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Kishore:

Thanks for sharing this article.

A month ago I emailed this link to Avinash for the purpose of serious discussions and sincere actions for transformation of Indian IT and business ecosystem towards proving this article wrong.

We have discussed enough about the fate of ecosystems here in India. We have listed enough things on the fate of education, transforming IT in India and so on.

Some will say that it is wrong and nothing is true and some will accept it. There will be so much exchange of emotions.

Some of us know what we have and don't have. Not sure how many people really care about our weaknesses.

My only advise is that we should stop talking about our gaps and start taking appropriate actions towards great transformations in India. Period.

I will be very happy to support in whatever way I can. I have registered a website called transformindia.in. Planning to take solution driven approach to it.

However bitter it may be, we are eating the fruits of what we have sown. If we or atleast our children want to eat the right tasty fruits, we must start sowing the right seed now, right now! I believe it is possible.

We only get what we gave to the ecosystem. Most part of the ecosystem is not a physical object but our collective behaviour. In blink of an eye, we can change ours towards that collective behaviour that will create a better place for billions & more to live.

Well I read the article and it seems to be a rant. It seems to me that the author has blogged some personal opinions and there is very little in the blog post that is based on a thorough analysis. Instead a few choice selected quotes from Times of India and Zee News!!

The article has nothing to do with China or India. It is simply a rant that the government is not providing incentives for his company.

Sujai runs a hardware company. So naturally he is irritated that a lot of attention in India is focussed on software companies instead of hardware. A few years ago he was attacking the VCs for not investing in his company, now it seems to be the government for not providing incentives for his company.

Personally, my viewpoint is different. I don't believe that entrepreneurship comes because of government incentives. Silicon Valley didn't come up because the government decided that it would be a good place to have a startup hub. It came up on its own due to the kind of people and culture that got built there over a period of 70 years.

Take a country like Singapore - they have spent tons of money trying to promote entrepreneurship and giving all sorts of incentives to get bright people to start companies there. But how much is there to show for it? Even the US has struggled to replicate Silicon Valley in other parts of the country.

The government is just a convenient scapegoat to blame for all your problems. Sure, there are a lot of things that they should be doing. But its quite convenient to blame everything on the govt and give a clean chit to yourself.

The West is good at SELLING,

The far east is good at MAKING (read manufacturing)

We (read Indians) are good at TALKING....

A bit of an introspective note.... Why is it that we always have someone "else" to blame when it comes to actual work ?

Its either the government, the politicians, the babus or one's own neighbor..... it is never "my" issue that I'll "solve" ?

So much so, was fairly p****d at a comment I heard in a school where there was biscuit packet litter in front of the class-room. I was told that it is the job of the local "municipality" to clean it !. This is the role-model we are trying to build ?

Be the change you'd like to see was supposed to be Mahatma's mantra ....how can we make it the mantra for every Indian ?

Slightly despirited,

Ravi.

I loved reading that note from Ravindra. I think we should stop worrying about what China is doing and try to see how India can be developed. End of the day whether you are first, second or thrid does not matter as long as quality of life of average Indian is improved in absolute terms. In order to be more successful in certain areas like product development, we would have to extend the horizon of strategic thinking. I have seen people going haywire when we talk about 5 year strategies. R&D in specific areas could take 10-15 years for realisations; our present social system might not support graduates taking that much time to bring results. While the long drawn asset creation process by Indian parents for their children (and the increased savings rate) is the strong point that we have compared to West, we do not apply same yardstick of long drawn process for business/work success. It could be a better way to mentor entrepreneurs to look at 10-15-20 year windows for building sustainable business propositions.

>> I think we should stop worrying about what China is doing and try to see how India can be developed.

Only Paranoids Survive" - Andy Groove. First, we should realize our gaps, worry about it, get the necessary motivation & drive from our worries and desires, work towards strengthening and finally enjoy the frutis of it. To realize our gaps, we need benchmarks. We should definitely compare India with US on Innovation. We should compare India with China on productivity. We should definitely compare India with Germany & Japan on quality. Either we worry or not, we must compare to see the gap or just proactively move forward. We always compare and list top innovative, fortune 500, top Indian IT companies etc.,

We need a Key Performance Indicator (KPIs) for our country. It should reflect the state of our country. We need to follow certain best practices to perform better.

>>R&D in specific areas could take 10-15 years for realisations; our present social system might not support graduates taking that much time to bring results.

What are you trying to convey? We should do R&D or not? Do you suggest to fix the social system first? Is it a sequential process?

>> End of the day whether you are first, second or thrid does not matter as long as quality of life of average Indian is improved in absolute terms.

Can you build a secured nation without being the best or better in Defence or Satya graha? When we transform our education system, won't it move to the top? Today the best education institute in India is at 64th rank. The best Indian IT company is at 48th rank. Are you happy?

We must first worry about it. So that, we will all converge our energy to move forward to great heights.

It will ultimately bring down poverty and crime to some extent in India. We always give reason for why it is not possible. We should only find ways to make things possible.

No doubt gaps should be identified and improved. But I wouldn't use this article as a basis for that.

There are many more better sources that clearly pinpoint the various shortcomings that we have with careful research and good analysis. Let us look there for identifying gaps.

Like I said before, this article has nothing to do with India or China. Two years back he was attacking VCs for not investing in his company. Today it is an angry outburst that the government is not giving sops to his company, as simple as that.

Ah, I am in the terrific position of disagreeing with EVERYONE here. Here's why:

1. Should we worry about what China is doing? OF COURSE we should. Not for historical reasons (meaning 1962 and so on) but for very pragmatic ones: there is only one world market and both our countries will be vying to dominate that - or, what little the US will allow us to. You want to talk 50-year horizon? Then you'd better be worried about crushing competition from China.
2. I don't really care what the writer did or did not do in his past. Let's look at the message, not the messenger. Yes, he may be ranting and flailing against the Govt. and VCs and all the other agencies that've denied him his rightful due, but his comments have a context and that's what I'd consider. I am not denying or decrying the genesis of the discontent - I am only focusing on the discontent, not the genesis, in this forum.
3. While I have a huge amount of respect for the Mahatma, I am not particularly taken with platitudes and philosophies at this stage. I am here to gain, from all of you, insight into how I can be a better entrepreneur. About, basically, how I can make my stock-value grow exponentially. If I want to use the results of that work in a philanthropic or nation-building mode, I will do that on my own dime.
4. While the author's writing may be a rant more than anything else, there are kernels of truth in there - and big ones, at that. His comments about the Govt. being enamoured by large corporations, for example, is a fairly accurate characterization - even of certain "industry bodies" that we know and love.

I have  to admit that I have reservations of my own, too. I certainly don't agree with the idea that Indians are "clueless" about being Socialist or Capitalist. After all, we are one of the few economies that shrugged away the CDS Flu and delivered nearly 8% growth last quarter. So I'd guess our Govt. knows at least a things about Economics that Wall Street does not.

Personally, my take-away is this: that we should look at the Chinese and other countries' SME models in some detail and see what we can learn to pitch to our own Govts. That we as entrepreneurs need to "make our own fates happen" is a given. But any help we get along the way is welcome!

Do I see the makings of a roaring discussion here ;-) ?

I've NO problem with learning from others (including China)...my problem is that we seem so distracted by this as a nation that we do not worry about finding our own solution ? What happens to our famous "Jugaad" mentality ?

I've tremendous respect for the SME's who make margin in the local Indian market as I consider that quite a feat at times. My only refrain is that we get tied in Socialist / Communist / Capitalist discussions and lose sight of basic business principles ie. Value creation through increased efficiency (be it capital, skill or application).

This quest for efficiency is the individual's / business responsibility and not that of a "policy". To make a "red flag" statement, IMHO the Government has NO BUSINESS to be in BUSINESS.

Rgds

Ravi.



  

Kishore,

Govt's being enamoured of big companies happens everywhere. The US spent billions bailing out banks and companies that were "too big to fail". Does that make the US entrepreneur unfriendly?

If Sujai thinks that China is a model of entrepreneurship then he is living in fantasy land. See the article from The Economist below [1] and tell me if thats the model we should be following.

Now, I am not saying that China sucks and India rocks. Obviously both have some deep flaws. The problem is that Sujai has not done his research. He has picked out a couple of random quotes (from Zee News and Times of India for heavens sake!) that supported what he was feeling and has used it to justify his rant.

[1] http://www.economist.com/businessfinance/PrinterFriendly.cfm?story_id=13145129

Quoting from the article:

1. More than 30 of the 100 firms anointed by the Boston Consulting Group in January because they are "contending for global leadership" are Chinese. However, almost all of these are owned at least in part by the government and benefit from protective barriers in their home market
2. Even today only the rarest company can claim unfettered independence. According to Yasheng Huang, an economist at the Massachusetts Institute of Technology, explicitly state-controlled firms make up half the economy. That probably understates the true effect, because even private firms understand that their existence depends on their relations with the state
3. Factories inevitably occupy land that was once state-held. As a consequence, their shareholders often include local government
4. Blurred ownership distorts finance, management structure and long-term planning...Securities offerings must be approved by the government and the bulk of legal financing comes from state-controlled banks. With all these political ties, lack of innovation is hardly a surprise
5. Raising money is hard: loans to [private] firms account for only a small part of the total lending by those state-controlled banks. China is filled with grey-market financiers, including pawn shops, "credit-guarantee" firms, and small industrial companies that lend to other small industrial companies

@Ravi: I am not as much of a Market Capitalist as you are, so while I agree that the Govt. has little role in operating companies, I believe it has to do everything it can to support, nurture and grow "disadvantaged" sections of the economy, be they low-income  individuals or small companies. Yes, I know that sounds self-serving, but if the US and Japan can have huge structures for SME support that're outside the WTO purview, why not us?

@Siddharth: let us not forget that the US also has the strongest SMB support structure in the world, viz. the SBA. Fully 23% of all Govt. contracts HAVE to go to SMBs in the US. It is not surprising, then, that small businesses make up such a large segment of the economy.

@Both: I am not in any measure espousing the Chinese SME model. The percentage of SME failure in China is higher than in the worst years in Peenya (an SME industrial cluster in BLR) and Chinese Governmental "pressures" (read: Corruption) on business would make Madhu Koda look like a small-time crook. My point is, though, that there ARE things we can learn - even if they are what NOT to do.

I think it is time we did some comparative analysis of what's worked and what's not elsewhere - China, Japan, the US, etc. In parallel with building our businesses, I think we need to put some real effort into bringing these initiatives home to the Indian Govt., so at least some of them can be implemented here. That may not help our own businesses, but that's not the point. Even if it only makes small businesses stabilize and grow in Tier III and Tier IV cities, that's a terrific win for the country. 

Without the timely government initiative, Mr. Narayana Murthy would have been a tiny invisible dot in the IT industry. Thousands of people would have been below the poverty line.

Government initiatives are vital and government incentives are key for emerging areas and research & development. US governments created a good infrastructure. Incentives are not always about giving cash!

Kishore,

   OK - I understand your point + stance and respect that. 

   My market capitalism stems from the fact that the ONLY sustainable model for growth is to create / nurture efficient models. In all my dealings, both in commercial and not-for-profit areas, I've found that the Government intervention is inherently inefficient.

Lakshman,

   Infrastructure is certainly part of good governance. However, it should be "commercially" priced. If you look at our energy structure - the inefficiencies (pricing / subsidy etc) all add up to create a lopsided environment. In reality, the millions of Diesel generating sets in every industry (+ UPS / Stabilizer and the like) are all manifestations of a HUGH opportunity cost. Today, the value of some / lot of these are not realized as we tend to take these for granted. Diesel / Petrol pricing is one such example where we take the differential for granted while globally this is not true.

Both :

    I do not want to drive this discussion away from the main point ie. China .vs. India / Entrepreneurial  failure here .... All I'm trying to state is that Entrepreneurial failure is a given if we do not build "efficient" models in the global context.

Ravi.

OK, so let's look at the some of the comments in that post. Here are some of the things that I think apply in our context - the context of being entrepreneurs.

1. The idea that Indians have been "gloating" over their supremacy in intellectual pursuits like Software while the Chinese are "only" good at Manufacturing. Certainly, there's greater visibility to this Brahminical (Oops! Is that not PC?) pride in us being good at Software instead of, say, exporting great inner-wear from Coimbatore. But I think that's a function of the environment, not of entrepreneurs choosing to start one business instead of another. So let's not blame Indian entrepreneurs because ToI made Services CEOs poster-boys (and -girls, a la Dell!)  for the New India.
2. The charge that big Services companies have done nothing to promote entrepreneurship is interesting. Intel and Cisco regularly funding and acquiring small companies helps entrepreneurs look forward to a valuable exit. But I don't know if we can blame the HCLs and Wipros for not being acquisitive. A Cisco can acquire a small company for a great new communication stack that it can repackage. But what will a large Services company get in a small one, since employees and customers can be enticed away? Maybe my Product bias is showing, but...
3. About China's District Collectors being able invest in startups - OMG! I don't think I WANT the local DC to be my investor! But if capital IS that easy to access, maybe that's a good thing, even if you have pay the DC to put the money in...

On the other hand, though, I am sure there are generic issues that Indian entrepreneurs need to address, be that in comparison to the Chinese or not. Any ideas on what they are? And how we can address them? Basically, I'm looking for some introspection here, as Lakshman implied early on.

None of the 3 points above are really bottlenecks. Companies follow a proven model where talent, experience and role models are easily available. It's not services companies job to support entrepreneurship. And imagine being forced to have the DC on the board. Scary.

Now coming back to the original question - what can the govt do for us? Here are a couple off the top of my head.

1. Administrative overheads. There are crazy overheads to doing business here. A big company can hire a department to sort it out. SMEs are at a huge disadvantage here.
   
2. Infrastructure. Impacts big companies more, but hits SMEs too. For eg: unreliable electricity means we have to have backups. Bad roads and traffic means people are feeling miserable when they enter the office. Things come to a standstill during monsoons etc

To us as emerging IP/ software centric companies, comparing India to China should be written in magazines like 'The Economist' and not here. The only relevant point is whether the Govt should give special incentives in any form to SME software companies (with or without IP) - do we deserve it compared to other industries?

About 20 years back the software services industry leveraged the tax free incentives to make something great out of it.

Now the question is whether this incentive given to the services companies should change towards IP centric companies. 10 years from now it will be IP which determines whether services are done by company a) or b). When Wipro/ Infosys starts sourcing from Chinese software product companies, then may be we will look back and say - should the government have stopped giving incentives to services companies and give that to IP oriented companies.

Do we have a government that is looking forward or backward.

Irrespective of whether the government supports or not, we as entrepreneurs know where the future is. Getting some support on the way will accelerate it.

Good useful discussion!

I totally agree with Kishore's observations all through this thread!

One thing that is usually missed in most discussions about India and China is the pervasive risk aversion in India and adventurous risk taking in China!

This will be the one that will eventually make the difference! India's risk aversion may spawn low risk, low return industries that are highly undifferentiated and can run for so long on labor arbitrage. When other countries catch on then there will be a race to the bottom in all service oriented companies, like what is happening already in India. Every IT major is making news about how IT is slowing down and BPO services are booming! Domestic business is also low margin and cannot be an effective substitute to moving up the value chain globally in services. It is easier said than done in that area when you are a local India services company competing with the likes of Globals like IBM and Accenture! Tough Indeed!

On the other hand, China seems to be investing much heavier in Research and steps towards developing IP in many areas. They may seem like floundering, but just given the scale of their investments in Research compared to India, sooner or later they will move effectively towards IP and higher value added products!

That's when we will see the real differences!

I really applaud the Infosys Prize and things that Mr.Narayana Murthy is writing about and doing, all on his own! He seems to realize what is wrong and doing something about it!

I have done my part to stir up this discussion!

The blog makes an interesting reading.  The comparison with China and the differences are more a matter of opinion. I agree that China is ahead of us in many respects and will perhaps continue to do better. But the answer to the reason why they are ahead needs a little more analysis than just analyzing on its current state.

China has been slowly building on the power of manufacturing for years. China had a head start in building their economy. The best industry available at that time was indeed manufacturing. We will be barking up the wrong tree if we continue to think that manufacturing will pave us the path of "Uber". Therefore the model followed by China cannot be replicated for India. The world has moved from 1980s. West was looking at any country that would pick up their manufacturing excess. Perhaps if we were in the 1980's we would have considered pushing manufacturing as the industry as well. India has chosen the right industry "Service" to build its current and future economy.

If we do retrospect there are similarities in the approach of China and India: catering to the west's insatiable needs. Perhaps now is the time where we can start moving to a different path from China and build internal as well as external consumption for our entrepreneurs to help them grow faster. Keeping pace with the changing environment will be the only means that can help our entrepreneurs survive. I am not a huge fan of "state owned" methods to create market. Markets are created because there are needs that has to be fulfilled. You cannot sell a green shirt when someone wants a blue shirt. It is a choice and the survival of the fittest.  However some support in terms of incentives will definitely give entrepreneurs a means to  reduce costs while sustaining growth to build their markets.

Nari: I am not sure whether your comparison of "pervasive risk aversion in India and adventurous risk taking in China!" is completely true. Risk aversion and calculated risk can be mistaken. Mentoring and support , as you refer, definitely helps the cause.

When there is "gap", do not cover up. Realize its intensity and address them with real solutions!