India Trip Debrief — First Impressions & Thoughts On Its Growth
I spent 5 days in May for a friend’s wedding in Jaipur, the capitol of Rajasthan, a state in northern India. Aside from the blistering daytime temperatures of 40+ degrees C (100+ F), the experience was amazing as it was both my first Indian wedding and first time visiting the country. Overall, I treasured the opportunity to reconnect with good friends from the MBA and witness such a special occasion.
While fun stuff from the trip can be found on Instagram, I did get an interesting glimpse into how India operates through my own experiences and chats with the wedding guests and locals. Please note that below are my first impressions and by no means generalize the rest of India. I plan on going back in the near future to visit Mumbai and New Delhi to better understand how the tech and startup scenes are developing in India. Any comments and feedback are very much welcome!
You will also notice that I make many comparisons between China and India and it’s because my trips to both countries were almost back to back so the memories are still very fresh. However, unlike my China trip, I didn’t prepare a big mind map for this post because I genuinely expected to be on vacation and didn’t have any particular business-y topics I was burning to explore. Just going to blast my observations plus a few research bits to add some meat to the bone.
As there’s no subway system in Jaipur, the main means of transportation are buses, taxis (including Ola and Uber), and rickshaws (aka tuk tuks). For this trip, we exclusively took Ubers because it was easier than trying to go back and forth with the drivers on directions. The one exception was when we took a tuk tuk to the local night market, which was an exhilarating experience braving the crazy streets without the protection of a caged car and seat belts.
The city itself is very flat and vastly spread out. It generally takes a while to get anywhere and you have to give a wide cushion time to account for heavy traffic. This was very similar to Shanghai in the early 90’s when a 20-minute trip on today’s subway would have taken nearly 2 hours by bus in 1995. The combination of building up, condensing everything and better public transportation contributed to dramatic improvements in transportation speed, which subsequently also speeds everything else up. However, before a city like Jaipur can build skyward, it first needs to improve its electrical grid and water infrastructure. On a national level, 20% of the population still has no access to electricity, compared to 5% in China.
And there is also the cost and complexity of getting permits and dealing with red tape for large real estate projects, which can account for half of the total construction cost.
This part should really go under (digital) infrastructure but because I’ve been immersed in the internet-connected world for so long that this is a sensitive pain point. I also believe this is particularly important for India’s service and tech economy.
As of 2016, 35% of Indians have access to the internet compared to 52% in China and 88% in the US. However, note that the total number of users in India has already far surpassed that of the US. That’s India-scale for you. However, only 1% have wired broadband subscription vs 10% in China. While mobile internet usage is dominant over desktop in both developing countries, we can use this as a proxy for businesses and homes that use fixed internet.
My “on the ground” experience was that Internet access was amazingly expensive at hotels. For example, the cost of wifi at our hotel was 1,000 rupees (equivalent to £10 or $15) per day per device, an astronomical amount by Indian standards. All the passcodes are printed on paper stored in a ringed binder. Each passcode is logged by the receptionist to ensure no codes are unaccounted for. You even have to hand over your phone or computer for them to enter the login details for you. Similarly the Marriott next door only had wifi for their guests and my friend had to squeeze them hard for an hour access by pulling the Marriott status card (she’s a consultant).
Mobile internet access is also not immediate and the Vodafone SIM cards we got took 2–3 days to activate. (*Though this is probably just Vodafone or our particular plan because I heard from another friend that Airtel activates on the spot.) The easiest way for a group of people to get internet access is to have one person get a hotspot beforehand and share the access. We were mostly offline during the entire trip, which is fine for a vacation but I imagine it might be an issue if you’re trying to be a digital nomad.
Smartphone penetration is pretty low with most people on the streets using feature phones. This is understandable since smartphones are of lower priority when you’re trying to fulfill the more fundamental layers of Maslow’s Hierarchy of Needs, and uploading selfies isn’t one of them.
Fun diversion: if you want to learn more about Facebook’s catastrophic bid to seize market share in India with Free Basics, read this great article from The Guardian.
Government and Corruption
Political and economic comparisons between the US, India, and China eventually did creep up during my conversations with the other wedding guests and I noticed a few insights. America is a representative democracy with cultural diversity in a developed country setting while China is a totalitarian single party system behind its growth engine. Both serve as role models for their respective government systems, despite being on opposite sides of the political spectrum. India is an interesting hybrid of democracy in a developing economy setting, and this is contributing to growth pains, especially with respect to corruption.
Corruption is well known to be a huge downer for economic growth due to its impact on public services, infrastructure development, morale and incentives of its economic agents. Despite India faring better than China on Transparency International’s Corruption Perception Index, my qualitative experience with talking with people in both countries leads me to perceive China as having a better handle on its corruption problems, not least of which is thanks to the communist party’s sweeping crackdowns, catching 280,000 officials in 2015 with punishments ranging from a slap on the wrist to a life sentence or death penalty. This sends a pretty strong message domestically and internationally that China’s serious about, at its core, economic and political fairness. I haven’t seen anything resembling this level of sweeping reform from India other than last year’s crackdown in the mining sector.
This leads me to hypothesize that corruption in developing countries might be better dealt with a benevolent, strategic and agile totalitarian government (a rare combination indeed and the continuity of which is also difficult to maintain) rather than a democracy without the foundation of informed and engaged citizens. I’m going to stop here because it’s a rabbit hole topic I’ll return to in a future post on China.
The Reservation System — Affirmative Action, Indian Style
During the road trip from Pilani back to Jaipur, we stopped by the Ramnath A. Podar Haveli Museum in the town of Nawalgarh. One of the rooms in the museum featured a collection of the various Indian castes. Our guide explained what each one was and it was during this conversation that I first heard about the controversial reservation system and how it could be contributing to Indian brain drain, especially to the US.
The reservation system is an affirmative action job and school admission quota system that mandates a certain quota of disadvantaged segment of the population, often those belonging to traditionally lower castes (aka “backward” castes or Scheduled Castes or SC under the reservation system) and those living in remote areas (aka Scheduled Tribe or ST). Similar to affirmative action in the US, the Indian reservation system is meant to give historically disadvantaged people a boost in the right direction.
Our guide belonged to Rajpoot, one of the three upper castes, and he explained that many highly qualified Indians were going abroad for school and work to avoid being hampered by the quotas. This discontentment seems especially acute in highly competitive fields of business, engineering, and medicine. This Quora answer elaborates on what each class needs to score on the CAT (Common Admission Test) exam in order to be admitted to schools.
While there are certainly many individual examples of the system increasing opportunities for disadvantaged people, according to a 2013 Economist article, very little has been done to quantitatively evaluate its impact on poverty, and if anything may be contributing to corruption, brain drain, and class conflict.
Opportunities — Now and Tomorrow
India’s real GDP growth was 7.3% in 2015, bringing it in-line with China, and is expected to continue growing at a high rate in the coming years. A series of underlying reforms under the Modi administration include 1) monetary policy agreements between the government and the central bank to control inflation, 2) opening up FDI to revive the investment cycle (the most important of which is single window clearance or the reduction of the number of permits required to set up businesses in India for foreigners), 3) and large scale infrastructure investments.
Infrastructure improvements deserve special mention here, as I see it as key to India’s future. In January this year, 20 cities including Jaipur were named to take part in the pilot $7.5B Smart City Mission. The initiative is aimed at making the living conditions in those cities on par with those in the west, including adequate power, clean water, and (applause) internet. The plan is eventually to scale up to 100 cities but that will cost just south of $150B.
The most well known of Modi’s programs is the “Make in India” initiative aimed to increase share of manufacturing from 18% to 25% across 25 sectors, from biotech to automobiles to renewable energy. This is timed very well as many multinational companies are looking to shift their manufacturing centers from China to lower cost regions.
These initiatives go hand-in-hand with demographic trends too. India has one of the youngest populations in the world with over half of its citizens under the age of 25. By 2020, the average age in India will be 29 (prime working age) compared to 37 for China and 48 for Japan. India’s young population can be either an asset or liability. Get it right and you have an economic boom. Get it wrong and you get rampant unemployment and social strife. In addition to re-evaluating its reservation system, higher investment is crucial to educate and provide employment and entrepreneurial opportunities to keep pace and stay ahead of the growing demands.
The “easiest” way to get young people employed is to get them to employ themselves, and that’s exactly what the Startup India initiative aims to do. Startup India is a campaign that promotes, among other things, the creation of innovation hubs across India, bank financing for startups, 80% reduction in patent registration costs, and reduction of regulatory hurdles compared to large companies.
India is, without a doubt, a country of enormous potential with its 1.3B people. However, it does come with a host of hurdles that it needs to get over first, both at the fundamental education and infrastructural level as well as the regulatory and business level.
The Word Bank ranks India 130 out of 189 countries on ease of doing business. While it’s a slight improvement over previous years, there is still has a long way to go. Initiatives like Make in India, Smart Cities, and Startup India are all designed to pave the way to making it easier to do business in India, especially in the sectors that matter. However, these programs are still in their infancy and it is still unknown whether the government and all the market players can work together to put India’s future first and whether their impact will be dampened by rampant corruption.
Like China, India is a dynamo of a country and will change rapidly in the next decade. I look forward tracking India’s progress and revisiting the country soon to meet the movers and shakers of the tech startup scene.