Ever since the NDA (National Democratic Alliance) returned to power at the Centre under the leadership of Narendra Modi-led BJP, there has been heightened expectation across the spectrum. With the new government’s maiden budget just days away, the sense of anticipation has only increased.
How will Modi’s government balance the aspirations of so many constituencies? What will be the fate of the still-increasing wish-lists? No doubt, the climate has distinctly moved from one of pessimism to that of guarded optimism. But the new government has quite a task on hand to sustain this optimism.
Instead of looking through a micro prism, it will do well to train its efforts on certain broader aspects that will give a big push to the nation-building as a whole. How to convert this optimism into real gains? Simply put, it requires a new mindset, and some breakthrough initiatives. If China could do it, why can’t India? This calls for a shift in focus — from service to innovation.
Experts have often articulated how innovation creates more value in the system than a blinkered horse-like focus on services. Not surprisingly, an increasing number of voices are now vociferously arguing for the promotion of start-ups. From IT (information technology) to pharmaceuticals and what not, industry verticals across the canvass are now demanding the government extend afriendly policy environment that would facilitate the building of an ‘innovation engine’ in the economic system. This aspect hasn’t got adequate attention from fiscal bosses. China, especially, has consistently ensured that people with ideas are backed up with high quality investment. Evidences are aplenty in China where such investment-backed start-ups have gone on to make it big. If proof was required, search engine Baidu is there for all to see. Over two dozen start-ups started inside a decade in China have gone on to enjoy a market cap in excess of $10 billion today. How did they do it? The answer simply lies in two-fold action — building innovation engine and providing friendly investment climate. Innovation-led creation of any enterprise will have huge multiplier effect on the economy in terms of job creation, which must indeed be a key concern of policymakers.
It is precisely because of this reason the maiden budget of the Modi government must create the climate for doing business free, simple and friendly. Also, it should place premium on innovation. “There is no reason for folks like Amazon, a U.S. company to come in, and take Indian market share,’’ says the CEO of an IT company. His is certainly not a voice in isolation. There are many who feel — may be rightly so — that policy planners have not really focussed on exploiting the domestic talent pool, and leveraging it in the international market place. The way ahead is to really address this issue on a priority basis. Otherwise, India will be left way behind in a dynamic world that is bit by the innovation bug.
What is to be done now? A few things — and they need to be done on an urgent basis. For one, the country needs to put more money into beefing up internet bandwidth. In the emerging age, speed is essential to provide high quality service. And, bandwidth constraints are holding it up in India. Can India take a clue or two from Singapore, which has a separate group that helps in the buying decisions for the government? Can India have something like that with a lot of focus on locally-developed products? The Modi government should make start-ups an investment priority. This calls for a well-developed venture capital market in a true sense. The PE market is for matured companies, and as such the risk appetite is actually low. The venture capital market is pre-revenue investment, and hence the risk is very high.
The Modi government should focus on encouraging the VC market, which helps first-time entrepreneurs a lot. Can there be a sovereign fund that fully supports ideas? More than for tax give-aways and sops, the maiden budget of the Modi government is anticipated eagerly for clues for the road ahead.
jagannathan.kt@thehindu.co.in
