Techade: The reforms that India needs
During a conversation, the late Arun Jaitley once asked me, “Do you really know what people are talking about when they say they want more reform?” It was, characteristic of him, a pithy but sharp question. What does reform mean? Which reforms will have the biggest impact?
Reforms correct past decisions that currently create inefficient outcomes. The problem with correcting past decisions is that the ecosystems that get created around them, and the market players who have built businesses models customised to those conditions, get destabilised. As economist Mancur Olsen showed, change is always resisted by entrenched groups who lose lots versus the large, dissipated population that gains a little individually, even though the overall system in the long-term becomes more efficient — the collective action problem as it were.
So, it has been with the agricultural laws, which, despite their obvious benefits, were robustly resisted by those who would lose a lot. This is a reality we need to contend with given the nature of our democratic system.
Currently, we have another crying and urgent area to focus on — where reforms are overdue, will benefit us, and may not be as controversial. Prime Minister Narendra Modi’s call to take advantage of “techade” (a portmanteau of technology and decade) needs it. Technology is going to be the key driver of the global economy in the next 20 years. Both the United States (US) and China are leaders in the most cutting-edge tech. Eight of the 10 most valued companies in the world are tech companies. Many sectors are being transformed by tech, be it automobiles or retail. The net-zero imperative will further accelerate the advancement of tech. In many areas, Covid-19 has taught us that a new paradigm is possible.
To take full advantage of the “techade” India will need to do many things. It will need to play a constructive role in joining and shaping global standards that are currently in evolution – around privacy, data localisation, tax laws, the definition of monopolies, cyber security, immigration and predictability of regulations. But agreement around standards, while vital, cannot substitute for the basic gaps in our soft infrastructure.
I refer to education and health care, subjects we often talk of but don’t respect with the investments they need. We are falling behind at both the high end, and at the low end. Our primary education is in a shambles and requires a reset, and our higher education institutions, once our pride, are falling behind. In terms of government expenditure, we spend 5% on health and education combined. Most countries spend a multiple of what we do. A large proportion of our young population is unschooled and malnourished. But this does not become a crying election issue like agricultural reforms because its impact is not felt immediately. This is where urgent action is needed. We have the building blocks now with the Jan Dhan-Aadhaar-Mobile (JAM) trinity to be more creative.
The recent National Family Health Survey has pegged our total fertility rate below the replacement level of 2.1. This adds to the urgency, for the young will start shrinking over time and young adults who have missed being schooled will become a burden unless we target them with adult education and skilling. We are staring at the prospect of vast swathes of our citizens ill-equipped to deal with the future.
How can much needed actions on soft infrastructure be also made attractive vote winners? Can we consider mixing some freebies together with a revamping of education and health — free or subsidised smartphones, some free data, subsidised connectivity, and direct benefit transfers through loaded wallets useable for nutritious food?
Delivery on education and health should then use intelligent engagement methods – make learning entertaining and engaging possibly by using gaming to stay on these platforms. Focus on numeracy, language skills and the use of basic gadgets should be made fun. People can start enjoying learning, interacting, doing business, getting loyalty health points.
What smart mechanisms can we use to improve the basic education and health of our citizenry? At a minimum, it will require a sizeable increase — perhaps tripling — of expenditure on health and education. Given the subjects, a Goods and Services Tax-type council will be needed to foster coordination and alignment across the Centre and the states.
At the high end, we will need to invest heavily in our top universities and encourage new private universities. We need to align their curriculum with the needs of the future — developments in robotics, quantum computing, biotechnology, machine learning and all the developments that are reshaping the world — and make teaching and research attractive professions.
We cannot allow the developments that play to our strengths to pass us by because we don’t do the basic minimum to invest, and upgrade our facilities. Despite our handicaps, Microsoft, Alphabet, Adobe, IBM and now Twitter are led by first-generation Indians, and our entrepreneurship has led to the creation of a unicorn a week this year. But it is not enough.
In the next phase of our journey, the defining focus must be soft infrastructure. Even a $10 trillion economy gets us to only $7,000 per capita. We must double down on education and health care in a new technologically-enabled paradigm, so that our per capita keeps increasing. In the digital era, digital access should be the weapon to rethink our future. “Techade” can be India’s moment. But we must seize it.
Janmejaya Sinha is chairman, BCG India
The views expressed are personal