Business & Technology
Read an excerpt from Nandan Nilekani's Imagining India (continued):
My years as an entrepreneur have especially brought home to me how much India, despite its recent tremendous growth, is straining against the challenges that hold it back. Today, we are a nation that has barely scratched its potential. Almost two decades after economic liberalization, the absence of critical reforms means that for a majority of Indians daily life continues to be a struggle—for the millions of marginal farmers unable to find alternatives to bare, hard livelihoods; for people living in slums for want of cheaper housing; for families cobbling together their savings to send their children to private schools because our government schools are a mess.
A big reason for our struggle lies in our inability to push through and implement critical ideas. Once in a while, at a committee consultation in Delhi or in a state-level advisory role, I have had the chance to have candid conversations with our ministers. Admittedly, an Indian politician for all his faults faces a complicated balancing act in our government, where the socialist ethos is still dominant. Being a legislator in this system means negotiating for money from both the central and the state governments; getting work out of an often reluctant bureaucracy; navigating an agenda through the various, often unconnected, state organizations; and of course meeting the demands of one's constituents and somehow retaining power through our unpredictable election cycles. These various pulls and pressures mean that when it comes to policy the urgent wins over the important, tactic triumphs over strategy and patronage over public good. The result is a certain cynicism, evident in what a prominent politician said to me when I buttonholed him with some policy ideas: "I don't see much upside in talking to you— you're neither good for notes [money] nor votes."
During such conversations I have felt very far away from India's new optimism and its bustling markets. It is not easy to find common ground— between governments, entrepreneurs, the middle class and the poor—when people's priorities and incentives are set so wide apart. In fact our ideas for the Indian economy have in recent years become more ghettoized than ever.
A different view
I have been fortunate to have had a unique perch from where to witness these divisions. I am of course an outsider in India's politics, but the label also applies to me when it comes to Indian business. Having cofounded and worked in Infosys for twenty-six years, I can call myself an Indian entrepreneur. But as an information technology (IT) company, Infosys always faced challenges different from the rest of the Indian industry. Shortages in infrastructure did not affect us, as our markets were international, and all we needed to do business was a wire and some computers. We experienced little of the labor problems and strikes that plagued India's traditional industries. Since the government did not recognize us as a "conventional" business for a long time, their regulations did not hamper us, and we worked outside the controls that stifled companies in manufacturing and agriculture. We did not need the raw material—iron or coal, for instance—that required Indian firms to interface with the state-run companies that controlled these resources. And we did not have to build relationships with bureaucrats or make periodic visits to Delhi, so we were not drawn into the charmed circle of Indian companies whose relationships with governments both benefited and constrained them.
Culturally as well, we stuck out. We were seven skinny (alas, no longer!) engineers, first-generation entrepreneurs who were untested in business. This was quite an anomaly at a time when family-owned firms dominated Indian industry. These were companies whose owners wielded tremendous operational and financial control, and while some of them remained competent despite the perverse incentives that came from such power, quite a few were run haphazardly and rarely made profits for the small shareholder. Their operations were often opaque and misleading—for instance, they would report inflated prices while purchasing raw material or importing capital goods, and underreport sales. A common joke in those days was that the owners of these companies had returns that were "RBI"—"returns before investment." Industry observers would note wryly, "These firms are going bankrupt, but their owners are not."
Infosys was among the first companies to change this perception of Indian business through an ethos of transparency and strong internal governance. We quickly built a reputation for creating widespread shareholder wealth. People began to call us India's "new economy" company. Fifteen years later, they still call us that.
Infosys came with none of Indian industry's typical history, family ties and regulatory baggage. Consequently I have been more of an observer than a participant in the trials of Indian industry. I am hopeful enough to believe that this combination of proximity and objectivity gives me a rare and valuable perspective. And although I have spent my entire career in the private sector, I have been lucky in the chances I have had to foray into public policy, both at the state and the national level, and to directly experience the challenges in the government since the reforms of the early 1990s.
But while I have been privy to many interesting conversations and views on India, writing a book on the country required a leap of a different order. I have never considered myself a writer, and there was no long-hibernating desire within me to pen down something in the hope that a book would eventually emerge. However, one reason to write this book came to me when I met Vijay Kelkar early in 2006. Dr. Kelkar is one of India's most respected economists and a passionate reformer. I have been a long-time admirer of his, especially after I saw a remarkable presentation he gave in 2002, titled "India: On the Growth Turnpike," which predicted—with what would turn out to be unusual accuracy—India's growth trends over the next few years. Dr. Kelkar looks very much the serious academician, but he has a wicked sense of humor and a reputation for straight talk, which has sometimes created a few problems in his interactions with the government. "What I discovered, however," he told me, "is that just putting my ideas out there—regardless of how unwelcome they were to our legislators at the time—mattered. Doing this seeds new ideas among people, and sometimes they catch on. This kind of legacy is, I think, the most enduring one you can have." Dr. Kelkar's remark got me thinking. Perhaps I could write a worthwhile book if I could distill my experiences—and those of the policy makers, entrepreneurs, academicians, social activists and politicians I knew—into ideas that not only explained the peculiar animal that the Indian economy was shaping up to be, but also helped chart a way forward for the country (even if this meant courting controversy).
As both an entrepreneur and a citizen, I have been heartened by our economic progress in the last twenty-five years. India's annual growth of more than 6 percent since the early 1990s is surpassed in history by only one other country, China. And we have made incredible strides in other areas—in the rise of our domestic market, our average incomes and a powerful middle class. But our successes are bittersweet. The immense challenges India faces more than two decades after reform trigger a range of emotions in me, as they do among many of my fellow citizens—puzzlement and frustration at the modest pace at which we are bringing about change, and sadness at the persistent inequity that is visible across India. There is a growing sense that these problems are now coming to a head—that our inequalities are making people angry and also limiting our ability to take advantage of the huge opportunities India has today.
The fact that India has a great opportunity before it seems more apparent when I travel—in people's minds across the world, India has unique promise. The country has enormous advantages in its young population and its entrepreneurs, a growing IT capability, an English-speaking workforce and strength as a democracy. It seems poised to grow into a strong economic power.
But what optimism I encounter about India is more often among people far from our shores—these are opinions shaped by our economic numbers, distant from and untouched by the tumult of our domestic politics and debates. At home, this opportunity feels much more fragile. Here, it is clear that there are many things holding us back—our pessimism around what we have accomplished so far, and a resistance to the ideas we need to implement in order to solve our remaining challenges. India's weaknesses are all within, in the ongoing struggle to define the direction of our future ideas and policies for the country. This book is my small attempt to make sense of this struggle and the possible ways we can resolve it.
Beyond business
When I told people that I was working on a book, they assumed it was a memoir of my business career, or my take on management strategy. They looked quizzical (and were probably alarmed) when I said that I was writing a book on India. Businessmen, after all, do not usually make good public intellectuals. I console myself that I am but an accidental entrepreneur, who if he had not walked into the office of the charismatic N. R. Narayana Murthy in late 1978 in search of a job would probably have at best languished in a regular nine-to-fiver while living in a New Jersey suburb, taking the daily train to Manhattan.
