Vijay Govindarajan: Empower Youth and Entrepreneurs

For the next five years, the focus should be on using our biggest asset—our demographic dividend—to turn India into an economic powerhouse

Published: May 27, 2014 06:48:15 AM IST
Updated: May 22, 2014 02:59:56 PM IST
Vijay Govindarajan: Empower Youth and Entrepreneurs
Vijay Govindarajan Coxe Distinguished Professor at Dartmouth College’s Tuck School of Business. An expert on strategy and innovation, he was the chief innovation consultant at General Electric and is most famous for his co-authored book Reverse Innovation. He is also a noted management thinker

I sit in the US and look at India through the eyes of American multinationals. As far as I can tell, the India shine is off for people here. In the last 12 months, news from the country has been anything but good: Growth has slowed, inflation is back, direct foreign investment has plummeted, politics is stuck in a rut, corruption is on the rise, the rupee has turned unstable and rating agencies have given India a thumbs down. People are starting to question whether India matters anymore. But I believe that is a wrong conclusion. Let me explain why.

India at crossroads
Today, India’s per capita income is $1,500 (Rs 90,315), compared to $50,000 (about Rs 30 lakh) in the US. Now, even if India does not achieve the $50,000 per capita level, it can reach $15,000 (approximately Rs 9 lakh) per capita—a 10-fold growth—by 2050. This will move India from a $2 trillion economy to a $20 trillion economy and this is huge growth. The size of the US economy today is $18 trillion.

That’s why the next government, whoever it is, has to take critical decisions to create the India of 2050. In fact, the country is poised at a crossroads as we speak and we must make the right choices over the next five years. The reason I say this is because the current average age in India is 25 years. We have a window of 35 years (by which time the average 25-year-old turns 60) to leverage the demographic dividend which, otherwise, will become a demographic disaster.

Failed Socialistic Policies
There is a tendency in India of following socialistic policies. We have tried that since 1947 and it was a disaster. We bankrupted the country. In the early 1990s, we were forced to embrace free market and capitalism and when we did that, we saw tremendous growth. But that created concentration of wealth in some quarters and, now, politicians say let’s swing the pendulum as income inequality between the rich and the poor is becoming too wide. They talk about giving free food, free energy and subsidies but I think that is the wrong way to go. We have to continue to focus on capitalism but just on a different version of it.

Compassionate Capitalism
We have for long used the American form of capitalism, which only took care of 10 percent of Indians. Instead, we need to focus on what I call compassionate capitalism, responsible capitalism and inclusive capitalism. Every one of the 1.2 billion Indians should reap the benefits of economic growth. In fact, India has the opportunity to reinvent capitalism.

In the next five years, we have got to embark on a journey which focuses on using our biggest asset—our youth—to turn India into an economic powerhouse. We have to emphasise on economic development as the central engine to move India forward, and that will create jobs. To do that, we have to come up with the big ideas because they galvanise a country. This is similar to John F Kennedy’s “Man on the Moon” statement.

My Three Big Ideas

1)  Let’s go back to the Ganga-Cauvery river link: This was mooted almost 40 years ago and forgotten soon after. We must initiate it. This could transform India by transforming agriculture. Rural development is critical in creating jobs. This project will provide drinking water and sanitation and bring in new sources of energy. It will mitigate the recurring flooding problems in the north while alleviating the drought in the south. It will also help generate millions of jobs both in rural and urban India. It will create upstream and downstream business opportunities in both manufacturing and services. In short, this has the potential to remake India.

Is it easy to do? No. Big ideas are always challenging. But India has the scientific, engineering and environmental capabilities to actually pull off something like the link. We implemented a mega project like the Golden Quadrilateral, so why can’t we take on a project like this?

Vijay Govindarajan: Empower Youth and Entrepreneurs
Image: Ajay Verma / Reuters
The next government must emphasise on economic development as the central engine to move India forward and come up with big ideas to create jobs for youths

2) Nuclear energy from thorium: India’s energy consumption today is 22 quadrillion Btu (British thermal unit) annually. The world consumes 500 quadrillion. Indians, therefore, are consuming less than 5 percent of all the energy used. We are energy-starved so we import most of it, and from less-than-desirable countries and regimes. We have to think boldly and out-of-the-box to solve our energy problems.

India cannot continue to use fossil fuels, which are expensive and also environment-unfriendly. It cannot afford to embrace anything other than clean and sustainable energy sources. Here is my idea: Why can’t we focus on nuclear energy from thorium, which is found abundantly in India? The West has ignored thorium because, compared to plutonium, it does not allow for weaponisation of nuclear technology. Thorium can produce a lot of clean energy, and it’s not just inexpensive but can also be easily scaled up. Further, the West will not object to it since it cannot be used as a weapon.

3) Relax controls for businesses: Let us have a country where economic growth is encouraged. Controls on businesses stifle and paralyse India. We have to relax these for both multinationals and domestic companies. The tax system and excise duties structure and controls have to be streamlined. The problem with this, though, has been the subsequent concentration of wealth and this stems from the way we have implemented policies in the last 20 years. For instance, we said multinationals can enter India as long as they have a local partner, typically a gatekeeper which tended to be an already wealthy company. As a result, wealth got concentrated.

We need to find a way in which every Indian gets to participate, to ensure social justice. Why not allow global companies to enter India solo—that’s how they will bring their best-in-class technology. The only requirement is that they must list their shares on the Indian stock exchange and raise equity capital here. They can keep 51 percent stake but the remaining 49 percent must be raised in India. Regulations must be devised which look at diverse share holding so that there is be no single class of shares or institutional ownership. This will democratise value creation.

Freedom to Entrepreneurs and Youth
India faces a dilemma of whether to go back to socialism and populist measures or to stick to the road chosen 20 years ago which was to liberalise India, make it free to do business. I believe we have chosen the right path: We made a few mistakes so we need to restore good, corruption-free governance. We also have to let entrepreneurs and the youth have the freedom to take initiative and action.

India’s growth is bottom-up. Our strength lies in our people. But we have had no leadership to harness the talent: We need the political heft that says we want entrepreneurs to spread their wings and grow. Of course, the government has to play a role in setting fiscal and monetary policies, regulations and social justice but, ultimately, the responsibility for  growth should come from entrepreneurship and innovation based on big out-of-the-box ideas.

(As told to Deepak Ajwani & Salil Panchal)

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(This story appears in the 30 May, 2014 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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  • Dr.a.jagadeesh

    Excellent article. Countries like India and China have great assets - Human Resources especially Youth. I have a novel scheme to provide nationwide employment and bringing waste land under cultivation. There are millions of hectares of wastelands in the country. Can't we put it to good use? There are care-free growth plants, regenerative and CAM like Agave and Opuntia which can be put to many uses especially for Biofuel/biogas power. Mexico is pioneer in this. A scheme YOUTH ECONOMIC ZONES(YEZ) on the lines of SEZ can be created where in unemployed youth trained in farming can each be allotted 10 acres each on lease basis. 10 such youth can form a co-operative. They can grow Fast growing ,care-free growth plants like Agave and Opuntia. From the output Biofuel/biogas power units can be set up at local level. Here are the many uses of Agave and Opuntia: For decentralised power generation as well as cooking, biogas is the best option. Biogas power from care-free growth ,regenerative CAM plants can be obtained on massive scale. These plants can be cultivated in waste lands. Being CAM plants they act as Carbon Sink. Crassulacean acid metabolism, also known as CAM photosynthesis,is a carbon fixation pathway that evolved in some plants as an adaptation to arid conditions.[ In a plant using full CAM, the stomata in the leaves remain shut during the day to reduce evapotranspiration, but open at night to collect carbon dioxide (CO2). The CO 2 is stored as the four-carbon acidmalate, and then used during photosynthesis during the day. The pre-collected CO 2 is concentrated around the enzymeRuBisCO, increasing photosynthetic efficiency. Mexico is pioneer in Biogas/Biofuel production from Agave/Opuntia. Every village can be provided a Big Biogas plant and gas supplied through pipes to houses.Biogas power plants from KW size to MW size are available commercially. The main drawback for wider application of Biofuels is input. There was a big movement for biofuel from Jatropha in India but in reality not much has been achieved. Agave(Americana),Sisal Agave is a multiple use plant which has 10% fermentable sugars and rich in cellulose. The fibre is used in rope making and also for weaving clothes in Philippines under the trade name DIP-DRY. In Brazil a paper factory runs on sisal as input. A Steroid HECOGENIN is extracted from this plant leaves. Since on putrification,it produces methane gas, it can be cut and used as input in biogas plants. Also in Kenya and Lesotho dried pieces of Agave are mixed with concrete since it has fibres which act as binding. Here is an excellent analysis on Agave as a biofuel: Agave shows potential as biofuel feedstock, Checkbiotech, By Anna Austin, February 11, 2010: 'Mounting interest in agave as a biofuel feedstock could jump-start the Mexican biofuels industry, according to agave expert Arturo Valez Jimenez. Agave thrives in Mexico and is traditionally used to produce liquors such as tequila. It has a rosette of thick fleshy leaves, each of which usually end in a sharp point with a spiny margin. Commonly mistaken for cacti, the agave plant is actually closely related to the lily and amaryllis families. The plants use water and soil more efficiently than any other plant or tree in the world, Arturo said. 'This is a scientific factthey don't require watering or fertilizing and they can absorb carbon dioxide during the night,' he said. The plants annually produce up to 500 metric tons of biomass per hectare, he added. Agave fibers contain 65 percent to 78 percent cellulose, according to Jimenez. 'With new technology, it is possible to breakdown over 90 percent of the cellulose and hemicelluloses structures, which will increase ethanol and other liquid biofuels from lignocellulosic biomass drastically,' he said. 'Mascoma is assessing such technology.' Another plant of great use is OPUNTIA for biogas production. The cultivation of nopal((OPUNTIA FICUS-INDICA), a type of cactus, is one of the most important in Mexico. According to Rodrigo Morales, Chilean engineer, Wayland biomass, installed on Mexican soil, 'allows you to generate inexhaustible clean energy.' Through the production of biogas, it can serve as a raw material more efficiently, by example and by comparison with jatropha. Wayland Morales, head of Elqui Global Energy argues that 'an acre of cactus produces 43 200 m3 of biogas or the equivalent in energy terms to 25,000 liters of diesel.' With the same land planted with jatropha, he says, it will produce 3,000 liters of biodiesel. Another of the peculiarities of the nopal is biogas which is the same molecule of natural gas, but its production does not require machines or devices of high complexity. Also, unlike natural gas, contains primarily methane (75%), carbon dioxide (24%) and other minor gases (1%), 'so it has advantages from the technical point of view since it has the same capacity heat but is cleaner, 'he says, and as sum datum its calorific value is 7,000 kcal/m3. Biogas power generators from KW to MW size are available from China and Vietnam. Agave and Opuntia can be grown on a massive scale in wastelands in developing countries. The cultivation of nopal((OPUNTIA FICUS-INDICA), a type of cactus, is one of the most important in Mexico. According to Rodrigo Morales, Chilean engineer, Wayland biomass, installed on Mexican soil, “allows you to generate inexhaustible clean energy.” Through the production of biogas, it can serve as a raw material more efficiently, by example and by comparison with jatropha. Wayland Morales, head of Elqui Global Energy argues that “an acre of cactus produces 43200 m3 of biogas or the equivalent in energy terms to 25,000 liters of diesel.” With the same land planted with jatropha, he says, it will produce 3,000 liters of biodiesel. Another of the peculiarities of the nopal is biogas which is the same molecule of natural gas, but its production does not require machines or devices of high complexity. Also, unlike natural gas, contains primarily methane (75%), carbon dioxide (24%) and other minor gases (1%), “so it has advantages from the technical point of view since it has the same capacity heat but is cleaner, “he says, and as sum datum its calorific value is 7,000 kcal/m3. Dr.A.Jagadeesh Nellore(AP),India

    on May 30, 2014
  • Vikas Mohan

    Rightly said: India will over time redefine Capitalism, proving to be passionate lovers like none before.

    on May 27, 2014
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