good bye to the first decade of the twenty first century it does so with a new confidence and commitment, looking forward to an even more eventful second decade. During the decade that went by Indian software engineers helped the world handle the Y2K bug seamlessly and smoothly, India surprised the world by becoming a space power on its own, Indian corporations acquired some of the most expensive global marquees, from steel to automobiles, and India as a country caught the fancy of global investors as the emerging economic powerhouse. For those whose lives are intimately woven with India, however, only a few small steps have been taken, and giant strides remain to be taken.

There are several potholes in India’s journey towards sustainable progress. Individual prosperity needs to be channeled for public good. Economic growth needs to be combined with social equity. Urban might need to be balanced with rural delight. Industrial development needs to be powered by innovative spark. India’s global dominance in pharmaceuticals needs to be reflected in healthcare for all in the country. Universal education needs to be sharpened with leading edge competencies. Public services have to be truly utilitarian fulfilling the needs of the teeming millions. Corporations need to hold economic wealth as trustees for the society. The list of the heights yet to be conquered in India’s quest for progress is endless.

It is easy to be despondent that the images of Incredible India are as yet not so credible. India has, however, demonstrated in patches that it can be world class when it plans with diligence and executes with commitment. India has the world’s largest number of US FDA approved pharmaceutical plants. With the largest count of drug master files and abbreviated new drug applications, India has become global generic pharmaceuticals powerhouse. India has become the home to the world’s cheapest 4-seater small car that was indigenously designed and manufactured. Indian information technology firms have continued to dominate the global software industry. The question, however, remains as to why progress in India has to be so tardy and patchy.

Mahatma Gandhi, the Father of the Nation envisaged that India would be a country where the downtrodden would be genuinely cared for. Successive governments since the independence have sought to alleviate poverty by focusing on economic growth, building dams and establishing industries. As a result, India achieved a measure of self-reliance although introverted socialistic dogmas substantially sub-optimized growth. Having achieved a notable level of industrialization the time has now come to shape India as a truly Welfare State. This article advocates a bold paradigm that targets social security, connectivity, energy assurance and innovative agro-industrial development as a strategy to build India into an ideal Welfare State.

Billion homes

Security of shelter, food, education and healthcare are the four pillars of social infrastructure, on which a true welfare state can emerge. Several of India’s problems, both from civility and sanitation purposes, can be traced to widespread homelessness across the country, which is an occurrence without any urban-rural divide. The Governments, Central and State, must target building of a billion homes by 2020 to be able to provide the security of shelter to the billion population which could increase by around 25% by 2020. While a proportion of the billion homes, say around 20%, could be left to a totally private initiative to meet the needs of the middle and upper income groups, around 50% could be in a mix of public-private partnership to build affordable, homes on ‘pay to own’ concept while another 30% would need to be entirely in public ownership to meet the needs of the downtrodden who cannot pay to own any home. The public participation could be in terms of the land that the governments would lease or transfer to the home building corporations and eventually to the owners.

A massive home construction initiative such as the ‘billion homes’ program would not only protect the massive population from the ravages of nature but also provide an influential pan-Indian trigger for employment generation. In a creative manner, the homeless and the jobless themselves can be involved in the construction activity providing them with a steady income even as they participate in the building of their homes with passion and commitment. The entire industrial sector, from cement and steel to design and construction majors would benefit enormously from this initiative, given the widespread upstream and downstream linkages of such residential construction activity. In fact, the ‘billion homes’ initiative would need to be conceptualized in terms of several thousands of environmentally harmonious townships all across India, in and around the established urban and rural habitats, with requisite rail and road connectivity.

Food security

India being a largely agrarian nation, setbacks to food production due to monsoon failures and floods on one hand and lack of incomes to secure daily food on the other hand are the two major handicaps of the economy. Certain State Governments have attempted to mitigate the adverse impact by cheap rice schemes, supported by public distribution system. Leakages in the public distribution system as well as inadequate quantities and quality of supplies to the system, together with the accompanied budgetary subsidy impact have curtailed the positive impact of these measures.

The answer to the financial constraint lies probably in taxing those segments of the food processing industry that cater to affluent sections (eg., fast foods, functional foods, aerated drinks, spirits and beverages) and recycle the money to beef up the public food procurement and distribution systems. Expansion of the subsidized rice or wheat scheme and supplementation with another essential nutrient such as lentil or egg would need to be taken up as a national food security program with adequate budgetary provision.

Universal education

Universal education needs to be a fundamental right as well as a basic obligation for the entire population. Eradication of child labor, with the provision of durable shelter and food security, should hopefully curb the practice of keeping poor children occupied in hard labor denying them the vital time for, and access to, education. Significant increases in the availability and quality of public school system, covering nursery, primary, secondary and vocational schools are urgently called for to support the objective of universal education.

Non-governmental organizations (NGOs) and socially responsible organizations can support this initiative through supply of qualified and committed teachers, which alone can enhance the real utility of the schooling system. Apart from budgetary support, encouraging private or public sector corporations to adopt and fund public schools for better quality of education as part of their corporate social responsibility also would go a long way in supporting universal education. Simultaneously, all higher education institutions should be mandated to reserve at least ten percent of their intake for economically handicapped but meritorious students. Food security offers direct benefit for education. The mid-day meal scheme pioneered by the Government of  Tamil Nadu for school going children, for example, led to a sharp increase in enrolment in schools. Reinforcement of such programs with more hygienic and nutritious food can help the objective of universal education even more significantly.

Healthcare for all

Reference has been made in one of the author’s earliest posts to a pioneering initiative undertaken by the Government of Andhra Pradesh to provide access to healthcare to the needy. The program called ‘Arogya Sri’ provides free treatment to the needy not only in government hospitals but also in corporate hospitals. This coupled with an emergency ambulance service which covers the nook and corner of the State has had a positive impact on the health security of the general population. Though initially it was feared that such schemes would impose an unmanageable subsidy element it has been established that the State’s financial system, though by no means healthy, has adequate resilience to absorb the impact of this noble endeavor.

The Western model of health insurance which is based on ‘pay and benefit as per affordability’ is not appropriate for the large number of ‘low income’ and ‘no income’ group of population in India. Direct intervention by the governments, NGOs and private sector in terms of providing quality hospital facilities and nursing services is a more relevant model for India. Given the fact that the direct healthcare system can be managed if the subsidy element is absorbed by a wider range of public-private partnerships, it is appropriate to extend the ‘Arogya Sri’ scheme nationally across all the states with relevant reinforcement.

Multi-modal connectivity

An efficient multi-modal transportation infrastructure comprising rail, road, air and waterways is a vital superstructure which can nurture a welfare state with productive work-life balance. These four transportation sectors are completely national and intrinsically geographic in any country. Absence of capital goods, consumer goods or food products can be made up through imports or barter mechanisms. Transportation infrastructure, however, has to be developed only within a country. India needs to take great strides for upgrading its transportation structure. While transportation systems call for massive outlays, various advanced nations would be willing to support futuristic transportation systems as evidenced by the India-Japan cooperation on industrial freight corridors that has been recently cemented. A multi-modal transport plan needs to be firmed up and global collaboration arrangements established on an urgent basis by the Indian Government.

Introduction of high speed bullet trains connecting all the State capitals would be a fundamental pre-requisite for enhancing the efficiency and productivity in the Indian transportation system. An entirely new rail network needs to be built across the length and breadth of the country to support the introduction of the bullet trains. Similarly, governments have to move away from archaic concepts of flyovers and take up construction of elevated highways for providing total solutions to intra-city transportation. The golden quadrilateral highways program needs to be expanded into a golden multi-lateral highways program connecting all Tier 1 and Tier 2 cities. The need for modern air transport may be less obvious as it is seen to cater to higher income segments, with an adverse impact on overall fuel consumption. However, air transport has also demonstrated how it can dramatically alter the mobility equation of a country, both in respect of personal and cargo movement. Waterways, in contrast, have been largely ignored in the country despite their being an environmentally clean and fuel-efficient option. Cleaning up of inland waterways and development of new coastal shipping pathways will be helpful to introduce an additional element of productivity in the overall transport system.

POGA for energy assurance

If the wheels of society, industry and economy are to move uninterrupted, and with increasing speed, to fulfill higher economic aspirations, the engines of the growth have to be adequately powered. Power, Oil, Gas and Alternative energy (POGA) sectors are the four vital sectors that require major attention to ensure energy security for a nation that is hungry for growth. Fortunately, unlike other infrastructural sectors, most advanced nations are equally interested in achieving energy security and are willing to provide their technologies and resources to exploit and commercialize sources of energy in countries such as India. India also must treat energy security as a global business that needs to be secured through access to, and control of, energy sources across the globe. Indian Government would need to draw up a strategic global energy plan that meets India’s long term energy requirements.

Over the last few years, despite liberalization the POGA sectors have not received the sustained policy thrust that these complex sectors deserve. Polices for super-mega power projects as well micro-mino power projects need to be put in place along with policies for efficient energy distribution and viable energy pricing. Oil and Gas sectors need to be strengthened by providing the ability for state run ONGC and GAIL corporations to aggressively explore and exploit global energy sources. Integration by oil refining companies into energy exploitation and generation on the models of western oil companies will also need to be considered. Importantly, new corporations have to be established to invent and / or assimilate technologies for exploitation of alternative energy sources such as solar, wind, thermal and bio-energy modes. Grants and subsidies as well as long term tax breaks for private and public sector corporations operating in the alternative energy field also need to be considered. The POGA sector, in terms of generation, distribution and usage of energy will play a critical role in reducing the carbon footprint of the country.

Digital workshop for the world

Over the last few years, the global view that India would only be the world’s back office while China would ideally be the world’s workshop has been changing in India’s favor. Global companies have started to recognize that India could be a high quality-low cost manufacturing base for several consumer and industrial products. India has certainly made such a mark in automobile and component sector and is, in fact, ahead of China in these domains. However, in respect of electronics-driven product categories, India lags behind China in a significant manner.

Digitalization and electronics have been the core of most new product development. Multinational corporations who possess such technologies are unwilling to establish such development and manufacturing bases in India unless majority or total ownership of such enterprises is assured in their hands. India’s restrictive policies on joint ventures and foreign investments in high technology areas and the propensity of Indian partners to hold on the majority voting rights and / or management control have limited the flow of foreign investments and induction of advanced technologies into the electronics sector in the country. Taking a cue from China, Indian industry and government would need to create helpful conditions for overseas corporations developing India as their preferred manufacturing destination, even for the most advanced electronics goods.

‘Re-farming’ the nation

While reforms has been the most popular buzzword of the Indian economy for the last two decades (1990-2009), the new decade of 2010-2019 requires a new buzzword that strengthens India’s agrarian roots to provide total food sufficiency and even achieve exportable surplus to meet the needs of the less privileged nations. This requires construction of new dams, inter-connection of rivers, desert and dry farming technologies and massive afforestation to counter the dwindling green belt in the country. Even as the economy and industry would directly benefit from economic reforms, the economy, industry and the society as the whole would benefit from a massive drive to ‘re-farm’ the nation.

‘Re-farming’ of the nation requires a cultural shift away from endless and chaotic urbanization to a more modern and balanced rural thrust which preserves the natural fundamentals of a rural economy while integrating the amenities of an urban economy. Several other initiatives discussed earlier such as social security, infrastructure stability, energy assurance and transport connectivity would go a long way in reversing the flow of men and materials from rural to urban economies. It is not uncommon to witness in Japan, environmentally clean factories situated in close vicinity of lush farm fields signifying a harmonious blend of the agrarian and industrial sectors. There is no reason why industrial development in India should be at the cost of agricultural development. Rather than convert huge tracts of land expansively into sparsely used industrial or service zones, ways and means must be found to promote co-existence of agricultural, industrial and service economies.

Reaching global scale

A few industrial houses as well as a few first generation enterprises have understood and executed with perspicacity plans to achieve global scale and scope. Global scale with comprehensive scope enables companies access the best technologies, resources and customer bases, internationally. That said, a vast majority of industrial and business enterprises which have potential to reach global scale are content to remain fragmented and sub-optimal in scale for fear of loss of identity. The typically Indian emotional bonds of growing and staying together have inhibited companies from seeking synergies from mergers and acquisitions, nationally or internationally.

A new mindset that subordinates professional aspirations to corporate potentialities and derives individual prosperity from national wealth could lead to a sea change in the traditionally ambivalent approach of the Indian businessmen towards individual business identity versus global business standing. Banking industry, automobile industry, pharmaceutical industry, software industry and FMCG industry are some of the industrial sectors which would benefit from selective India-centric or cross-border amalgamations based on product and market complementarily as well as synergy of capabilities. Industry associations as well as individual corporate honchos and entrepreneurs are well-placed to initiate this process. The Central Government, by setting up a ministry similar to Japan’s famous Ministry of International Trade and Industry (MITI), now Ministry of Economy, Trade and Industry (METI) can help such orderly industrial progression with strategic oversight and guidance (and not necessarily, control!).

Innovating a generic mindset

India had centuries ago, through its brilliant scholars, made phenomenal discoveries and contributions in the fields of astrology, astronomy, healthcare, architecture, civil engineering, administration and financial management. Over the last few centuries, however, India has become a follower rather than a leader in several domains, being content with replicating products, duplicating technologies and recycling business models, either from the West or the East. In doing so, however, India did find a new niche in reverse engineering, technological adaptation, follow-on product development, generic manufacture and cost-competitive global integration. In order to become a leading and vibrant nation, India, however needs to combine its acknowledged “generic follower” skills with innovative pioneer capabilities.

Any generic-follower model has inherent limitations of operating in the tail end of a product life cycle where the price-cost equations leave uncomfortably thin profit margins. Time and again, even in an industry such as the software industry where Indian talent is globally recognized, break-through product concepts continue to emanate from the West. Industrial sectors which have high intellectual potential in terms of the human resource base should make specific and sustained efforts to incubate new products by investing in special development laboratories. Several of the sectors listed earlier as well as additional ones including automobile, pharmaceutical, information technology, watch, gems and jewels, food processing, automotive components, and design, development and engineering services, have the potential to add a significant innovation edge to their broader generic portfolio and emerge as unassailable global players of multiple facets.

Epilogue: Incredible India, from 2010 to 2020

The journey from 2010 to 2020 can be exciting and fascinating for India if the vision, strategies and execution are aligned to build a truly Welfare State with robust social and industrial infrastructure and high productivity. With the vision and strategy outlined in this article, India can be a self-assured nation where complete social security is ensured through universal housing, food, education and healthcare; an upwardly mobile nation in which multi-modal transportation enhances connectivity; a powerful nation which has the energy sufficiency to turn wheels of progress faster: an advanced nation which houses a futuristic digital workshop for the world, a bountiful nation which ‘re-farms’ itself industrially and a creative nation which adds an innovative edge to all the generic competitiveness that it possesses. This ambitious blue print does require massive financing. As with micro-enterprise formation, a worthy and genuine concept, even at a daunting national scale as outlined herein, will not be found wanting for national and international funding support. The India Welfare Plan, 2010-2020 outlined in this article has the potential to transform India into a truly global power bringing cheer and pride to all the Indians as never before.

Goodbye 2009, and Welcome 2010!

Posted by Dr CB Rao on December 29, 2009


Unknown said...

Thought Provoking write-up. My belief is that if Comprehensive Healthcare and Education (not to forget the vocational kind) are provided for by the Government, working hand in hand with Private Institutions, and if the importance of Agriculture is instilled into all the youngsters in the rural areas, with a good incentive to organic produce, then India would become a very prosperous nation. Corruption and greasing of palms have become part and parcel of our everyday life. But I guess that is another matter.
Your thoughts are too valuable, not to be published as a book. Please do think on those lines. Please.

Kiran said...

Dear Dr.Rao,

A Very Happy New Year to you and readers of your blog. Your thoughts are commendable and worth taking a serious note. In order to realize your vision & many of the strategies outlined, I strongly believe that India needs to have a National identification Program in place before rolling out new programs or initiatives. Currently there are numerous welfare programs both and state & federal level that are riddled with inefficiency and fraud. Identification should be used to measure the quality and efficiency of the programs.

We are young / growing / ambitious bunch of people. However, many entities i.e. individuals, corporations compete for the scarce and limited resources such as land, water, roads & bridges. This has been and will be played out as many more flash point incidents such as Tata Group walking out of West Bengal / PepsiCo facing the wrath of locals for misuse of water resources. Solution is to not tax them away but to make them apart of comprehensive solution. For example PepsiCo should be allowed to bring in and demonstrate various technologies & techniques for desalination & recycling of water resources. Educate locals in techniques to increase produce per acreage & efficient distribution system. Tata should help state and local governments to improve the connectivity so they can put more of their products i.e. cars, buses etc on the roads and make driving them enjoyable. These steps will help both parties to contain cost i.e. inflation, live harmoniously.

Under education & Un Education has been malice to the society and will deprive the people in understanding and getting the basic rights. Government along with private & public corporations should have a comprehensive program & funds allocated to address the basic education needs. Government should rollout subsidies and create competitive landscape for corporations to take part in the programs. Mid-day meals schemes though popular are short sighted, rather a long term approach, such as providing incentives to qualified students who complete the education from these schools are helped in paying the tuition for higher studies, scholarships from sponsored corporations, employment opportunities in state & federal governments etc. Government & corporations can get their money worth when these newly minted graduates enter the work force and breed innovation and pay taxes on their high paying jobs.

Lastly, we need to make our citizens aware / educate them that cheating or underpaying taxes will only translate to cheating our future and robbing the future of their children, which takes us right back to national identification program i.e. every citizen should & must file taxes & demand his/her basic rights and social welfare programs that they are entitled to.

Unknown said...

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