Business Week on India’s Rise

[via Reuben] Media coverage always comes in a flurry. A few years ago, China was the toast of the media. Now, it is India’s turn. Business Week has a cover story on what India’s rise means for the global economy:

Quietly but with breathtaking speed, India and its millions of world-class engineering, business, and medical graduates are becoming enmeshed in America’s New Economy in ways most of us barely imagine. “India has always had brilliant, educated people,” says tech-trend forecaster Paul Saffo of the Institute for the Future in Menlo Park, Calif. “Now Indians are taking the lead in colonizing cyberspace.”

This techno take-off is wonderful for India — but terrifying for many Americans. In fact, India’s emergence is fast turning into the latest Rorschach test on globalization. Many see India’s digital workers as bearers of new prosperity to a deserving nation and vital partners of Corporate America. Others see them as shock troops in the final assault on good-paying jobs. Howard Rubin, executive vice-president of Meta Group Inc., a Stamford (Conn.) information-technology consultant, notes that big U.S. companies are shedding 500 to 2,000 IT staffers at a time. “These people won’t get reabsorbed into the workforce until they get the right skills,” he says. Even Indian execs see the problem. “What happened in manufacturing is happening in services,” says Azim H. Premji, chairman of IT supplier Wipro Ltd. “That raises a lot of social issues for the U.S.”

But there’s also a far more positive view — that harnessing Indian brainpower will greatly boost American tech and services leadership by filling a big projected shortfall in skilled labor as baby boomers retire. That’s especially possible with smarter U.S. policy. Companies from GE Medical Systems to Cummins to Microsoft to enterprise-software firm PeopleSoft that are hiring in India say they aren’t laying off any U.S. engineers. Instead, by augmenting their U.S. R&D teams with the 260,000 engineers pumped out by Indian schools each year, they can afford to throw many more brains at a task and speed up product launches, develop more prototypes, and upgrade quality. A top electrical or chemical engineering grad from Indian Institutes of Technology (IITS) earns about $10,000 a year — roughly one-eighth of U.S. starting pay. Says Rajat Gupta, an IIT-Delhi grad and senior partner at consulting firm McKinsey & Co.: “Offshoring work will spur innovation, job creation, and dramatic increases in productivity that will be passed on to the consumer.”

Whether you regard the trend as disruptive or benefical, one thing is clear. Corporate America no longer feels it can afford to ignore India.

India’s IT workers sense an enormous opportunity. The country has long possessed some basics of a strong market-driven economy: private corporations, democratic government, Western accounting standards, an active stock market, widespread English use, and schools strong in computer science and math. But its bureaucracy suffocated industry with onerous controls and taxes, and the best scientific and business minds went to the U.S., where the 1.8 million Indian expatriates rank among the most successful immigrant groups.

Now, many talented Indians feel a sense of optimism India hasn’t experienced in decades.

There is little doubt that India has to change: “If India can turn into a fast-growth economy, it will be the first developing nation that used its brainpower, not natural resources or the raw muscle of factory labor, as the catalyst. And this huge country desperately needs China-style growth. For all its R&D labs, India remains visibly Third World. IT service exports employ less than 1% of the workforce. Per-capita income is just $460, and 300 million Indians subsist on $1 a day or less.”

Haiti’s Partners in Health

I read Tracy Kidder’s “Mountains beyond Mountains” recently (will write more on it sometime later – highly recommended). The book is about Dr Paul Farmer who has been working in Haiti for two decades and his “quest to cure the world”. So, it was a pleasant surprise to see a New York Times article on the work going in in Haiti – helped complete the story the book began.

Partners in Health has become an influential model in the frenetic race to expand drug treatment in dozens of poor countries across Africa, Asia and the Caribbean…No program to treat people in the poorest countries has more intrigued experts than the one started in Haiti by Partners in Health which has succeeded by enlisting help from hundreds among Haiti’s vast pool of unemployed and underemployed workers.

The AIDS treatment program here, one of the first of its kind in the world, was started by Dr. Paul Farmer, an American, and the group he founded, Partners in Health. It began giving antiretroviral drugs to patients here in 1999, when such efforts were virtually unknown.

“We didn’t do it to be a model program,” said Dr. Farmer, 44, a Harvard medical professor and anthropologist. “We did it because people were croaking.”

The Spartan model of care used by Partners in Health was born of necessity, but its very spareness is now seen as a virtue by many experts who want the scarce dollars for treatment to stretch as far as possible. Doctors here grafted AIDS treatment efforts onto the existing program for tuberculosis control.

AIDS patients, who will have to take the drugs daily for the rest of their lives, are visited in their homes every morning and evening by a health worker who hands out pills and watches as they are gulped down. Ensuring that the medicines are taken properly reduces the risk that drug-resistant strains of H.I.V. will emerge.

One of the biggest obstacles to rapid expansion of treatment in poor countries is the extreme scarcity of doctors, nurses and high-tech equipment. And the program here has minimized reliance on them. Generally, there are no lab tests done once treatment begins. The only monitor is a scale to weigh patients monthly.

Peasants have been trained to dispense the medicines, draw blood, take X-rays, clean bedpans, measure vital signs and spread the word about condoms preventing H.I.V. infection. Most of the workers who visit patients’ homes are paid a small stipend of $38 a month.

It is the story of how a few can change the world.

ITC’s Rural Hubs and Spokes

ITC is one of the most active companies in rural India. They have set up over 2,500 e-choupals in the villages and expect income from e-choupals to be more than their tobacco business by 2010. “In the next 5-7 years, ITC will have 20,000 choupals. Since each choupal covers around five villages, the company will have access to 100,000 villages. Each choupal currently serves 500-600 farmers.” To complete the picture, India has about 600,000 villages with about 700 million people in all. “[ITC chairman Yogi] Deveshwar explained that the revenue estimated from choupals in the coming years was not unfounded, given the importance of the rural economy. He said at present the propensity to spend was low among villagers because surplus income was low. However, the choupal network would boost farmers’ income and increase their propensity to spend, he said, adding that this would have a multiplier effect on the economy.”

The e-choupals are spokes, and where there are spokes, there is a need for a hub. The Economic Times writes about their plan to set up rural malls:

ITC is setting up 45 shopping malls in the countryside, each the size of Delhi s Khan Market, to retail everything from John Players clothes and ICICI life insurance to Eicher motorbikes. The first five malls, costing more than Rs 20 crore, will be ready for shoppers in 16 weeks.

What ITC gets in return is a dedicated customer base, savings through procurement of cheaper farm produce, and a cut ranging from 3%-40% of sales value from the brands which use its shelf space. The focus at present is Madhya Pradesh, where ITC has already managed to set up an exhaustive network of e-chaupals for procurement of soyabeans and sale of agri-inputs.

Built on 5 acres, each mall would cost ITC anything between Rs 3-5 cr [USD 650K – 1.1 million], depending on the price of real estate. To put that area in perspective, most malls in the large metros are built on just 2-3 acres of land. Each mall will be a self-contained unit, with facilities for storage of goods, warehousing of agricultural produce procured by ITC, shelf display, and parking. Each store will be manned by at least five full-time ITC sales staff, and the number could go up in busy seasons of the year.

This interests us is the context of our RISC ideas. We are working to set up a pilot by mid-2004. RISC’s goals are broader: “Fundamentally, the specific market failure that RISC addresses is that of coordination failure. RISC is designed to coordinate the activities of a host of entitiescommercial, governmental, NGOs. It synchronizes investment decisions so as to reduce risk. It essentially acts as a catalyst that starts off a virtuous cycle of introducing efficient modern technology to improve productivity that increases incomes and thus the ability of users to pay for the services, and so on. It creates a mechanism that reduces transaction costs and therefore improves the functions of markets.”

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From Invention to Rcognition

On Dec 17, it will be 100 years since the first flight undertaken by the Wright brothers. Forbes has a special series of articles celebrating 100 years of flight.

One of the Forbes articles looks at about how a few years elapsed before “the world discovered the Wright brothers.”

One hundred years ago, on Dec. 17, 1903, a flying machine carrying Orville Wright rose from the dunes of Kitty Hawk, N.C., and landed 12 seconds later and 120 feet away. Orville and his older brother Wilbur made two other flights that day, the longest being 852 feet. It was the first time in history that a machine carrying a man had lifted from the earth, moved forward under its own power, maintained control in the air, and landed at a point as high as that from which it started. The world could not have cared less.

Build a better mousetrap, they say, and the world will beat a path to your door. That didn’t happen to the Wright brothers. Most people at the time still considered heavier-than-air flight the province of deluded dreamers, especially after the highly public attempts by Samuel Langley, the director of the Smithsonian Institution, to fly his own machine, which ended in spectacular failure that autumn.

Word about the Wright brothers circulated amongst flying enthusiasts, especially in France. But it was not until 1908, five years later, that the general public hailed the Wright brothers as the fathers of flight.

This continues to be true with invention and innovation – it takes time for the world to recgonise the benefits of something that is path-breaking. We are used to thinking incrementally, and so find it hard to recognise disruptive innovations until much later.