'We need to celebrate wealth creation': CRED's Kunal Shah

Seventy-two years after Independence, India is now a functionally capitalist society. While it’s taken decades, we are no longer embarrassed by wealth, as the majority of working professionals earn a living from delivering profits. This has bred a new generation for whom wealth creation is aspirational and entrepreneurship is a desirable endeavour. The significance of this shift will become more evident over the next 10 years, during which our $5-trillion GDP aspiration will be tough to achieve without enabling business-creation opportunities.

The scope and scale of the entrepreneurship opportunity in India will be shaped by a few factors. These will drive social, infrastructural and cultural transformation, empowering thinkers and doers to create markets, jobs and wealth for themselves and the country.

The first area of transformation will be in our ability to empower value-creators to invest in India’s growth story. Our systems need to create a desire among our best to live in India and create businesses here. Over 200,000 Indians are waiting for a green card in the US, and over $14 billion was sent abroad, up from $1 billion five years ago. There is abundant capital, resources and intellect in India that today seek other avenues to maximise growth, which could have created immense value if invested locally.

We need to create the right ecosystem for our smartest to stay back, celebrating wealth creators and easing their lives and work. Unfortunately, friction and unpredictability are baked into practically every interaction with public services—from registering a company to paying taxes. Time that could be invested in value-creation is sunk in daily transactions, unlike, for example, Singapore where a business can be started in one working day. As long as it’s easier to live and work in another country, with a higher standard of living, more transparent regulations and a better quality of life, our best and brightest will not have any incentive to stay back and invest in India.

The lifestyle, process and infrastructure challenge is most felt by the least-represented value-creators. Half our educated population—India’s women—are locked in uncompensated labour in households, doing work that they are overqualified for. India ranks an abysmal 112 in the World Economic Forum’s Gender Gap 2020 report, and it’s getting worse across metrics, including economic opportunity, where our female workforce participation rates are as bad as 28 percent. Just reaching global parity of 48 percent can add $700 billion to our GDP.

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This requires a transformation in the social mindset that considers female education a passport to a better husband rather than a better life. We can learn from China, which empowers working women through thoughtful policies such as tax deductions on parental-aged care and health care costs, addressing two reasons why women stay at home. Apart from the productivity gains and increased consumption driven by double-income households, the China experience has also shown that the additional income is reinvested for the long term: Extra-curricular activities for children, attendance at highly rated institutions and better household care.

Spike in household income is directly correlated to consumption, which is expected to become a $6-trillion opportunity in India by 2030. But this opportunity cannot be fully realised if our entrepreneurs continue to import thinking from other markets and execute narrowly applicable copycat ideas.
 
The most successful startups of the next decade will focus on solving local problems, applying their contextual knowledge to create, invent and innovate solutions for India. The work to be done here is reflective in the number of patent applications filed: While over 600,000 applications were filed in the US in 2017 and over twice that in China, in India 46,600 applications resulted in a measly 12,000 grants. Japan, with less than a tenth of our population, had over 200 times the number of patent filings. For invention to become ingrained in our culture, we need to focus less on rote learning and more on creation, acceptance rather than mockery of new thinking, and provide the infrastructure to quickly prototype new products.

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Local invention, ease of living and working, and access to opportunities become growth catalysts when paired with transformation in how India is perceived abroad. People like to do business in environments that they are comfortable in, and foreign investors are people first. We need to present a more modern, reliable and safe face to the world, going beyond ad campaigns and slogans to create desirable destinations out of our cities.

The vibrancy of our urban ecosystems needs to be felt as much as shown: Do we have nightclubs and cultural hotspots that indicate the presence of young professionals and talent? Are our cities filled with tourists who are comfortable using public infrastructure and services? Do we have art and architectural icons who indicate prosperity and optimism? For India to be attractive to foreign capital, we need to first become a destination that capital owners and allocators desire to participate in. This will build currency as a new land of opportunity, similar to post World War-II US.

The most successful startups will focus on solving local problems and creating solutions for India

Lastly, individuals will invest time, money and effort in value-creation when they trust the system to operate transparently, resolve conflict quickly and enforce regulation effectively. This requires trust in institutions across the board, from the judiciary to law enforcement and banking. Every developed economy sustains itself on the basis of trust in its institutions and participants; a study by American economist Dr Kenneth Arrow found that high-trust societies are high-performing economies because they reduce friction in transactions and ease the availability of credit. Drop in trust levels results in the creation of closed parallel ecosystems—from the gated communities where we insulate ourselves to exclusive clubs where we interact only with people like us. These closed ecosystems become silos disconnected from wider society, limiting the opportunity for entrepreneurs to build products that can be distributed across segments.

The next 10 years of Indian entrepreneurship and economic vitality will be governed by the speed and efficacy of transformation in these five areas. We are the world’s second-largest startup ecosystem, with a projected 4x growth in consumer spending by 2030, by which time 80 percent of our households will be considered middle-income. We have all the ingredients and the alchemy of desire to live better and create our own opportunities. There’s no better time than the coming decade to not only dream of starting up, but also do so with confidence, even as our society transforms into one where wealth is celebrated and the opportunity to create it is available to everyone.

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