The Hindu Business Line : Unleashing Indian entrepreneurship

The key lesson from the economic performance over the past year or so has been the obvious recognition of India's competitive edge in numerous sectors. The economy is rocking and rolling, as it mounts a challenge to China's title for the world's fastest growing GDP. The sheer adventure of India's economic growth with social justice and entrepreneurship is staggering, yet providing a human face to development, says R. Gopalakrishnan.

JUST a few years ago, the constant refrain of Indian industry to the government was that multinational corporations would dominate and protection was essential.

In December 2003, the Finance Minister dropped the effective import duty by five percentage points. Between April 2003 and March 2004, the rupee appreciated by nine percentage points whereas Indians have had 50 years' experience with devaluation. Both were noticed, but that was about it. Indian industry went ahead to attend to its agenda rather than crib or complain.

Between November 2003 and April 2004, Indian companies acquired 44 firms abroad worth two billion dollars. A few years ago, Tata Tea acquired Tetley in the UK, recently Tata Motors acquired Daewoo Heavy Trucks in Korea, Bharat Forge a company in Germany, Reliance Infocom Flag Telecom and the list goes on.

Manufacturing

There is also something happening out there in manufacturing too. Moser-Baer, a firm near Delhi, is the world's largest optical media manufacturer, and the lowest cost-producer of CD-recorders. Its exports are over a quarter of a billion dollars!

Hero Honda is now the largest manufacturer of motorcycles in the world with a production of nearly two million vehicles per year.

Hindustan Inks is the world's largest, single stream, fully integrated printing inks plant with subsidiaries in the US and Austria. Essel Propack is the world's largest laminated tube manufacturer with a manufacturing presence in eleven countries.

Tata Steel is the lowest cost producer of hot-rolled steel coils in the world. Tata Motors will supply over 100,000 India-made cars over five years to Rover plc to be badged as the City Rover and sold in the UK and European countries.

It has been commented that "the key lesson from the economic performance over the past year or so has been the obvious recognition of India's competitive edge in numerous sectors... The Indian economy is rocking and rolling, as it mounts a challenge to China's title for the world's fastest growing GDP." A bit hyped up, but not entirely wrong, in my view.

Knowledge

The second illustration of entrepreneurship that I wish to use pertains to knowledge. India has a long tradition of knowledge. The world's first university was established in Takshila in 700 B.C. The value of pi was calculated in India, as also the invention of quadratic equations.

There are today 250 engineering colleges producing 1,50,000 engineers out of a world output of 9,00,000 engineers/annum.

We have over 900 management schools which turn out about 80,000 graduates, about the same as the US and much more than, say, the UK or Germany.

Admittedly, the quality is very variable, but the best are truly outstanding. The list of multi nationals setting up R&D centres in India includes General Electric, Microsoft, IBM, Cisco, Intel, Astra Zeneca, Motorola and Texas Instruments.

Patent applications in India have shot up from 4,000 in 1995 to almost 15,000 last year. The Indian subsidiary of Intel filed for 63 patents engaging 1,500 professionals at its R&D centre in Bangalore in "engineering challenges as complex as any other project on the planet".

Inadvertently, I should not give the impression that India alone has captured the world's intellect to the detriment of other countries. All I intend to communicate is that we have set out on a new journey in R&D.

Sarnoff, an American R&D firm, has correctly argued that of the three requirements for developing an innovation-driven industry, India has two: The technical skills and access to capital. What is missing is an indigenous business model.

So, why are foreign companies, some of which with budgets higher than India's R&D budgets, moving their R&D in part to India? There are several reasons.

First, the cost of doing R&D is a fraction of that in the developed world.

Second, there is a pretty robust technical educational system, producing some excellent manpower.

Third, foreign companies are seeking access to high quality engineers due to problems of availability/costs in their home countries.

Fourth, R&D globally has become multi-geographic with innovation-specific patterns of collaboration and diffusion. These regions permit GE to set up the John F. Welch Technology Centre at Bangalore with 1,800 engineers, engaged in fundamental research for most of GE's 13 divisions.

So, knowledge is a strong entrepreneurial force in India. What about R&D in IT, you may wonder. I did not cover it because IT is better known.

Today, Bangalore has 140,000 IT professionals, 20,000 more than Silicon Valley! Research agency, Frost and Sullivan, has reported in April 2004 that the R&D outsourcing market for IT in India will grow at 32 per cent p.a., from $1.3 billion in 2003 to $9.1 billion in 2010.

Microfinance

It is not just about entrepreneurship being unleashed through manufacturing and knowledge. Ideas are being generated and experimented with in the most potent area of rural entrepreneurship through microfinance. Microfinance is the small loan given to the poor by NGOs to help start small business. The world over, microfinance is synonymous with Grameen Bank, Bangladesh.

In India too, organised entities such as Share Microfin, Andana, SKS are pioneering microfinance initiatives in some pretty backward areas of the country.

Now, an Indian-born venture capital specialist from Silicon Valley and a Berkeley professor have conceptualised a sort of Marshall Plan for the reconstruction of rural India. It is called RISC: Rural Infrastructure Services for Commons.

The authors argue that $1 million is enough to provide power, telecom, transportation and financial infrastructures to 100,000 rural people. Hence, with $5 billion, one can create the infrastructure to liberate, infrastructurally-speaking, 500 million rural people. The village/community society receives the investment directly on behalf of its 100,000 members.

Entrepreneurs in that village society receive their loans directly based on a business plan.

The authors feel that even if the economic output is raised by only 10 per cent, the project will pay back for itself. Of course, this is only an idea, but a rather engaging one.

The sheer adventure of India's economic growth with social justice and entrepreneurship is staggering, yet providing a human face to development. You can focus on its beauty spots or its warts and moles.

And let me state upfront, there are warts and moles: The high fiscal deficit of our government, the urgent need to take development programmes and jobs to the rural areas, the inadequate state of our infrastructure and so on.

These are real problems awaiting solutions. However, no such experiment of balancing growth, entrepreneurship and social justice has been undertaken in human history by any other developing country on such a large scale.

To borrow from a generalisation of Lord Keynes, one hopes that my country is likely to do the rational since most alternatives have already been tried!

In the next few decades, India has the real possibility to be once more at the top of the league tables among the nations of the world, a position it held for centuries, but lost in the last few hundred years.

The coming decades will be truly momentous, as the script for India's insaaniyat journey will continue getting scripted. That is why there is a palpable air of excitement in India and I hope I have shared a bit of that with you.

(Concluded)

(The author is Executive Director, Tata Sons.)

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