RISC Presentation at ISB


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Presentation made at the Indian School of Business on 9th March, 2007 at the Global Social Venture Competition

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RISC Presentation at ISB

  1. 1. Business Strategies for Inclusive Growth RISC – Rural Infrastructure & Services Commons Dr. Atanu Dey Chief Economist NetCORE Solutions Pvt Ltd, Mumbai
  2. 2. The Big Questions <ul><li>Where’s India today? </li></ul><ul><li>Where should it be in 2020? </li></ul><ul><li>How do we get there? </li></ul>
  3. 3. Who are you? <ul><li>Where do you live? </li></ul><ul><li>What do you do? </li></ul><ul><li>How much do you earn? </li></ul><ul><li>You are exceptional </li></ul>
  4. 4. The Present India <ul><li>Rural areas mostly </li></ul><ul><ul><li>600,000 small villages </li></ul></ul><ul><ul><li>700 million people </li></ul></ul><ul><li>Village-centric agriculture related economy </li></ul><ul><li>Guaranteed low productivity and income </li></ul>
  5. 5. A Choice of Futures in 2020 <ul><li>Hundreds of millions living in hundreds of thousands of small villages, engaged in subsistence agriculture? </li></ul><ul><li>OR </li></ul><ul><li>Living in a large number of medium-sized cities, engaged in non-agricultural sectors? </li></ul>
  6. 6. Development and Growth <ul><li>Economic development is distinct from growth </li></ul><ul><li>You can have one without the other </li></ul><ul><li>Economic growth necessary for development if per capita GDP is low </li></ul><ul><li>India needs economic growth </li></ul>
  7. 7. Urbanization and Growth <ul><li>Urbanization is both cause and consequence of economic growth </li></ul><ul><li>Cities are Engines of Growth </li></ul>
  8. 8. Engines of Growth <ul><li>Economies of scale, scope, and agglomeration </li></ul><ul><ul><li>Infrastructure has high fixed costs </li></ul></ul><ul><li>Range of economic services </li></ul><ul><li>Aggregation of people </li></ul><ul><ul><li>Specialization and division of labor </li></ul></ul><ul><li>Increased productivity </li></ul><ul><ul><li>Lowered transaction costs </li></ul></ul>
  9. 9. Rural Development <ul><li>Rural area development </li></ul><ul><ul><li>Barking up the wrong tree </li></ul></ul><ul><ul><li>Village-centric development wrong </li></ul></ul><ul><ul><li>600,000 is a large number </li></ul></ul><ul><li>Rural people development </li></ul><ul><ul><li>Urbanize the people </li></ul></ul>
  10. 10. India’s Development <ul><li>Development of rural people </li></ul><ul><li>Economic growth of India </li></ul><ul><li>Urbanization of India’s population </li></ul><ul><li>Rural – urban migration impossible </li></ul><ul><ul><li>Megaslums </li></ul></ul><ul><li>Creation of the Engines of Growth </li></ul>
  11. 11. Urban Development <ul><li>Development of rural populations depends on urban development </li></ul><ul><li>Urban planning is the key to rural development </li></ul><ul><li>Time to let go of our fascination with village-centric development </li></ul><ul><ul><li>We aren’t that rich! </li></ul></ul>
  12. 12. India—Land of Opportunities <ul><li>Build cities from scratch </li></ul><ul><li>Engage the enormous human resources </li></ul><ul><li>Take the best from lessons learnt by others anywhere </li></ul><ul><li>Use the best state of the art technology and know-how </li></ul><ul><li>Build for the future </li></ul>
  13. 13. IMAGINE <ul><li>Urbanizing 600 million people </li></ul><ul><li>600 new large cities of one million people each </li></ul><ul><li>Building houses, schools, shopping centers, parks, factories, roads, public utilities, hospitals, libraries . . . </li></ul><ul><li>Using the best urban planning known to humanity </li></ul>
  14. 14. UDLG <ul><li>Urbanization Demand Led Growth </li></ul><ul><li>Similar to “ADLI—Agriculture Demand Led Industrialization” – Irma Adelman </li></ul><ul><li>Increases aggregate demand for goods and services for building cities </li></ul><ul><li>Provides a migration path for labor released from agriculture </li></ul>
  15. 15. Organic Growth of New Cities <ul><li>Using best urban planning </li></ul><ul><li>Seed the cities </li></ul><ul><li>Use the best “DNA” evolved so far </li></ul><ul><li>Nurture the seed for a time-being </li></ul><ul><li>Allow the “tree” – the city – to grow and evolve over one generation </li></ul>
  16. 16. RISC – The Seed <ul><li>Why RISC </li></ul><ul><li>What is the structure </li></ul><ul><li>How it will be implemented </li></ul><ul><li>The Business Model </li></ul>
  17. 17. Why RISC <ul><li>People need life and livelihood services </li></ul><ul><ul><li>market access, educational, health, financial, entertainment, transportation, and communications </li></ul></ul><ul><li>Services require infrastructure </li></ul><ul><li>Infrastructure investment is lumpy </li></ul><ul><li>Infrastructure investment requires coordination </li></ul><ul><li>Coordination failure at the heart of growth </li></ul>
  18. 18. Structure of RISC <ul><li>Two levels – Infrastructure and Services </li></ul><ul><li>Infrastructure Level at the bottom </li></ul><ul><ul><li>Building, power, telecom, air conditioning, water, etc </li></ul></ul><ul><ul><li>Coordinated investment by a small set of large infrastructure providers </li></ul></ul><ul><ul><li>Income from User Services Providers </li></ul></ul><ul><li>Services Level above the I-level </li></ul>
  19. 19. User Services Level <ul><li>Uses the infrastructure services below it and pays for the infrastructure use </li></ul><ul><li>Income from user fees for services </li></ul><ul><li>Market demand driven set of services </li></ul><ul><li>Services income-generating </li></ul><ul><li>A complete set of services commercially viable </li></ul><ul><li>Large number of services </li></ul>
  20. 20. The Users <ul><li>RISC located on the site of a “future city” </li></ul><ul><li>Within “bicycle commute” distance of about 100 villages </li></ul><ul><li>Aggregate population served – 100,000 </li></ul><ul><li>Aggregated demand for services makes service provision commercially viable </li></ul>
  21. 21. The Growth of RISC <ul><li>Users gradually migrate to settle around the RISC </li></ul><ul><li>The “city” develops according to the urban-planning blueprint </li></ul><ul><li>RISC is the catalytic agent which transforms the rural landscape </li></ul>
  22. 23. Economies <ul><li>Scale </li></ul><ul><ul><li>At the services level </li></ul></ul><ul><ul><li>At the infrastructure level </li></ul></ul><ul><li>Scope </li></ul><ul><ul><li>Complete set of services </li></ul></ul><ul><ul><li>Mutual support </li></ul></ul><ul><li>Agglomeration </li></ul><ul><ul><li>Urbanization economies </li></ul></ul>
  23. 24. RISC Features <ul><li>Ecological set of services determined by the market </li></ul><ul><ul><li>Provided by private, public and NGOs </li></ul></ul><ul><li>Small set of infrastructure providers </li></ul><ul><ul><li>Large aggregate volume of infrastructure </li></ul></ul><ul><li>RISC is an aggregation model – supply as well as demand </li></ul>
  24. 25. The Business Model <ul><li>Initial infrastructure investment made with long planning horizon by a small number of private and public organizations </li></ul><ul><li>Large amount of marginal land acquired at low prices </li></ul><ul><li>RISC implemented </li></ul><ul><li>Land value increases due to improvements </li></ul><ul><li>Investment recovered over the long term </li></ul>
  25. 26. The Trick <ul><li>Grow cities by planting RISCs </li></ul><ul><ul><li>Spread risk </li></ul></ul><ul><li>Transform marginal rural land into urban land </li></ul><ul><li>Recover the investment </li></ul><ul><li>No government funding required – only light-handed regulation </li></ul>
  26. 27. The Vision <ul><li>To look beyond the here and now, and envision the future </li></ul><ul><li>Bold, coherent, inspiring and realistic vision of the future </li></ul><ul><li>Not the India of today but one of endless opportunities </li></ul><ul><li>That vision to guide our purposeful actions </li></ul>
  27. 28. Thank You! <ul><li>Atanu Dey </li></ul><ul><li>[email_address] </li></ul><ul><li>Blog: </li></ul><ul><li>www.deeshaa.org </li></ul>