Why India cant fly - 2

The extention to the last post seems to be getting too complex to articulate in its entirety, so I just project one aspect - IPR and innovation in IT - and let you make up the rest of the story.

As talked about to death by intellectual property rights (IPR) advocates, India has an appalling record of IPR or copyright enforcement, whether it be international brand products or Bollywood material. One evil result of this is how it makes investment in new technology risky, effectively stunting innovation.

One classic, though trivial, example that comes forth is that of Microsoft products in India, a staggering proportion (+80%) of which are used in pirated form. While Microsoft gains immensely from this unpaid and unplanned market share, it is nonetheless making sounds about taking the battle to the streets with WGA. That said, given the small number of paying software users in India so far, Microsoft has little incentive to customize its softwares for Indian users. I never worked with a legitimate MS Office copy packaged for India (oops!) so I dont know the level of customization it has, but from what I saw on the pirated ones, I can imagine that Indian workers spend thousands of work-hours searching for the elusive "Rs." symbol in their spreadsheets, or fuming as spelling check throws up red lines under everyday names of people and places. Given the non-existence of copyright enforcement, there is no incentive for local innovators and investors to put stakes in developing a relevant product. This creates succulent conditions for Microsoft, for when IPR enforcement eventually becomes tighter, it can capitalize on its uninhibited market spread.

The Microsoft example is of course skewed, given the fact that its monopoly is global, but gives a good example of ineffective use of hand-me-down technologies. To further the illustration, a significant bit of the digital divide can be attributed to the fact that children who go to rural public schools in India (nearly all of which have the regional language as the medium of instruction) dont learn enough English to be able to operate English-language softwares till they are in high school or older. CDAC and others who developed native language tools have had limited success in propogation, given the plastering of the market with free pirated softwares which leaves few niches to occupy. A buddy who worked for Vikas Vikalp, a Delhi-based NGO which fathered TARAhaat recounted to me how they set up centers in rural Bundelkhand to teach computer fundamentals but on discovering the lack of English proficiency, ended up establishing basic English classes.

This warped way of approaching progress (i.e., teaching English as a first step to computer literacy), which results from the lack of institutionalized and indigenized innovation, infiltrates much more than my trivial IT example, and has far-reaching effect on India's worthiness as an economic powerhouse.

Exacerbating an environment of despondency in native-led innovation, the Thomas Friedmans and Gurcharan Das' of the world celebrate (or bemoan) the 'success' of the Indian IT industry by pointing out the numerous R & D centers that IBM, Intel, Cisco and others have established in India. The fact that active minds from India are driven to seek sanctuaries in American universities and corporations to invent and patent everything from microprocessors to petrochemicals doesnt bother them, of course.

The Empire, it seems, is mighty pleased to have a satrap - who seems strong but docile, independent but tractable, and has all the politically correct qualities of being democratic, multicultural and stable - and it is making an uninhibited show of it, what with the nuclear deal and the good press. Last month, EU and American leaders met in Vienna for the 2006 US-EU Summit where they resolved to reduce global piracy and encourage protection of IPRs. On the tail of the successful TRIPS mandate, India will be nudged to fulfill this mandate too and enforce its laws. The unsung tragedy of reforms in the 1990s was that dismantling of the license-raj did not precede globalization, it came hand-in-hand; the tragedy about to happen is that the enforcement of indigenous IPRs will not precede that of global IPRs.

Why India cant fly - 1 (or, what The Economist wont tell you)

Last week, I posted a review of the The Economist's special report on India here. While critical on specifics, overall the report maintains a tone of awestruckness at the pace of India's progress. While there is no disputing the fact that something unusual is indeed happening, as an Indian I feel wary of taking the euphoria to heart. I see two main reasons why the run wont translate into flight.

1. Energy

In the recent State of Nation address given by the president of the United States, he talked about reducing the country's "addition" to foreign oil and developing sources like ethanol and fuel cells. The gesture comes too late, but nonetheless represents a turning point in the history of the US' energy policy. For all their faults, the American are strong-willed and there is no doubt that when using oil becomes economically unfeasible, they will have an alternative waiting at the backdoor.

Unfortunately, India can boast of no discussions, let alone strident proclamations such as these, in mainstream polity (with due respect to those few in India who have been campaigning for rethinking energy policies). Leaders who have successfully reformed and driven forward the country's economy seem unperturbed by the ominous energy scenario, and political attention on energy is restricted to the short term. As we speak, political parties are wrangling over the government's proposal to raise petroleum prices. When spokespersons for the industry (say, The Economist) talk about energy, it is more to lobby for reliability of immediate local supply than long term assurance.

While many pundits are predicting a keen race between India and China for dwindling energy sources to feed their growing economies, even without the competition India would still struggle if it has to keep up the current growth trend. From my layman's perspective, recent developments in the county seems to have been cast in the same mould that led other countries to prosperity in the past century. Nowhere do I find provisions anticipating a fundamental energy makeover in the future, or even attempts to deny its possibility.

The pursuit of an economic model more suited for the oil-secure age will take India only so far, forget helping her fly.

More later.

Can India Fly?: The Economist's special report on India

The June 3rd - 9th issue of The Economist has a 14-page special report on India dramatically titled "Can India Fly?".

For an Indian, the report holds no surprises. Expectedly, the report paints a very bright and optimistic picture of the Indian economy. While it does meticulously and repeatedly point out the fact that shoddy infrastructure and red tape is holding back the boom from manifesting in its full form, a highly upbeat and almost fantastical feel runs through the report. What with quotes like "Not once in a decade, not once in a millenium, its once in a lifetime for India".

As is the norm now, the report pays its due respects to the biggest rocks on the roll - BPOs and IT. To get an idea of its scale, NASSCOM estimates that BPOs alone will contribute 7% of GDP by 2010 (the figure is 5% today). Something that was news to me is that the BPO industry is becoming ever more sophisticated, offering judgement and analysis based services, the new industry being described "knowledge process outsourcing" (KPO).

As far as manufacturing goes, there is good and bad news. Given the fact no country has climbed out of lower-middle-income status povery without a strong manufacturing base, the good news is that Indian manufacturing IS booming. The bad news is that it isnt creating a huge numbers of job because of continuing automation as manufacturing USP moves from low-cost to high-value. The Economist heaps part of the blame on labour-friendly laws.

The growth of consumerism in India too gives the business world sufficient cause to rejoice. For example, the knowledge that "only 15% of people use shampoo" is enough to convince Hindustan Lever to roll up its sleeves and take the challenge of seeking new ways of making the rural poor shampoo-literate.

A few sobering points: For all the boom, India is primarily rural (read, untouched by the boom) with more than half the workforce engaged in agricuture. Infrastructure leaves much to be desired, with a case cited in the report describing how trucks from Kolkota to Mumbai do an average of 11 km/hr after countless unproductive stops along the way. Last, and most important, is the government's lack of support to the growing economy. The report goes so far as to say that the Indian boom is happening more because of the government's neglect (by way of not strangling growth) than its proactive encouragement.

Old-style corruption better?

Thats the title of the editorial in Down To Earth magazine of May 15, 2006. The editor, Sunita Narain, argues that given a choice between the legalized 'lobbying' system of the US and good old under-the-table-cash bribing system of India, she had prefer the latter. Her reasons being that while both systems hold democratic processes hostage, bribes are at least vulnerable to being exposed but the lobbying system is law-proof!

On first thought, the idea of someone endorsing bribing and corruption seems outrageous, but if you think carefully she probably has a point. The editorial lists a bunch of instances (in the realm of environment affairs) where corporate interests have influenced legislation negatively. And many more come to my mind.

For starters, lets talk about healthcare in the United States. The fact that the US does not have universal healthcare seems to come as a surprise because almost every American you meet would rather have it. I have no references to cite, but I take the liberty to assume that it is the insurance lobby which manages to ensure that things stay the way they are. It seems to be an insult to democracy that something that nearly all voters would want cannot materialize because the election campaigns of their political representatives are being payrolled by elements that want the contrary.

I might be stretching my imagination to say that the US' foreign policy and constant overseas military activity too is affected by lobbying groups of arms manufacturers, military contractors and multinational businesses. Or maybe its not such a stretch.

Some might argue that the American way (of influencing policy), even if not right, is at least legal. I guess this is a tough one to debate, given the fact that the laws that make it legal have been written by law-makers who were susceptible to the influence. Constitutionally, would it be an ideal state of affairs if market interests are structurally separated from the state (in the same way like religion is separated from state)? Practically, this would mean payrolling election campaigns through public funds and ensuring that law-makers are insulated from business interests. Has this ever been tried anywhere?

Book Recap: All The Shah's Men

For those who came in late, in 1953 Britain and the United States organized a coup in Iran which brought down a democratically elected prime minister and reinstated a western-friendly monarch. This coup was the fledgling CIA's first successful "outing" and was officially under wraps till the 1990s.

This is the key theme of All the Shah's Men - An American Coup and the Roots of Middle East Terror (2003) by Stephen Kinzer. Whether you like broad-brush political drama or the nuts-and-bolts of spy intrigue, this book has juicy chunks of both. I enjoy the former more, and the first half of the book had me captivated. Kinzer takes great pains to take his readers back to 559 BC when Cyrus reigned over what is present-day Iran(Cyrus founded the 'Pars' empire, from which came Persia and India's Parsis) and then guide them back to the day in 1953 when protestors broke down the door's of the prime minister's apartment in a bid to capture him. He has a really interesting take on Shia philosophy and how it affects the worldview and politics of contemporary Iran (which is 89% Shia).

The prime minister in question was Mohammad Mosaddeq and those who overthrew him were supporters of the ousted king Mohammad Reza Pahlavi. Conditions for the coup arose after Mosaddeq nationalized Iran's oil, the rights to which lay since 1908 with the Anglo-Persian Oil Company (the present-day British Petroleum) threatening the vital supply of oil and oil-profits to Britain. To their credit, the Americans weren't initially enthusiastic about the regime change; it was the British who sold them the idea by packaging it as being necesary to keep the Soviets off Iran. The book has some fascinating description of how the CIA exploited the spy- and informer-network in Iran to destabilize the country and eventually facilitate the violent grab for power.

The one place where Kinzer fails is his single-minded approach to representing the entire episode as being influenced by the Americans and Brits. As his own descriptions reveal, there were other significant powers working in the country, not least the Communist and Islamic movements. I get a sense that Mosaddeq was as much hassled by Islamic fundamentalism in Iran as by British attempts to derail him. Unfortunately, Kinzer seems to give only cursory mention to and dismiss any factors other those related to the CIA. If you are very enchanted with the internal combustion engine, it is easy to forget that you also need a transmission and wheels to run an automobile.

This book (or others on that period in Iranian history) would be essential reading for anyone to form an opinion on what is happening in Iran today. One need only have half a brain to connect the dots from 1953 to 9/11 and Kinzer doesnt dissapoint. To quote him: "The crucial question of whether the American coup was necessary...cannot be conclusively answered. The coup certainly had disastrous aftereffects. What might have been the effects of not carrying it out must remain forever in the realm of speculation".