Knowledge Report

1. Knowledge Report 1
Launched at
Epochal Shift in the Idea of India -
Meeting Aspirations?
16th
Regulators and Policymakers
Retreat 2015
September 3-6, 2015, Goa Marriott Resort & Spa,Goa

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Disclaimer (3): The views and opinions expressed in the articles of the Knowledge Document are
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as an organisation.
Editing : Pathikrit Payne
Editorial Assistance : Gaurav Sharma & Dharun Kapur
For Socio-Ecological Section :
Editing- Mita Nangia Goswami & Parjanya Chaudhry
Copy Edit- Divya Parthasarathy
Knowledge Report2

3. Knowledge Report
On the occasion of the 16th Regulators and Policymakers’ Retreat, I am pleased to
bring you IPPAI’s Knowledge Report titled, ‘An Epochal Shift in the Idea of India – Meeting
Aspirations?’ This report is a collection of articles written by thought leaders on pertinent
issues and challenges that arise from India’s move towards achieving the aspirations of
its people.
India is looking to create a new identity on the global stage. It is looking to provide its
1.2 billion people,where more than 54% of the population is below the age of 25, a
better quality of life using the latest technologies, giving connectivity and job generation,
education, healthcare and food, water and energy security. With this ambition comes
many challenges as well as opportunities.
As the nation starts to take this development leap, the significance of the Power Sector is
amplified. Without Power, this ambition cannot be achieved. However, across the spectrum
of the economy, unscalability, inefficiency and under-payment for services rendered by
utilities are challenges that hamper the growth of the sector. Along with these, there are
also problems from fuel availability, unstable and congested power grid, thin and erratic
cash flows, increasing pressure on existing resources to cross subsidize consumers as a
hangover from the command market era when the state funded utilities from the central
exchequer, and there was no place for competition or private sector. In these times of
transformative change, Independent Power Producers need to be recognized as an integral
part of the system and also to be supported to bring in competition, private investments
and efficient management in order for them to be able to deliver. It is seen that in the
present context, the private sector is viewed with suspicion and is discriminated against
by the public sector.
The Private Sector is a vital element to the development of the country. The inspiring
vision of the Prime Minister of India can become a reality only with the active participation
of both public and private sectors. However, there is a lingering discriminatory stance
against private enterprises, a lack of clarity about its role that remains a stumbling block
inhibiting the development of the power and infrastructure sectors. In these times of
change and realizing potential, when nation building requires the participation of all
sections of society, there is need to ensure and regulate the role and contribution of the
Private Sector in the development process.
This Knowledge Report covers the many issues and challenges that arise from this
road to development that India has taken, including the issue of separation of content
and carriage, mainstreaming Renewable Energy and its challenges and environmental
concerns about depleting water tables and vanishing forests, among others.
Foreword

4. Knowledge Report
The title of the report is also the theme of the 16th RPR conference. ‘An Epochal Shift in
the Idea of India – Meeting Aspirations?’ not only opens a platform to discuss and debate
these issues, challenges and the way forward, but also celebrates the mandate that India
has secured for development.
The Regulators and Policymakers’ Retreat (RPR) is a cerebral initiative that attempts
to address the critical issues in the fields of Energy, Infrastructure and Governance
by bringing together thought leaders and experts among regulators, policymakers and
industry stakeholders. Over the years, RPR has become a premium initiative where
visionaries have thought provoking discussions on the existing and future challenges of
and strategies for India’s energy and infrastructure sectors.
I hope this document will complement the discussions at the conference and contribute
to the comprehensive perspectives that RPR explores.
On behalf of IPPAI, I would like to thank the Ministry of Power, the Ministry of Coal and
the Ministry of New and Renewable Energy, Government of India, for extending their
support to the event. I am also pleased to extend our gratitude to all the eminent speakers
who have agreed to participate at the event. Lastly, but in no way the least, I would like
to extend a heartfelt ‘Thank you’ to all our sponsors, media partners and supporting
organizations for their support. I hope we have more opportunities to work together again
in the near future in the national interest.
I hope you will enjoy the event as much as we have enjoyed putting it together.
Harry Dhaul
Director General
IPPAI
Knowledge Report

5. Knowledge Report
Index
Topics
PART - 1 7-50
THEME PAPER
Resonance of an Idea : India through the Sand Dunes of Time 9-50
Pathikrit Payne
PART - 2 51-91
INDUSTRY NARRATIVES
Seven Policy Actions which Crimped the Umbilical Cord of Power Sector in India 53
Anil Raawal
Challenges of Fuel Production & Availability Issues. Is India Poised to Tackle Them? 61
Satyajit Ganguly
Technologies and New Paradigms in Renewable Energy Sphere 68
Dr. Ramakrishna R Sonde
Regional Electricity Sector Cooperation in South Asia –The Way Forward 73
Dr. Anoop Singh
Developing an Adequacy Architecture for Power Procurement to Make 24/7 Power 77
Supply a Reality
Ravi Arya
Driving the Off-Grid Revolution 79
Shravan Sampath
An Epochal Shift: Changing Perception of the Private Sector's Role in the Indian Power Sector 84
Gaurav Sharma
PART - 3 93-157
SOCIO-ECOLOGICAL NARRATIVES
Current Ecological Concerns in the Power Sector: Options to Avoid or Minimise Impacts 95
Dr. T. R. Shankar Raman
Dr M. D. Madhusudan

6. Knowledge Report
The Ecological Narrative in the Idea of an Energy Secure India - of Rivers and Dams, 107
Grasslands and Solar Farms, Habitat Connectivity and Habit Diversion
Ananda Banerjee
The Neo-liberal Era- Sustainable Futures or Corporate Colonizations? 123
Kisor Chaudhri
The Indian Power Sector: Need of Sustainable Energy Access 132
Sanjeev Kanchan
Aruna Kumarankandath
Breaking the Myth Behind Coastal Thermal Power Plants 148
Shripad Dharmadhikary
PART - 4 159-172
GEOPOLITICS AND HISTORICAL NARRATIVES
Is a Shift Towards an India, China, Russia, US Global Partnership Ever Possible? 161
Atul Aneja
The Evolving Idea of India – Revisiting History 170
Aneesh Gokhale
PART - 5 173-182
SOCIO-ECONOMIC NARRATIVES
Demographic Dividend: What Does India’s Future Hold?
Dharun Kapur
Knowledge Report

7. Knowledge Report 1
PART - 1
THEME PAPER

8. Knowledge Report2

9. Knowledge Report 3
Resonance of an Idea : India
through the Sand Dunes of Time
Preface
A
n idea is often an ever evolving entity. With time and change in environment, ideas
germinate to take a more evolved or nuanced shape. The idea of India in the same
league is not a constant proposition. Since time eternity perhaps, it has been
metamorphosing. From being a cradle of civilizations to a melting pot of cultures, from
being a fountainhead of knowledge to getting subjected to relentless invasions, India
along with its very essence have had eras of zenith and nadir. But much on the lines of
an ever expanding universe, the idea of India has often proved its intrinsic strength to
permeate the geographical boundaries and resonate across different parts of the globe.
In 1947, with independence and simultaneous partition, India started a new journey
on a tumultuous path. From being an inward looking closed economy, India did have a
phoenix like rise as an emerging economic powerhouse. From being an essential believer
in ahimsa, it did have to fight wars to keep its sovereignty intact. From being the abode
of spirituality, it did have to give importance to the concept of materialism for creating
jobs and to feed mouths.
There have been moments in the history of time when certain tectonic shifts brought
about a paradigm evolution in the Idea of India. Interestingly though each time the idea
became more mature and comprehensive.
Over the last two decades, India has witnessed some key moments when its emergence
in the global arena and its increasing economic, military and above all the soft power ,
have been hard to ignore for the global community. From the nuclear tests of 1998 to the
historic Nuclear Deal in 2008, from touching the $2 trillion GDP mark in 2014 to the
decisive mandate the disparate electorate gave in the 2014 Lok Sabha Elections, each
has heralded a new step towards a giant march.
This paper would examine the journey of India through the sand-dunes of time over the
last half a century and try to decipher the manner in which the nation’s idea and essence
evolved.
Pathikrit Payne
THEME PAPER

10. Flashback – India through the Lens
Two important incidents that happened in India in the year 2007 deserve a special
mention. It was in the year 2007 that India entered an elite club by becoming a trillion
dollar economy.1
From the verge of financial bankruptcy, sovereign default and a severe
foreign exchange crisis that gripped India in early 1990’s as a result of decades of not-
so-perfect economic policies, her phoenix like turnaround to becoming a trillion dollar
economy in less than two decades’ time, riding on the back of a liberalized economic
policy, was truly stunning if not a miracle.
The year 2007 was also significant in some way for another reason. It was the year when a
Bollywood film named Guru, loosely based on the life of Dhirubhai Ambani was released.
Thirty years back, it was in 1977 that Dhirubhai Ambani had taken his company to public
raising Rs 2.82 crore from 58,000 investors. An investment worth Rs 1000 in Reliance
shares in 1977 was worth around Rs 7.78 lakh in 2012 and yet in 1977(PTI news),
it would have been well nigh impossible to have a film like Guru released and made
commercially successful. A film on the success of an entrepreneur was almost a taboo in
Socialist India.
The Bollywood of seventies of the 20th Century reflected India of those days. It epitomized
high inflation, lack of employment opportunities, sheer despondency all around and a
society where business was looked down with considerable apprehension, and restrictive
trade practices of all kinds throttled any scope of individuals to experiment with ideas to
give shape to viable commercial initiatives.
The norm then was to glorify despondency of middle class, educated but unemployed
youth ( that gave rise to the angry young man image) and to vilify the businessman who
was perennially projected as a merciless profit seeker and a law breaker who would resort
to all kind of malpractices to earn profit. The norm then was also to presume that profit
making is a sin and that the profit making businessmen were responsible for all the
malaise of the society.
By 1990’s however, four decades of restrictive economic policies had pushed India to the
brink, leaving it with little option but to open the economy and allow private sector to play
a more prominent role, if the nation had to be saved from perpetual economic collapse.
India’s private sector, kept under shackles for decades, showed their mettle and gave a
glimpse of what they could do for India when unleashed. Since then, there has been no
turning back.
THEME PAPER
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11. Knowledge Report 5
The Image that had a Profound Makeover
From a nation known for centuries as one of snake charmers and often associated with
abject poverty, malnourishment, malaria and black magic, suddenly that same nation
became the back-office of the IT world. From nowhere a string of first generation
companies emerged which took India into an altogether new league. Companies like
Wipro, Infosys, TCS or HCL became household names with a generation of young Indians
growing up with dreams of working in such companies followed by the quest to create
such entities on their own.
Private sector organizations, which for long were presumed to be not having either the
appetite or capacity for long term capital investments, emerged as major investors
spending hundreds of billions in expanding the nation’s capacities in the realm of oil
refining, steel production, power sector, cement and aluminum.
From an era, when all that educated Indians wanted was to get hold of a secure government
job to an era when they aspired to rise up the professional ladder and manage major
companies, the epochal shift of the idea of India became complete when over the last
one decade or so, India emerged as a country of millions of young entrepreneurs who were
willing to give up even cozy jobs in order to take plunge into the uncharted terrains of
entrepreneurship and create successful entities in many uncharted terrains. There were
countless Davids who were not scared of challenging the Goliaths.
In other words, the shift in the Idea of India consummated with a generation of young
Indians aspiring to become employers from employees and with India from a nation of
a million mutinies emerged as a nation of a million entrepreneurs. The success of the
movie Guru was the triumph of coming of age of the entrepreneurial Idea of India.
With time India has raised its bars. From the trillion dollar mark in 2007, the Indian
economy crossed another milestone by getting into the $2 trillion GDP club in 20142
. In
terms of Purchasing Power Parity the nation’s economy is on the threshold of touching
the $8 trillion3
mark while its nominal GDP is expected to be $3 trillion before 2020.
The story though has not ended there either. Today India’s aspiration and quest for more
economic growth is not an indulgence but an abject necessity if the yearnings and desire
of a billion plus population has to be met.
THEME PAPER

12. The Challenge – Unenviable Task of Steering a Billion Dreams
Ironically, if one compares with Greece, the nation on the brink of sovereign default and
literally at the mercy of its richer European counterparts, India’s forex reserve at around
$355 billion is even more than the nominal GDP of $238 billion that Greece has. So far
as the forex reserve of Greece is concerned, its very existence is in doubt. Yet if one has
to compare the concerns that the Prime Minister of each nation has for their respective
nations, the concerns of the Indian Prime Minister is no less than that of his Greek
counterpart. Fulfilling the aspirations of a billion plus people is not a small task.
Thus while the Greek Prime Minister would be happy and feel overwhelmed merely with
a bailout package from the European Union, for the Indian Prime Minister the solace is
not that his nation has a $355 billion forex kitty or a $2 trillion economy but at what
rate he is able to grow it so that more jobs can be created at a faster pace. In certain
respect, even through on the face of it comparisons between India and Greece may seem
fallacious, the challenge of steering an aspiring nation with perpetual quest for a better
life is no less than that of salvaging a sinking one.
How it was before - India before Economic Liberalization
In the history of Bollywood, there have been at least four movies having the word Roti in the
title of the movie. The trio of Roti Kapda and Makaan have often found key places in the
dialogues of Hindi movies. And it is not without any reason. Time since the nation got freedom
from British rule in 1947, for decades, the mass found it difficult to make both ends meet.
A restrictive and a not so enterprising economic policy based on severe clamp down
on private enterprises through the four pillars of licensing policy namely (i) production
control, (ii) price control, (iii) priority to small scale industry and (iv) insistence on an
import substitution regime, made sure that for decades India failed to reap the benefits
of economies of large scale production to create more jobs.
China since 19784
realized the folly of following such a policy and evolved itself. It took
advantage of the economies of large scale production to produce commodities in large
quantities thereby substantially reducing the per-capita cost while creating globally
competitive products for the world market and jobs for her people. India failed in the same
and thus in a restrictive environment where breaching the production limits by companies
invited penalties, creation of fresh jobs or low cost products were daydreams. In the
absence of the same, fulfilling the basic necessities for the common man was a challenge.
THEME PAPER
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13. Knowledge Report 7
Flashback- From 1950’s to 1990’s, the Long Difficult March of India
India for decades kept literally everything out of bound of the common man and even
the basics of things which are taken for granted today were luxuries here a few decades
back. If one looks at the era from just after independence, India was a nation in perpetual
turmoil. Massive migration of an unending mass of humanity that happened as a result
of the tumultuous partition in the middle of 1947 left the newly formed nation with
countless number of refugees. The British did leave behind certain major infrastructures
but had made sure during the colonial era that India did not become a competitor to
Manchester or other major British manufacturing hubs in terms of industry.
In other words, a newly independent India completely lacked industrial infrastructure
and thus job creation for masses was as good as a reverie. Thus in the absence
of industry, for the majority of the people having recovered from the trauma of
partition, getting job for a livelihood was almost an impossible challenge no less than
finding god himself.
Getting into some kind of business activity or small time manufacturing by virtue using
the traditional knowledge was perhaps the only possible and viable source of livelihood.
And yet the common man with an entrepreneurial urge to make both ends meet was met
with the wall of license raj and permit raj meandering through which needed special
mettle and skill sets. Most thus gave up thinking on a large scale and barely survived by
compromising with the system.
India’s economic policy for the first 40 years since independence saw major impetus to
the development of heavy industry with the state as the prime investor through Public
Sector Undertakings. The heavy industry oriented economic development model was
commendable since it did help in creating the industrial foundation of the nation. But
what was not commendable was the apprehension, stranglehold and the distrust towards
private enterprises. The License era, also known as License Raj, throttled development
of a viable and vibrant environment for economic activities and instead, the environment
was vitiated. The state those days tried to do everything on its own through PSUs and
other state departments and the results were far from satisfactory.
There was distrust towards private sector and against wealthy individuals. With the highest
tax slabs reaching as high as 97.75% in 1973-74,5
it gave a glimpse of the socialist
mindset then . Wealth creation was akin to a taboo. With that kind of tax slabs at one end
of the spectrum, it was more convenient to either be a beggar for earning tax-free income
or manipulate records to show much lesser income or to exit the country altogether. Most
preferred the second and the third option.
THEME PAPER

14. Such were the restrictions towards private sector that throughout the 60’s and 70’s of the 20th
Century, India witnessed a massive exodus of bright educated Indians for greener pastures in
the West. Frustrated by the throttling bureaucratic culture where individuals had little space to
create, nurture and flourish new ideas, the educated Indians with bright ideas found breathing
space in US and elsewhere, where their ideas where received with much warmth and incubated
into flourishing organizations. Many companies started by NRIs abroad should have ideally
been an India incorporated company. But that was not to be, all thanks to the license era that
inhibited the growth of private enterprises. India did learn the follies later, but by the time it
learnt, precious time had already been lost along with massive brain drain for decades.
While India Languished, the Diaspora flourished
The exodus of educated Indians to US and its profundity could be gauged from the fact
that it is the Indian diaspora in US that played a key role in the development of the
Silicon Valley based IT industry of US even while India was struggling to indigenize basic
technology back home and was entirely dependent on the import of the same.
As per a Dun & Bradstreet database of 19986
, between 1980-84, there were 47 Indian run
start-ups in the Silicon Valley followed by 90 start-ups between 1985-89 and an astounding
252 companies started by Indians between 1990-94. The seeds of this migration of brains and
their starting of wealth creating entities in the Silicon Valley of California were sown by none
other than India’s restrictive economic policies which lasted for more than four decades since
independence and led to exodus. In 2007, as per the report submitted by a High-Powered
Expert Committee appointed by Government of India, the combined wealth of the 25 million
NRI community was more than a trillion dollar7
and almost at par with the Indian nominal GDP
then, which was proof enough of who was wrong and who all were right for several decades
before that.
Defining the Nation- Beyond the State
A nation is not just about the state, its policies and its stranglehold on everything. It is
also about individuals who are deeply connected to the umbilical chord of the nation
and they need not be part of the state machinery in order to do something good for the
nation. For generations since time immemorial, individuals have risen as change agents
and metamorphosed societies for better.
The common man or the individual thus plays a very critical role in the development of
the nation and no nation can flourish without the state allowing citizens to become equal
partners in national development. A case in point is the fact that more than 50% people
of India are self employed8
and there are more than 5.5 crore micro-units which employ
12 crore people. In other words, millions of people in India not only don’t depend on the
THEME PAPER
Knowledge Report8

15. Knowledge Report 9
government to provide them with jobs but also create employment for millions of others.
However it is also a reality that such micro and small enterprises cannot sustain and survive
without the existence of large scale industries. There is a symbiotic relationship which
cannot be denied. Each needs the other to sustain and flourish. Yet for several decades
since independence, there was a kind of apprehension against large scale industries. Not
only a large array of commodities were reserved for production only by the Small Scale
Industry (SSI), there were also many other major industrial products which were reserved
only for State Owned Enterprises. The educated Indian’s big dreams for creating giant
enterprises were thus squeezed in between and barely had space to breathe.
The Legacy of the Socialist Era : Proliferation of the Perception that Profit Making is a Sin
Basic minimum profit making which is so much needed for viability of enterprises was
looked down as if it was a sin. Nothing portrayed it better than India’s Hindi movies of
60’s, 70’s and 80’s of 20th Century India where the villain or the negative character
was invariably the businessman who was depicted as ruthless, often a smuggler or a
black marketer and one having nexus with anti-social elements. Such depictions did
not do any good to the creation of an entrepreneurial culture which was already down
in a vitiated license regime. Making of the bare minimum normal profit is a reflection
of optimal utilization of capital and serves as an incentive to create wealth. Further, for
any capital scarce nation, optimal utilization of same is extremely important. Instead, for
decades India encouraged squandering of the same. Socialism became a great excuse for
inefficiency, profligacy and leakage.
While those with budding ideas who left for West found foot below ground, many of those
who had decided to stay back and attempted to make it happen in India found it an
uphill task to viably do business and create wealth both for themselves as well as for the
society. In the absence of opportunities of growth of business, creation of job was limited
and thus as a chain reaction, not only was it a challenge to start an enterprise but equally
challenging was therefore to get a job. High rate of unemployment among the educated
youth created a vitiated environment giving rise to violent extremist movements in many
places.
The Lost Decades of Low Exports, Poor Quality Products and High Prices
Stringent production control conditions imposed as part of the license to any private
company to manufacture in India made sure that the basic cost of production remained
perennially high as limited scale of production failed to reap the benefits of economy
of scale. Price control made sure that there was no competition among organizations
to reduce price. Both created a distorted environment. Lack of expansion of production
THEME PAPER

16. resulted in limited or no creation of additional jobs whatsoever.
While basic cost of production remained high and price control prevented market from
deciding the optimal pricing of products, both created a massive black market of products.
This led to huge leakage in tax collection but was a good avenue for bribe seeking for
those whose job was to inspect in the era also known as Inspector Raj.
Everyone knew what was happening and everyone remained a blind eye to it. Many companies
continued to produce more than their quota but showed something else on books. All that
was needed was to keep certain people in the chain of inspection happy. Price control
likewise created a regime of distorted prices. Had price control remained in today’s era,
prices of mobiles phones or say FMCG products would have never come down to the level
where even people from considerably lower income group can afford them today. There was
a way of doing business in India and it worked well for over 40 years for those who knew how
to get access to the exclusive licenses and keep it out of bound for the rest lest competition
arises. With the advent of economic liberalization much of this became history.
The Legacies that Died when Dawn of Globalization Emerged
Interestingly, the quintessential Ambassador car made by Hindustan Motors literally became
an icon of the socialist era. For nearly four decades, it had a near monopoly or was rather part
of a duopoly in the Indian four-wheeler market. In the absence of any real competition there
was not much reason for the company to put efforts to change or innovate. Thus every ten
years, when a new model of Ambassador used to be introduced, the more the company, i.e.
Hindustan Motors, tried to make it look different, the more it looked the same. Reason? Lack
of competition made sure there was not much impetus to work on design or other features.
Besides the power of the engine, which invariably increased with each new model, nothing
else changed. Aesthetics never mattered. The promoters knew it well that the hapless
Indian consumer did not have much choice but either to buy an Ambassador or choose
from one or two other options, or not buy at all.
In other words, consumer was not the king but the license holding companies were the
rulers because the license era immune them from competition and allowed them to thrive in
a cartel kind of an environment without investing in research & design or in end consumer’s
requirements. The same has been the case with many state monopolies as well.
Later when the automobile industry was opened up to competition, the kings of the License
Raj era namely the likes of Hindustan Motors faced stiff competition and eventually by
2014, the company had to halt the production of Ambassador9
because in the era of sleek
designs, superior technology and constant innovation where delighting the consumer is
THEME PAPERTHEME PAPER
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17. Knowledge Report 11
the prime objective of companies that desire to survive, there were no takers for the
mammoths of the socialist era. Today India is a global automobile manufacturing hub
and is set to be the third largest by 202010
. All thanks to economic liberalization and the
end to the cartels that License era created. From an era when owning even a Jurassic
age vintage looking Abmassador car was a luxury, today the Indian automobile industry
contributes nearly 7% to the Indian GDP.
The Struggle back then for the Enterprising Ones
In the same league, a regime of an import substitution mechanism resulted in India
attempting to make everything on its own with mixed results and deprived its industry
from high quality key components and inputs whose import could have helped India
in making quality outputs. Exorbitantly high import duties inhibited imports of most
products and even the critical ones.
One of India’s most iconic and prestigious companies namely Infosys, which inspired an
IT revolution in India and played a key role in making India the global back-office of IT
services, had to run from pillar to post, back in the seventies of 20th Century to even get
a license for importing a computer. In an article titled, ‘History revisited: The initial years
at Infosys’ by Bibhu Ranjan Mishra & Pradeesh Chandran (May 19, 2011) published in
Business Standard, Infosys founder Nr Narayana Murthy was quoted saying the following,
“Computers were not easily available in the market. It used to take at least three years to import a
computer to India at that point in time. So we decided that some of us would be based in the US to
start work. But, even before travelling abroad it took us 10 days to get permission from the RBI.”
The Infosys founder had further stated in the same article that it also used to take nothing
less than one or two years for getting a telephone connection. Worse, if one sought foreign
exchange, then as per RBI rules, one had to first earn the same and share with RBI 50%
of the same. However ridiculous these may sound today, that was the way India was run
for almost four decades. One cannot however deny the stupendous role played by RBI in
the post liberalization era to transform Indian banking.
Foreign exchange reserve was essentially a scarce commodity those days and solely
because India did not produce anything worthwhile which other countries were willing to
happily import. And the reason for such poor quality products that India manufactured
was India’s own doing through obnoxious industrial policies centered around a restrictive
license regime. Looking from today’s perspective all these may sound shocking but in those
days, India's approach towards managing the economy was essentially shocking when
compared with what China and South Korea were doing to transform their economies.
Post the economic liberalizations of 1990’s; the only thing that was changed was the
THEME PAPERTHEME PAPER

18. ease of doing business for the same private sector which was kept restricted for more than
four decades. And the results are there for everyone to witness.
The Lost Decades when Economic Growth was not the Priority
For more than four decades, severe restrictions were imposed on the ability of the
industry to grow. If investments on plants and machineries crossed a defined threshold,
the concerned organization was to lose Small Scale Industry (SSI) status and all related
benefits of incentives and exemptions. Since Small Scale Industry (SSI) could not invest
more, fresh jobs were not created. As a result, large scale unemployment among educated
youth was the norm than exception. In any case, each of these policies did neither make
India self sufficient nor created jobs.
Bottomline was that India continued to make low quality products which had limited scope
for exports while the nation was deprived of critical technologies because of a lopsided
import substitution policy. But intriguingly or rather most ironically, even as apprehensions
towards private sector and the penchant for import substitution continued, it did not
deter the Government of India from perennially rushing to the developed countries with
request for funds and technical support for setting up heavy industries by Indian PSUs.
The Legacies of the Socialist Era- APMC, APM, MSP and Populism
If the Licensing policy was one aspect of India’s tryst with the closed economy, creating a
subsidy regime, introducing Administered Price Mechanism for petroleum products and
regulating the prices of agricultural commodities through creation of Agricultural Produce
Marketing Committee (APMC) for each state were other hallmarks which completed the
stranglehold of the state on the economy with market forces having very little or no role
to play. However, the end result for each of them became disastrous. While economically,
each became an albatross round the neck of the government exchequer, politically on the
flip side, each became a powerful tool for vote-bank politics.
While subsidy on electricity and free water became powerful election promise, resulting
in massive and chronic losses for state power utilities and leading many towards
bankruptcy, APMC brought in severe restrictions on the ability of the farmers to sell their
farm produce to whosoever they want. Most were compelled to sell only in the Mandis
and while wholesale prices remained low resulting in farmers getting limited price for
their produce, retail prices, on which government had no control, mostly remained high.
As a result, while farmers remained deprived of their legitimate prices, the end consumer
kept on paying a much higher than normal price with the middlemen minting money in
the supply chain in between. Agriculture, for many reasons including this, continues to
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19. Knowledge Report 13
remain unviable. Interestingly, if one looks at one of the key reforms that Deng Xiaoping
introduced after taking over the reign in 1978 in China was to unshackle the Chinese
farming community from collective farming and giving farmers the right ‘to choose what
crops to grow and to sell any surplus for profit’11
. Deng’s initiatives of giving freedom to the
farmers were completely in contrast to the agriculture policy that India started practicing.
Restricting the choice of the farmers to who they can sell their produce started having
cataclysmic effects. While the purchasing power of the Chinese farmer kept increasing,
that of his Indian counterpart kept falling and is still in jeopardy.
The Impact of APMC and the Vicious Cycle
A lowly remunerative agriculture massively reduced the ability of the Indian farmer to pay
for the electricity he uses for farm work or to repay the loan he had taken from the nearby
bank. Instead of attempting to make farming more remunerative, the entire attention
shifted towards political battles to make electricity free for him and to waive off his bank
loans. Further, India’s Green Revolution in late 60’s did increase farm productivity but
India’s experiment with Food Corporation of India and developing a grain reserve created
a weird scenario where farmers, especially from states like Punjab Haryana and western
UP found it more convenient to sell food grain to the state owned Food Corporation of
India than to attempt it to sell it in the open market.
The net result was the politics of Minimum Support Price or the MSP that ideally
was mooted as a concept to give a minimum price to the farmer to recover his cost of
production (in case he is unable to fetch that price from open market) but eventually
became a political tool. Whoever promised higher MSP started getting more votes from
the large chunk of farmers from North India who form a formidable size and could decide
the fortune of any election. Thus while a certain section of the Indian farming community
flourished by selling their food grain to FCI, the rest languished.
Politics of raising MSP made sure that whatever money was allocated to provide the poorer
section of the society with subsidized food grain was being used up to buy the food grain, so much
so that then the Food Corporation of India was left with not much option but to let the collected
food grain rot in the open because the cost of disbursing it far and wide was too high. In reply to
an RTI, Food Corporation of India had stated that between 2005-2013, a whopping 192,502
metric tonnes of food grain was wasted12
. By certain estimates, the amount of food grain wasted
in India annually is almost equal to the amount of food grain produced by Australia annually.13
Thus, a socialist India created a state where green revolution increased productivity to
produce more food grain which was then harvested and left to rot in the open mandis
across India while a significant proportion of the population went to bed half nourished or
malnourished. This continues till date because neither agriculture nor food subsidy has
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20. been reformed, the prime reason for the same being the fact that these are politically hot
potatoes and no one wants to rock the cart as reforms in these would upset many in the
supply chain who have thrived on the status-quo.
India of the Socialist Decades- An Era without Personal Dreams and Aspirations for the
Common Man
Interestingly, for all those years when things were extremely grim for India in terms
of economic opportunities and availability of jobs, and when everything was literally
rationed including entertainment ( for example- one may even say Hindi movie music was
rationed in terms of half an hour of Chitrahaar and half an hour of Rangoli every week) the
common man did not expect much either and was surprisingly compliant because devoid
of connections with the rest of the world, he did not have much idea about what he ideally
deserved. The age of internet and private television media later changed all of that.
In other words, in spite of the deplorable condition of the Indian economy, at a time when
leave alone the West, even China and South Korea were racing past India, the common
man in India was quite content with his overall lack of opportunities and deplorable
condition since he did not have the means to know what other countries were striving for.
Today, the digital revolution and access to information has changed it all. But in those
days, aspirations revolved around facing the challenges of meeting the bare minimum
requirements. The rest were all termed as luxury and were out of bound for the mass.
Jobs were few, far and wide. The only ones who had passage to a better life were the ones
who had government jobs. Thus hordes of young educated Indians spent years and often
almost a decade trying hard to get a government job, their only gateway to a privileged
life and opportunity to be ahead of the wretched mass. Elsewhere militant trade unionism
and inflexible, stringent labor laws made sure that whatever little potential Indian industry
had, in spite the stifling environment, never got the chance to flourish.
The Docile Indian of the Socialist Era
The common man did not know that when because of stifling and restrictive policies, expansion
of business ventures was a struggle in India and as a result of which job creation was miniscule,
China was creating mega Special Economic Zones and creating jobs in millions. He did not
know that when for him to buy the ubiquitous Ambassador or the lackluster Premier Padmini
was a daydream, the common man in many of the West or even of many Asian countries was
riding cars which could make Ambassador look like a Jurassic Age product.
When possessing even the rotary-dial black colored telephone was a luxury in India, chordless
phones were becoming norm elsewhere. When the common man here was struggling to
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21. Knowledge Report 15
even purchase a black & white television, remote controlled color television was becoming
the norm elsewhere. Yet he did not protest or asked for more because no one was there to
tell him what was happening elsewhere. He did not know that he could have afforded all
these and much more had the economic policies were different. He was docile because he
presumed life could not be better. No one complained beyond a point about why successive
models of Ambassador always looked all the same or why landline phone hardly ever worked
because buying even those dismal products was out of bound for most.
While India’s self imposed moratorium on import of technologies including computers did
no good for the nation, those select few who had industrial license flourished at the cost of
the Indian consumer. They neither had the onus to invest more on better delivery of service
nor bothered ever to produce quality products because they knew that the wretched Indian
consumer did not have a choice but to buy their products. The closed economy meant
assured business for the chosen few, including the state owned enterprises.
Ironically, even when India in those days had opted for a centralized planned economy
where state owned enterprises would play the pivotal role, most PSUs remained loss
making and lacked the desired efficiency level or penchant for innovation. Ironically, in a
liberalized economy, many of India's PSUs have become more competitive than ever before
while some have essentially become globally renowned.
Yet, there were few who could gauge the enormity of change that was happening abroad
especially in the realm of information technology. They were qualified and were visionary
but had not left for West and wanted to create something right in India, a rarity of a dream
in those days. Infosys which was incorporated in 1981, had to struggle for almost a decade
in the stifling conditions before the nineties arrived with some breather and a new lease of
life. But this was no news. India was different then and entrepreneurs were not the icons.
In a broader sense, politics in India during the whole of seventies and eighties of the 20th
Century, was essentially driven by left of centre ideologies. When jobs were scant and
foreign trade was minimal, instead of asking for policy changes or reforms in policies of
government, the blame was always pinned on private sector.
The Harbinger of Change – What Made the Shift Happen?
The strains were evident for long but the State was in a state of denial. While Rajiv Gandhi
initiated some of the much needed economic reforms, it was under the aegis of Prime
Minister PV Narasimha Rao and Finance Minister Manmohan Singh that India witnessed
economic reforms in the real sense. This of course would not have happened had India not
been pushed to the brink of sovereign default as a result of scant foreign exchange reserves
left with the nation, not good enough to even import the basic commodities for long.
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22. The incumbent Government of that time was compelled to liberalize the economy and
allow more foreign investments to arrive and shore up the foreign exchange reserves. The
inward looking, closed economy was gradually giving way to a more market oriented one
wherein the private sector was to have a much bigger role and freedom to operate. Import
duties on many commodities were rationalized and market was allowed to decide many
things. In other words the Indian economy was finally unshackled. If the political freedom
of India happened in 1947, perhaps the economic freedom took place in 1991. However, it
was not without stiff resistance from many quarters, often with contrasting interests. While
a certain section of the business lobbies who had benefitted immensely from the license raj
resisted the opening up of the economy to more competition, Left wing parties came up with
stories of looming danger and how opening up of the economy was tantamount to inviting
East India Company again and how it would lead to economic imperialism and colonialism.
The Advent of the Liberalized Era –Empowerment of Indian Companies
After several lost decades and times of despondency, the dawn of the nineties of 20th
Century witnessed a whole new generation of entrepreneurs emerging out of nowhere and
making it big. Most did not even have business background or capital but had zeal and
passion coupled with education. Slowly an array of companies started to get attention.
Companies like Infosys, Wipro, Biocon, followed by Bharti and TCS were making headlines.
Many like them were attempting to do what was unthinkable for decades. They were
attempting to venture into the technology arena and trying to put India into that map. For
India Inc, those who were willing to metamorphose would eventually survive while those
who resisted change eventually became extinct.
Over the next one decade, from nowhere, India became a major hub for global IT services
and generic drug manufacturing. Even though the deep rooted apprehensions remained
in the mind of the common man, ingrained for decades, he could however see some stark
changes. The Indian roads, bored for decades by the presence of ubiquitous Ambassadors
were witnessing the arrival of Daewoo cars. Daewoo models like Cielo and Matiz became
icons of the first wave of foreign investments in India. Neither of the cars, both from the
Daewoo stable, had their dominance for long on the Indian road. But they had already
harbingered the change. With change in environment, many of India’s state owned
enterprises too started correcting course and eventually embraced change.
Indian Companies in the Fortune 500 list of 2015
COMPANY RANK
Indian Oil Corp. 119
Reliance Industries 158
Tata Motors 254
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23. Knowledge Report 17
State Bank of India 260
Bharat Petroleum 280
Hindustan Petroleum 327
Oil & Natural Gas Corp. 449
Source-http://www.huffingtonpost.in/2015/07/23/indian-companies-fortune-_n_7855444.html
Copyright © Boston Consulting Group. Image retrieved from https://www.bcgperspectives.com/content/articles/globalization_growth_
meet_2014_global_challengers/ (List of Indian Companies that featured in Boston Consulting Group's Global Challengers List)
Retrieved from http://www.rba.gov.au/publications/bulletin/2010/sep/images/graph-0910-3-1.gif
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24. The Change
India’s Forex Reserve as on 31st
March 1991- $5.83 billion
India’s Forex Reserve as on 7th
August, 2015- $ 353. 38 billion
The Change
India’s GDP in 1991 - $ 274 billion
India’s GDP in 2015 - $ 2.05 trillion
The Shift- Towards Globally Competitive India Inc.
By the turn of the millennium the Indian private sector had gone one step further and
was not just becoming part of the global economy but was also endeavoring to acquire
companies abroad. TATA’s acquisition of Tetley in the year 2000 was a landmark event and
played a critical role in boosting the confidence of India Inc. It was also an indication of the
perceptual change in the idea of India. India was no more that inward looking, third-world
laggard and the poster boy of destitution. It was now confident and at times even defiant.
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25. Knowledge Report 19
The rising confidence with a fearless attitude could be gauged from the fact that when
Tata Tea was acquiring the UK based Tetley, Tata Tea had a sales turnover of $114
million while the same for Tetley was $450 million then14
. It was not a wild goose chase
for Tata but a calculated risk that paid off handsomely later on after their successful
acquisition and integration of Tetley into the Tata fold. Over the next few years, the Tata
Group invested around $18 billion to acquire companies abroad15
. The quest for global
footage was not just restricted to Tatas only but spread across the length and breadth of
the Indian industry which took the plunge to increase their footprints across the global.
Back in India, India Inc, with a better knowledge of the Indian market in many sectors,
emerged market leaders and left their global counterparts far behind. Globalization for
India Inc. was now about making Indian companies global.
The Global Footprints of India Inc – Top Global Acquisitions ( till 2012)
Indian Company Acquired Company Country Deal Size
Tata Group Corus United Kingdom $12.98 billion
Bharti Airtel Zain Africa Kenya $10.07 billion
Hindalco Industries Novelis Canada $5.73 billion
ONGC
Oil & Gas Assets
( Kashagan Oil Fields)
Kazakhstan $ 5 billion
ONGC Imperial Energy United Kingdom $2.62 billion
Tata Motors
Jaguar Cars & Land
Rover
United Kingdom $2.3 billion
Tanti Group of Com-
panies and Arcapita
Bank BSCc
Honiton Energy Hold-
ings
China $ 2 billion
Adani Enterprises
Port Terminals (Abbot
Point X50 Coal Terminal)
Australia $1.97 billion
Essar Global Algoma Steel Canada $1.79 billion
Reliance Industries
Oil & Gas Assets (Mar-
cellus Shale)
United States $1.7 billion
Essar Global Minnesota Steel United States $1.65 billion
ONGC Videsh, Oil
India and others
stake in Empresa Mixta Venezuela $1.54 billion
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26. ONGC
Oil & Gas Assets (Cam-
pos Basin Oil Fields)
Brazil $1.4 billion
Reliance Industries
Oil & Gas Assets (Eagle
Ford shale gas field)
United States $1.35 billion
Source- 15 biggest overseas acquisitions by Indian companies
Data retrieved from http://www.rediff.com/business/slide-show/slide-show-1-fifteen-biggest-overseas-
acquisitions-by-indian-companies/20121128.htm#16
The Shift – For the Common Man, a little more Opportunity to have a Better Life
The educated Indian middle class, who for ages had got used to struggling for a job after
completion of graduation, and for whom education has been the biggest asset, leveraged
the opportunities thrown open by the expansion of the private sector. A plethora of jobs
started becoming available in the IT industry which needed technically qualified people
in thousands. The FMCG and consumer durable companies likewise started opening up
new offices and better quality products were getting available in retail outlets. They too
needed a whole new army of marketing personnel to create a market out of India.
The educated young Indian from cities started aspiring for more. He was no more
interested in waiting for years to get a government job but was happily taking over well
paid private sector jobs. He was no more swayed by the lure of job security and was
willing to take up the challenges of private sector jobs. Further, he was not even scared of
switching jobs whenever better opportunities came up. Retaining him became a challenge
for companies.
Consumption of FMCG and Consumer Durable products were gradually increasing not just
in urban India but also in rural India. Unique innovations were being conceived to reach
out to the rural Indian consumer whose per-capita consumption were low but the size
of the total market was too big to ignore. Sachets became an integral part of the Indian
FMCG market and a remarkable mean to reach out to the lower income group with limited
cash in hand.
The vintage products like black & white television and the rotary-dial telephones were
forced to give way to modern cars and sleek looking telephones. Sectors like telecom,
automobiles and aviation were thrown open to private sector and companies like Bharati
Telecom were attempting to do what Department of Telecom could not do for decades,
i.e. to make telecom affordable and within the reach of every Indian. What was scoffed
off as irrational by some quarters in 1995, created nothing less than a miracle in twenty
years’ time. In the middle of 2015, India’s total number of telecom subscribers stood
at more than a billion with the number of mobile subscribers being at 978 million and
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27. Knowledge Report 21
another 5-7 million being added every month as per India’s Union Telecom Minister, Mr.
Ravi Shankar Prasad.16
Further, India’s internet connection base stands at 300 million and is set to cross 500
million mark in the next two years. The impact of India’s telecom revolution has been
through empowerment of the common man in the real sense, which for decades has been
elusive. Beyond aiding in spread of awareness and fast flow of information, telecom is
now playing a key role in terms of becoming the medium for last mile connectivity for
real time financial inclusion. Reserve Bank of India’s decision to create a new category of
payment banks would have mobile telephony, and its sheer spread in India, playing a key
role for financial transactions. Most of the credit for this revolution has to go to private
telecom companies operating in India including the likes of Bharti Group, Idea Cellular,
Reliance Communications and Vodafone to name a few.
Role Models and Icons Changed too..
For the new generation of Indians who started their career in the post liberalization era, the
charm of trade unionism was fast waning. The new generation of young professionals was
not interested in Marx or Mao. For India’s fast growing army of urban professionals, their
icons were no more the likes of Che Guevera but Dhirubhai Ambani, Narayan Murthys,
Ratan Tatas, Sabeer Bhatias and Azim Premjis. Nation building for the new generation
of young educated Indians was not about protests and sloganeering against Capitalism
but about working with pride in new generation Indian companies which were helping the
GDP to grow fast.
From the generation of Indians whose aspiration was restricted to finding a job along with
job security, to the generation that was eager to shelve inhibitions about private sector
and aspire to go up the ladder, to the generation that wanted to give up jobs altogether to
take the leap into the unknown realm of entrepreneurial ventures, the last two decades
transformed the educated aspiring Indian like never before. He did not anymore need to
move out of India to fulfill dreams. He started doing it here and he was no more inhibited
by fears of insecurity. Uncertainty rather lured him more to take up challenges.
The new role models inspired a generation to take the leap from being employees to
potential employers. Organizations like Micromax, India Bulls, Flipkart, Snapdeal or
Mindtree are just a few examples of a massive metamorphosis of India that took place in
the last few decades. Today, every educated Indian graduating from engineering colleges
or B-schools and every Indian professional working in the industry, aspire to start his own
venture someday in the future, be it immediate or distant. Some would succeed while
many may not but this perceptual shift in aspiration is remarkable.
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28. The Shift- Emergence of a Hawkish India in the World of Geopolitics
The palpable changes in the confidence level of India could be witnessed in the realm
of geopolitics as well. An improving economy was making India more confident in her
approach. Both the dealing of the Kargil War and the nuclear tests by India in 1998 were
vindications of that emerging hawkish India, brimming with confidence and not bothered
much about how the rest of the world perceives it. Its supreme self interest was now
the sole driving factor and the common man was firmly behind the government on these
issues.
If in 1998 India remained defiant in spite of the threats of economic sanctions and
went ahead with the nuclear tests, in case of Kargil War, the Government of India gave
complete free hand to the armed forces to neutralize or push back the Pakistani soldiers.
The then Prime Minister of India, Atal Bihari Vajpayee remained firm on his demand for
complete withdrawal of the Pakistan forces and even refused the invitation of the then
President of US, Bill Clinton, to visit US and meet the Pakistan Prime Minister Nawaz
Sharif there 17
.
Likewise, in the aftermath of the 1998 nuclear test conducted by India, when sanctions
were imposed by US and the rest, India did not panic. Instead, the resilience of the nation
and the bondage it has with her diaspora was for all to witness when India’s central bank
namely RBI asked the NRI community to help India boost its foreign exchange reserve
by subscribing to the Resurgent India Bond. While the target was to raise $2 billion, the
overall deposit was over $ 4 billion eventually18
. The days of threats of sanctions or fear
of dwindling foreign exchange reserves were gone. Rest of the world was being forced
to change their notion about India. A few years down the line, the US President Bill
Clinton had no option but to visit India to enhance diplomatic and business ties thereby
vindicating the redundancy of the sanctions imposed by them.
If the measured but aggressive response of India in the Kargil War increased the
nation’s stature, the manner in which India emerged unscathed from the post nuclear
test economic sanctions made the world take note of the intrinsic strength of the Indian
economy that gave it the leverage to play the hard ball game. By 2008 when the Indo-US
nuclear deal was signed, it vindicated the coming of age of India in a new avatar. This
India was fast turning out to be different than the one the world knew for long. A year
before that India had crossed the trillion dollar GDP mark. That landmark event proved
right the economic reforms initiated in early nineties of 20th Century but with the caveat
that what India initiated in 1991 and that too out of sheer compulsion, was what China
started in 1978 with meticulous planning. India in essence was playing the catching
game and one wondered what would have happened if India had initiated the same
economic reforms in 1978 like China.
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29. Knowledge Report 23
In 2014, when India joined hands Brazil, Russia, China and South Africa to set up the
BRICS Bank and endeavored to unshackle from the Bretton-Woods system of Banking
dominated by West, the turnaround became complete and the world started accepting the
changing equilibrium in which India is expected to play a key role in global geopolitics
whose epicenter itself is shifting from the Western Hemisphere to Asia.
The Flip Side- While India Progressed, Bharat Faltered.
Yet the changes in India have not been without its flip sides. While India raced ahead
crossing one milestone after another, Bharat went on a perpetual decline. The rural-urban
divide was never more stark than it has been over the last two decades. One cannot blame
urban India for the same. It has done enough to contribute to the growth and well being of
the nation but the problem lies in the fact that India’s economic development has always
been city centric. Infrastructural facilities beyond cities continue to be deplorable. It is
not to say that the infrastructure of cities is the best possible but still it is far better than
the deplorable condition of basic amenities in rural India.
Did What Plague Indian Industry Plagued Indian Agriculture as well?
While urban India rode the highway of economic growth armed with education, rural India
continued to be plagued by the perennial problems of agriculture. In fact on this issue
of the lackluster condition of rural India vis-à-vis the phenomenal growth urban India, an
interesting angle needs to be mentioned.
A substantial portion of the Indian economy today consists of the service sector which
has grown phenomenally in the last two decades. Services industry may include banking,
telecom, trading, aviation, media, hospitality, education and software among others. The
plethora of laws, restrictions, taxes and enormous delay in getting approvals for starting
any manufacturing entity in India made sure that investors and entrepreneur preferred to
invest in services sector because this sector did not have so many complicated laws and
taxes as no one during the closed economy era foresaw such growth of this sector or that
this sector would one day employ more number of people than organized industry. This
was in essence a blessing in disguise and the sector grew rapidly since the archaic labor
laws and the industrial acts did not apply to them. Thus industry continued to lag behind
services in the overall share of GDP.
Incidentally, it is the same stranglehold and lack of policy reforms that has been the core
reason for the continued faltering of Indian agriculture and as to why engaging in agriculture as
a whole has become a loss making proposition. This resulted in lower per capita income which
coupled with lack of skill development avenues and poor quality of education in rural India,
prevented that part of India to reap the benefits that economic liberalization had to offer.
THEME PAPER

30. Why Agriculture Falters in India…
Probably there is no other sector in the history of world economics which has for so long
remained unviable as agriculture in India has been. In the last one and a half decade,
more than quarter of a million farmers have committed suicide19
for which agriculture
related woes have been one of the most critical reasons. To understand the plight of
Indian agriculture one has to understand the peculiar nature of it. The average farmer
in India is in trouble on two occasions. He is in distress when he has a bumper crop,
which leads to massive crash in prices and he is unable to recover his cost of production
because in the absence of a national integrated agricultural market as well as lack of
adequate storage facilities, his perishable farm produce cannot be quickly transported
to distant places where it might be in demand. Thus, he has no option but to sell to the
local traders in the Mandi at a very low price which may not be enough to recover even
his basic cost of farming.
Likewise he is also in distress when he has a crop failure wherein he is unable to recover
even the cost of cultivation resulting in his inability to pay the high interest loan he is
often compelled to take from rural moneylenders who often charge interests which could
have broken even the backbone of major industrialists of the country. Charging up to
even 20% interest on a four month loan20
or around 60% a year is not uncommon for
moneylenders in rural India.
For decades, vested interests allowed the moneylenders to thrive in rural India and gave
them enough leeway to charge exorbitant rates of interests. While this problem does
remain in spite of increasing reach of the state owned banks in rural India, the bigger
problem or perhaps the mother of all problems is the massive restriction imposed on
movement of agricultural commodities or the complete denial of freedom to farmers to
sell their products to anyone they like under the APMC Act or the Agricultural Produce
Marketing Committee Act that most states have in place.
While in the initial stages, conceptually APMC was conceived as a means to protect the
farmers from exploitation by middlemen and moneylenders, eventually in reality APMC
in most states have failed to deliver benefit to the farming community and have become
the biggest impediment to agri-reforms. New-age shopping malls, major retailers and
agro export companies are often debarred from buying directly from the farmers wherever
APMC is in place. They have to necessarily procure agro-products from the mandis which
are under the ownership of APMC but in reality are fiefdoms of middlemen, commission
agents and agro-traders who often make sure that even when retail price of farm products
are high, the wholesale price remain suppressed thereby depriving the farmers of their
legitimate price.
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31. Knowledge Report 25
The exploitation of farmers by middlemen and agro-cartels in rural India in spite of APMC
is an open secret. In India, even when at times the prices of essential agro commodities
had reached to the level of even Rs 100 per kg of potato or onions, the producing farmer
never got more than 5% of the market price. The rest of the price has always been raked
in as profit by the middlemen. Even though in the APMC mandated mandis, auction takes
place for buying farm produce from the farmers, and the highest bidder gets to buy, trading
cartels invariably suppress the prices and deprive the farmer of their legitimate price.
Most farm produce and especially vegetables being perishable commodities, and because
of lack of viable alternatives (like selling directly to major departmental stores, hotels,
restaurants or export houses, which are not permitted) or absence of proper storage
facilities, the farmers are forced to sell at whatever pittance of a price he is offered. Even
then, most of the time he is not given the money on time and in full amount. In this whole
saga the biggest losers or victims are the marginal farmers who neither have the money
power nor the muscle power or leverage of scale.
The problem of suppressed price is not just about APMC but also about lack of food
processing facilities. In states like West Bengal potato farmers have often been in
utter distress because of sheer lack of processing industry coupled with bumper crops
of potato which led to massive crash of prices21
. However, in the absence of any other
viable employment opportunities farmers are literally left with no option but to continue in
agriculture and often in the form of disguised unemployment. Unfortunately, in the realm
of agriculture, India’s post liberalization prosperity did not have much of positive impact in
rural India because agriculture has mostly been kept out of bound of reforms and sadly so.
The Politics around Indian Agriculture – No Shift for Betterment
As a chain reaction to the above mentioned scenario, suppressed price in the wholesale
market, even when retail prices of food items have often shown inflationary trends, tend
to reduce the ability of the farmers to pay for the inputs that he uses for his farming.
A key component among those, apart from monetary loan is electricity that he uses to
extract ground water and other farm related activities. But as politics has been in India,
instead of striving to bring APMC related reforms to give more freedom to farmers to sell
their products to whosoever they want or instead of increasing the avenues of more food
processing industry to reach out to farmers directly, rural politics have always veered
around freebies amongst which the politics of price of electricity has been the most
cataclysmic.
Charging fair price for electricity used by farmers for farm related activities has been
a hot political potato for decades now and no political party or regime barring a few
exceptions has been able to garner courage to make farmers pay for consumption of
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32. power. Free power for farming in India has become a norm than an exception resulting
in not just mindless use of power for uncontrolled extraction of ground water but also for
rampant diversion of such free electricity for use in household purposes.
Indiscriminate extraction of ground water with the use of motor pumps has resulted in fast
depletion of ground water levels in many parts of India and especially in Punjab22
. Fast
depleting ground water level meant the need for more powerful motor pumps to extract
the requisite water for India’s water guzzling foodgrain cultivation such as wheat and rice.
Ironically, even though there is subsidy on electricity, the same is non-existent when it
comes to purchase of motor pumps. And thus only the prosperous or reasonably well-off
farmers can afford motor pumps while the marginal farmers continue to either depend on
the mercy of rain god or take loan from private moneylenders at hefty interest rates.
If one part of the politics around farmers has veered around electricity, the other has been
around waiver of loan taken from banks. Here too it has often been the relatively the well-
to-do farmers who avail loans from the banks who benefit most whiles the large populace
of marginal farmers most of whom fall prey to loan sharks, get no benefit at all. Bottom-
line is that in spite such populist policies like huge loan waivers and free electricity, the
fortune of Indian agriculture has not improved and would never improve because the
problem lies somewhere else.
However, even when majority of farmers have not benefitted much from such largesse,
the politics of loan waiver and free power have been having cataclysmic impact on critical
sectors of the Indian economy.
The Chain Reaction…
Free electricity for agriculture meant much higher charges for industry which increases
input cost for industry resulting in highest cost of production and resulting in products
being more expensive than they ideally should have been. Most of the State Electricity
Boards in India have witnessed colossal losses resulting in their inability to pay the
power producing companies resulting in major increase in their unpaid dues and putting
strain on their ability to manage operations and recover their basic operating cost. The
cumulative losses of India’s State Electricity Boards have been to the tune of Rs 3 lakh
crore23
as of 2014 and one key reason for the same has been the politics of free or
subsidized power.
The loan waiver politics and the strain on the power sector for underpayment of services,
in return put stress on the financial well being of the Indian banking system thereby
increasing their Non Performing Assets (NPA). For the last nearly two decades, successive
governments in India have encouraged major private investments in the power sector. The
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33. Knowledge Report 27
quest for power for all cannot happen without private initiatives. However, if the persistent
problems of underpayment for services, as is the case with usage of electricity in India
continues, the desired results may not be achieved. For long, similar populist policies
with price of petrol, diesel and kerosene through Administered Price mechanism (APM)
have had severe strain on the well being of the oil refineries and oil retailers as well.
Reforms therefore are needed in the power sector of India, which invariably cannot
happen without reforms simultaneously happening elsewhere, namely agriculture sector.
A beleaguered power sector languishing in red as a result of vote bank populism does not
augur well for India, since electricity is at the very foundation for the kind of social or
economic progress that India aspires to achieve. Thus, making the power sector immune
from politics of freebies and simultaneous other institutional reforms can go a long way
in improving the health of the sector. Gujarat’s success in the same should ideally be
considered as a benchmark for the rest to follow24
.
An Epochal March towards Rural Reforms- Will it ever happen?
Indian agriculture sector has been in a mess for long and it would take a gargantuan
political will to unshackle it from the clutches of those cartels which have strangled the
supply chains and completely deprived the farmers of their legitimate dues. The mess
has resulted in miniscule investments in the sector resulting in a large proportion of rural
populace being completely in destitution due to lack of viable alternate employment
opportunities even as share of agriculture to India’s GDP has witnessed consistent erosion.
Apart from agriculture supply chain reforms, what has always been in need is to have
complimentary industrial activities to supplement the income of the rural lot. Yet not only
agriculture has been in massive trouble, acquisition of land for setting up industries have
been such a major political and social issue that in most such regions where agriculture
has been in dire straits and where people invariably needed alternate job opportunities,
even in those places, activism made sure that industry did not come up.
While land acquisition in rural India has been a very contentious issue, anti-land
acquisition activists could never explain the reasons for major migration of rural folks
towards cities in search of jobs and better livelihoods even in those places where there
have not been any acquisitions of agriculture land. Reports state that by 2030, India’s
urban population would reach a level of 530 million and majority of the additional 300
million (from the present level of around 230 million) would be because of migration
from rural to urban India 25
. It is no more a news that people from rural India have often
even sold their land and have been willing to embrace worst kind of hardships in urban
India in their quest for better earning opportunities and better life for their progenies.
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34. The Common Thread- Rising Aspirations
The aspirations of the common man in rural India today are not much different than that
of his urban counterparts. He aspires for a better life along with better education and jobs
for his next generation. He aspires for better infrastructure and a life of peace. And for all
these he needs more purchasing power which can only happen with reforms in agriculture
and more avenues for productive employment near his house. Yet more often than not, his
aspirations have been the last in the list of priorities of those who claim to fight on their
behalf and prevent both agri-reforms as well as industrialization.
The controversy around the Tata Nano factory has been a stark reminder of the kind of
myths that foment activism and prevent industrialization. Massive protest and political
activism around the proposed factory of Tata Motors in place called Singur near Kolkata,
eventually forced the TATAs to shift the factory from Singur in Bengal to Sanand in Gujarat.
In the heydays of construction of the TATA factory in Singur, spread over a thousand acres,
the place was brimming with economic activities with construction workers working round
the clock to put the main assembly shop and several ancillary workshops in place within
a stipulated timeframe. Presence of such a large number of migrant workers resulted in
creation of major commercial activities in the region with many enterprising people of
Singur setting up small hotels, fast food centers, tea-shops, shops for construction tools
and even started plying or auto rickshaw services to help workers commute.
In other words, the TATA Nano factory even when it was at least a year away from rolling out the
first car was acting as a catalyst in terms of boosting the local economy. Singur’s local hamlets
also saw intense real estate activity as locals even took loans to construct rooms to give out
on rentals to the migrant workers. Yet as fate would have it, intense protest, logjams and the
quintessential nature of most in India and especially in Bengal, to support any movement
against private sector and industry (under the mythical garb that capitalism is responsible for
all malaise), forced TATAs to exit. They eventually shifted to Sanand in Gujarat.
Over a period of time, even a Singur sunk further in destitution, Sanand in Gujarat
flourished and created innumerable number of farmers who overnight became multi-
millionaires by selling off their land for the Nano factory and to several other auto majors
who made a beeline towards the Sanand, and which eventually became an auto hub26
.
Singur meanwhile had sordid stories of being given a bitter deal and left in the lurch after
the political class and activists had leveraged to the hilt the Nano factory saga. The local
economy which had started to thrive as a result of seeds of industrialization was in red
again. Many who had taken loans to start small businesses were in debt and those who
had hoped to get a job once the factories would start production, and for which they even
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35. Knowledge Report 29
had acquired technical training, now were staring at a grim future.
Singur could have been the Gurgaon of Bengal but politics of agitation made sure it
was not to be. Eventually what was Bengal’s loss was gain for Gujarat. Apart from multi
millionaire farmers, the auto-hub in Sanand also created plenty of jobs. And that’s what
India needs today than anything else. It is not to say that industrialization should entirely
replace agriculture but the core issue is that if India has to move ahead then it has to
reform the way agriculture is practiced in India and it needs land reforms to make the
setting up of industries more seamless.
For most states of India who have lagged behind in industrialization as well as failed
in taking agriculture to the next step, not only did not learn from the Sanand-Singur
saga but have also failed to replicate the AMUL model for helping the rural mass by
improving on the supply chain and making the rural populace a critical part of the agro
processing based industrial movement. As stated in the research paper titled, ‘Business
Strategies for Managing Complex Supply Chains in Large Emerging Economies: The Story
of AMUL’ by Pankaj Chandra and Devanath Tirupathi of IIM Ahmedabad, Amul’s success
has been primarily because of its success in ‘building networks, developing trust & values
in the network, developing fair mechanisms for sharing benefits across the supply chain,
coordination for operational effectiveness, innovation and new technology for gaining
competitiveness’.28
Needless to say, AMUL has been an exceptional success story in India
whereas it should ideally have been the norm. Replication of the same across the length
and breadth of rural India can change the destiny of Bharat forever.
Image Copyright © with Business-Standard
Image Source- http://www.business-standard.
com/article/companies/sanand-the-new-
global-auto-hub-115032200818_1.html
Bengal’s Loss was Gujarat’s Gain. Shift of Tata
Nano factory from Singur to Sanand acted as
a Catalyst to create an auto-hub in Gujarat.
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36. Can Rural-Urban, Developed- Undeveloped Divides Ever be Bridged?
A research on the pattern of internal migration of Indians, both educated and uneducated,
both skilled and unskilled, and both urban and rural, would show that the trend always
veers around migration from underdeveloped and undeveloped states toward developed
and industrialized states. For economic reasons one would hardly hear someone migrating
from Gujarat or Maharashtra to Bihar or West Bengal. The opposite though is a sheer
reality of today’s India. While the saga of migrant laborers from the heartland of Uttar
Pradesh and Bihar moving towards the industrialized states like Gujarat, Maharashtra or
agriculturally prosperous states like Punjab, the same is almost always the case nowadays
even with educated and skilled graduates from states like Bihar, UP, Bengal or Jharkhand.
Improving on Human Development Index and quality of education are all key empowering
tools. But they don’t sufficiently empower the mass in the absence of quality employment
opportunities. Kerala has been far ahead of other states on most parameters of Human
Development Index. Even states like Nagaland and Mizoram fare well on Human
Development Index. Yet, be it Kerala or Nagaland or Mizoram, lack of availability of viable
employment opportunities compel their residents to migrate elsewhere, and invariably
towards industrialized states like Gujarat, Maharashtra, Tamil Nadu and some others, or
shift to Middle East to work in the construction or oil business there.
Likewise, in case of Bengal, a plethora of engineering colleges have mushroomed over
the last few years even as the pace of industrialization has been negligible. End result
is that now even the engineering colleges are finding it difficult to have their seats filled
because students prefer to go to other states for their studies as it is better to study in
places where industry is present particularly because getting jobs become easier. Recent
reports suggest that more than 50% (19,000 out of 36,000 seats) in Bengal’s 100 odd
engineering colleges have remained vacant29
even after the final round of counseling has
been completed, proof enough of the fact that merely improving educational infrastructure
without creating simultaneous job opportunities can never have positive results.
The Fault-lines in the Shift
Bottom-line is that critical reforms have eluded rural India or rather have been forced
to stay out of bound of rural India for decades and neither the political support for
Industrialization been unambiguous. In the end, politics of agitation have always got
primacy over everything else in India.
Surprisingly, even when the aspirations of people have gone up, even when they started
asking for better jobs, better pays and better lifestyles, when it came to introspecting or
analyzing the root causes of lack of employment opportunities or as to why agriculture has
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been unviable, for long, the sad saga has been that people left the thinking or decision
making to the local political satraps and allowed the status-quo to continue.
It is from this perspective that the shift towards a vote for development and a complete
rejection of politics of agitation that was witnessed in the 2014 Lok Sabha election
becomes a remarkable metamorphosis of India. This will be discussed in details later.
Has Democracy Become a Double Edged Sword for India?
Agitations in places of proposed industrialization has been one of the key reasons for
enormous delay, cost overrun and sometimes even complete cancellation of major projects
in India. Recent reports suggest that delays in completion of central projects alone had
an impact of Rs 2 lakh crore30
on the national exchequer. In 2013, it had come to light
that there were stranded projects worth Rs 15 lakh crore31
in India for want of clearances.
Such clearances became increasingly difficult to come by and one key reason for the
same had been apprehensions of the previous regime that clearance of many of those
projects would instigate protests and agitation. In addition, there were of course issues of
litigation and colossal task to get land for setting up even the cleared projects.
The sad saga of stalled projects, agitation over projects and delays has been happening
even when the quest for job creation has been the biggest concern of the nation and for
all sections of the society. On many occasions NGOs including several foreign ones or
foreign funded ones have been accused of instigating resistance and protests against
such industrialization. Surprisingly many such global NGOs have no problem with scores
of nuclear power plants in France or uranium mining in Australia but have problem when
the same is replicated in India.
So where does India stand now? Has democracy been its strength or the Indian version
of democracy has become an impediment towards implementation of real development?
Has democracy failed India by allowing rhetoric to be given more attention than real time
nuanced debates and deliberations? Or is it that India failed democracy by giving in or
surrendering to caste, community and region based identity politics? Has mobocracy
been allowed to masquerade as democracy? Has populism become the prime means than
development to win democratic elections?
Whatever the case may be, for long vote bank politics have prevented strong decision
making in India. Across all major cities water logging and encroachments on vacant
government lands and footpaths have been real headaches. Ensuring that cities don’t
have water logging would mean dredging of city based water bodies, enhancing the
water storage capacity of adjacent rivers, prevention of choking of drains and pathways.
This would entail clearing such water bodies and their catchment areas of all kinds
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38. of encroachments. However such critical decisions are rarely immune from political
interference and resistance. Political imperatives and vote-bank calculations have often
got primacy over rational administrative decisions.
Where Democracy Impede- The Politics of Encroachment and the Decay of Indian Cities
Illegal they may be by their actions, squatters, encroachers including both slum dwellers
and commercial encroachers, make up for a huge vote bank in most cities. Touching them
or offending them, by rescuing the encroached land from the clutches of encroachers or
squatters always meant risking the loss of a large chunk of votes in the next election.
In other words, acquisition of land for construction of city infrastructure by releasing land
from illegal occupants have been as challenging for India as has been the acquisition
of land for setting up factories in areas distant from cities. Whereas the taxpaying law
abiding citizen in Indian cities generally have to run from pillar to post to get mutation
of his legitimate properties done and has to make sure that his bills and taxes are paid
on time lest he gets penalized by India’s super efficient municipal corporations and
state electricity boards, the quintessential illegal encroacher of urban India has no such
qualms. So long he has a voter card and can play the card well in unison with his mates,
so long he can coalesce a sizeable electorate and project it well, he would remain safe
from actions.
Further, he also has the right to seek compensation when asked to vacate the land. The
aerial view of the large slums beside the Mumbai Airport is a glaring example of India’s
both lopsided democracy and development. The dense slum just beside Mumbai Airport
is owned by Airport Authority of India. The encroached area is to the tune of 308 acre or
around 15% of the total area that belongs to the Mumbai Airport32
.
Expansion of the airport itself has been hampered because of the complete refusal of the
habitants of the densely populated slums to relocate unless compensated with alternate
accommodation. Further, the spate of terror attacks on aviation infrastructures across
the world has been a stark reminder regarding the threat such densely populated and
unguarded slums pose to the Mumbai Airport. However, as Indian democracy would have
it, wherever encroachment of government land takes place and wherever the issue is about
evicting a large number of illegal squatters, politics can never really be far behind from
all of it. Local legislatures from that region knew that their own political fate depended
on their ability to defend the squatters and encroachers given the strength of the ballot.
As it would happen in India and probably nowhere else in the world, Mumbai International
Airport Limited, the operator of the Mumbai Airport had to enter into an agreement with
Housing Infrastructure Development India Limited (HDIL) in 200733
, for constructing
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flats elsewhere to accommodate the encroachers so that they can relocate and vacate
the land legitimately owned by Airport Authority of India. Recent reports state that more
around 20,000 tenements have already been constructed but have not yet been occupied.
Litigations and bureaucratic delays followed by political interference have continued to
make sure that not only slums remain where they were but continue to pose a major
security risk to Mumbai Airport.
The penchant for protests and demand for compensation by encroachers to move out
of land illegally occupied, and the indulgence of the political parties to bend backward
to accommodate all such demands have essentially institutionalized and legitimized
encroachments of precious land in India’s cities. The encroachers are not scared and
on the contrary know well that these illegal acts of theirs might be their only gateway to
having a legitimate housing or hefty compensation. They need not work hard for that.
Squatting is a good way to achieve it. All thanks to India’s vote bank politics.
The Intricate Connection between Rural Backwardness and Urban Slums
In essence most cities of India have slum problem and slums coupled with illegal colonies
are growing in numbers in most of India’s major cities. From Dharavi in Mumbai to the
slums elsewhere, they are imbued with migrants most of whom are essentially from rural
background and who have migrated for a better life and livelihood in the midst of India’s
faltering rural economy. The Cycle goes this way :
• The stranglehold of middlemen and private moneylenders coupled with restrictive
policies has made agriculture extremely unviable in most parts of India.
• The debt ridden farmers who rarely get even their legitimate dues for their farm produce,
often have either the option of continuing with the misery or sell off the land in their
attempt to move on to cities.
• Landless or marginal farmers suffer more in case of faltering agriculture and in the
absence of alternate employment opportunities, they tend to migrate.
• Many small or medium sized farmland holders keep the farmland for subsistence
farming and while keeping the family back in the villages, the earning member move
to city in search for livelihood as unskilled workers.
• In other words, rural Indians, in the face of a faltering agriculture, tend to move towards
industrial towns and cities for jobs. But when industry proposes to move toward rural
India for creating jobs in their own backward, there is resistance from the same rural
lot who otherwise has been migrating fast to cities.
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40. • India’s cities have a limitation so far as their ability to absorb an ever increasing
migrant population is concerned.
• Creation of more slums and illegal colonies to accommodate the migrants put
tremendous pressure on basic infrastructure of cities.
• Such slums on encroached land eventually become massive impediments towards
developmental work. Politics of votes then make sure that slums and illegal colonies
once created remain there forever thereby completely jeopardizing the developmental
plans of cities.
• All this while, resistance towards reforms to agriculture and acquisition of land for
building industry nearer to the original homes of migrants in their villages, continue.
Looking at the chain of events, one then is forced to wonder if vote bank politics have
completely done away with rational, logical and long term thinking ability of this nation.
Even as the new regime has started working on the development of 100 new Smart
Cities, the fate of these cities tomorrow would be as it is of Mumbai or Delhi, imbued
with unplanned growth and slums, if the issue of relentless migration of people from
rural and backward regions of India is not addressed with more economic growth and job
opportunities in rural India. This in turn would not happen unless agriculture is reformed
and a culture of coexistence of industry and agriculture in rural India is created. And no
wonder this has to go hand in hand with education about the bigger picture which has
always missed the sight of the common rural Indian.
Can India Shift from Populist Policies to Pragmatic Ones?
Sadly, populism based vote bank politics have always given precedence to dole-outs by
creating a condition of penury for rural India in the first place. There has never been
a concrete effort to create permanent, sustainable and viable assets in rural India.
Development of institutional infrastructure like rural roads and electrification has all been
piecemeal instead of absolute. Rural roads are created but such is the quality that they
don’t last the subsequent monsoon.
The National Rural Employment Guarantee Scheme or NREGA which was launched
with much fanfare nearly a decade back to supplement rural mass with additional work
opportunities ended up as one of the biggest avenues for creating disguised unemployment
and wastage of precious money. NREGA failed from the very beginning to focus on the
development of sustainable asset in rural India.
Instead of using rural labor to create durable assets like buildings for village health
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clinic, village school, village community centre, village rain water harvesting schemes,
check dams, village bio-mass plant, village level skill development centers and village
food processing centers, the whole focus remained on spending more money to pay as
daily wages to the laborers who were engaged in constructing village roads made of brick
and glued with mud, instead of concrete, and kachcha drains, neither of which was meant
to survive after the subsequent monsoon. And then an equal amount of money would be
spent once again in the next year for repeat construction of the same. The mandate to
spend 60% of the fund on paying of wages and to only keep 40% for materials34
made
sure that not only durable assets were not created, whatever was created was of such bad
quality that they served no purpose.
This saga has been continuing year after year and even after thousands of crores have
been spent every year on NREGA, the landscape of rural India has not changed one bit.
Instead, dependence of NREGA dole-outs, and systematic corruption through connivance,
receiving payments even while not working and availability of easy money created shortage
of labor elsewhere. Net outcome of the same is that even after 68 years of independence,
Indian villages have remained perennially dependent of central and state dole-outs and
have continued to remain under the stranglehold of middlemen who in many ways have
occupied the erstwhile exploitative positions of the Zamindar. Gandhiji’s dream of Gram
Swaraj is far from reality in spite of stupendous potential of rural India and on the
contrary it is heading towards insolvency.
Resurrecting rural economy by massive reforms in agriculture include dismantling of
APMC and giving freedom to the farmer to sell farm produce to anyone he wants coupled
with creating an integrated national market for agricultural goods and creating a vibrant
policy to link every farm produce with a processing centre nearby would perhaps mend
some of the follies committed for decades which destroyed the intrinsic strength of rural
economy to stand on its own.
The Rising Aspiration of Rural Folks – Is India Geared to Cater that?
Had the rural lot been happy with their subsistence living as it had been for centuries,
things would not have been like this. But aspirations have risen and much like their urban
counterpart, the rural Indian too today has aspiration for better life for himself and his
progenies. He not only wants a better job but also seed capital to start a business later on,
As stated earlier, places like Sanand or areas around Gurgaon are flush with examples of
how people have benefitted by selling their land for setting up of factories and have used
the money to set up their own ventures. It is not to say that selling agricultural land is
the only solution, but what is important is to accept the importance of industry for rural
welfare along with reforms and mechanization of agriculture.
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42. Meanwhile in states like West Bengal, Bihar and many other states, it has become a norm
than an exception for students from rural areas to do reasonably well in board exams. All these
are indications of the rising aspirations fulfilling all of which would need massive reforms.
The challenge for the nation is not just to implement reforms but to convince people
about the need for the same. Imposing anything has always been counterproductive in
India. Engaging people in constructive debates and evolving on consensus on the needed
reforms would have to be the way forward. At least the success of Tata Steel Plant in
Kalinganagar vis-à-vis the failure of the then West Bengal Government to have the Tata
Nano Factory in Singur vindicate the same. Last but not the least, India has to change
policies to create a new generation of agro-entrepreneurs to transform agriculture and to
bring more investments into the sector.
The Glimpse of Hope- Harbinger of Change
Probably never before in the history of independent India, the nation has been so much
poised for growth and brimming with energy. While there have been severe bottlenecks,
impediments and resistance to change, in spite of all these, India have been witnessing
stupendous growth in its economy over the last one and half decade.
The seeds of entrepreneurship are now blossoming like never before. For majority of
educated Indians, aspirations today don’t stop at the door of getting a job alone, but as
stated before, they aspire to be the next Azim Premji or Dhirubhai Ambani. For companies
today, the biggest challenge has been to retain their employees who are aspiring to take
the plunge into the uncharted terrains of starting ventures. Today India has almost
become a Start –Up Nation with cities brimming with young minds filled with passion and
revolutionary ideas. As per NASSCOM, India today has the 3rd-largest start-up ecosystem
in the world with over 3100 start-ups present in India in the IT sector alone along with
800 being added to the kitty annually35
. By 2020, India is expected to have 11,500 start-
ups employing over 2,50,000 people. India needs to replicate this across all sectors. The
journey from being an employee to an employer is perhaps the most pious journey since
it ends up creating jobs, something that is almost a panacea for many of India’s ailments.
However, institutionalizing this energy and making sure that ideas are adequately provided
with seed capital is still a challenge. Generally speaking India’s banking system has mostly
stayed away from funding ideas of young minds who are armed with lots of passion but not
capital. It has been the venture capitalists and the angel investors and not India’s banking
system which has played a key role in funding new age companies during their inception
days. The nation needs a whole new generation of agro-entrepreneurs to change the
landscape of Indian agriculture and for that to happen, funding has to be institutionalized.
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