Mega Forces; Universalisation: Reengineering Millennium Mindsets

TRIMILLENNIUM MANAGEMENT: UNIVERSALISATION
Reengineering Millennium Mindsets

By Pradip P. Shah

As we enter this millennium, we in India have to think about doing things differently if we wish to catapult ourselves to the forefront of the world economy. Must we, as an economy, be necessarily wedded to our legacy of strategies which have, for the past 53 years, deified manufacturing, pampered agriculture, and ignored services? At a time when re-engineering is one of the prevailing business themes in the world, our planners need to borrow this concept and re-engineer the economy to capitalise on our strengths, mitigate our weaknesses, and address emerging opportunities in the world economy.

Consider these facts: in the US, 78 per cent of the labour-force is employed in services and 15 per cent in manufacturing; in India, according to the 1991 census, 21 per cent of the workforce of 279 million is engaged in services, 13 per cent in manufacturing, and 67 per cent in agriculture. The world over, an increase in prosperity has been accompanied by an increase in the demand for services. At one level, India has the opportunity to cater to this demand for services. At another, with rising prosperity, the country will witness an increasing demand for services in the domestic market too.

Distressingly, our economic policies, not just in the early years of planning, but even in the recent past, were designed towards encouraging manufacturing rather than services. A recent survey conducted by the Political & Economic Risk Consultancy placed India at the top of the list of Asian countries in terms of the availability, quality, and cost of skilled labour, ahead of other countries such as the Philippines, China, Australia, Japan, and way ahead of nations like Singapore, Thailand, Hong Kong, and Indonesia. India has to build upon this strength of its white-collar workforce.

In contrast, when the Far Eastern Economic Review surveyed 3,000 of its subscribers between April and June, 1999, the respondents placed India a lowly 8th out of 10 possible locations for a new factory, with China, Thailand, Malaysia, and Philippines leading the list, principally on the basis of their quality of labour. The quality of India's blue-collar labour, or, more likely, the country's labour laws, creates this unfortunate impression. But, with coalition politics emerging as the norm in the foreseeable future, a rationalisation of India's labour legislation is unlikely.

Technological and commercial developments will present India with opportunities to capitalise on the basis of its white-collar skills. The Net, for instance, will allow it to participate in the exponential growth predicted for e-Commerce in developed markets by providing services like document-processing. Already, companies like General Electric, Swissair, and American Express have established centres that perform some of the services from a distance. In a recent study, McKinsey & Co. identified 11 white-collar services that can be performed off-shore with relative ease. The firm projects, by 2010, a global market of $180 billion for such services, including finance and accounting ($20 billion); engineering and design ($6 billion); data-search, integration, and management ($20 billion); distance education ($19 billion); Website-services ($7 billion); and customer-interaction services ($42 billion).

Parallely, a study conducted by the National Association Of Software and Service Companies (NASSCOM) indicates that about 23,000 Indians are already generating $225 million in revenues from such services. The NASSCOM estimates that these services could generate 1.10 million jobs and $19 billion in revenues by 2008. In the gap between $180 billion and $19 billion lies an opportunity for India Inc..

Infotech is not the only area of opportunity for India in the 21st Century. Technology consultant John V. Buckley points out that European companies spend upto 10 per cent of their total R&D budget outside the company, and US companies, even more. The beneficiaries of this include academic institutions and contract-research organisations. Buckley predicts that the technology leaders will be those companies that outsource product-development, enabling them to exploit technology faster and more cheaply than their competitors. Clearly, India stands to benefit from this contract R&D wave, especially in pharmaceuticals and biotechnology.

The international tourism industry records international arrivals exceeding 650 million. The Economist expects jobs in the sector to increase from 255 million in 1996 to 385 million by 2006. India, which attracts not even 0.50 per cent of these tourists, can secure some of those jobs; additionally, the tourism business has the potential to deliver jobs to the doorsteps of citizens in rural and urban areas throughout India. But for all this to happen in the 21st Century, India needs to re-organise its regulatory framework with one objective: less governance. Even in coalition politics, it may be possible to have a Cabinet rank minister for the economy, who would be responsible for the areas of finance, industry, railways, civil aviation, tourism, labour, telecom, planning, and all the other ministries that have some bearing on the Indian economy.

Each of these areas could be headed by a Minister of State. But it would be the overall responsibility of the Minister for Economy to develop and implement a strategy that leverages India's intrinsic strength in services to propel us forward in the first decade of this century. In each functional area, this strategy would require the government to re-examine its policies and rationalise them in a time-bound manner to achieve articulated and measurable goals: in terms of job-creation, and contribution to GDP, productivity, and foreign exchange earnings.

Elements of this services-oriented strategy would include encouraging the acquisition by students of linguistic skills in German, French, and Japanese instead of forcing them to learn regional Indian languages which bring pride, not prosperity; grants to universities and support to government research laboratories contingent on those institutions raising matching funds from commercial services; and freeing foreign tourists from the hassle of obtaining visas from inefficient Indian embassies. No fiscal concessions are envisaged in this strategy. Nor is it necessary to create a new governmental infrastructure. All that the government must do in the third millennium is to reduce its stifling embrace.

If our history books are to be believed, India was an economically prosperous region 2 millenniums ago. Since then, however, there has been a secular decline. With our human resources, we have the wherewithal to reverse that decline in this millennium. Good leadership, good organisation, and good policies at the government-level can make this a reality.

Pradip P. Shah is the CEO of Indasia Fund Advisors

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