India in Churn : Make'ing (New) India

India is going through a massive transformation that is unparalleled in the history of not just this country; but possibly in the history of mankind as well, except in a slightly exaggerated fashion, comparable to the mythical Samundra Manthan, or the holy churn.

This is the digital transformation, wherein the old paper based or unconnected organisations or humans are replaced by new connected ubiquitous, and digitally natives/ organisations. This redraws a large number of industries, lifestyles of consumers and governments; in short its something that impacts maybe two thirds GDP of the country. Even if there is a 20% productivity improvement in each of these areas due to all these new things that came about not more than a decade or at the most, this could make the dream of growing at 10% a reality. The scale of the various initiatives that are sponsored by successive Governments are nothing short of staggering and as we will see shortly leading to a massive churn that has the potential to bring about both the nectar as well as the poison. Rather than remaining mute spectators, each citizen could take a position based on facts and research rather than mainstream media which could be biased at times and almost always oriented towards sensationalism. So this is my effort to spell out position on this whole change, and request everyone to take position/ comment.

For those who don't know, Samudra manthan (Sanskrit: समुद्रमन्थन, lit. churning of the ocean) is one of the most famously recognised episodes in the Hindu mythology. The legendary epic appears in the Bhagavata Purana, the Mahabharata and the Vishnu Purana. The samudra manthan explains the origin of amrita, the drink of immortality. This is referred to in multiple texts going back thousands of years, though obviously no direct evidence exists of whether it actually happened, save for some of names of places that exist in the world even today.

I will briefly describe the transformations in the 3 main areas, i.e. Businesses, Consumers and Governments, one by one. Obviously, each of these areas interacts with the other two in India, and in some cases globally, making various acronyms B2C or B2B or G2C etc, implying that the changes are compounded multiple fold. So if there is small improvement in each, it results into an exponential improvement across the entire system given that changes multiply on each other as network effects kick in. In fact, a digital super cycle turning a lot of projections that made Indian economy's projected rise to US$ 5 trillion economy by 2025 may get advanced if a lot of these changes gain traction across the society and stakeholders.

A quick look at the changes in last 15 years. When I graduated 20+ years back, we used to study from books; travel in a train, went to markets to buy/eat and speak to other people far away on STD/ trunk calls. The next generation increasingly learns from internet directly, books a cab on the phone to travel or buy globally on internet and video-chats with anyone across the world on VoIP. Similarly Government offices were marked with files from floor to the ceiling, with no clarity on when things would get deliver, with typical babu ruling like a king at his hapless subjects. Today, you could get a new passport same day, in cities the traffic police gives an automatic receipt on traffic violation thats pre-populated with vehicle details and penalty paid by plastic card/mobile wallets and smart farmers in rural areas can see prices of their produce deciding market entry. This is the generation which has little interest in history, whether of opulence millennia before or subjugation centuries ago; though there is a clear unmistakable renaissance sub surface of reestablishing the once prosperous identity. They are ready for a new world with lot less preconceived notions and with confidence that can match anyone in the world. This is the societal backdrop for a new India of digital natives.

So with this backdrop, lets look at whats happening on each of the 3 engines of economy, starting with the business side, including financial system. Indian businesses have come a long way after the liberalisation, where in select areas we are the largest globally, and reasonable scale in every respect given large domestic economy. However businesses have been used to be individually efficient, but collectively weak. This is a product of policy of excellence in own house focusing on internal stakeholders, often times ignoring the well being of the ecosystem, whether vendors, dealers or tax authorities. This was akin to having a clean house in a dirty neighbourhood. Three changes challenge this fundamental behaviour. One is the GST, which makes every large corporate look out for efficiencies across the ecosystem; as it otherwise impacts their competitiveness. This does lead weaker players out, especially smaller businesses that are not tech savvy; but then that fate would have eventually been faced by them anyway, and in some ways the current crisis gives everyone an early warning to reskill or else get dis-intermediated by intelligent machines which are on the way. The second major change coming is Electronic Way Bill. While GST is not a new invention given it is there in almost all geographies, the eway bill, or a national identifier for goods movement is a rarity even amongst developed nations. While the immediate impact would be logistics would get organised and faster movement of goods with lesser tax evasion, in the longer term, this creates opportunities for redrawing supply chains for customised manufacturing, or industry 4.0, thanks to the spread of 5G, IOT technologies etc.The third big change is Renewal of Banks. An estimated 10 Lakh Crore, or approximately 10% of assets of banking system have turned sour; and this number could grow further with the greenhouse effect (pun intended) being countered by an activist regulation. In this modern era of smarter decision making using technology, this staggering number begs the question on how risk assessment in financial sector was being made, and how variety of financial institutions never collaborated on improving their intelligence on a common client base. The NPAs are the noose around the productivity of the country, with direct correlation with lack of capital availability for a small business or at rates that makes her uncompetitive in global markets. Hopefully, with the full admission of the problem by Governments, regulators showing the rot, one can hope for paradigm change by a new data driven credit decision preventing the leakage by losses going forward. While the past can't be changed, ensuring the clean up and more importantly, change in processes that so hopelessly have been unable to detect wrongful decisionmaking at a systemic level will ensure that future will be bright. Availability of capital at a reasonable cost (which does not need to subsidise sins of a few rogue elements) is important to ensure India's revival for the famous initiative of Make In India.

Next lets look at Consumers. The consumers are probably the fastest to adopt technology, within the 3 segments, thereby pushing the other two to become more tech savvy. This is more true for urban or young Indian, rather than rural or old Indians; but that is a generation shift that is happening in every country in the world. The consumers willingness to be part of a digital ecosystem, where they trade their hitherto trust in a only physical world to share information assets in an anonymous digital world has been simply astounding. So while 10 years back, people would not share their bank account number or personal details or their future plans on internet in public for fear of copying or fraud or physical risk; today's GenZ is willing to live a purely digital life, in fact sometimes trading sensitive personal data to get better services, as can be evidenced by some youngsters who would not bat an eyelid to allow a digital lender to access their locations, contacts, friends or messages to get a better rate of interest for a short term loan. On the other extreme are the privacy advocates, who are against the ubiquitous Aadhar and its supposedly pernicious effects on freedom, notwithstanding the very clear benefits of such schemes in eliminating wasteful Government expenditure for decades on non existent human beings or cattle; just like banks lending money to non existent companies on back of fake transactions. I think the march of technology is inexorable, and those who are not willing to share are sometimes looking to hide something. Remember the early adopters of cryptocurrencies were drug dealers because of the anonymity it offered, apart from the technophiles who did like the concept. Of course, the scary picture of a totalitarian Government or the famous George Orwell classic 1984 reminds us of the problems of an all powerful intrusive surveillance state. But we know there is a election that happens which has in past generally been successful in defeating wrongful administrations by sheer force of public will. Further, even if theoretically, someone could game that system, I personally think private citizens will always be more innovative than a Government, however resourceful, and can find ways around to overthrow a patently unfair system when pushed to a wall. After all, thats how French revolution happened as well as Indian freedom struggle, so there is no reason to doubt human ingenuity, especially of the next gen of India. Of course issues around data privacy and cybersecurity are critical, but thats both at individual and country level. In fact I would argue that one has to be worried much more about massive piles of data with large global digital leaders and their big data/ AI powered algorithms which maybe using that huge data treasure with improper/unauthorised consent. The real opportunity for India is digitising its vast rural populations, extending native language natural applications, ensuring its potential is used to be fullest by extending it to the global marketplace of goods, services and talent. This is where the third pillar of Government comes in.

The third pillar, Governments have been thankfully healthy adopters of technology. People should have been more worried if individuals and select businesses (not just IT companies) moved ahead with time and Governments remained old fuddy duddy organisations. The scale of the ambition of particularly this Government can be gauged by the fact that while the rest of the world is thinking of going electric cars over maybe next 30 years, India wants to make the transition in under 15 years. In every field, whether Solar energy or clean India (Swatch Bharat), the targets set are certainly very tall and can definitely not be called safe; even remotely; and so is the case of spreading technology into decision making, increasing transparency digitally and so on. Clearly, there are big upsides to a digitally active Government. The prospect of much higher resource availability due to by plugging tax evasion and cleaning NPA mess as well as providing a basic service to citizens in terms of faster Government services have already been dealt with above. The next step is to take the benefits to improve the lot of weaker sections, through areas that impact the most. That was the promise of the recent announcements of universal health coverage and fair return to farmers and bringing electronic boards to all schools. While the details of these schemes as well as financing are yet to be spelt out, there is huge potential of a revolution if the fundamental premise is to bring services to those needy directly, without any intermediaries or possible leakages to the extent of strengthening the receiver rather than making her dependent on entitlements. Of course, every one; whether ruling or opposition parties could help by making the process less political and more result oriented. We should await the details of these ambitious next initiatives, in terms of timelines and steps.

To be fair, the above is one of the many probabilistic scenario of the next half decade or so, and admittedly optimistic. It could very well turn out differently as risks abound. For starters, the banking system renewal may still leave holes, as new bank frauds surface. Bigger issue is the lack of implementation bandwidth for ambitious programs. This was shown best when on the first day of the proposed national eway bill on February 1, the website crashed due to massive load forcing the administration to defer the start of this ambitious initiative indefinitely. Now the load while high; could have been expected; and there are global comparable, not just of Facebooks or Googles which run many more users/sessions/ compute simultaneously; but also many gaming companies. The experience was a bit like opening a newly built much awaited highway and the traffic bringing it to halt on very first day. Skeptics would ask, wasn't the traffic load expected and may compare it to finding familiar old potholes on the shiny new digital highway. There is no doubt patience will be needed, course corrections will happen and thanks to sensationalist media, some of those may get blown out of proportions too. However, one thing is clear, if this mammoth effort was to remain on track for another few years, with maybe reinforcement of better talent and focussed execution, the Samudra Manthan will indeed throw up the famed Amrut instead of poison as it seems currently, changing this country forever. India's tryst with destiny is about to become transforming the destiny thanks to the churn again.