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P R E S E N T S
2020
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L A S T 2 0 Y E A R S , N E X T 2 0 Y E A R S
5VISIONPART
DECEMBER 2011
TT RAM MOHAN PRASOON JOSHI PERCY S MISTRY MEGHNAD DESAI
C RAJA MOHAN JANMEJAYA SINHA R GOPALAKRISHNAN
SURINDER KAPUR G MADHAVAN NAIR K SUBRAMANYARAJESH SHUKLA
AMITABH KANTAJAY DUA DR PRAHLADAVR FEROSE NILESH SHAH
CHANDRA BHAN PRASAD SOM MITTAL PAWAN GOENKA RAGHAV BAHL
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06 INDIAS OWN HARVARDBY TT RAM MOHAN
10 INDIAN BRAND AMONG TOP 10BY PRASOON JOSHI
14 MUMBAI AS A GLOBAL FINANCIAL CENTREBY PERCY S MISTRY
16 CAN WE CATCH UP WITH CHINA?BY MEGHNAD DESAI
18 WILL INDIA BECOME A PERMANENT UNSCMEMBER?BY C RAJA MOHAN
20 CAN WE GROW AT 9 PER CENT?BY JANMEJAYA SINHA
22 INDIAN FIRM AMONG FORTUNE 10BY R GOPALAKRISHNAN
24 INDIA AS A SMALL-CAR HUBBY SURINDER KAPUR
26 INDIA AS A SPACE LEADERBY G MADHAVAN NAIR
28 RISING WITH THE SUNBY K SUBRAMANYA
30 A MIDDLE-CLASS INDIA
BY RAJESH SHUKLA
32 OUR OWN SHANGHAIBY AMITABH KANT
34 MEGA MANUFACTURERBY AJAY DUA
36 THE R&D DEFICITBY DR PRAHLADA
38 AN APPLE FROM INDIABY V R FEROSE
40 WILL THE SENSEX TOUCH 30,000?BY NILESH SHAH
42 WILL RESERVATIONS STOP?BY CHANDRA BHAN PRASAD
44 WILL UID DRIVE ALL TRANSACTIONS?BY SOM MITTAL
46 AN INDIAN AUTO GIANTBY PAWAN GOENKA
48 AN INDIAN MEDIA MOGHULBY RAGHAV BAHL
THE FUTURE OF INDIA
BY RISHI RAJ
PAGE 4
CONTENTS
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EDITORIAL: Rishi Raj DESIGN: Bivash Barua, Bipin Sharma ILLUSTRATIONS: C R Sasikumar, Shyam Kumar
ASSOCIATE SPONSORS
VISION
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4 REFORMS 2020 | DECEMBER 2011
20Reforms 20L A S T 2 0 Y E A R S , N E X T 2 0 Y E A R S
The future
of India
According to English poet Lord Tennyson, change is the essence of lifethe
old order changes yielding place to new. However, all changes are not his-
toric in the impact they have on society, economy or polity. The economic
reforms which India adopted in 1991 is one such change that transformed
the way the country grew in the years ahead, which, in turn, changed the
global perception of India. The nation that was perceived to be strong on spirituality also
proved to the world its material prowess. From being a recipient of aid to tackle its pover-
ty, today India provides aid in times of global catastrophes. Whether it is in terms of
brands, talent or wealth, Indians can be seen on the global stage.
It is this change that we have tracked in four parts of the series on 20 years of
economic reforms. From key reforms to reformers, brands, personalities and trends, all
have been captured in the four volumes. However, no nation can rest on its laurelsandwho knows it better than we Indians! If 1991 was historic, the growth momentum it
began needs to be continued. Sure, in the past 20 years, the entire environment has
changed. From a nation for which growth and prosperity once meant owning a Bajaj
scooter by the time one retired or, if lucky enough, a second-hand Ambassador car,
today be it automobile, telecom or FMCG products, India ranks among the fastest-grow-
ing markets. Once Indias finest technical brains went abroad to work in multinational
companies; today, those very companies are busy setting up shop in India.
If 20 years have brought about such radical changes, it is natural to speculate where
we would be as a nation 20 years on. All discussion today about the growth of our society,
economy and polity centres on the fact that we started late in the growth story, that the
decades of 60s, 70s and 80s were lost, and therefore we need time to demonstrate to the
world what we can achieve given the right environment and policy framework. This is
what the fifth and the last part of the series aims to bring to you. We have come a longway from the days of Ambassador cars, but will we be able to produce in the next 20 years
an automobile company that ranks among the top five in the world? The growth of
mobile telephony in India is the fastest, and all the global biggies are present in India, but
do we have the ecosystem to produce an equivalent of Apple in the next 20 years? India's
growth rate of around 8 per cent is only next to Chinas, so will we be able to overtake Chi-
na? Will we see Sensex touch 30,000? Will Mumbai look like an international financial
centre? Will the booming Indian media scene be able to produce a media baron like
Rupert Murdoch?
These questions have been answered in this volume by writers who are the finest in
their fieldsfrom economist Lord Meghnad Desai analysing whether India would be able
to overtake China to Percy Mistry examining whether Mumbai could finally become an
international financial centre. What is strikingly common in all the analyses is that we
have the ecosystem and the talentwhat we need is a little speed and the right approach.
And yes, democracy is an opportunity not a limitation. So read on!
Rishi Raj
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Those who wail about Indiaseducational institutions notbeing world-class lack an
appreciation of what it takes toget there T T Ram Mohan
Indiasown
Harvard
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NOand we shouldnt even try. This statementwill, no doubt, come as a big disappointment
to many who believe that India is on its way to
becoming a major world power, if it is not
already one. Let me, therefore, soften the blow
by saying that I cant see second-rung universities in the US
attaining the level of Harvard in the next 20 years either; nor,
for that matter, universities in Europe, China or Japan.
In higher education, as in defence, the US is the worlds sole
superpower. Nothing comparable to Americas top universi-
ties, of which Harvard is one, obtains anywhere in the world.
These marvels, which are to be found in both the government
and private sectors, have been created over hundreds of
years. Harvard itself is 375 years old. They are supported byphilanthropy and government funding on an enormous scale.
Harvard sits on an endowment of $26 billion. Harvard Busi-
ness School alone has a corpus of more than $2 billion; com-
pare that with IIM-As total funds of around $45 million.
Americas top universities have the resources to fund
infrastructure and research on a
scale that others cannot hope to
match. They can also attract the
best minds from all over the world,
whether students who go on to
become faculty at US universities
or academics who have made a
name for themselves elsewhere.Resources and Americas openness
to immigration are among the fac-
tors that underpin the success of
the top American university. But
they do not fully explain it.
A third factor is crucial. The top
American universities have man-
aged to bring the discipline of the
financial marketsand their ruth-
less equation between performance and rewardinto the
university system. The market for higher education is
intensely competitive, unlike in India where there is no
worthwhile competition for, say, the leading IITs and IIMs.Universities, schools and departments are all ranked on per-
formanceand the ranking is taken seriously.
Performance of individual faculty too is measured. Confir-
mation in a tenured position happens on the basis of mea-
surement of output (with research as the key output) over a
period of five to seven years.
Finally, there is a highly developed eco-system for facilitat-
ing research. This comprises generous grants, quality doctor-
al students, seminars at which ideas can be presented and cri-
tiqued before papers are finalised, peer collaboration and
peer review, etc. This combination of resources, culture, strin-
gent performance measurement and incentives has resulted
in something that others can envy but cannot easily emulate.
Those who wail about Indias educational institutions not
being world-class lack an appreciation of what it takes to
get there. We must not aspire to produce the next Harvard:
setting unrealistic targets is not only demoralising, it willcome in the way of achieving what is achievable. What we
can and must do is to seek a substantial improvement in the
performance of our institutions, including those that have
achieved a certain reputation for excellence.
In moving towards this modest objective, we face a num-
ber of choices. Should we focus on universities (that encom-
pass a range of disciplines) or on institutions that specialise
in one discipline? Should we aim at a significant improve-
ment in teaching or at superior teaching as well as research?
Should we aspire for publications in international journals or
should we strive for relevance in research?
To begin with the first question, the Yashpal committee on
higher education wanted the IITs and IIMs to expand theirscope and become universities so that the excellence they
have attained can be brought to bear on disciplines other
than engineering and management. There are practical diffi-
culties in doing so, for instance, the lack of land and other
infrastructure as the existing IITs and IIMs were not intended
for broader purposes.
That apart, the IITs and the IIMs have a long way to go in
their own disciplines, engineering and management, so it
may not be advisable for them to spread their energies thinly.
Our experience so far has been that we are able to produce a
level of excellence in institutions that focus on a particular
disciplinethe Indian Statistical Institute, Indian Institiute of
Science, TIFR and AIIMS are institutions that come to mind.The 14 National Innovation Universities planned may be a
better way to inject higher quality into the university system.
However, finding leaders for these universities, along with
boards of governors and boards of studies will not be easy.
The IITs and IIMs have done a good job of teaching. Should
they scale up their teaching and produce more engineers and
managers or should they try to enhance their research out-
put? The Anil Kakodkar committee on IITs wants both to hap-
pen but this may not be feasible. A compromise may be for the
older IITs and IIMs to aim for a combination of teaching and
research while the newer IITs and IIMs aim at producing large
numbers of undergraduates and graduates of high quality.
Thirdly, in aspiring to become world-class, should Indiasleading institutions aim to improve their record of publica-
tions in leading journals or should they seek to achieve a
superior impact on the Indian environment by applying
ideas to real-life problems? In a number of sectors health,
energy, environment, infrastructure we need research that
benefit practice. Indias academic institutions can become
leaders in research that focuses on emerging market prob-
lems. This may be a more meaningful objective than playing
catch up with the top schools in published research.
There are no easy answers to the questions I have posed.
But these are the questions that we must grapple with as we
strive to improve the quality of higher education. To aspire to
produce the next Harvard is to chase a will-of-the-wisp and
end up nowhere.
T T Ram Mohan is a professor at IIM Ahmedabad
WE MUST NOT
ASPIRE TO
PRODUCE THE NEXT
HARVARD: SETTING
UNREALISTIC
TARGETS IS NOTONLY DEMORALISING,
IT WILL ALSO
COME IN THE WAY
OF ACHIEVING
WHAT IS
ACHIEVABLE
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The brands that will come out of India will beof a different hue. In fact, not just brands butreinterpretation of branding and its newerconcepts will emerge from India Prasoon Joshi
Indian brandamong Top 10
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The cues of the largest mass market, economicgrowth, youngest population and more make it
natural to impatiently conjecture about India
marking territory with a homespun brand that
has global legs. For many the question is not will
but when. Brand consulting firms such as Wolff Olins have
gone on record to predict that the next global brands might
not come from the west. Earlier, to be a global brand, domi-
nating the US market was key. Now Asia is the arena.
This 'seismic shift' away from developed markets has
heightened the cry for the next Chinese or Indian global
brand. India, apart from IT, is recognized for budget automo-
biles, a burgeoning retail and near-global' names such as
Infosys, Tata, Ranbaxy, Airtel and, recently, ICICI. Indiasdemographic dividend, intellectual depth and creative
bandwidth are bulwarks of its legacy of contributing new
ideas to the world. Add global ambition to it and there seems
to be little doubt that the next big thing will be from India.
But is that indeed so simplistic? Has the time come for Indi-
an brands to be heralded across the
globe? Penn Schoen Berlands
study on the most recognised Indi-
an multinationals seems to suggest
differently. Highest unaided recall
for an Indian company was a mere
29 per cent. Additionally, theres
concern that the back-end, brand-less success will not continue as
newer markets are opening and
competition intensifying.
Can an Indian company achieve
peak global positioning by design?
For this, the genesis and concept of
branding itself needs to be exam-
ined. Attributed to the industriali-
sation and mass production histo-
ry of the west from trademarking to infusing the trademark
with a set of imagery, symbols, values and personality the
branding process gathered steam in the early part of the 20th
century. The quest to find newer markets and loyal con-sumers became the battle cry for many.
Global brands and the conquests of the yore, which the west-
ern, especially European, world launched, share similar codes.
Conquest too was about growth, about carrying a set of beliefs
and values, language, architecture, cuisine and supplanting
them in foreign territory. Hoisting your flag on an alien land
was territory-marking and expansionglobal branding.
In the Indian context, though, this is a relatively new phe-
nomenon. The very thought and concept of branding as
defined popularly has an alienness associated with it. I do not
imply pre- and post-liberaliation phase but an aspect much
deeper. Brands emerge from the socio-cultural ethos. The
concept of devising a brand, IP or copyright emerges from a
mindset that is very different from that of India. The facet of
individualism, of self-expression, of the need for a brand loy-
alist to see expansion of self through the brand and manifest
himself through a brand, is not natural for India.It is Collectivism that has seeped deep into the DNA of this
civilisation called India.
If the western world is about Logoslogic, scientific rea-
soning, invention, the personal, progress; India is more about
Mythosorigin, emotion, intuition, purpose and the cyclical.
Creation is often deemed subconsciously as collective and not
individuals alone. In fact, the concept of I is viewed as an
impediment, and it is only when the individual is non-exis-
tent that union with almighty is possible. Jab main tha hari
nahin, ab hari hain to main nahi" (when I was there was no
God, now that God is there I am no more).
The ease with which individualism is let go of reflects in
unique ways. It will be hard to provide examples of film-director pairs or the retinue of music-director duos anywhere
in the quantum that the Indian film industry, a microsm of
our society, has.
In the present context of a global brand, it is imperative to
have its voice and triumphs amplified. In contrast, examine
the manner in which Indians desist from claiming ownership
even that of individual achievement.
If pointed out, they attribute it to the almighty, the guru,
the blessings of elders and perhaps, in a lighter vein, even
share itaapka hi toe hai (this is yours too)never openly
acknowledging achievement as personal accomplishment.
Sangachadwam (let's go together), Vasudhaiva Kutum-
bakam (the whole earth is a family) or Sarve bhavantu sukhina(all stay happy) are not quotes. These are core beliefs that
define the way Indians embrace collectivism vis-a-vis indi-
vidualism. So branding as defined today doesnt seemingly
come natural to India. But if we expand branding into a larger
landscape then the Hare Rama Hare Krishna, Iyengar yoga,
Indian-origin doctor/CEO and to an extent Bollywood could
be considered global brands that have emerged from India.
True, the tenor and nature that these display are not the
same as that of global brands as perceived in a classic capital-
istic model. But this very existing model is struggling to
evolve in order to find a fit in todays world. The so-called
global brands are now seeking to be more participative, col-
lective and are expanding their boundaries to more meaning-ful social fusion.
In fact, the emerging corporate-innovation model is glob-
ally collaborative, with product ideas, customer insights,
money and talent coming from all over.
Reports say that nearly 50 per cent of Procter & Gamble's
innovation initiatives involve collaboration with outsiders.
Will it then be a surprise that India is more conducive to the
new way of looking at global brands? The aspect of collective
ownership that global brands are now seeking is but natural
for India. The brand and the branding we will see emerging
will be consciously or unconsciously in sync with the deeply
entrenched socio-cultural ethoshealthcare, spirituality,
education, hospitality.
Prasoon Joshi is executive chairman
of McCann Worldgroup
BRANDS EMERGE
FROM THE
SOCIO-CULTURAL
ETHOS. THE
CONCEPT OF
DEVISING A BRAND,IP OR COPYRIGHT
EMERGES FROM
A MINDSET THAT
IS VERY DIFFERENT
FROM THAT
OF INDIA
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MIFC would be useless if India does not improvethe sophistication of its financial system and makeMumbai a global city similar to Singapore, London
and New York Percy S Mistry
Mumbai as a global
financial centre
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Four years after the (Mistry) Report on Mumbai asan International Financial Centre (MIFC), the
prospects emerging soon are dim. Seen wrongly
as advocating an IFC, what the report did was to
point out that MIFC would be useless if India did
not: (a) improve the sophistication of its financial system;
and (b) make Mumbai a global city similar to Singapore,
London and New York. Toward that end, the report made
many recommendations that are still being episodically res-
urrected. My pessimism (realism?) about MIFC emerging
anytime soon is based on 11 reasons:
Lack of Commitment to Financial System Reform: Four
years (2007-11) have been wasted. There is no commitment
by central, state or municipal governments to implementwhat was advocated. Reforms are necessary for Indias finan-
cial system to meet the increasingly sophisticated needs of
its real economy. Without them, India cannot undertake
long-term financing for infrastructure, nor cater to simpler
needs of 300-400 million people excluded from credit. An
IFC connects a domestic financial system to the much larger
global system. If disparities between the two are too large, no
IFC can achieve calibrated integration of the domestic with
the global financial system.
Little Progress in Implementing MIFC report:About 80 per
cent of the recommendations made in MIFC report have
been ignored. Currency and interest rate futures have been
introduced, but in a desultory, sub-optimal fashion, guaran-teed to ensure that they would not make the contribution
they should.
Financial system/market regulation and supervision by
RBI remains antediluvian; stuck in command-control,
micro-management mode: Sadly, the 2008 debacle has
convinced Indias knowledge-proof legislators, policy mak-
ers, regulators and public that it is safer to have a primitive,
micro-managed, state-controlled, financial system, with
credit directed by MoF/RBI, rather than allocated by the mar-
ket. What is not appreciated is that so risk-averse and ineffi-
cient a system is ill-suited to meeting Indias gargantuan and
varied financing needs.
Imbalanced Financial System: Indias financial system islop-sided in a way that would disable MIFC. An over-devel-
oped, febrile equity market subject to locally and globally
induced volatility co-exists with an infirm, undeveloped
debt market. There is no real 'debt market to speak of. It
comprises a primitive bond market and a banking market
dominated by SOBs that are inefficient in mobilising and
allocating resources of different tenures, risks and currency
composition at low cost.
No Bond Market: No IFC can function without a wide/deep
domestic bond market at its core which it plugs into the
global debt market. In India, 85 per cent of the paper in the
bond market is issued by GoI and its instrumentalities. On
the other side, 75 per cent of the institutional money in that
market is controlled by institutions owned/directed by
GoI/RBI to buy its own paper. That is pre-emption. The state
controls price, demand, and supply. It controls both sides of
the buy-sell transaction.
No Ancillary Supporting Currency, Derivative & Commodi-ty Markets: The report noted that bond markets do not func-
tion if unaccompanied by markets for currencies, derivatives,
insurance, pensions and commodities. These need to be deep,
liquid, and fluid for funds flows across segments. Each of these
domestic markets is so undeveloped and micro-managed by
regulators, relative to its global counterpart.
Inefficient Risk/Term Financing: Indian policy-makers
seem unaware that the absence of a bond market accompa-
nied by ancillary markets disables Indias ability to finance
infrastructure. They think special institutions can be set up to
finance what they perceive as gaps. Four have been set up so
far. They have accomplished little. Until India has a bond
market worthy of the name, it will not be able to financeinfrastructure nor will it be able to achieve financial inclu-
sion or manage systemic risk properly.
The Relentless Degeneration and Diminution of Mumbai:
State and municipal authorities
seem unable to comprehend that
mindless localisation policies are
resulting in Mumbai becoming a
Maharashtrian village. Mumbai is a
city in which political violence and
thuggery have been legitimised by
convention, despite their criminal-
ity. Local politics is killing the goose
laying golden eggs for so long.Urban-Rural Transfers: Mumbai
is a milch cow for kleptocratic, cor-
rupt state politicians enriching
themselves through an unholy
nexus with slum landlords,
builders and property developers.
They are disabling the city with
unplanned developments that its
infrastructure cannot cope with. Mumbais revenues are
siphoned off to shore up political bases in rural Maharashtra. It
would be better for the state capital to be shifted permanently
to Nagpur. Then Mumbai might get some relief.
Collapsing Infrastructure: Infrastructure is crumbling. Thecity is unpleasant and unlivable. It has pollution, privation
and public filth that should not be tolerated in any civilised
country. That is hardly conducive to the emergence of an IFC.
Cultural Suffocation: Worse, the multi-ethnicity, multicul-
turalism and multilinguality that made Mumbai what it was,
is now under daily attack and suffers mindless cultural suffo-
cation. Mumbai is disadvantaged vis--vis Delhi in not being
a union territory or a state in its own right. For that reason, an
IFC may emerge in NCR rather than Mumbai. Only a truly
Indian city, not a narrow-minded state capital, can be a hos-
pitable home to the broader Indian and international citizen-
ry needed to support an IFC.
Within 20 years India will need an IFC. But it looks unlike-
ly that it will be in Mumbai.
Percy S Mistry is chairman of Expert Group on
Mumbai as an IFC and author of the MIFC report
ONLY A TRULY
INDIAN CITY, NOT A
NARROW-MINDED
STATE CAPITAL,
CAN BE A
HOSPITABLE HOME
TO THE BROADERINDIAN AND
INTERNATIONAL
CITIZENRY
NEEDED TO
SUPPORT AN IFC
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At one level, the question posed is a num-
bers game. I will keep the numbers sim-ple. In 1975, China and India were at the
same income level. Then China broke
out first from the starting block and
began its long growth spurt. If you grow at 8 per cent
per annum, you double your income in nine years, and
if at 10 per cent, in seven years. Chinas total GDP
increased sixteenfold over the next 30 years. So 100 in
1975 was 1,600 in 2010. India hesitated at the start,
being a socialist country, you have to understand. It
grew by about 5 per cent for the next 12 years and
then by 6 per cent for the next 10 and then by 8 per
cent for the decade after. So the income doubled in the
first 14 years and then again in 12 years and perhaps
the next doubling will be over in nine years. So India is
at 800 compared to Chinas 1,600, very roughly. (The
actual ratio is $10 trillion to $4 trillion but let that be.)
To catch up now in the next 20 years, India would
have to grow at, at least, around 3.5 per cent rate fasterthan China. If China continues to grow at 9-10 per cent
India has to grow at 13 to 14 per cent. Only if China fal-
ters in its growth path and begins to grow at some-
thing more modest like 4-5 per cent can India continue
its practice of its own 8-9 per cent growth. What then
are the pluses and minuses of the growth race between
India and China?
To take over China, India must begin by assuming
that China will not slow down by much and raise its
growth rate to double-digit level of 15 per cent. Can
India do this?
It is not impossible, though few economies have
grown at this rate in a sustained fashion over two
decades. Yet there is a first time for everything. Asian
economies have grown at much higher rates than
Western economies throughout the last 50 years.
To take over China, Indiamust begin by assuming that
China will not slow down by much andraise its growth rate to double-digit levelof 15 per cent Meghnad Desai
Can we
catch upwith China?
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What must India do to catch up?Growing faster would require a single-minded consensus
about the primacy of growth with the clear understanding
that with growth, it is possible to remove poverty and
many other deprivations that the majority of Indian people
suffer from. Without growth or with slower growth, those
goals can be achieved only if there is a commitment to
drastic redistribution. Nothing in Indian politics tells us
that any such redistribution will be pursued. So growth is a
necessary condition; for it to be sufficient as well, India has
to choose employment-enhancing rather than job-protec-
tion strategies. It has to radically transform its manufactur-
ing sector by allowing large-scale factories producing
exportable goods with unskilled and semi-skilled manuallabour. This labour will be drained from its rural habitat
where the workers earn semi-starvation wages, or if lucky,
work 100 days a year on make-work NREGA jobs. These
produce little of value but do generate an income for them.
India has only one advantage relative to China and that is
the demographic bulge. Population was regarded as a hand-
icap not all that long ago; now it is an asset. For India to ben-
efit from this, it has to invest massively in skill and educa-
tion infrastructure from childhood up and make sure that
the incoming labour force has literacy, numeracy and cyber
skills. This investment need not be from the public purse.
Private sector investment should be allowed in all these
sectors. India should also use its female population muchmore actively than has been the case so far.
India needs to transform its agriculture. There has been
some investment in GM seedsin Bt cotton for example.
Once surplus labour is removed from the rural areas to
urban manufacturing centres, the radical transformation
will be easier. There has been some push for technological
change in agriculture thanks to higher wages as a
result of NREGA. This should be used to adopt capital-
intensive technology.
To help this focused growth strategy along, India will
also have to raise its percentage savings rate up to the mid-
40s . The first requirement would be a total elimination of
budget deficit and rapid reduction of the debt burden. Thegovernment dissaves upto 8-10 per cent across the Centre
and the states. If eliminated, this dissaving is enough to
boost Indias investment potential. The Union Budget allo-
cates 33 per cent of current revenue to interest payment on
debt. I know of no other country where the debt burden is
ten times the spending on health. Massive disinvestment
of PSUs should lead to reducing the debt.
Could China Falter?
The other side of the coin is that China may not be able to
sustain its growth rate. There are some tell-tale signs of
China faltering. The recent accidents with the high-speed
train showed shoddy workmanship, too much hurry and
wrong investment. China also has much more capital- and
resource-intensive growth strategy than India. If you con-
sider its higher savings rate of nearly 50 per cent plus FDI
its growth rate of 10 per cent implies a much higher ICORthan Indias. China is wasting its capital while India pre-
serves it. China builds infrastructure ahead of demand with
dubious returns on the capital while India has its infras-
tructure supply lag behind demand.
China also has Big Power delusions which India thankful-
ly does not have. Its policy of having a necklace of pearls
ports around the Indian Ocean and then the Mediter-
raneanis a foolish aping of 19th century British Empire.
Such overstretch yields little fruit though it may frighten
nations. India has a worry over its northern border of a
potential war with China which cannot be ignored but even
so it need not follow China in vying to become Middle Earth.
Chinas biggest unsolved problem is governance. TheChinese Communist Party openly acknowledges that its
acceptability depends on sustaining a high growth path. As
it tries to refashion its economy from over-saving and
exporting to domestic market and consumption, there will
be tensions. We have already seen some of these tensions
in matters of workers strikes and
disputes about land deals. These
conflicts are worked out openly in
India but repressed in China.
China is about to have a change
of the top guard. As always the
process is opaque and has no
democratic legitimacy. It also willbe only the second time that
peaceful transfer of power will be
carried out. This is a very fragile
state though it may deploy much
power. A regime which has to
bring out tanks against unarmed
demonstrators as Deng Xiao Ping
did in Tiananmen Square is a
frightened state not a confident
one. With all the errors, UPA only jailed Anna Hazare
for three hours.
Legitimacy of the political system is the shoe which has
yet to drop in Chinas case. All bets are off about continuinggrowth until that issue is resolved. It is not that China has to
adopt Western democracy but it has to have a government
which does not need to hide behind a manufactured una-
nimity and faceless bureaucracy to rule over its people.
Conclusion
In the final analysis, catch-up is a silly game. What is need-
ed is for India to be prosperous enough to eliminate pover-
ty, correct the gender imbalance, provide productive and
rewarding jobs to the bulk of its population while preserv-
ing its free, democratic institutions. China can do what it
likes. Let India show the world that a prosperous caring
democracy is possible.
Meghnad Desai is an eminent economist
and a British parliamentarian
CATCH-UP IS A SILLY
GAME. WHAT IS
NEEDED IS FOR INDIA
TO BE PROSPEROUS
ENOUGH TO ELIMINATE
POVERTY, CORRECT THEGENDER IMBALANCE,
PROVIDE JOBS TO ITS
POPULATION WHILE
PRESERVING ITS
DEMOCRATIC
INSTITUTIONS
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If India acquires thesubstance of power, the
symbols will presentthemselves in the next two
decades C Raja Mohan
Will India
become apermanentUNSC member?
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Apermanent seat at the worlds top table, theUnited Nations Security Council (UNSC), has
been a long-standing aspiration for the Indi-
an foreign policy establishment. That was
just a dream through the Cold War, when
India isolated itself from the global economy and posi-
tioned itself some times as a leader of the third world and
at others as an Asian ally of the Soviet Union.
Indias hopes acquired a little more traction amidst two
important simultaneous developments at the turn of the
1990s. One was the collapse of the Soviet Union and the
end of the Cold War, and the other was the launch of Indias
economic reforms.
The first injected a much-needed flexibility into Indiasforeign policy that was trapped in the East-West and
North-South divisions. The second began to reverse the
relative decline of India through the earlier decades and
allowed Delhi to generate the economic resources neces-
sary to develop what we might call comprehensive
national power.
The end of the Cold War opened up a new debate on
reorganising the United Nations to make it more effective
in dealing with the new global security challenges. Civil
wars in the developing world replaced the great power
rivalries in the developed world as the principal new con-
flict dynamic after the Cold War. That, in turn, opened the
prospect for great power cooperation in transforming theUNSC. With Russia down and China yet to emerge, the
West had a free hand in setting a sweeping new agenda for
the post-Cold War United Nations.
While India had deep reservations about the new West-
ern agenda on issues relating to territorial sovereignty and
intervention, New Delhi knew that the reform of the UN
system would not take place often.
India, then, chose to mount a campaign for the perma-
nent membership of the UNSC in the early 1990s. It was a
dismal failure. While some saw Indias new potential to
become a major power at the end of the Cold War, few
were willing to bet on it; for Indias internal economic
change was yet to manifest itself on the global arena. Thehumiliating end to the Indian campaign came in 1996
when India lost to Japan, by a massive margin, in the con-
test for a rotating non-permanent Asian seat.
When the pressures for UN reform emerged again in the
middle of the last decade, India revived its campaign, this
time in an alliance with three other candidatesBrazil,
Germany and Japan.
The reluctance of the US to back this effort and the deter-
mined opposition of China to any introduction of new
Asian permanent members into the UNSC grounded the
campaign. Yet, there was no denying Indias new diplo-
matic standing amidst its growing economic weight and
deepening political influence around the world. This was
reflected in India winning the Asian seat for non-perma-
nent, two-year membership with resounding, near-unani-
mous support at the end of 2010.
Might India be third-time lucky? Could the next roundof the debate in New York on the UNSC reform see India
realise its objective? On the positive side, the United
States, during the visit of President Barack Obama to India
at the end of 2010, backed Indias case for a permanent
membership of the UNSC. Even as he lent that vital sup-
port, Obama asked if India was indeed ready for such a role.
Will India join the international promotion of democratic
values that it so cherishes at home? Is Delhi willing to con-
front the third-world regimes that oppress their own peo-
ple in the name of territorial sovereignty?
The test for this came pretty soonin the form of the
Arab Spring that continues to shake the Middle East to the
core. And Indias performance at the UNSC in 2011 has dis-appointed many of its supporters in the West.
New Delhi had problems responding to Western calls
for humanitarian intervention in Libya and the interna-
tional condemnation of Syrias treatment of its own citi-
zens. India either abstained from key
votes or found itself on the side of
Russia and China that oppose West-
ern interventions in the name
of sovereignty.
While many of Indias decisions
can be explained in terms of political
prudence and a tradition of avoiding
strategic risk, it is quite clear thatNew Delhi has a long way to go
before asserting a larger role in world
affairs. Many in the Indian security
establishment continue to see India
as a weak third-world nation that
must emphasise autonomy rather
than as a rising power that is willing
to write international rules and con-
tribute to the maintenance of
the global order.
There is no doubt that this transition will eventually
take place; but it could be a prolonged one. Meanwhile, it is
not quite clear if the UN system will survive in the presentform as Chinas rapid rise and the Western decline redefine
the global power hierarchy.
In the next two decades, India must focus relentlessly on
three main objectives. One is to maintain its current high
growth rate to emerge as the worlds third-largest econo-
my. Second is to convert its expanding economic resources
into comprehensive national power. The third is to build
the institutions and instruments to translate national
power into global influence.
If India remains focused on these three objectives, it wont
need to campaign desperately for the permanent member-
ship of the UNSC. If India acquires the substance of power, the
symbols will present themselves in the next two decades.
C Raja Mohan is a senior fellow at
the Centre for Policy Research
WHILE MANY OF
INDIAS DECISIONS
CAN BE EXPLAINED IN
TERMS OF POLITICAL
PRUDENCE AND
AVOIDING STRATEGICRISK, IT IS QUITE CLEAR
THAT NEW DELHI HAS
A LONG WAY TO GO
BEFORE ASSERTING A
LARGER ROLE IN
WORLD AFFAIRS
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Given that we have 570 million peopleunder the age of 25 and that at every agebetween 0 and 25 we have between 20and 27 million people, educating them willgive us such a boost that we can expectgreater than 10 per cent growth rateJanmejaya Sinha
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21REFORMS 2020 | DECEMBER 2011
Given that the 12th five-year plan has sought a 9
per cent per annum growth target, I have beenasked to consider the proposition whether
India can, in fact, grow at 9 per cent. To my mind
the question can has a very simple answer
YES! But the question will has a different answerMaybe!
After the 1991 reforms, succeeding governments have done
well to hold the line on reforms and have not allowed a fall-
back on what was initiated. But the second leg of reforms is
harder, and we havent seen much action on that front yet. So 9
per cent and even 10 or more per cent growth requires real
leadership which is not evident. Some years ago, I had quoted
the Buddha in an article, who had said, I do not believe in a
fate that falls on men however they act, but I do believe in a
fate that falls on them unless they act.So while there is a need for discussion on the second-gen-
eration reforms, my piece today will be different. Yes, there
is a need to highlight the implementation requirements and
speed up infrastructure provisionroads, rail, power distri-
bution are just three that are top of mind. Currently, inflation
and the implications of high interest rates on capital invest-
ment are appropriately getting a lot of airtime. A slowdown
in capital investments does have adverse effects on GDP
growth. But my piece today will discuss a future for educa-
tion which, if we act on, can convert our demography into a
force for an accelerating GDP growth rate over the 9 per cent
level that we seek.
Let me articulate a future scenario for Indian education.Currently, the penetration of digital media in schools is less
than 5 per cent. There are about a million schools in India. Lets
assume each of these schools has four sections per class. Given
the poor level of power supply and the importance of continu-
ous power supply for my argument, lets seek the provision of
1 million generator sets to ensure these schools get uninter-
rupted power. Lets then provide to these schools 50 million
desktops and 50 million large TV sets. Lets then link all the
schools to regional education centres like a banks core bank-
ing solution. We have 16 national languages so we create, say,
16 regional education centres based on spoken languages.
Thereafter what is required is relatively straightforward.
Identify the ten best teachers in every language for every
subject. We could run contests to select these teachers. We
can record lessons from these teachers and air them across
the region. When the lessons are being aired the ten selected
teachers would sit in the computer lab of the regional educa-
tion centre ready to answer any questions that may come inover email or phone from the schools during the class. The
current teachers in these schools will act as tutors. The
uneven quality of teachers will to some extent get corrected.
By hearing the lessons being taught by the best teachers,
they will also get trained. If the calls get too much, we could
even create a regional education call centre where we have
trained teachers (college graduates, volunteers) sit in front of
computers with access to answers to frequently asked ques-
tions. A school Wikipedia, as it were. Likewise problem sets
can be devised by teachers in the regional centre and
emailed to every class room.
Advanced teacher guides on how
to evaluate answers along withthe answers can be provided.
These same lessons can also be
aired at set times on DD so that
there could be adult education
also or at least parents interested
in learning what is being taught
can tune in and see the lesson. All I
am suggesting here is industrialis-
ing education the same way as the
BPO industry has been able to off-
shore backoffice processes. In edu-
cation, the logic is driven not by
cost but by the scarcity of goodquality teachers and good content.
Given that we have 570 million people under the age of 25
and that at every age between 0 and 25 we have between 20
and 27 million people, educating them will give such a boost
that we can expect greater than 10 per cent growth rate. Karl
Marx once wrote, Philosophers have only interpreted the
world The point, however, is to change it. This holds true
for us in India today more than ever. The paradigm shift in
education that I suggest can have profoundly beneficial
results and can ensure 9 per cent growth. The question on
growth rate is not can but will and the difference
depends on some innovative action to address the con-
straints in new ways!
Janmejaya Sinha is chairman, Asia Pacific,
Boston Consulting Group. Views are personal
Can we grow at9 per cent?
ALL I AMSUGGESTING HERE
IS INDUSTRIALISING
EDUCATION THE SAME
WAY AS THE BPO
INDUSTRY HAS BEEN
ABLE TO OFFSHORE
BACKOFFICE
PROCESSES. THE LOGIC
IS DRIVEN NOT BY
COST BUT BY SCARCITY
OF GOOD TEACHERS
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Worlds leading companies were challengedto compete for market share and were compelledto invest strongly in innovation, technology,management and people R Gopalakrishnan
Indian firm amongFortune 10
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Indias rising prominence in the global economic are-na is a reality, but it is not a phenomenon to be taken
for granted. Likewise, for sure, an Indian group or
company could become a very visible global compa-
ny after 20 years, but the subject should not be
viewed in nationalistic terms. The recent ranking of Tata
among global brands by Brand Finance at number 41 with a
brand value of almost $16 billion is heartening.
Global companies joined the Fortune list by being posi-
tioned favourably and doing certain things. They are posi-
tioned in large markets that are growing strongly and sus-
tainably, such as America at the turn of the 20th century
and China since the 1970s. The companies were chal-
lenged to compete for market share, and were compelledto invest strongly in innovation, technology, management
and people. They built a culture of ambition beyond visible
resources and an ethic of persistent pursuit of those ambi-
tions. The same companies that achieved all of these also
lost their position later by not being adaptive to changing
circumstances.
An aspiring Indian company has to replicate all of these to
be in a Fortune 10 list, for example, by 2030. Some champion
companies could have a crack at it.
Positioned in a strongly and sustainably growing market
India is a fast growing and global market with per capita
income growing at 6-7 per cent per annum. Hence, Indiancompanies are well-positioned in a growing and vibrant
consumption market. Equally, India is the only emerging
market which is modernising in a framework where democ-
racy has preceded capitalism and efficient property laws. It is
rare and uncommon for any economy in the world to have
placed full voting franchise ahead of capitalism and constitu-
tional liberty.
Thus the role of government is still quite strong although
the economic liberalisation story began 20 years ago. Indian
companies, therefore, need to engage meaningfully with the
government to create an egalitarian and transparent policy
environment for growth. The administrative system and the
corporate sector have a history of opacity, cronyism and pur-suit of vested interest. These were the characteristics of oth-
er adolescent economies when they were in a similar stage
of development. They initially benefitted, but later withdrew
from these characteristics; India too must do so.
For example, a more efficient and transparent legal sys-
tem to resolve disputes is an essential infrastructure for
commerce and industry to grow. The government itself is a
litigant in two thirds of the cases in commercial disputes. No
chamber of commerce has thought it fit to lobby for and
advocate urgent change in speedier legal systems. It almost
seems that the government, corporations, top lawyers and
the courts have all got into an unhealthy equilibrium of satis-
factory underperformance. Similar, though not identical,
points could be made with respect to power, roads, public
health and primary education. It would be a serious mistake
to take the Indian economic growth story for granted. A lot
more needs to be done diligently.
Investing in innovation, technology, managementand people
At the company level, leadership focus on this agenda is
essential for success. Some companies are leading the way,
though process excellence in the design, adoption and exe-
cution of these is not visible enough. With respect to innova-
tion, for example, Indian executives are creative but not dis-
ciplined. We need a better balance. With regard to
technology, we are accustomed to quick fixes rather than a
ground-up and solid developmental approach. Talent devel-
opment and management systems are evolving, but not
nicely enough to assure a Fortune 10 company by 2030!
Oriented to nurturing ambitions more than theirresources
Indian entrepreneurship is fabulous and legendary with sol-
id cultural roots and evolutionary strengths. However,
entrepreneurial ambition in the past has too often been
advanced through the short cut of
currying social favours rather
than meritocracy. This is an Asian
reality, called guanxi in China,
waastha in Arabia and sifaarish in
India. Our champion companies
have to break the traditional
mould. Bold approaches that have
been deployed by some championcompanies in international mar-
kets augur well for the future.
Hugely adaptive to a dramatical-
ly changing global environment
The champion Indian companies
are able to generate more cash
flows than their capacity to invest
in the domestic market. This is not because the consumption
market is not there, but because there is more frictional time
loss through Indian public policy inadequacies than the rate
at which they are able to generate cash flows. Further some
companies have built up a market capitalisation, which is sig-nificant compared to GDP. In short, champion companies are
well on the path of having enough to invest at home and over-
seas. The challenges of running complex and global opera-
tions will mount as the international economy adjusts to the
shift of economic power from the west to the east. Adaptabil-
ity to different market conditions and cultural adjustments
will become very important. The best example of a sector,
which needs to reinvent itself for the future, is the Indian ITeS
sector. This sector will employ more than 6 million people in
India within the next five yearsa number achieved by the
organised manufacturing industry over 50 years!
These four characteristics are possible for a few of our
champion companies to combine. The precise pathway to
the accomplishment is unclear but the attitude and mindset
to accomplish is clear.
R Gopalakrishnan is a director at Tata Sons
23REFORMS 2020 | DECEMBER 2011
GLOBAL COMPANIES
IN THE FORTUNE
LIST ARE
POSITIONED IN
LARGE MARKETS
THAT ARE GROWING
SUSTAINABLY,
SUCH AS AMERICA
AT THE TURN OF
THE 20TH CENTURY
AND CHINA SINCE
THE 1970S
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Recent models that are liked bothin India and abroad indicate thecountrys potential to become thesmall-car manufacturing hub ofthe world! Surinder Kapur
India as asmall-car hub
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Indian industry has come a long way since the firstMaruti 800 was rolled out to the launch of the Nano
which the entire world watched with interest.
Over these years, Indian industry has imbibed the
ability to create and sustain the eco-system for
building small cars. It has also developed the engineering
and design skills.
India offers a vast market for just right products such as
the Alto, Nano and Micra, which meet the basic needs of the
bottom of the pyramid. In fact, Nano, as is well known, was
developed as a just right vehicle for this market.
Since 1984, when Maruti launched its first car, the
passenger car market has seen seemingly effortless
achievement of many a milestone. The last two-and-halfdecades witnessed very rapid growth in the number of
cars sold every year: from less than a 100,000 to over 2
million. In 2010, India became the sixth largest car mar-
ket of the world, which is expected to rise to the fourth
position by 2014.
India has surpassed China as Asias fourth-largest
exporter of cars in 2009. Today Made in India cars can be
seen whizzing past the streets of Cologne, Colombo, and
Cape Town. Last year, India exported over half a million
passenger cars. Hyundais i10 and i20, Marutis A-star and
Alto and Nissans Micra have been the leading brands being
exported out of India. Nearly 90 per cent of the vehicles
exported are small compact cars.While domestic car markets were growing at a frenetic
pace, the automotive supply chain in India went through a
major quality revolution. Several Deming Application
Prizes, many more TPM excellence awards and strong
quality initiatives by the OEMs (original equipment mak-
ers) saw world class cars being produced in India.
Let me share some lessons I have learnt from the
course that the Indian automobile industry has charted.
Once the leader sets an aggressive target, it can be
realised with the right talent, perseverance and hard
work. This is one of the main reasons for Nanos low cost;
Ratan Tata announced its price long before the car was
taken to the drawing board. The development of theScorpio by Mahindra & Mahindra also offers similar
lessons. This car was designed and developed at a cost of
$90 million compared to a global standard of $500 mil-
lion, by no means a small achievement. The Maruti Alto
has been designed to remain light on the buyers pocket
both in terms of its capital and operational costs.
Secondly, the development of Nano was focused on
manufacturing the core of the vehicle such as the engine,
in India. The Nano team worked to reduce the number of
tools to make components while increasing the life of the
dies by three times the norm. While it made design and
manufacture of dies more complicated, this helped
achieve the cost targets. Tata Motors leveraged their
partnership with Warwick University in UK to conduct
R&D at low costs. Local suppliers were later developed to
manufacture these parts after the initial work was done
at Warwick , thus building skill and capacity in India.Over the last three decades, the Indian auto compo-
nent industry has largely built to print. However, in the
process the country has developed both design and engi-
neering skills. Tata Motors utilised the local design skills
combined with the inherent frugal engineering skills
that Indians have to develop a low-cost vehicle. Cultural-
ly, Indians are used to do with limited resources. This has
fostered a frugal mindset amongst them. This Asian out-
look, coupled with their Indian technical capabilities, has
made it possible for the Indian engineers to design a car
appreciated for its styling, utility and value for money.
While Tata Motors set up a group of engineers tasked
with target cost, Indian suppliers were asked to developparts and sub-assemblies with aggressive cost targets.
The mindset of Indias top management has also
evolved over the years and is encouraging of risk takers;
they are increasingly more tolerant of failures and
rewarding of successes. This is
also perhaps the reason why
we have seen customer orient-
ed vehicles coming out of
almost every vehicle manufac-
turing company in the last 8-10
years; the Mahindras Scorpio,
the Maruti Alto, the Hyundai
i10, the Nissan Micra and theTata Indica, Ace and Nano. Mr
Tata, of course, led his team
from the front for the full dura-
tion, encouraging and motivat-
ing them. This could help the
team to take whatever risks
they had to with full support
from the management.
Finally, while Tata Motors have filed for 34 patents
associated with the design of the Nano, perhaps the most
innovative aspect of the Nano is its modular design. The
Nano is constructed of components that can be built and
shipped separately to be assembled in a variety of loca-tions. In effect, the Nano can be sold in kits that are dis-
tributed, assembled, and serviced by local
entrepreneurs. Recently, Nano might have hit some
roadblocks after the initial euphoria associated with its
launch. These hurdles will be overcome, and Nano will
set a new trend that was expected when it was unveiled
to the world. For now, it has taught the world how to
make an ultra low-cost small car.
Given the growth of the small-car segment in India,
the fact that manufacturers have come up with models
that meet the needs of this segment and are also able to
export to the world, there is very little doubt that India
has the potential to become the small-car manufacturing
hub of the world.
Surinder Kapur is CMD of Sona Koyo Steering
25REFORMS 2020 | DECEMBER 2011
THE MINDSET OF
INDIAS TOP
MANAGEMENT HAS
ALSO EVOLVED OVER
THE YEARS AND IS
ENCOURAGING OF
RISK TAKERS; THEY
ARE INCREASINGLY
MORE TOLERANT OF
FAILURES AND
REWARDING OF
SUCCESSES
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It is essential to set thespace vision for the next
20 years with a focus onareas such as low-costaccess to space,developmentof reusable launchvehicles, earth observationsystems for environmentalmonitoring and disastermanagementG Madhavan Nair
Indian space programme had a late start of nearly 20
years compared with developed countries such as
the US, Russia and Europe. The western countries
had the advantage of military programmes from
where advanced technologies were taken for civilian
space research. However, India is the only country in which
tools for space exploration were developed in the civilian
domain and perfected. Equally important is the societal
application of space technology as demonstrated through
tele-medicine and tele-education and application of satellite
images of the earth for the benefit of farmers, fishermen,
water resource management, disaster management, etc.
Dr Vikram A Sarabhai, the visionary scientist, had initiat-
ed modern space programme in India in 1963 by launching
a sounding rocket from Thumba Equatorial Rocket Launch-
ing Station (TERLS) to study the equatorial electrojet phe-
nomenon. He had the vision that India should become self-
reliant in space technology and apply such technologies to
enrich the quality of life of the common man. This vision
had led to a series of developments in areas such as rocket
systems, satellites systems for earth observation and com-
munication and a variety of application programmes.
Today, India has fulfilled the dreams of Dr Sarabhai. We
have powerful satellite launch vehicles such as PSLV &
GSLV and spacecraft such as Indian Remote Sensing Satel-
lite (IRS) and Indian National Satellite System (INSAT). Due
to the constraints of dual-use technology, practically no
inputs were available from developed countries. Hence,
there was a strong thrust for development of indigenous
technologies associated with rockets and spacecraft. Such
India
as a space leader
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advanced technologies developed in India are proven to becomparable to those developed by advanced nations. India
is able to compete commercially with other global players
for building spacecrafts and providing launch services for
foreign customers. India also has demonstrated that the
development of such high technologies can be carried out
in a cost-effective manner. Most of the time, the amount
spent on developing new systems is hardly one-third of
that in western countries. This places India in a unique posi-
tion to emerge as a global player in the space arena.
The PSLV rocket is the work horse launcher with ability
to orbit up to 1,500 kg in low earth orbit. GSLV is a system
capable of launching about 2.5t in to the geo-transfer orbit.
Already a large number of spacecraft have been carried byPSLV into orbit for various customers and has demonstrat-
ed itself as a reliable space transportation system through
17 consecutive successful missions.
The earth observation satellites such as IRS, Resourcesat
and Oceansat are providing extremely valuable data on
natural resources of the earth. This data is widely utilised
for providing useful information to farmers and fishermen,
weather forecast and planning infrastructure projects. The
data from earth observation satellites has revolutionised
the disaster warning system and helped mitigation mea-
sures after floods, earth quakes, etc.
The INSAT series of satellites is supporting a wide variety
of communication links within the country. The DTH ser-vices being provided through the geostationary spacecraft
have revolutionised the entertainment sector. The commu-
nication connectivity has been taken to far-flung and inac-
cessible locations such as remote villages, mountain
regions, islands, etc. The satellite connectivity has been
effectively put to use for societal applications such as tele-
medicine and tele-education programmes.
Apart from these, India has also demonstrated that space-
craft once launched can be brought back safely to earth at a
designated place through spacecraft recovery experiment.
There are very few countries who have gone to moon. In
2008, India had sent the Chandrayaan-1 spacecraft to moon.
Through Chandrayaan, India has demonstrated that it hasemerged as a space power among the leading countries such
as the USA, Russia, Europe and China.
Space is going to be the next frontier for the human activi-
ty which poses a number of challenges. With the global sce-
nario of the US grounding the space shuttle and the possible
closure of the space station before the end of the decade,
India has a unique opportunity. Russia and China will be left
as the only players with capability to carry human beings to
space. Because of resource constraints, the US, Europe and
Russia are not pursuing further development or investment
in new space transportation in the near future. China is the
only country making investment in this field. This is where
India could position strategically and evolve as a global play-
er with capability to access space at low cost. The develop-
ment of low-cost space transportation systems will demand
looking at issues related to recoverable and reusable launch
vehicles, air breathing propulsion systems and semi-cryo-genic propulsion systems. In addition, the deep space mis-
sions will demand development of electric propulsion and
nuclear propulsion systems.
The human space flight is yet another challenging field
where designing and development of space capsules for
sustaining life in space environment and ensuring safe
return of humans to earth are major challenges. Life support
systems, providing supply of food, water and oxygen in a
controlled manner, shielding against hostile radiation, man-
aging re-entry and safe landing are some of key technologies
to be mastered. Action is also required to improve the relia-
bility of rocket systems. If such initiatives are taken now in
developing the human space flight programme, in about sixto 10 years, India can emerge as a service provider for carry-
ing human beings to outer space and nearby planets.
There are equally challenging tasks in spacecraft technol-
ogy too. With the demand for communication growing day
by day, providing high bandwidth
connectivity to remote areas and
handheld devices will require devel-
opment of high-power satellites
working in high-frequency bands
with large deployable antenna sys-
tems and appropriate switching net-
works. Digital connectivity to remote
areas and handheld devices will bethe emerging services.
In the context of growing concern
over environment and depleting
natural resources, powerful earth
observation systems will have to be
in place. This will require develop-
ment of hyper spectral imaging
technology observation platform
from geostationary orbit,
microwave remote sensing technology and sensors for
looking at carbon emissions and other pollutants in the
atmosphere. A lot of sophisticated sensors, data processing
platforms and advanced techniques for assessing variousmineral deposits will become inevitable. The search for
resources on moon and other planets such as mars will see
the emergence of deep-space missions with robotic plat-
forms and bases.
The last 20 years have seen India emerging as a space
power. To become a global player, it is essential to set the
space vision for the next 20 years which will have major
thrust in areas such as low-cost access to space, develop-
ment of reusable launch vehicles, earth observation sys-
tems for environmental monitoring and disaster manage-
ment. Human presence in space and nearby planets is going
to be a reality and India has got a unique opportunity to take
a lead in developing low-cost access to space and much-
needed human transport system for space exploration.
G Madhavan Nair is a former chairman of ISRO
27REFORMS 2020 | DECEMBER 2011
THE US, EUROPE AND
RUSSIA ARE NOT
PURSUING SPACE
TRANSPORTATION.
CHINA IS THE ONLY
COUNTRY INVESTINGIN THIS FIELD. THIS IS
WHERE INDIA COULD
EVOLVE AS A GLOBAL
PLAYER WITH
CAPABILITY TO ACCESS
SPACE AT LOW COST
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28
ReformsL A S T 2 0 Y E A R S , N E X T 2 0 Y E A R S
2020
REFORMS 2020 | DECEMBER 2011
While the economic reforms since 1991have led to the opening up of the
economy in terms of liberalisation,
privatisation, and internationalisa-
tion and impressive strides have been
made in sectors such as telecom, civil aviation and
financial markets, the all-important energy sector has
not been able to keep pace with the rate of economic
development. The yawning gap of 12 per cent between
demand and supply of electricity continues to be an
acute problem.
India is faced with the challenge of sustaining its
rapid economic growth of 8-9 per cent in order to lift
out of poverty one-third of its people who are livingbelow the official poverty line while at the same time
dealing with the threat of climate change and global
warming. India has committed itself to reducing its car-
bon emissions by 2025 per cent by 2020 starting with
2005 as the base year.
Power shortages could be the single biggest factor to
derail the country from its high-growth trajectory.
Around 53 per cent of our electricity is generated from
burning coal. Around 25 per cent of our power supply
comes from hydel resources, which are location-specif-
ic and cannot be seen to provide dramatically more than
what they do right now. This leaves us with nuclear
power and renewable sources of energythe sun, the
wind and biomass.
Even as the countrys energy security is compromised
since it depends so heavily on oil imports, India has
India has realised that a large part of its energysecurity can be achieved by using what it has
free of cost and in abundance all over the country,all round the year and foreversunlightK Subramanya
Rising with the sun
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29REFORMS 2020 | DECEMBER 2011
realised that a large part of its energy security can beachieved by using what it has free of cost and in abun-
dance all over the country, all round the year and forev-
ersunlight.
There are numerous reasons for India to go solar.
Solar energy is clean energy as it emits no effluents or
pollutants into the atmosphere unlike the thermal
energy obtained by the burning of coal or natural gas.
Besides being free, solar energy is forever, unlike fossil
fuels, whose stocks are getting depleted everyday with-
out being replenished and which we will exhaust com-
pletely within a few decades unless fresh sources are
discovered in the meantime. Solar energy is abundantly
available in India. The irony is that Germany does nothave as many sunny days as India does, yet Germany
accounts for 50 per cent of the global market for photo-
voltaic cells which are used to convert sun rays into
electric energy, while India accounts for only 1 per cent
of the global market. Solar energy is modular and scal-
able and can be generated at the point of use, in which
case there is negligible or no loss in transmission and
distribution. It is simple and quickly implementable
requiring no or low gestation period. Importantly, there
are no rehabilitation issues related to solar power pro-
jects as are seen in the case of mega power projects.
Also, solar power projects require virtually very
little maintenance.PV modules exposed to the sun can produce enough
power to run the basic appliances in a home. Solar
street lights, traffic signals, solar water pumps and solar
lanterns are getting readily accepted. Solar water
heaters can save enough electricity to pay back for their
cost in three to five years.
Like universalisation of education the central gov-
ernment should make it a national mission to achieve
universalisation of electrification.
It is estimated that some 14 lakh solar PV systems of
about 110 megawatts peak capacity have been set up in
the country. A total of 33 grid-interactive solar PV
plants have been set up in the country with financialassistance from the Ministry of New and Renewable
Energy. These plants with an aggregate peak capacity of
2.125 megawatts are estimated to generate about 2.5
million units of electricity in a year.
It is under the Jawaharlal Nehru National Solar Mis-
sion that the government has set out an ambitious tar-
get of generating 20,000 MW of grid-connected solar
power by 2022 in addition to 2,000 MW of off-grid
solar installations. Starting from 200 MW today, the
mission targets have set out a huge challenge for the
Indian industry to achieve these targets in a time-
bound manner. The good news is that the first phase of
the mission (2010 -13) is on course and already some
800 MW of solar projects have been allocated and are
currently under execution. As more and more solar
power projects come on stream, larger volumes will be
generated in manufacturing and operations and thewhole supply chain. This will lead to economies of
scale bringing down unit costs. Spurred further by the
economic forces of competition and technical innova-
tions and R&D, the cost of solar power will further
come down. Already solar power plants costs have fall-
en by 30-40 per cent over the last two-three years, and
this trend is likely to continue. The overall aim of the
solar mission is to achieve parity of solar power prices
with conventional power by 2020. Given the current
trends in the gradual rise in cost of conventional power
and the steady fall in solar power prices, the grid pari-
ty target will hopefully be achieved earlier than the
NSM target date.The government has launched the Renewable Ener-
gy Certificates (REC) mechanism which will help
developers sell the power to the local utilities at aver-
age power purchase cost of conventional power and at
the same time sell the RECs generated upon produc-
tion of solar power to the buyers on the energy
exchange within a price band defined by the central
regulator. The REC buyers would
be the entities/utilities obligat-
ed to procure a minimum
amount of solar power (set 0.25
per cent for 2011) to meet their
RPO obligations.On the financing front, Indian
banks are still not fully confident
about financing solar power pro-
jects. Their knowledge and
awareness about the solar power
technology is very limited
which is understandable since
the grid connected solar power
plants are a very new phe-
nomenon in India. The Indian
banks are insisting on financing
the solar power projects on the
strength of the companys balance sheets rather thanthe merits of the project per se. This, and the high rate
of bank finance in India, which is above 12 per cent per
annum, is making it very difficult for the solar power
developers to make the projects viable. This is com-
pounded by the fact that around 150 MW of solar PV
and 470 MW of solar thermal projects were selected
last year on the basis of competitive bidding for the tar-
iff, and the process resulted in unduly low tariffs.
The sun is a great leveller. It shines on the homes of
the poor and the rich with the same intensity. Every-
one, rich or poor, can produce their own electricity with
the necessary set of photovoltaic panels on top of their
roof. Lets therefore implement the 20,000 MW target
in the interest of India.
K Subramanya is CEO of Tata BP Solar India Ltd
THE SUN IS A GREAT
LEVELLER. IT SHINES
ON THE HOMES OF
THE POOR AND THERICH WITH THE SAME
INTENSITY. EVERYONE,
RICH OR POOR, CAN
PRODUCE THEIR OWN
ELECTRICITY WITH
THE NECESSARY SET
OF PHOTOVOLTAIC
PANELS
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30
ReformsL A S T 2 0 Y E A R S , N E X T 2 0 Y E A R S
2020
REFORMS 2020 | DECEMBER 2011
By 2025-26, while thedeprived will constitute under
a fifth of the population, themiddle class will account for
around 37 per centRajesh Shukla
A middle-class
India
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If the biggest revolution of post-independence Indiawas the rise of the Great Indian Middle Class and
everything that went with this in political and eco-
nomic terms, the biggest revolution of the next two
decades will be the virtual disappearance of the
poor or deprived. With economic growth of 8-9 per cent,
India is well on its way to become a middle-class haven.
The projections made in the Goldman Sachs Brics reports
are well-knownby 2032, India will be a larger economy
than Japan. What is less known is the NCAER projection
that by 2020-21, there will be as many middle-class house-
holds (defined as those with an annual household income
of between Rs 3.4-17 lakh at 2009-10 prices) as there are
deprived ones (defined as those with an annual householdincome of less than Rs 1.5 lakh at 2009-10 prices). By 2025-
26, while the deprived will constitute under a fifth of the
population, the middle class will account for around 37 per
cent of the population.
How huge the impact of this will be is best seen through
an example. If 10 million new persons buy a mobile phone
every month, as was happening some months ago, this
means a total of 12 crore persons buying a mobile phone in
a year (were not taking into account the replacement
demand which will be much bigger given that India
already has 80 crore mobile phones). Assuming a new
phone costs Rs 1,500 and these new customers spend just
Rs 100 a month on their mobile bill, thats an annual expen-diture of Rs 32,400 crore, an amount which roughly equals
the sales from an automobile plant with a capacity of 1.3
million cars (assuming each car costs Rs 2.5 lakh). Multiply
this many times over to get a sense of the impact of Indias
middle-class revolution. Additionally, as millions more are
added to its ranks, the share of income accruing to the mid-
dle class will rise from the current 35 per cent in 2010-11 to
47 per cent in 2025-26 (assuming that relative level of
earnings by various income categories remains the same).
This is more than the income accruing to the rich category
and more than twice the income accruing to Deprived and
Aspirers category combined.
The deprived, by contrast, will account for approximate-ly 3 per cent of the countrys income, making it quite clear
how Indias consumer power will shift even more.
The political impact of this will be even larger. With 37per cent of the population middle class versus a fifth which
is deprived, the political constituency will shift dramatical-
ly. To the extent the government wants to run social wel-
fare programmes, the emphasis will have to shift from PDS
for the poor to unemployment insurance, from food subsi-
dies to a greater emphasis on education and health facili-
ties which are middle-class priorities. Given the govern-
ment-sponsored education system is hardly deliveringa
fourth of those living in even rural India, the Pratham sur-
veys show, are sending their children to private schools
expect an even larger growth in private education services.
The middle class, needless to say, is not rising in a vacu-
um; it is the product of greater industrialisation and givesrise to greater urbanisation. According to an estimate by
McKinsey Global, in the next two
decades, India will add 260-280
million more persons to its cities. So
as many persons will be urbanised
in the next 20 years as have been
urbanised in the last 60. India will
need to add 700-900 more square
metres of commercial and residen-
tial space in urban areas, which
means two new Mumbais each year
for the next two decades.
This means Indias political debateis less likely to be about caste as it
will be about infrastructure, roads,
metros, skytrains the debate will
be about the benefits of bus rapid
transit corridors versus metros.
Since India is nowhere near fixing
the problem of making the land available for this new rush of
migrants from villages to cities, expect a lot more Dharavis to
bloom. The latest Census data shows this. While the urban
population rose from 286 million to 377 million in the last 10
years, 14-27 per cent of this population got accommodated
in census towns, those that have more than 5,000 persons.
But these are agglomerations that do not have a formalmunicipality and so not likely to have civic amenities such as
sewerage, water and roads.
While politicians will respond to what middle classes
want, perhaps the biggest change will be in terms of the
governance structure. Describing this unique class and its
implications for society and polity, Aristotles words that
The best political community is formed by citizens of the
middle class and Those states are likely to be well-
administered, in which the middle class is large come to
mind. The rising political conscience of this burgeoning
class will act as an agent of the age and as an important sta-
bilising force in India. Their participation in the Lokpal agi-
tation is an indicator of things to come.
Rajesh Shukla is the Director of NCAER Centre for
Macro Consumer Research
31REFORMS 2020 | DECEMBER 2011
SINCE INDIA IS
NOWHERE NEAR
FIXING THE PROBLEM
OF MAKING THE LAND
AVAILABLE FOR THIS
NEW RUSH OF
MIGRANTS FROM
VILLAGES TO CITIES,
EXPECT A LOT MOREDHARAVIS TO BLOOM.
THE LATEST CENSUS
DATA SHOWS THIS
Deprived
Middle class
50.0
40.0
30.0
20.0
10.0
0
Distribution of income by household category
Rich
2010 2012 2020 2025
Aspirers
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Shanghai, Chinas most exciting city, changed at
an unprecedented speed. That transformation
along with the hope, fear, greed and nostalgia of
its citizens is a fascinating case study. Shanghai
rushed into the future even as its inhabitants
struggled to deal with the present. It raced to become a
paragon of modernity, and yet in building a new tomorrowit forgot or even erased its own past.
To my mind, India should not blindly ape Shanghai but
create its own unique model of livable, vibrant cities.
Indias urban challenge is enormous. While meeting this
challenge India must innovate and create cities that focus
on enhancing the quality of life of its citizens. India cities
must reinvent themselves through creative policies and
institutions and emphasise the basic elements of a livable
city. These are attractive public spaces, mixed-use and
higher-density neighbourhoods that support a range of
green infrastructure, public transportation, affordable
housing and vibrant pedestrian experiences. A
livable city lays emphasis on walk-ing, bicycling and mass
transportation. Such cities
meet environment, eco-
nomic and equity goals
and are great cities to live,
work and play.
Recent studies have projected that India will face an
unprecedented scale of urbanisation350 million Indians
will move to cities by 2030. This number is likely to double
to 700 million by 2050. This is 2.5 times the size of the US's
present population and will be the largest urban move-
ment in the world. This implies that every minute duringthe next 20 years, 30 Indians will leave rural India for set-
tling in urban areas. Management guru CK Prahalad had
emphasised the need for India to create 500 new cities to
accommodate and provide a better quality of life to its
migrating people. Otherwise, every existing city will
become a slum when India becomes 75 in 2022.
Cities are centres of growth, innovation and creativi-
ty. In todays world, it is not countries but cities that
compete for resources and investment. The GDPs
of New York and Tokyo are on a par with that of
India. Not a single Indian city figures in the top
100 cities of the world. Mumbai ranks 114th and
Delhi a dismal 214th. The future of Indiasgrowth process lies in the
dynamism and vibrancy of its
cities. In India, farm-
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ReformsL A S T 2 0 Y E A R S , N E X T 2 0 Y E A R S
2020
REFORMS 2020 | DECEMBER 2011
For China, economic development was, inessence, about shifting people from sustenancefarming to manufacturing, and urbanisation wasthe spatial manifestation of this shift Amitabh Kant
Our own Shanghai
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ing accounts for more than 58 per cent of its workforce butonly 14.2 per cent of GDP. Agriculture can sustain a growth
rate of 3 per cent while the Indian economy must grow at
9-10 per cent to lift vast se