The Hindu Business Line : `Innovation is India's strength'

Innovations in delivery... It is an unexplored, uncommitted point. The dubba-wallas of Mumbai. It is world-class operation; 5000 semi-literate persons distributing 200,000 tiffin boxes everyday, at Rs 250 a month... For similarly pioneering ef forts in decentralised production, centralised collection, centralised/modern marketing... look at Amul or Lijjat Pappad. It is a completely new way of transacting business...

IT was a vintage Arun Shourie, Union Minister for Communications and Divestment, who regaled the distinguished audience from Chennai's world of business and industry that had assembled in the Ball Room of Taj Coromandel Hotel on Tuesday evening to celebrate the 10th anniversary of Business Line.

Though Mr Shourie said that listening to the other two speakers of the evening — Mr K. V. Kamath, MD and CEO of ICICI Bank; and Mr R. Seshasayee, MD of Ashok Leyland Ltd — was an "absolute feast", the audience feasted on his speech too, greeting it with spontaneous laughter and cheers, as he went about taking digs at the political opponents of the BJP. Taking to task the media for not doing a decent job in exposing the lack of development in Madhya Pradesh during the Digvijay Singh era, he said, "It was a great surprise to me during the elections to go to Madhya Pradesh. All of us had been taught by the press that Mr Digvijay Singh was one of the best managers and the State was being very well administered. And suddenly everybody started saying there is no infrastructure. How is it that for five years the MP press was not reporting that?"

Coming to West Bengal, he said the media had failed to report for 13 years the economic stagnation in the State. "It was a taboo subject. And when the same West Bengal has pioneered some reforms, again we don't write enough about them! It is the only State in India which has declared IT as a public utility and therefore outside the purview of strikes and bandhs! That's a pioneering effort. We should celebrate it but we don't broadcast it... "

Urging journalists not to allow "pink spectacles" to "censor" out such developments, he found ridiculous the trend in some newspapers to have "two editorials on the same subject; one for and one against! Yeh koi high school ki debate chal rahi hei? (Is it a high school debate going on?) ... you're all becoming economists and as useless."

Urging journalists to take more pains to report on the innovative and creative side of Indian business reflected best in success stories like Lijjat Pappad, he said the most amazing aspect of the Indian economy today was the "new confidence" that was palpable.

"The world's perception of India has changed and India's perception of itself has changed... Earlier pessimism that the Japanese or Chinese goods will swamp us... all this has been left behind and we see a new kind of enterprise in every sphere."

Once again making a political statement, but with a remarkable light touch, he said, "All this happened because sometimes a weak political class needs a breakdown to do the right thing. That's what happened in 1991. There was a breakdown, things had to be altered and industry was willy-nilly thrown into the water and it has learnt to swim so well. That has settled the argument of the early 1990s from within industry that the sequencing of liberalisation was wrong."

People had then said we should have opened up competition within India first before opening up to the rest of the world. "But development doesn't proceed as on an architect's drawing board. It proceeds in a haphazard way, especially in a diverse society like ours. But the happy result is that the native creativity of our people... the acumen of industry that had been held back by the licence-quota raj, came out and did what we see before us."

Edited excerpts of Mr Arun Shourie's speech:

It is a completely new phenomenon that even in the business houses in which the names are the same, the enterprises are completely different... Tisco's share in Tatas' revenue has fallen from 21 per cent to 17 per cent, Tata Motors from 23 per cent to 17 per cent, and TCS which was 0.8 per cent in 1991 is now almost 10 per cent... Even Haldirams, selling sweets and snacks, is completely different; its packaging is different, its approach to management is different. So they have reinvented themselves, exactly as Mr Kamath was saying... It is a very different world. For the first time, we have set a dramatic example of the type of opportunity that was there in eastern Europe. But 10-12 years ago we missed out... our circumstances were different, our policies were slow to change. The world was changing much more rapidly.

But, today, I was delighted to read that in the last five years about $2 billion has been invested by Indian companies in foreign companies and I just asked my friend Dr (Amit) Mitra (FICCI Secretary-General) for a list of companies that have been acquired by Indian companies in the last four months. He gave me a list of 44 companies that have been acquired. In each, a different business model, financial instrument has been used, invented by financial institutions, by companies like Reliance and others. Mr Kamath gave a fine example of ICICI's innovation in affordability. This is a really Indian contribution.

For example, Arvind Eye Hospital. A cataract operation costs $1500 dollars in a US hospital, but costs $12 here, including the cost of the lens. These are all great steps forward. The example Mr Kamath just gave about the banking sector, working through other intermediaries to reach a much wider client base and thereby keeping the transaction costs low...

Innovations in delivery. It is an unexplored, uncommitted aspect. The dabba-wallas of Mumbai. It is world-class operation; 5,000 semi-literate persons distributing 200,000 tiffin boxes everyday, at Rs 250 a month...

For similarly pioneering efforts in decentralised production, centralised collection, centralised/modern marketing... look at Amul or Lijjat Pappad. It is a completely new way of transacting business. Instead of putting all cows and buffaloes in one shed, as in America, it is the individual housewives milking cows, centralised collection, centralised modern sanitary processing and distribution into every corner of India.

Lijjat Pappad, started by seven housewives on a rooftop, now has 40,000 working women and a turnover of Rs 300 crore. It is phenomenal, the involvement of communities...

In Bangalore, Akshyapatra feeds 40,000 children with mid-day meals every day of the year with just $ 1 million a year. This is the diversity of India; you find a lot of initiatives of many different kinds.

That is why the world has great difficulty in keeping up with us or trying to block us... We will do something else. There are several factors which enable this to happen... greater creativity, diversity of India. I remember when the Soviet Union collapsed, the World Bank started sending teams there. A friend who led a World Bank team to Russia was saying, "no, no, they can't keep up with us. They don't have markets." We not only have markets but have the capability to manipulate...

Institutions have got a robustness, acquired confidence, and acquired capability... The RBI did not allow the South-East Asian economic crisis to touch our shores. Five years later, when the IMF team came, it recognised that India's currency and foreign exchange management in particular should be the model for other Asian countries.

Another enabling factor, which gets us to do all this, I feel, is the privation and difficulties we have had in even getting public services of any order. Because getting through the day requires inventiveness... I asked Dr (R.A.) Mashelkar (CSIR chief) to send me some examples of outstanding innovations. He sent me two volumes. In each case, it was an innovation made by persons almost illiterate...

We find there is scope for Business Line to locate such innovations... it is a fact that whether we look at Akshayapatra or Sewa or Arvind Eye hospital, each one of the founders had enormous difficulties and each one was rejected as uncredit-worthy by banking institutions.

But they tapped other avenues. That was enough support. I am not commenting on the banks, but on the strength of our society. Many times we forget this. Today, for instance, we are looking for safety nets provided by the state. We are forgetting the strength of the Indian society in terms of the family and community and we should try to strengthen those links rather than try to replace them with nets of other societies. I find this in Arvind Eye Hospital, Lijjat Pappad...

Seven housewives meet and start Lijjat Pappad. It is the community and family which sustains them. My friend (S.) Gurumurthy has another set of examples in which he says that the caste system, which is reviled, helps in many ways. Communities often sustain enterprise. For example, the Nadars in the case of retail trade; the Gounder community in transport; in Tirupur, textiles; in Karur, handloom exports...

In the case of Tirupur, the working and fixed capital requirement for the year is Rs 2,400 crore. The banking industry provides only Rs 800 crore and the rest of it comes from arrangements of various kinds. The Naidus who built up Coimbatore, the educational institutions that they and the Gounders have set up; Gurumurthy was saying that there were 60 such institutions of engineering and other colleges within a radius of just 25 km. The golden example of this is that communities which did not do this, communities which the state apparatus and many of our activist-journalists, social commentators are encouraging into purely — if I may use the word in a very narrow sense — political activity have really slid down. So, the community strength can work both ways, but it has to be channelled in a particular way. That is one of the small lessons that is coming out.

I think just as privation made us inventive, this licensing quota raj also made us inventive in one respect. That is in skirting laws and regulations. I am sure that this will come in very handy when the Indian IT industry meets the anti-outsourcing Bills of the United States. Another feature of India which is not commented on enough is this informal transmission of skills. It is unique to India. If you read Drucker on Thailand, he said the essence was training and re-training. In Punjab, where I come from, if your automobile of the latest vintage breaks down on the road, our wayside mechanic, in fact his mundu, his chokra (son) can set it right. He has not been to an auto school. But there is an informal way in which skills are transmitted in India. This is also how computer literacy has happened. It has not come so much through the formal system of education as that the wayside typing schools became computer education centres in a way.

I would suggest that one of the small things that could be done to capitalise on the success that has come about is to document these other features of Indian enterprise as well as what sustained it. Some of the most important examples to document in this are those of self-made men.

Of course, we had great pioneers like Jamshedji Tata, but much of this explosion is taking place before our eyes, even for our generation in its 50s and 60s. So, we as journalists can have enough source material, enough primary material in self-made men and women to be able to write about them and convey the great romance of overcoming difficulties and crafting and fabricating a new country.

As Mr Kamath was saying, we have just begun and the vistas before us are unlimited. In agriculture, we were just reminded that it is way behind. But wherever I travel, there are new things happening in agriculture. This business of two-thirds and one-thirds, it is again one of the under-calculations that Mr Kamath was talking about.

Madhya Pradesh is one of the BIMARU States, but is one of the centres where there has been a soyabean revolution. I remember Mrs Amrita Patel asking me `Can you guess, where there has been a real leap in the last three, four, five years in milk production?' I didn't know. She said, `Bihar'. You laugh at it. But that is because we are not looking. And, if I may say so, our papers are not looking and making us see. American law firms are so expensive. We should certainly be able to use IT to provide them first-class research in American law. We just have to expose our law graduates to a bit of German law, American law, and they would be able to outclass anybody there. Chartered accountancy, product design... in DaimlerChrysler they were telling me that two-thirds of their components are now being designed in India.

In architectural drawing, while they may design the concept of the building, but the detailed work, we can do at one-tenth the cost at ten times the expertise of any architectural graduate in any other part of the world.

In health the opportunities are just vast.

I would close by mentioning five or six things that we may all do, especially governments and others should do to propel enterprise in India. The first is competition. Intensify that, do not sort of just keep clutching, do not do the BIFR. An enabling state, of course infrastructure being provided... IT is a good example. Private enterprises made all the difference, that is the propeller. But the fact that 80 per cent of exports in IT come from 35 software technology parks set up by the government shows that this public-private partnerships is what can work in many ways.

Third, I would think that it will be one of the main points of focus of the government after the elections, and that is governmental processes. We have not made any advance. Much of the reform in the first instance was just announcement. Announcements were reform. In a sense, that was enough. It is important because if you say, I abolish licensing, it is an announcement. It is a great reform. But now the processes have to be done, that is this detailed work.

This is an essential function of the State — to anticipate and prepare. And we do not do enough of that. It is not just five and 10 years, it is really five and 10 years, and 20 years, and tomorrow. Whether it is in relation to the stock market or steel prices suddenly going up and what effect it will have on 200,000 fellows in Ludhiana who are working in factories that use steel, whether it is automobile components or bicycle or sewing machines. Suddenly, when steel prices double, how are they going to keep up?

And whether the government should be doing this, encouraging a set of incentives and disincentives when it is more profitable for our steel plants to send pig iron and steel to China and import finished goods from there. We used to almost decry this. But that cascading structure of taxation, which would work the other way so that we do not export too much of raw materials but actually add value here before we do this, these are the kind of changes that government should anticipate and work towards looking at.

I have been whipped by many of the editorialists after I had to talk to some of the stockbrokers two to three weeks ago. (They questioned) the `intervention' in the market, how is this free-market fellow intervening? We should first find out if there is a market. How is it that these stocks go up and down with just 10 fellows. If only 10 chaps were manipulating it, then why not manipulate those 10 fellows?

We are all for free trade. The developing countries thought that they had got a great victory in Uruguay when they got everyone to commit that the quota regime would end in 2005. But now it is not clear who would benefit from that ending of the quota regime. In any case, with that happening, are we sufficiently prepared?

The first hopeful thing that I have heard today from Mr Kamath is that our textile industry has also modernised. But (what about) the effects that SAFTA would have on us? What about Bangladesh textiles and the impact they would have on Ahmedabad?

We are all enthusiastic about closer links and freer trade with Asean, but how must we prepare for it? There must be an informed action-plan. We have just been told, if it is Thursday, it should be China, if it is Friday, it must be Asean. It should really be about the developments that are happening there and how they are going to impact us when we go and embrace them. Sometimes, we should be afraid of enmity but sometimes, we should also be cautious of friendship in this regard.

The regulator's point is a very important one. You said regulators have come into being but as I have to deal with a number of them, there are a lot of uncertainties in this. One of the things we should look forward to in the next four-five years is a better definition of this. Often, in Cabinet meetings, we hear the question: `are we not creating a super government'? Are we not abdicating too much? Are we not giving them too much power? In the legislature, of course, there is no acceptance as yet about conventions in regard to regulators. I suffered on this count.

In January, TRAI had given indicative figures — a sort of ceiling In BSNL, a package was crafted which would completely protect the poor subscriber, the rural subscriber. But many people started shouting that this was only to help the cellular operators. The cellular operators were actually certainly hurt by what BSNL was doing. But the shouting went on.

I got up and said, Mr Chairman, I will have to go by the law that you people have passed. I was not here. It is the Telecom Regulatory Authority of India. Section 12 of this law says that it is TRAI which has the authority to notify. You don't even have to recommend to government. They directly have access to the Gazette and they notify it. That is what they have done.

Everybody shouted: "We have passed the law. Who is this regulator? You bring an amendment and we will pass it just now." So, this whole attitude has to change.

And then, the question of who has to be the regulator. As you know, the judges have started saying `why not us'? Among regulators, there is a tendency to become micro-managers. Regulation would really have to go in many ways.

There are many other things that need to be done in R&D, higher education because no industry can survive for long and compete in the world that Mr Kamath was depicting for us, unless we prevent this collapse of standards in our educational institutions.

My final plea is to our journalists, among whom I count myself, and our academic community. There is not enough intellectual work being done... There hasn't been a single occasion in which I got an idea from an academic which I found to be of use. Other ideas had come up in government offices and government offices were regarded as uncreative. So, much more work in this regard needs to be done seriously in journalism on what kind of an economy we will be 5-10 years from now.

We have left ecology completely to the activists. But the way in which the water table is falling in north India, the way in which water bodies are getting polluted... these are matters which will really overwhelm us in 5-10 years and we must do much more work on this.

We must document the creative work that is being done across the country. Change will dislocate. Therefore, what should be done. Should it be just the social security nets of governments or something else?

The use to which public sector enterprises, the so-called crown jewels, are being put should be examined. And who is using them and borrowing money as if it is their own. Then there is the opposition to policies, to which I think the press is also a prey. To what extent is a corporate interest being dressed up as principle? We should be alert to that rather than being instruments in the type of stories that come out.

There should be much more faithful reporting about individual stories. In doing all this, please avoid both sides of the question. In some papers, there are two editorials — for and against.

On most issues, there are no two points of view and we should argue vigorously the point of view that we think is right and thereby we should awaken our citizens on what needs to be done.

Document, argue, educate all of us, be our guide, and we look forward to greater and greater success for Business Line.