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Hail the Invisible Hand of the State

The current debate in India about how to trigger a quantum jump in industrial manufacturing activity and thus create large scale employment is largely centered on ways to reduce the role of the State- in allotting land, in environmental clearances, in firing workmen and so on. Yet, the case studies of two industries which came from origins even smaller than where manufacturing is today and have become international success stories, the Indian pharma industry and the Indian information technology services industry, proves the opposite point. Neither would have come to their current stellar role in the Indian economy without the active but largely invisible hand of the Indian State.

The Indian pharma industry has grown from minuscule revenues in the late 1960’s to a world player with an annual revenue of $ 40 billion (of which $ 15bn is in exports) and an activity base of 20,000+ manufacturing units employing over 29 million people. The case of the software services industry is even more striking; it employed just 8,500 people in 1990 and had a revenue of a mere $165m (tiny Ireland had a $185 million software industry at that time). Today its size is $118 billion with $100 billion as exports. The people directly employed in the industry is reported as exceeding 2 million with another 7 million employed indirectly. Both these industries have also created multiplier effects in sectors such as housing construction, transport services, and household goods as young chemists and programmers set up homes and bought cars and home appliances.

What was the magic? Unfortunately, finding the key to these success stories is like that old tale of the blind men of “Hindoostan,” who, when asked to describe an elephant, said that it was like a wall, snake, spear, tree, fan, or rope, depending upon which part of the elephant each touched.

Proponents of the “market economy” will say that the success of these two industries is an example of what energetic Indian entrepreneurs can achieve when the government of India steps aside. Reinforcing this view is India’s business press, which frequently features stories about software and pharma industry millionaires. Proponents of ‘“globalization,” such as New York Times columnist Thomas Friedman in his book The World Is Flat, credit globalization: increased world trade that spreads prosperity around the world. Proponents of “privatization” say that decades of public sector efforts in these industries (Electronics Corporation of India in the case of IT and Hindustan Antibiotics are often quoted as examples) came to nothing until the private sector was “allowed” to participate. To them, this is proof that the government needs to privatize many other industries as well. And of course there are those that say that the State’s only role should be to provide zero-income tax on export incomes, government-sponsored software parks and export zones.

But actual case studies of these two industries tell another story. The rise of the Indian software services industry can be traced back to two mega projects sponsored by the government of India: the computerization of public sector banks and Indian Railways. These two projects, apart from providing an impetus to the startup and growth of hundreds of software development companies, also had another dimension. Far sighted government policymakers like Dr Seshagiri of what was then called the Department of Electronics, the forerunner to the current Ministry of IT, insisted that these applications be built using such technologies as the Unix Operating System and Relational Database systems; the world was then getting ready for a paradigm change that would unleash an insatiable wave of demand for computer programmers well versed in these specific technologies as the world shifted from mainframe computers to client server computers. Thanks to the Banking and Railway projects, Indian companies had a ready stock of thousands of software programmers well-versed in these new technologies who could be immediately deployed on assignments abroad.

The rise of India’s pharmaceutical industry is based on similar visionary moves by the Indian State. In 1970, the government introduced a new Patents Act reforming the 1911, which excluded pharmaceuticals and agrochemical products from eligibility for patents. Patents on molecules, which are products of chemical reactions or on mere admixtures and the like were made non-patentable in India. Only the method of making the product was patentable. This resulted in the Indian pharmaceutical industry developing considerable expertise in reverse engineering of drugs that are patentable as products throughout the industrialized world but not patentable in India.

You need to peer really hard to detect this kind of invisible hand of the State. Professor Marianna Mazzucato, Professor of Science and Technology at the University of Sussex and the author of The Entrepreneurial State – Debunking Public vs. Private Sector Myths did just this and uncovered the role of the American State behind what is generally seen as the ultimate artifact of entrepreneurial vision, the Apple iPhone. “What actually makes the iPhone a smartphone, instead of a stupid phone?” she asks in a recent TED talk. And answers that it is the Internet, the Global Positioning System (GPS), which detects your geographic location, the touchscreen display which makes it also a really easy-to-use phone. She points out that “the very smart, revolutionary bits about the iPhone, are… all government-funded. ….the Internet was funded by the Defense Advanced Research Projects Agency (DARPA) of the United States. The GPS was funded by the [US] military’s Navstar program…the touchscreen display was funded by two public grants by the CIA and the US National Science Foundation”, and in the American pharmaceutical industry, “a full 75 percent of the new molecular entities with priority rating are actually funded in boring, Kafkian [US government] public sector labs”.

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The Brief Wondrous Life of Indian eCommerce

( I wrote this at the request of Outlook Magazine who published a mangled version...this is the original)

Can all these web businesses that sell mobile phones, books and apparel 10-20% below the cost of what is available at retail shops and delivered free of charges home to you be for real? Will it all come crashing down? Or, perish the thought, is it one of India’s periodic spectacles that start with gushing media accounts of outsized company valuations, hitherto unknown entrepreneurs now being heralded as millionaires, which then leads to a grand denouement in which the same business men are then shown in rumpled clothes, with stoic expressions being led away by the CBI to Tihar jail?

Or, is all this a sign of India being dragged to its long overdue entry into the ecommerce era. Why long overdue? Because the percentage of all retail sales served by “organized” retail, i.e., non-mom-and-pop stores, and is considered a  measure of a country’s modernity and by that measure, in India is a tiny 3% compared to our sibling rival China at 13%  and European countries and the United States at 50%+. Why dragged?  Because the infrastructure that would have naturally led to ecommerce, the companies who could have provided widespread availability of credit and debit cards and reasonably priced broadband access have all being looking the other way while the world transitioned to the new economy.

I should know; it was on Independence Day 1998, that is to say, fifteen years ago, that I grandly declared at a press conference to an audience of puzzled journalists that Indian consumers could from now on, from their PC, “choose from over 40,000 music titles and 100,000 book titles to order online with discounts up to 40%, or make bookings in over a 180 carefully chosen hi-quality reasonably priced hotels”. For the next few years a few of us folks battled a narrow broadband user-base, a steeply depreciating Rupee that made PCs progressively more out of reach every year and poor credit card penetration; even a cash on Delivery payment system we launched in 1999 seemed to be of no avail.

What woke-up a somnolent Indian ecommerce industry that the rest of us had just about given up on was that a clutch of US private equity funds led by Tiger Global, had the vision to note that a consumer ecommerce market could be created in India because India had a per capita consumer expenditure roughly at the level of Brazil and China where ecommerce was flourishing. Since then, this group, and others who joined them, have invested large dollops of capital, by some accounts $2.5 billion, or Rs 15,000 crores in 2012 and 2013, into dozens of Indian ecommerce startups. These investors have then encouraged the ones who lagged behind in growth to merge with the ones which were forging ahead in an attempt to create at least one or two ecommerce companies that could make it to an IPO in the New York stock markets before the current euphoria about Asian ecommerce triggered by the impending IPO in New York of China’s ecommerce company Alibaba, ends.

Alibaba! Its annual revenues are $248 billion, about three times that of eBay worldwide and two-and-a-half times that of Amazon. Alibaba is also hugely profitable, its profit in a recent quarter was in excess of a billion dollars unlike Amazon which reported a loss. The international investors who are investing, merging and shaping India’s new ecommerce startups are betting that if China can produce an Alibaba with an expected market value of $ 170+ billion market value when it does its IPO, India should produce at least one or two with a $5bn+ market value.

There are many reasons why India may go the China path in its adoption of ecommerce. Organized retail companies that have the scale, management expertise and the information technology infrastructure to deliver consistently high quality and low cost goods, have never found a real foothold in China or in India. In China, for instance, such large retailers’ reach, even in urban areas is a mere 10%; in India even smaller. On the other hand, the Internet reaches more than half of China’s population, so selling things online in China makes eminent sense. India’s internet reach is only 11% now, but should it get to even 25%, as it is likely to in the next few years, one can easily imagine more than a handful of multi-billion dollar ecommerce players from India.

Indian ecommerce, so far, has merely taken its first wondrous baby steps.


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When I am 64

Published first in Business Standard

“Will you still need me, will you still feed me, when I’m 64”, sang the Beatles when they burst into the international music scene. I was in my late teens  when I first heard this beautiful refrain. To me, like for all teen agers, asking your girlfriend whether she will care for you at sixty four appeared tantamount to asking her whether she would care for you forever; sixty four seemed so impossibly far away. Then, I woke up one day last year and realized that I had just crossed that milepost.

I quickly turned to Salman Rushdie for answers to the questions that came welling into my mind; after all he had made my age cohort famous worldwide, by casting Saleem Sinai, the protagonist of his novel, Midnight’s Children, as one of us. Saleem Sinai, was born at the stroke of midnight 1947 and his life, like that of the rest of us born in that period is shaped by the tumultuous events in Indian history. We were entering high school when India went to war with China, entering our teens at the time of the war with Pakistan, in our early twenties when Indira Gandhi declared an Emergency and embarked on forced sterilizations and when it looked like the democratic status of India that we had all been taught in our school days to believe in had come to an end. Saleem Sinai, in Rushdie’s novel, dies on his 31st birthday and its just 1978. The rest of us, Midnight’s Children, lived on to see Indira Gandhi defeated in a democratic election and spring back again to power two years later.

Why I asked myself, am I glancing through Rushdie’s novel, yet one more time. Was I trying to find meaning in there for all the years of my life that had run a parallel course to Saleem Sinai’s? Or was I the classic stereotype of a man in his mid-sixties that Erik Erikson, the German-American psychoanalyst, wrote about when he said that the mid-sixties is the age when a person looks back at his life and asks, Was it OK to have been me;  period of life when we reflect over all we have achieved so far in our life. If we conclude that we have achieved all that we set out to do, we develop a sense of integrity; if we conclude that our life till now these goals have eluded us, we develop despair which could lead to a sense of depression and hopelessness.

Erikson saw life as having eight stages. The first stage is from birth to the age of 1, during which if we receive maternal love and care, we develop a sense of trust, but if that maternal care is withheld, we go through life seeing the world as unpredictable and inconsistent. The second stage, from the age of 1 to 4 is when we face the challenge of toilet training- success here results in a sense of autonomy, lack of success leads a life-long sense of shame. The stage when we are between 3 and 6 is the pre-school period when the challenge is to take initiative, for example, to dress oneself. Success leads to a sense of being able to do things on one’s own, failure leads to a lack of confidence in one’s own judgment. The age of 6 to 11 is when a sense of personal competence is developed vis-à-vis others in one’s age group. The adolescent years, 12-18 poses the question, who am I? Where am I going in life?  The ages of 18 to 35 is the time for dating, marriage, family and friendships- successfully forming loving relationships with other people in this stage leads one to experience intimacy, failure to achieve lasting relationships in this stage leaves one feeling isolated and alone. During the ages of 35-64, one we are either making progress in our career or unsure whether what we are doing is what we want to do for the rest of their working lives. Successful resolution leaves us with a sense of comfortableness with the way our life is progressing; failure leads to a sense of regret. And then we are in our mid-60’s and a time of reckoning for one’s life, if one believes in Erikson.

But, on the other hand, the mid-60s is also the stage for some to achieve their greatest success. When Winston Churchill stood up in the British House of Commons, on 4th June 1940, as Nazi Germany was readying their invasion of England and declared ” … we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender…” he was 67. When Mahatma Gandhi launched that final push for India’s independence, the Quit India Movement in August 1942, he was 63. More recently, Narinder Modi, the man who India has chosen by an overwhelming majority as its new leader, will be turning 64 in a few months from now.

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Film Review: The Good Road (2013)

A yuppie Bombay couple and their seven-year old son set out in their SUV, across the barren salt marshes of the Rann of Kutch. He, David Shroff, is in his sleeveless olive bomber jacket, American baseball cap and blue jeans, she, Kiran, wears a designer kurta over her cut-off blue jeans, and the child Aditya is in his T-shirt, blue jeans and sneakers. The road that they are on is one of India’s modern multi-lane highways with the white divider lines looking as if they had been painted on that morning.

Where are they going to and why is it taking so long asks the kid Aditya. Athangasa, and it’s only a few hours away, says Dad. Why do they have to drive, asks the bored kid, why can’t they just take a plane like the rest of his friends do whenever they go anywhere mutters the kid as he goes back to playing with his toys.

David, the dad, is feeling macho at the wheel of his SUV.  When two goods trucks approach each other ahead of him, he makes a daring maneuver and darts through them irritating his wife.

“Your driving always makes me tense!” she says
“When have I ever had an accident?”
She leans back on her seat with an air of resignation
“Can’t we drive in peace”, she says
“Why do the two of you always bicker?” asks Aditya

They are driving through is the Rann of Kutch, that vast 8000 square kilometers of salt encrusted land that the Kutch District of Gujarat shares with the Sindh province of Pakistan,  where daytime temperatures in summers can be as high as 49°C and winter temperatures can go below 0 °C and where the horizon can stretch into nothingness for a hundred miles in every direction without sight of a man or a tree.

There are others on this good road. Pappu, a laconic truck driver and his “cleaner” Shaukat, a teenage boy are making their way in a 6-tonne truck overloaded with marble tiles to 10-tonnes. Pappu drives all day long and all days of the week for twenty-five days at a time. He misses his family and wishes he did not have to stay away from them for such long stretches. But Pappu has a scheme that he is working on to get out of this grind. He is going to stage an accident where his overloaded truck will crash, he will “die” and collect insurance.  This is a scheme thought up by a dabha owner Jadeja and Pappu has every reason to believe in Jadeja’s scheme- the dhabha owner’s name, Jadeja, implies that he is a descendant of the clan of Jadejas who have ruled over this part of Gujarat for centuries even though this particular Jadeja’s fortunes have declined to a point that all he does is preside over this dabha and switch at a moment’s notice from chanting praises to the gods Brahma and Vishnu to plotting insurance fraud schemes.

The road may be state-of-the-art but its length is punctuated by traditional dhabha’s, basic diners, where the truck drivers stop for camaraderie, food, cigarettes and cheap sex from the nearby brothel.
The harshness of the environment of the Kutch desert that the film’s director evokes contributes to the tension, like the US-Mexican border desert setting does in the novels of Cormac McCarthy and films made from them like No Country for Old Men.

The action picks up when our yuppie couple in their SUV arrive at the Jadeja dhabha. David sneaks out to get a cigarette hoping that his dozing wife does not catch him. Son, Aditya plaintively asks for water, but not getting a response from his mother, gets off the SUV, goes looking for water, is distracted by a pup and wanders away far from the SUV. Dad David, finishes up gets onto his SUV and drives off. They do not notice that their son is missing from the SUV till some hours and dozens of kilometers later.  David Shroff reports his missing son to the local police and pillion rides a police scooter re-tracing the road they came from in search of his son. The headstrong mother, Kiran, drives off on her own in the SUV across the barren Kutch desert, something that even the Indian army hesitates to do because their trucks and jeeps can get stuck in the mud, even in the dry summer season.  Jadeja, meanwhile, notices the wandering Aditya and entrusts him to a reluctant Pappu to be dropped off at the next dhabha.

All that stands between the Shroffs and disaster are the inhabitants of this remote area of Gujarat- the wandering gypsies of the desert, the truck driver Pappu and his cleaner boy Shaukat, the itinerant brothel owner and his prostitutes, all stoically marching through their meager lives in a way best exemplified by the song the young brothel inmates sing as they go about doing their daily chores:

Spin the grindstone, spin the grindstone
If the grain is too fine the wind will blow it away
If the grain is too coarse, no one will eat it
*        *        *

“The Good Road” (92 minutes) is written and directed by first-timer Gyan Correa, the delectable camera work is by Amitabha Singh (Khosla Ka Ghosla and Chillar Party), and the exquisite sound is by Rasul Pookutty (who won the Academy Award for Best Sound Mixing for Slumdog Millionaire). The film is produced by the National Film Development Corporation.

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Book review: “The Future as Cultural Fact”, by Arjun Appadorai

Book review: “The Future as Cultural Fact”, by Arjun Appadorai
Arjun Appadorai is Goddard Professor of Media, Culture and Communication at New York University. I made these remarks at the Asia Society, Bombay, on July 25th 2013

When the Berlin Wall came down in 1989, says Arjun Appadorai, he, like many of us, was breathless in anticipation of “a new world of open borders, free markets and young democracies”. He was so enthusiastic about “globalization”, as this came to be known, that he even wrote a book about this new world. But then he says he watched in despair as all that the 1990’s brought was ethnocidal wars in the Balkans, the war against terrorism, the East Asian Financial Crisis and, the grand finale, the World Financial Crisis of 2008. It was as if the  contending parties in each of these conflicts were each pursuing their own visions of what they wanted this globalized future to be.

Arjun’s new book is an attempt to understand what these contending visions of the future each of these parties carry in their heads.. Evangelical Christianity in the United States, for example, he says, emphasizes self-help, commercial enterprise and a view of the family as a moral oasis against the threats of divorce and sexual freedom. This is their concept of “the good life”. The Muslim view of the “good life”, on the other hand, he says, has a different view of the relationship of authority to society, and a different view of the relationship that commerce and profit have to social values.

I first met Arjun in Madras in 1975, when we were both in our twenties. I was busy trying to set up Rediffusion’s first branch outside Bombay, Arjun was there pursuing  his doctoral dissertation from the University of Chicago.  I was much intrigued when he told me that, as part of his dissertation, he was studying South Indian temples such as the Madurai Meenakshi Temple. I was intrigued because such temples  for me were just  places to which  your parents dragged you off to once every few years, where you had to stand in line for hours to get a fleeting glimpse of the deity. In other words, these grand South Indian temples or me were at best, a focus of people’s religious sentiment and at worst a repository of antiquated beliefs.  But no, said Arjun. The religious function of these grand temples was a minor aspect. Their core function in early-modern South Indian society was  as “re-distributive networks” of tangible and in-tangible resources and thus were key sites for the constitution and legitimization of political authority in early modern South India.  In plain English , if you were an enterprising war-maker and brought vast areas under your control by force you could legitimize your authority by making suitable donations to these temples.

 When Arjun moved to New York in 2009, first to the New School and then to NYU  I expected something like the book we have before us to happen. How could he, an anthropologist, live and work in lower Manhattan at NYU without casting his anthropological gaze at that other dominant institution in lower Manhattan, Wall Street and the Financial Establishment. This book in one sense is the result of that gaze. The rest of us, including me,  look  at Wall Street as a place you bought and sold shares and other financial instruments just as people like me  view South Indian temples as mere places of worship.  But in his new book, Arjun   tries to extract meaning from the  rituals and artefacts,   political and economic actions of these financial actors.. His discussion about the culture of risk there follows the same thread of inquisitiveness as he did in his study of South Indian temples. He  tries to illuminate for us the meaning of such risk-taking activity.

He joins Naomi Klein, the Canadian social activist and author, in characterizing as “disaster capitalism”, actions such as the  “shock therapy” administered to some countries ( Pinochet’s Chile, Iraq, Poland, Russia…) where the winners in these countries end up living  in a world of  guarded suburbs in an arrangement that allows them to escape all tax responsibilities for their poorer fellow citizens who have lost out in the shock therapy. He also joins the American financial journalist and the author of “Casino Capitalism”, Michael Lewis, in casting a sceptical eye at modern inventions such as the “catastrophe bond”, financial instruments the buyers of which will lose all their money if a certain disaster event occurs within a certain number of years and the sellers of these “cat bonds”, usually an insurance company seeking to insure itself against extreme losses, pays the buyer a high rate of interest.  Such a system, he says,  is dependent for its prosperity on a steady stream of disasters ecological, military or financial. Unfortunately,  many, many bright and well-educated people are attracted to such businesses  and the practice of what Arjun calls “the ethics of probability”- the practice of making their futures betting on natural or man-made disasters. All very well except that 50% or more of the world suffer terminally when such catastrophes happen and no thought is given to such suffering.
He then  presents an alternative view  about our future- one which is based on a description of what combinations of norms, dispositions, practices and histories that lead to  and paths that lead to desired discernible ends.. If such as future can be imagined it becomes possible for us to aspire to this future good life. This is what he calls “the ethics of possibility” as opposed to the ethics of probability.

He says that our generation has abdicated the construction of a vision of our future to econometricians and mathematicians who construct a future which is a mere extrapolation of the present. The alternative he proposes is the construction of a future which factors in our aspirations, our anticipations and our imagination. In using our imagination in this way we are able create a vision of our common future.  Our future then becomes not a blank space filled with possible catastrophes but a space which people can democratically design, it becomes “a Cultural Fact”.


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The feast that lies ahead

My speech introducing the research  papers presented at the World Management Conference- Goa 31st May 2013...a conference presented by all the 13 IIMs

It is my pleasant duty today to provide you a quick 10 minute guide that you can use to navigate through the many excellent papers being presented today. When we first thought of organizing this conference it was our fond hope that papers presented would go beyond the mere methodological rigor and would venture to the riskier job of looking at new and emerging issues in management theory. I am glad to report that we have many papers here today that do just that.
Corruption and bribery are daily headlines in India, yet little is known what factors determine why some business entities do these things more than others- is it the values of the people who run these firms or are there industry-related factors?. Malay Biswas (IIM Rohtak) examine a data set of 1106 Indian manufacturing firms to answer this question.

Management scholars are increasingly looking at business organizations not as stand- alone entities but as players in an environment. Saroj Pani (IIM Indore) introduces the concept of “Nodal Power” to explain why some firms are more successful than others in the same economic network of customers, suppliers and rivals. Sandhya Shekar digs into the concept of “virtual organizations” and develops a method of measuring the extent of virtuality in any organization. Saptarshi Purkayastha (IIM Kozhikode) studies 110 business groups in the 1998-2006 period and points out that such conglomerates prosper under conditions of market failures and weak institutional infrastructure but deteriorate when market-based mechanisms emerge. Swarup Dutta Institute of Management, Nirma U) examines how some organizations develop ambidexterity, the skill to pursue apparently contradictory goals such as being globally integrated but still be locally responsive.

The shift to the service economy is acknowledged in several papers. Susanta Mishra (IIM Indore) studies the link between emotional exhaustion and turnover intention among pharmaceutical sales representatives in India, a part of what he calls “emotional labour” and points to our need to get insights about employees in organizations such as call centres who have to constantly “put on” a pleasant demeanor and pacify irate customers who call in. Gilles Wijk (Esec Business School) asks whether service providers such as physiotherapists do what is right by their patient if they are asked by the hospital to measure their work by industrial era clock-time and not in an open-ended way that suits the patient. His unasked question is: will the time-and- motion principles that drove manufacturing productivity hold good in the service economy as well?

As India progressed through a series of cataclysmic changes from the broad-banding of licenses in the late 80′s to opening the economy in the 90′s how have the structural characteristics of Indian business changed? Tripathi Rao (IIM Lucknow) does a step-wise discriminant analysis of 6000 firms in 20 industries to study this. Chandan Sharma (IIM Lucknow) studies the productivity growth of firms who tried to cope with international competition by using imported intermediary inputs.
There are a number of papers on knowledge management in organizations. Amit Jain (National University of Singapore) uses data from US and Canadian biotech firms to study how organizations “forget” valuable accumulated knowledge (the converse of how organizations learn!). KBL Srivastava (IIT Kharagpur) has some pointers on using organization email systems to capture knowledge.

Being responsible to stakeholders other than shareholders is increasingly seen as mandatory, yet how does on measure how businesses perform on these dimensions.  A Rajagopal (Adhyaman College of Engineering)  compares the largest 200 Indian companies against 100 of their peers develops a sustainability reporting index and Ramendra Singh (IIM Calcutta) examines the CSR practices of 200 of our largest companies and propose a CSR Impact Index

What makes some companies internationalize more than others? Amit Karna (European Business School) studies 174 Indian IT firms in the 1997-2002 period to check what role the adoption of certifications like ISO and CMM Level 3 played in this and Ravindra Chittoor and Deepak Jena (ISB Hyderabad) uses “managerial intentionality” as the independent variable in his study of the internationalization of 226 manufacturing firms.

The characteristic of workforces are changing – no longer are they all-male and permanent or all from the same nationality. Prithviraj Chattopadhyay (HK University examines the “temporary worker”, a group that makes up 10% – 20% of the work force and studies what type of work gets allocated to them versus permanent workers; Rupashree Baral (IIT Madras) has some empirically grounded suggestions to be more family-friendly now that women and dual career couples and more nuclear and 20-somethings make up the bulk of our work force. Elizabeth George (HK University of Science and Technology) has pointers on how to work with internationally diverse teams. Vishal Gupta (IIM Ahmedabad) and his colleagues explore what types of leadership works in R&D settings.

I will end this guide by pointing to two papers who bridge management thinking with political economy. Arun Vaish (BITS Pilani) examines the paradox of many Indian farmers who have bank accounts but still borrow at what we think are “usurious” rates from the local money lender and has an unusual recommendation- the formal banking system has much to learn from the local moneylenders, he says, in designing a loan product which offers ease, promptness & assurance of getting loan as when required repeatedly- such well-designed products results in the borrowers being able and motivated to repay the loan.

Gaurav Chauhan (IIM Indore) analyzes financial data for 20,000 Indian firms for the period 1992 to 2011 and discovers that during this period these firms have steadily de-leveraged themselves ( reduce their debt/equity ratios). Is this a sign that they are capital starved? Is that in turn a result of an under-developed bond market? Has this resulted in these firms paying more taxes than they should have and is this the reason why corporate taxes have increased their share of government receipts from 8% to 30% in this period? And does this mean that Government now has a disincentive to develop bond markets in India?

Examining paradoxes such as these is the starting point for new ideas- many of the papers today do a good job of that.

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The Third Voice

First appeared the Business Standard

The comment that our normally mild-mannered and scholarly prime minister was reported to have made in an interview with Science magazine, that “There are NGOs [non-governmental organisations], often funded from the United States and the Scandinavian countries, which are not fully appreciative of the development challenges that our country faces…”, continued to ring in my head for several months. Was there more to NGOs than I had thought so far – at best, an independent third voice in India, bringing specialised expertise to areas such as health care and environment; at worst, idealists clamouring for a way the world ought to be rather than what it was?

I stayed in this stage of puzzlement for a few months till I encountered an article by Professor Nimruji Jammulamadaka of the Indian Institute of Management, Calcutta, in The Critical Review, a scholarly journal devoted to politics and society. The article, “The Needs of the Needy or the Needs of the Donors?”, takes a close look at 5,000 NGOs operating in about a thousand mandals, or administrative divisions, in Andhra Pradesh and running close to 2,000 projects. The focus of her investigation was to establish what factors – or independent variables – explained the number of NGOs in each mandal. In other words, if some mandals had more NGOs than others, what factors explained this. Her first finding was that NGOs begot NGOs – that is, if a mandal already had NGOs operating in the area, there was a greater chance of more NGOs being formed there. Her second finding was that the more extensive the activities of Christian missions in a mandal, the greater the chance of finding other NGOs there. Her third finding was that the easier the availability of funding (mostly from international sources) for some mandals, the greater the chance of NGOs being founded there – the Naxal-prone areas of Andhra Pradesh, for example, do not attract much funding and, thus, have far fewer NGOs. All these findings lead Professor Jammulamadaka to the question in her title: do NGOs get created and sustained to cater to the needs of the needy, or do they exist to cater to the needs of their donors?

A marker of the Indian NGO world is the transnational links that these organisations have forged that offer them increased leverage and autonomy, thereby allowing them to enter into conflicts with governments. But this has its hazards as well, says William Fisher of Harvard in his article titled “Doing Good? The Politics and Antipolitics of NGO Practices” (Annual Review of Anthropology). By depending on this kind of international funding, constituencies become “customers” and members become “clients”. This process of co-option of NGOs by development agencies, he says, is by now so advanced that NGOs may be destined to become little more than the frontmen for such interests.

The classic definition of an NGO is that it is a non-profit, voluntary citizens’ group, driven by people who share a common interest, perform a variety of service and humanitarian functions, and who bring citizens’ concerns to governments’ attention. In this sense, an NGO is merely an organisation form that “civil society” takes, a third voice, distinct from government and business, and includes a range of “intermediary institutions” – professional associations, religious groups and citizen advocacy organisations – that give voice to various sectors of society and, when done right, enrich public participation. But as someone pointed out, this could also include the Ku Klux Klan.

As I reflected on this insight, a sudden and more worrying thought struck me. Is it possible that these large numbers of NGOs (remember that Professor Jammulamadaka’s study had found 5,000 NGOs in just one state, Andhra Pradesh) act as a platform for what Leela Fernandes, professor of political science at Rutgers University, in her book, India’s New Middle Class: Democratic Politics in an Era of Economic Reform, calls the “New Middle Class” – an increasingly assertive group that “began to engage in a form of backlash protest politics against a democratic political field that they perceived as having been captured by previously marginalised social groups”. This newly assertive group, she says, is largely made up of the English-educated urban professionals. Are NGOs in India, then, merely a voice for this group?

A Reader Comment by email

I read your article in the Business Standard “ The Third Voice “, and I think the findings from the papers you quoted are entirely not true or have been arrived at by insufficient research or what we say “ convenient research “. There are 1.2 million NGO’s in the country and only 30,000 of them receive foreign funds . The Prime Minister’s office had retracted the statement after his report was published in Science. The author or the journalist who interviewed the Prime Minister Mr Pallav Bagla had indicated that the PM had only stated it in the context of the nuclear plant at Kudankalam. However the agitation continues there and no foreign funds have been detected. The real issue is that civil society reflects and voices the problems of the people and many such activists have spent years in the rural areas with a vision to transform India. I for one, am an engineer from BITS pilani and have worked for 30 years in rural India for elderly who are neglected by their own children.

I am attached a soft copy of my book on civil society which will help you  understand the good work being done in the sector across India even in Naxal areas. When we worked in Chandrapur, Maharashtra even the Naxals never touched us or harassed us. However media is not or never interested in writing on such work and will only cover the negative stories of civil society.
I hope you will write a piece more positive on the work being done by the sector . The bulk of the sector works with out foreign money ( 90 % of the NGO’s do not receive foreign funds or from mission organisations).
Best regards, Mathew

Mathew Cherian, Chief Executive, HelpAge India


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Thought Leadership at IIM Calcutta 2012-13

My Convocation Address, 6th April 2013
as Chairman, Board of Governors, IIM Calcutta

For the past few years I have taken the Convocation Address as an occasion to take a look at the contribution of our faculty to thought leadership in the field of management. I normally do this by using the week end before the convocation to read through the research papers published by our faculty that the year, picking a few to showcase at the Convocation. When I first started this practice there was a few dozen papers and my task was easy. Last year that number jumped to nearly a hundred. This year, I ensconced myself in Kotagiri a remote hamlet in the Nilgiri Mountains and opened my laptop and panicked!  My task this year was to read  66 research papers and chapters in journals and books, 68 papers in international conferences, 14 papers in national conferences and 29 Working Papers- adding up to more than 2000 pages in all!

So, if you find me a little bleary eyed, you must forgive me. As I staggered my way through this tremendous intellectual outpouring, I noticed several distinct patterns.

First, I could see that the big bet that we had placed four years ago that by expanding our doctoral programme we could step up our research output was starting to pay off. This year, there are six papers presented by our doctoral students in prestigious conferences in Venice in Italy, Beijing, Odense in Denmark, Hong Kong, Hawaii, Rome and Chicago.

Second, you can see that some of our faculty members are starting to address research questions that go beyond the Industrial Age and relate to the Information Age. Prof Ram Babu and Prof Uttam Sarkar, for instance, take a social network approach to study the interdependent structure of global stock markets. Prof Rahul Roy and team use social network analysis techniques to assess content quality in Wikipedia, Prof Megha Sharma on how to price Cloud Services and Prof Sumanta Basu on pricing Infrastructure-as-a-service offerings and  Divya Sharma, a doctoral student on a ranking algorithm for Online Social Network Search. These papers show that IIM Calcutta faculty are in the thick of the most exciting development of our era- the move to the Information Age.

IIMs are sometimes criticized for not spending enough time and effort in addressing the development problems of our country. Several research papers this year show that this view is not true. Prof Raghabendra Chattopadhyay and his co-workers ask the question, “Can Institutions be Reformed from Within?” and prove through their work that even high inertia organizations like the Rajasthan Police that can be improved by incremental administrative interventions. Then there are two studies by Biju Paul Abraham, Bhaskar Chakrabarti and co-workers which take a close look at the workings of the MNREGA scheme and provide some insights into what works and what doesn’t. Avantika took a look at human resource management in service delivery in healthcare organizations; Prof Somaprakash Bandopadhay has a paper on architecting a low cost peer-to-peer mobile phone network which can be deployed in disaster relief operations; Bhaskar Chakrabarty studies why there is a low level of participation by local farmers on decision-making regarding the allocation of a critical resource like water. All of these studies provide vital insights that will help improve the delivery of public services.

Working co-operatively on research projects with other academic institutions in India and abroad force-multiplies the creativity of both sides. I am happy to see many examples of this kind of co-operation this year. Prof Raghabendra Chattopadhay’s work on the Rajasthan Police that I referred to earlier was done in co-operation with scholars from the Massachusetts Institute of Technology and Yale University; Somprakash Bandyopadhyay’s work on peer-to-peer networks for disaster relief was done with scholars from B. P. Poddar Institute of Management. There are many more such examples: Parthasarathi Dasgupta’ with scholars from Academy of Technology & APC College, West Bengal; Prof Peeyush Mehta with scholars from the Indian School of Mines, Prof Debashis Saha with Kalyani Government Engineering College, Rohit Varman with  Suffolk University &  University of Rhode, Somprakash Bandyopadhyay with Dept. of Economics, Lady Brabourne College, Balram Avittathur with the University of South Carolina, Ramendra Singh with IIM Ranchi and Debashis Saha with Jadavpur University, Neotia Institute of Technology Management,  and Prof Asim Pal with the Haldia Government College. We also have examples of faculty collaborating with business organizations to produce research papers: Sumanta Basu with HCL Technologies, Ashok Bannerjee with the Thought Arbitrage Research Institute are two examples. I am particularly glad to see our faculty work with other Indian institutions- we are a public institution and we have a duty to stimulate creative work in these institutions.

All of this is very exciting, no doubt, but what excites me the most is when we see work which questions current deeply held beliefs in management theory. It is only then that the frontiers of knowledge are pushed back. And we have many different examples of this type of work this year. Here are some examples.
Prof Amit Dhiman examines that staple of corporate life, the Annual Performance Appraisal to understand its underlying political dimensions. Prof Ritu Mehta examines the unstated assumption in this era of globalization- are Indian consumers that identical to consumers elsewhere in the world? Prof Rajiv Kumar examines what exactly goes into making that oft-used concept “tacit knowledge”. Prof Nimruji Jammulamadaka studies the SKS Microfinance episode and asks whether the classic Private Equity culture can work in contexts like microfinance. In another paper she takes a critical look at the world of NGOs. Prof Raminder Singh delves deep into the notion of “Jugad” and demonstrates that it is not only a way of ‘making do’ but also a way of survival for consumers at the bottom of the pyramid. Prof Rohit Varman asks whether the Marketing discipline, which is usually seen as operating in the technocratic realm, is also used to advance ideas and ideologies of many kinds.

For those who think that our faculty researchers are lone voices in the wilderness with scant attention being paid to it by policy makers we have the example of Prof Sudip Chaudhuri’s work. His book, The WTO and India’s Pharmaceuticals Industry, was extensively quoted in the Supreme Court’s historic judgement earlier this week on the Novartis cancer drug patent case. Sudip’s long standing work on the dynamics of pharma patents has no doubt shaped policy thinking on this matter at the highest levels in India. He is now turning his attention to the problems of Indian manufacturing and I have no doubt that his work there will shape policy thinking on that as well.

, finally, to give you a sense of the international reach of our thought leadership, here is a list of cities in the world where our faculty were invited to present research papers at conferences: Atlanta, Auckland, Bali, Berlin, Boston, Chicago, Dubai, Florida, Hannover, Honolulu, Istanbul, Kyoto, Lausanne, Lisbon, Lyon, Melbourne, New York, Osaka, Paris, Pattaya, Phoenix, Porto- Portugal, Pretoria-South Africa, Queenstown- New Zealand, Rio de Janiero, San Diego, San Francisco, Seattle, Seoul, Shanghai, Singapore, Sussex, Umea-Sweden, Venice, Vitnius-Luthuania, Washington DC, and York, UK…all in the last 12 months!



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Pirates of the modern world

On January 18th users attempting to access Wikipedia, the online encyclopaedia saw a black screen and al statement that said “Imagine a world without free knowledge”, and then announced that “for 24 hours, to raise awareness, we are blacking out Wikipedia”. Thousands of other sites joined this protest in a similar fashion.
The din of protest soon reached such a level that the sponsors of the bill were forced to withdraw it, saying that the bill would not come up for a vote “until there is wider agreement on a solution.”  From the phrasing you can be sure that this is only a tactical withdrawal and the battle will soon resume

Why this maelstrom of protest against a piece of legislation that started out declaring loftily that its goal was “To promote prosperity, creativity, entrepreneurship, and innovation”?
For an answer to this you need to only glance at the armies assembled for and against it.

The supporters of the bill include all of Hollywood (studios, actors, directors, musicians and technicians), the American music and theatrical establishment  and the largest American trade union body in America, the AFL-CIO, among others.
The opponents are the the Silicon Valley crowd- Google, Yahoo!, YouTube, Facebook, Twitter, AOL, LinkedIn, and, of course, Wikipedia besides  the American Civil Liberties Union and Human Rights Watch.

Each side has framed its position in civilizational terms:  the Hollywood crowd say they are fighting “Piracy” and the Silicon Valley crowd say they are fighting for “Freedom of Expression.”

Mr Murdoch has thrown his weight behind this anti-piracy movement with his tweet- “Piracy leader is Google who streams movies free, sells advts around them”. A second tweet criticized Obama for “throwing his lot with Silicon Valley paymasters who oppose a pair of anti-piracy bills”.

I haven’t heard the word “piracy” thrown around so much since I as a thirteen year old buried my nose in Robert Louis Stevenson’s Treasure Island. a book populated with one-legged sailors with names like Back Dog with a  parrot on his shoulder and mysterious oil-skin-wrapped maps with X’s marked on them that could lead to treasures buried in far-off tropical islands.

It was a master-stroke when music companies, in America first and then the world, pinned the word “piracy” on all that people did without  their approval with music. What caused their ire was the appearance of the CD, the compact disk. Music companies watched in consternation as their revenues plummeted; young people were sharing copied CDs. Then the internet came along adding to the misery of the music companies.

The digital era brought on what can justifiably be called the golden age of piracy, a term that history books have hitherto reserved for the 17th century, a time when people like Blackbeard and Morgan the Pirate roamed the Caribbean, flying the skull and cross bones flag, pouncing on Spanish ships carrying gold from South America to Europe. The English authorities looked the other way until the attackers overstepped and started attacking British ships; the word “pirate” was invented to describe and prosecute them. From our vantage point of the early 21st century we would probably condemn not just the pirates but also the Spanish galleons- after all they were carrying gold and treasure that they had looted as colonialists from the South America.

We feel a similar ambivalence about the current imbroglio about media piracy.
The framers of the Stop Online Piracy bill have proposed things which will bring a gleam in the eyes of authoritarian regimes world-wide. They have, for instance, introduced the concept of a ‘‘U.S directed site” and defined it as “an Internet site or portion there of that is used to conduct business directed to residents of the United States”. So, off with the World Wide Web! Web sites will henceforth be seen to be “directed” at one or the other country and face liability in the country it faces. The original bill even required these servers to stop referring requests for infringing domains to their assigned IP addresses, which is the equivalent of telephone directory enquiry service not responding to requests about offending people’s numbers. Filtering of websites has now been introduced as a discussable topic.
The communication theorist and Harvard law professor Yochai Benkler  has educated us that the internet has three layers. The bottom  “physical” layer has the computers, and wires to carry messages, the middle “logical” layer has the computer code and  the top “content” layer has the digital images, text, music and movies. Battles about who will control what layer have going on for some time but the battles about the physical and logical layers are conducted in technical conferences and have little mass media value. The current  battle is about who will control  the most visible and glamorous layer, the content layer.

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Defending the internet, loudly

No sooner had we assembled in the conference hall at Delhi’s India Habitat Centre last week than an acquaintance sitting a row away leaned towards me and whispered, “They want to throttle freedom of expression on the Internet.”
“Who?” I whispered back.

He gestured at the podium where sat the minister, the minister of state, the secretary and additional secretary of the ministry of communications and information technology of the Government of India.

Even as I was trying to phrase my response briefly enough to be whispered back to him, the organisers called the meeting to order.
As the afternoon progressed and voices’ volume kept rising, I could not help but wish that the meeting was being held not at the Indian Habitat Centre in Delhi but in the Bengal Club on Russell Street in Kolkata. That venerable address was once the residence of Lord Babington Macaulay, who, as every Indian schoolchild knows, is the man who engineered English into being the language for India’s higher education system. What is slightly less known is that he is also the author of the Indian Penal Code, that vast compendium of dos and don’ts governing our unruly democracy — and which, among other things, threatens to fine or imprison whoever “sells or distributes, or imports or prints for sale or hire, or wilfully exhibits to public view, any obscene book, pamphlet, paper, drawing, painting, representation, or figure”.

Macaulay finished his masterpiece by 1837 and, bored with things in Calcutta (now Kolkata) by then, returned to London. The East India Company officials, who were busy with other things, forgot all about Macaulay’s Indian Penal Code. Then the Indian “Mutiny” struck. After quelling the revolt by force, including shooting some of the mutineers from their cannon, the British found it necessary to legitimise their rule not merely through the East India Company’s ad hoc rules, but through an organised body of law. Someone dusted off Macaulay’s work and enacted it in 1860, three years after the Mutiny.

From then on, governments in India have used a clause (known in the legal trade as Section 292 of the Indian Penal Code) to curb various attempts to titillate the Indian mind. A favourite target was D H Lawrence’s Lady Chatterley’s Lover. Glancing through the legal history of the early 20th century, I am struck by the fervour with which the British government clamped down on the book throughout its empire.

Independence from the British did not dampen this fervour. In 1962, Ranjit Udeshi, otherwise a law-abiding citizen, was convicted by the Additional Chief Presidency Magistrate in Bombay of the offence of selling Lady Chatterley’s Lover in his Happy Book Stall on Colaba Causeway, down the road from where I live in Mumbai. He was asked to choose between paying a fine of Rs 20 and a week’s imprisonment.

I was brought back from this reverie into the – by now – cacophonous meeting at the India Habitat Centre, by the protests of various Internet-related businesses that they lacked the expertise to take the call that Section 79 of the Information Technology Act requires: that if anyone objects to anything being done on their sites, the site owners have to decide whether to stop such action.

Here, again, I could not help but think how Section 79 is in fact preventing Internet site owners from the fate that befell poor Ranjit Udeshi of Happy Book Stall. By beginning with the words, “Notwithstanding anything contained in any law in time being in force…” the Section had, in one stroke, cancelled the application of Macaulay’s masterwork of 1837 to the Internet. Internet businesses, including cybercafes, now stand protected because Section 79 classifies them as “intermediaries” — not holding them responsible for what people view and upload.

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