From Legs To Minds

Context: Five million Indians now export more software than Saudi Arabia does oil. Imagine what 1.3 billion Indians could do with lower regulatory cholesterol.

Significance of science and technology 

• Building the scientific temper: Swami Vivekananda (in 1893) convinced Jamsetji Tata that technology could be imported, but scientific temper cannot be bought and must be built within a country.
• A direct outcome of this chance encounter was Jamsetji setting up the Indian Institute of Science in Bangalore.
• An indirect outcome was a technology-encouraging culture at the Tatas that pioneered India’s software industry in the 1960s: India now exports more software than Saudi Arabia does oil.
• Raising per capita income: Covid reminds us that raising our per-capita GDP (138th world ranking) matters more than raising our total GDP (5th world ranking). 
• Raising per-capita needs high productivity manufacturing and domestic services firms that disrupt our low-level equilibrium of labour handicapped without capital and capital handicapped without labour.
• India’s software services and tech startups are built on India’s openness, consistency and fairness.
• Raising per capita income would result in avoidance of the middle-income trap - developing country stagnation that comes from failing to transition from more inputs of land, labour and capital to the fourth factor of production; imagination, technology, and entrepreneurship

Potential of India in science and technology

• A development outlier: Being just a $2,500 per capita economy, about 5 million people write software, $10 billion in private equity raised in July, and a $3 trillion public market capitalisation.
• Increased digitalisation: internet data costs per GB at 3 per cent of US levels, 1.2 billion people empowered with paperless digital identity verification and 3.5 billion real-time monthly digital payments.
• Simplicity in regulation – avoiding regulatory cholesterol: One of the reasons for the divergent destiny of India’s software and manufacturing exports is the simplicity of rules under Software Technology Parks India rules of 1991 (STPI) and complexities under the Special Economic Zones Act of 2005 (SEZ).
• STPI allowed rebadging existing assets, embraced trust over suspicion, and adopted self-reporting that was largely paperless, presence less, and cashless. 
• SEZs largely replicated the regulatory cholesterol and distrust that has made India an infertile habitat for employment-intensive industries.
• Software industry – an oasis of high productivity: 0.8 per cent of India’s workers generate 8 per cent of GDP.
• The mandatory global digital literacy programme and digital investment super-cycle sparked by Covid in education, medicine, shopping, office work, payments, restaurants, and entertainment will double our software employment in five years.
• Consequently, India will have the switching costs in software that China has in manufacturing.
• Global engagement: 50,000 tech startups have raised over $90 billion since 2014 from 500+ institutional investors.
•  India’s software services industry and tech startups are each estimated to be worth about $400 billion today. By 2025, it is expected India’s startup universe value to grow to $1 trillion.
• India’s global soft power by reaching high revenue and valuation possibilities— have curiously come before physical infrastructure, farm employment reduction, and higher women’s labour force participation.

Way Forward

• Increasing productivity: Kenyan, Eliud Kipchoge, suggested that “the first half of a marathon is run on your legs and the second half on your mind”. Massifying our prosperity needs massive formal, non-farm job creation.
• Creating the productive firms that will offer these jobs to our young needs replicating the regulatory trust and simplicity that our technology industry enjoys in the rest of our economy.
• Involving the youth: As Verghese Kurien believed – “ We must build on the resources represented by our young ... without their involvement, we cannot succeed. With their involvement, we cannot fail.”