Incredible India|Shunwei Reports
Shunwei Capital 2017–03–17 18:53

Our neighbor India is like a foreign beauty who is wearing a veil. India is a multi-faceted country with mysterious religions and ancient histories, and noisy and bustling cities. India is home to gold watch and gold chain-wearing tycoons whose fortunes can rival those of the nations, as well as impoverished masses who wear practically nothing and sleep unsheltered under the skies. She is also home to audiovisual products in which performers launch spontaneously into dance and song, and a culinary culture where bare hands are used in eating and for the tossing of dough into the air.
For people who have been curious about this fantastic nation in the Indian sub-continent, the country’s tourism authorities have created a concise advertising slogan: “Incredible India”. We plunged headlong into Incredible India with boundless curiosity and the observational skills of those working in venture capital. What we saw for ourselves is a swiftly-developing market in a setting with both constant changes due to IT technologies and a backward society with little operational efficiency.

1. The swift popularization of the mobile internet

Just like credit cards have never become ubiquitous in China, desktop computers and the PC-based internet are rarities that have never really made an appearance in the homes of the man in the street in India. We can tell by how hotel reception personnel in major Indian hotels enter data into the computer. They are often seen using only one hand or a single finger for inputting information.
However, just as everyone has heard, Indian society has bypassed the PC age and is currently sprinting into the mobile internet age. With the proliferation of smartphones costing less than Rs.10,000 (CNY960), since 2014, the number of mobile internet users in India has grown dramatically. The most optimistic statistics have it that by the end of 2016, there would be 300 million users of mobile internet connections in India, making the market just second in the world to China’s (around 800 million users) in terms of size. And this figure is but 25% of India’s 1.2 billion mass population.
Here’s an incredible case study to illustrate just how quickly India’s mobile internet market is developing: India’s richest man, Mukesh Ambani, established a new company in 2016 called Reliance Jio. Mukesh spent billions of US dollars on building nearly 100,000 telecommunications towers across India which altogether cover 80% of India’s population. Then, it was announced that between 5 September 2016 and 31 March 2017 Reliance Jio users would be able to enjoy free 4G internet, calls and video services without any conditions attached. Countless Indian users were hurtled from “Stone Age” where the smartphone was barely known to a time when they could access mobile videos for free. The use of large-screen mobiles for gaming and videos became a very common sight on the streets of India.
According to MechMocha, an Indian game developer team, download numbers for their self-developed light-use games had increased threefold in the three months since September. If we are to say that the dividends from lower mobile handset prices in the previous few years have realized the swift popularization of these terminal equipment, then the example of Reliance Jio shows how Indian tycoons are able to educate the market using cold, hard cash and allow ordinary Indian users to learn how to adapt to mobile internet services and entertainment at no cost. We should note here that generous Mukesh’s family of four is currently living happily in a 27-storey mansion in Mumbai together with 600 faithful servants.
The rapidly-developing Indian mobile internet market has already nurtured a group of high-value tech companies. There are the Indian equivalents of Alibaba and JD.com (Flipkart and Snapdeal), Didi Chuxing (Ola) and Alipay (Paytm). Mass internet companies like Zomato, the Indian equivalent of Dianping; Hike (the equivalent of MOMO); and Quikr (the equivalent of 58.com), etc., are all swiftly rising in this space.
The sea of green and blue banners advertising the likes of Oppo and Vivo that are hung above numerous mobile phone shops on the streets of Mumbai would be familiar to those of us from China. The number of apps of varying kinds installed on the phones of white-collar workers at the entrance to Bangalore’s software parks is also no less than the number of apps installed by a factory girl in Shenzhen or Dongguan. Walking on the streets of India, one can hear the impressive characteristic ring tone of Xiaomi mobile phones at any time. This sound, part of the bustling street soundscape that also includes the horns of electric trishaws, tells us that the mobile internet wave is quickly washing over this country with a population of 1.2 billion.
2. The miraculous electronization revolution

If the story of how Reliance Jio is giving away free 4G internet service for half a year is not thrilling enough, then the “Demonetization” event that is on everyone’s lips should be sufficient to raise your heart rate. This was a sudden move made by the Indian government on 8 November 2016 to scrap all 500-rupee (around CNY48) and 1,000-rupee (CNY96) notes currently in circulation. Both denominations are the largest denominations in India’s paper-currency system, and have always been the favored denominations for cash-loving Indians in larger transactions.
Indian Prime Minister Narendra Modi kept his cards close to his chest, and then made the sudden announcement that all automatic teller machines would stop accepting 500-rupee and 1,000-rupee notes beginning 0000 hours, 9 November, and that such notes would no longer be recognized as legal tender. Everyone had to exchange the affected notes they held at the bank or post office within 50 days. The government claimed that the exercise was targeted at money laundering, a common problem in Indian society, as well as tax evaders and the use of fake currency. The objective of detonating this “underwater bomb” was to bring to the surface all the cash that had been hidden from the national financial authorities’ scrutiny.
In the modern history of currency circulation, this sort of sudden currency scrapping has only happened before in North Korea, and it was an instance in which those who spearheaded the policy met with terrible consequences. However, the Indian government pressed ahead with this unexpected move, causing the currency circulation in India to shrink by 80% suddenly. A “black market” for currency exchange emerged. As the supply of new replacement currency was not enough, and as each person was allowed to exchange only a limited amount of currency at one go, many people did not have the chance to exchange the currency they had on hand, and could only watch the money they have worked hard to earn and save turn into nothing. On the other hand, the rich and powerful who had held large amounts of “black money” were able to make it through the event somehow through various channels.
As the ancient saying goes: “A strong action will certainly render a miracle”. The demonetization exercise, which had wreaked havoc on the lives of the ordinary people, had also brought a new spring to the application of electronic technology to finance in India, benefiting a host of mobile internet services. Paytm, the Indian equivalent of Alipay and in which Alibaba has invested, put out full-page advertisements in several mainstream media outlets in India, expressing “Congratulations to our respected Prime Minister, Mr. Narendra Modi, for making the boldest decision in India’s financial history since Independence”. Within two months of the scrapping of the old currency notes, the traffic to Paytm’s website grew sevenfold, and app downloads also grew threefold. Over 500,000 new users were being added every day. At the same time, the registered-merchants also grew by 10,000 per day.
Without cash for taxi rides, people had to turn to India’s version of Didi Chuxing, Ola, and pay for their rides using mobile payment methods. Without cash to pay for their shopping, people had to turn to Flipkart — India’s version of JD.com — for their purchases. The demonetization exercise has led to unexpected developments. The demonetization exercise had promoted a switch to electronic means for currency and finance and thus the popularization of new-type internet services. With their affordable mobile phones in their hands, and using free 4G internet networks, India’s masses had been forced to master the more efficient e-transaction method. Now, the train heading towards the “spring” of mobile internet is unstoppable.
3. A government without centralized powers

Looking at history, we see that the region where India is in has never seen a large “Grand Unified Nation”. The great nation of India established by Mahatma Gandhi had actually enjoyed the benefits of the military consolidation conducted by the British colonists on the Indian sub-continent. Thus, today India continues to have 33 languages with a user population exceeding a million, 34 state-level administrative units with independent judicial and administrative powers, and a central government that neither has centralized powers nor has the power to do so. The Indian government has not have sufficient financial or political resources to consolidate the nation and society. This has become a very high barrier for India today in terms of its road towards the application of IT in industry.
To illustrate this developmental obstacle with an example from Bangalore, India’s Silicon Valley: on 12 September 2016, an outbreak of violence occurred in the city, which is the center of India’s emerging IT industry and economic center for internet companies. 159 vehicles were destroyed by arson, and 37 stores were robbed. 49 policemen and 17 civilians were hurt during the violence, and two were killed. 565 were arrested for their participation in the violence.
This outbreak of violence did not occur because internet services were cut off; it was because India’s supreme court had ordered Karnataka (where Bangalore is) to release the water of the Kaveri River to neighboring state Tamil Nadu, which had been suffering from drought. Bangalore’s rapid urbanization requires large amounts of water resources, affecting farmland irrigation in downstream Tamil Nadu. The dispute between Karnataka and Tamil Nadu was brought all the way to India’s supreme court, the decision of which, however, was rejected by the people of Bangalore.
While at the core of this incident is a dispute over water resources, there are three underlying issues worth thinking about here.
First, India remains relatively un-urbanized and unindustrialized today. The incident had occurred in the month of September, just after the rainy season, in the tropical region of southern India. If water shortage had been an issue at this juncture, it only indicates that local water infrastructure remains rather backward.
Second, this should not be the first time riots have occurred locally due to water issues. Violence had occurred 14 years ago for the same reason. This major problem had not been resolved effectively in the intervening 14 years.
Third, the two neighboring state governments did not have mechanisms for joint action. The decision of the supreme court could not be effectively implemented. The conflict eventually erupted into violence, affecting the social order in Bangalore as an economic center.
The diverse local administrations of India also present a number of challenges to the development of mobile internet services. For purely-online businesses, all internet services and applications based on the English language can only reach around 100 million elite users. Another seven language versions are needed to cover 70%-80% of the Indian population, with the remaining “long-tail” part of the population still unreachable with other language versions.
For businesses where offline services are involved, such as O2O or what the Indians call omni-channel services, even if the business model has been proven in one local market, replicating the model elsewhere will remain challenging. Thus, effective nationwide coverage is hard to achieve. Full nationwide coverage is difficult to achieve. This is what India, which is culturally-different and which does not have an integrated society like China, has to face in terms of the development of her mobile internet market.
4. Inefficient infrastructure

When you ask someone in Bangalore how far away somewhere else in town is, the person would typically not tell you the distance but how long it would take to get there by taxi. This is because the traffic in Bangalore is congested almost anytime (or called 7–11, namely 11 hours a day and 7days a week). Thus, using distance as a kind of measurement is no longer useful. Business people only need to know how much time it would take to get to their next destinations in order to plan their schedules.
This is a classic case of infrastructure failing to keep up with urban development.
In Mumbai, we met with RailYatri, a local start-up that develops and operates an app that provides for real-time lookups of rail operation status across India. When we realized that the app can only be used for the lookup of train information but not the online purchase of tickets, we judged the app to be a not-so-frequently-used tool using the perspective of the Chinese. However, when we learned more about the operations data of the app, we discovered that the app actually had an abnormally high usage. The founder’s subsequent explanation involving how Indian train operates also floored us.
It turns out that in India tickets need to be purchased four to six months in advanced, with half of all seats made available through advance sales. A waiting list is created for the other half. This way, many people would put themselves on multiple waiting lists to maximize their chances of getting a ticket. Thus, a situation arises where people would need to keep a close eye on the changing state of the waiting lists as individuals drop out or join in.
Do not think that one would not need the app once he or she obtains a ticket. Because trains are not very punctual in India, and no one really knows when a train would reach the station, the information provided by the app can help users to avoid the pain of making constant telephone calls to the railway station office in order to obtain updates. But it is not enough to know the precise time at which the train will pull into the station. Because of the erratic movements of the trains, one cannot tell in advance which train platform to head to. Considering that each train is two kilometers long and makes a stop lasting only two to three minutes at each station, one would need to look up the real-time information provided by the app to avoid dashing between platforms. This is why only when we understand the deep uncertainty that surrounds train rides in India, can be understand why RailYatri enjoys such high use frequency.
Backward infrastructure and inefficient social and public services are hallmark issues for Indian society. They are like a double-edged sword: they present stiff challenges for the mobile internet business model that advocates high efficiencies, while they also have given start-ups like RailYatri the business opportunity to resolve issues using information technology and Big Data. Finally, we asked RailYatri’s founder if the need for real-time information lookup would subside as the Indian train system becomes more efficient over time. This Indian elite in his forties unfolded his arms slowly, and gave us an intriguing smile that seemed to ask “are you kidding me?”.
In our few rushed trips to India, we have encountered a number of Indian elites who have undergone Western-style education and who speak with the accent of the London suburbs. We have also seen many impoverished Indians who take showers on the streets using water from fire hydrants. Inside the forests of skyscrapers in Mumbai are dark and squat slums that resemble stacks of hand-thrown Indian breads. These highly-contrastive scenes and peoples illustrate exactly the contradictions that exist between Indian’s swiftly-developing mobile internet scene and the inefficient and backward workings of Indian society.
With the professional optimism of venture capital professions, we believe that this sort of contradictions is nurturing boundless opportunities for the discovery and resolution of various problems. There will be even more unbelievable stories coming out of Incredible India. We believe that the stage for the mobile internet industry has just been set in this magical country.
最后来个彩蛋:一首诗歌,送给大家
“恒河水啊,浪呀么浪打浪。 十袋金坷垃比不上咱们一盘咖喱饭。 跳起我心爱的宝莱坞,十个好朋友啊一起登上我的摩托车。”
— — 印度传统民谣 《沃夏比安德》
