Universal Digital Access - prime requisite for leading the next techade: ETILC

If Indian policymakers and business leaders took a cue from global economic history, especially the last decade, it would be amply clear that if we have to thrive in the current economic conditions we have to make technological advancement our top priority. Global firms with a market cap of more than 100 Bn USD have doubled over the last decade. Focus has shifted from O&G to Banking & Technology. HBR recently published a scorecard that maps economies along two dimensions: the present state of the country’s digitalization and the speed of digitalization over time (as measured by the growth rate of the digitalization score over 12 years, 2008-2019). As shown in the graphic below, the resulting “atlas” for the digital planet segments the economy into four distinct zones: Stand Out, Stall Out, Break Out, and Watch Out. India needs to up both momentum and evolution.


In the Indian context, our tech startups are experiencing the kind of growth that has never been seen before and the public sector’s introduction of Aadhaar and implementation of GST have helped bring about tangible progress. After the upsurge of Covid-19 cases, the digitalization of health, rapid growth of e-commerce, and the utilization of AI, ML, and IoTs in sectors like agriculture, logistics, manufacturing, and healthcare has never been faster. And this is where the country’s focus should remain.

Economic Predictions
For Indian businesses, geopolitical dynamics will remain important and thus necessary to watch. Experts predict that while the US and China will show growth this year and next, Europe’s performance is not assured. Due to the high range of stimulus in most advanced countries, the inflow of money will continue and foreign flows will remain high, particularly in India. As far as global partnerships are concerned, areas of possible collaboration will include - Nuclear and Space, financing renewables, and climate. Along with this, trade and tariffs, issues related to labor and immigration, and capital investments; which have traditionally been areas of international competition, will remain to be so. The squabble between privacy and the public good, individual enterprise versus state control, governance and value over areas of 5G hardware, telecomputing, may lead to a new cold war over data.

Geopolitics
The US-China conflict can be a potential turning point for India provided the country interprets it as an opportunity rather than a threat. The global GDP is predicted to double by the year 2050, owing to the integration of technology. In India, most of the unicorn companies are based around technology and have the capability of expanding even more in the coming years with the use of AI and ML. However, the systemic shortcomings in our economic model constantly present us with the problems of unemployment and digital disparity, The need of the hour is an acceleration of vaccination, increased sectoral support, aiding MSMEs, investing in infrastructure, and ensuring the prevention of digital apartheid. Regarding the Covid-19 fiscal measures taken worldwide, India’s fiscal effort doesn’t rank as high as China’s or U.S’s but education and public health failures can be upturned via economic policy. What India needs is to upgrade the primary and preventive healthcare model, and to expand it along with a more accessible educational model to Tier- IV, V, VI cities. Doing this will aid the needed shift of the agricultural workforce to low-skill and high-skill jobs in the digital ecosystem.

“If you listen carefully to what Chairman Jerome Powell is saying, it is clear that the Fed is currently not seeing inflation as a worry. He intends to continue with an accommodative stance of the monetary policy till the Fed believes inflation expectations are anchored above 2% and there is full employment. He does not see that before the end of 2023,” said Dr. Janmejaya Sinha, Chairman BCG India.

Most monetarists believe in an extremely simplified correlation between money supply and inflation. We mustn't conflate the base effects of the tight situation during the pandemic and causes of inflation. Just because our input price is rising, it isn’t the equivalent of overall inflation going up. If we analyze the current situation of India, we can rightly infer that there’s a significant amount of stimulus. FII investments in India are at more than 38 billion USD and the stock markets are functioning successfully.

“Indian businesses’ tendency to spend on strategic tech seems especially depressed now. For how long do you foresee this continuing?” said Rangarajan Vasudevan, Founder and Chief Executive Officer, TheDataTeam.

India’s biggest digital problem is not technology, it is the shortcomings of our talent and organizational structure. There is a wide generational and ideological gap between the relatively experienced and conservative group with organizational power and those who are digitally skilled but lack the power of decision-making. The need to integrate these two standpoints is extremely crucial and lacking. As per an Accenture report, AI is expected to raise India’s annual growth rate by 1.3 percentage points by 2035—in a scenario of intelligent machines and humans working together to solve the country’s most difficult problems. This amounts to an addition of US$957 billion, or 15 percent of current gross value added (a close approximation of GDP), to India’s economy in 2035 compared with a scenario without AI.

“We have seen tremendous tech-related innovation and disruption in service sectors. What is the pace of innovation in traditional manufacturing industries?” said Kanchan Jain, Managing Director & Head of India-Credit, Baring Private Equity Asia.

Even in traditional manufacturing industries, various companies have already made major changes related to supply chains. In the past fifteen months, various companies have altered their ways of doing business; there have been large investments in digital marketing and an effective shift to the work from home model. Because of this, multiple opportunities, as well as implications such as data security issues, have risen. What has been important for CEOs here is diligently going through their supply chains, sales, ways in which their functioning has been impacted, and then weighing their drawbacks and benefits to deploy their learnings to the next stage.

“Shouldn't India introduce some form of protectionism to give confidence amongst Indian companies to spend on innovation and technology?” said Dinesh Aggarwal, Joint Managing Director, Head – New Business (ISAMEA Region), Panasonic Life Solutions.

A lot of our need to seek protection is the result of our inefficient policies. We have the potential to make a global mark. Instead of protection, we should focus on reforming institutional rigidities in areas that are making us uncompetitive and remove institutional impediments. The problems remain the same - the cost of capital, cost of power, difficulty in doing business. If we unwind the existing problems, we will automatically become more competitive. As per an Econstor working paper, protectionism is inversely proportional to investments.

“Do you see China's GDP overtaking that of the US in the next 10-12 years with China investing very significantly in R&D, both in basic sciences and data?” said Amit Ghosh, Senior Vice President - South Asia Region, Bureau Veritas India.

Soon, the digital space will be a competitive one. Different groups will have a monopoly over different spaces. It would be incorrect to predict the US’s permanent decline. If the US can find a resolution to its Republics-Democrats polarity, then it could retain its position. When it comes to data storage, India and China can be global leaders, provided they strategize effectively.

“How do you see the data localization policy in India going? This policy has been on the drawing board for some time now. When do you expect it to be notified?” said Sumeet Doshi, Country Manager & Senior Director, Sales India, Ultimate Kronos System.

Europe’s GDPR has already been introduced while China has its authoritarian form of government, which has its risks of limiting the level of unpredictability in policies. India needs a body to deal with data mobilization and localization effectively. While the process has begun, many challenges still have to be overcome.

“Are inflated valuations of companies distracting our focus from the real economic parameters of value addition and profits?” said Ravi Raghavan, Managing Director, Bharat Fritz Werner.

Identifying and distinguishing the free cash flow companies from valuation companies is vital. When there’s no potential for high multiples, we must create free cash flow instead. Valuations are high because people observe high growth in certain areas. Even when the level of valuation is not sustained, growth persists.

“Is cheap money coming in good for the long run? Will we see another tech bubble?” said Ramesh Babu, Managing Director, Velan Valves India.

There is a bubble every ten years. However, what is more, is that we stop confusing India, which is a project financing economy, with a working capital economy. Most of the economists are trained in the US or the UK where there are working capital economies and thus adapt that monetarist mindset.

“What is the level of confidence that global corporate leaders have in India have at the moment?” said Prashant Pandey, Country Manager, Right Management.

Although we’re deeply aware of the problems with the image of India and even though the pandemic has set us back further, India doesn’t stand completely inefficient. Despite the hurdles, there has been development in parameters like poverty reduction.

“There is a lot of talk about India benefitting in various sectors as supply chains need to get diversified out of China. Are we well placed to do that?” said Kanchan Jain, Managing Director & Head of India-Credit, Baring Private Equity Asia.

India does not necessarily need a China+1 model to participate in the global supply chain. If we make manufacturing uncompetitive owing to the high cost of capital, power, and land operations, then it becomes hard to participate. When it comes to de-risking from China, we also need to realize that there’ll be a lot of players evaluating this opportunity.

“Do you foresee any long-term global socio-cultural penalties directed at China due to Covid?” said Sankalp Saxena, Senior Vice President & Managing Director, Nutanix Inc.

When it comes to predicting socio-cultural penalties, the answer is less to do with indiscretion or breaking of the law and more to do with power.

“What is your view on ESG high score companies scoring high on valuations?” said Sridhar Dharmarajan, Executive Vice President & Managing Director, satyaHexagon|MSC Software.

More and more companies are now facing the pressure to deal with sustainability. Sustainable investing can create a competitive advantage, and adopting socially responsible practices is quickly becoming a requirement for doing business.

“The investors are still focused on India, it is the non-investor CEOs whose radar we need to get on. For us to manage our image, we need to make external outlets see our image from our perspective,” said Satyakam Arya, Managing Director & Chief Executive Officer, Daimler India.