Building for the world - from India

My take on how India can become a force of the future - Part 2/3

If you missed part 1, you can read here.

How will a country facing unique problems to realize it's incredible, untapped, and suppressed potential become a significant force for the world? Why am I upbeat about technology disruption in India? Let’s explore.

Investor interest:

The beauty of capitalism is that capital flow supports innovation to a large extent. In other words, an innovation that can produce market returns attracts capital. While the FDI inflow into India hasn’t been great so far(compared to peers’ FDI to GDP ratio), recent trends point to an increasing interest in investing in India.

Successes of large investments have yielded better returns to VCs and PE funds in the first phase of the innovation cycle(the mid-2000s to late 2010s). The recent poster boy deals - Walmart’s acquisition of Flipkart and its subsequent cash infusion, and Jio’s magnanimous fundraising from top VC firms and tech giants turned the spotlight on the Indian tech sector. This has generated interest among the small and medium-sized global investors to open shops in the Indian investment space. Successful entrepreneurs from the first phase are investing their money and knowledge further into the Indian startup space. Many startups are lined up for IPOs in the upcoming years giving another push for funds into Indian startups.

While Indian manufacturing had very little share in the developed markets, Indian startups are proving to be capable enough for developed markets. Postman, Ola, OYO have set up their stores across the US, UK, and Australian markets giving a confidence boost to investors that Indian startups can go global and return larger than anticipated returns. Not only the returns but the learnings from Indian innovation are also proving to be truly global. Paytm played a pivotal role in Softbank’s launch of a mobile wallet, PayPay in Japan, a stubborn cash loving developed economy. Google and Facebook launched certain products(Google Pay and Reels) in India before the global launch.

The geo-political scenario is another opportunity for India. The recent China-US trade war is creating diversification moving manufacturing GDP from China to other countries such as India and SE Asia. The resulting income boost will generate better margins and ideas here.

Talent:

Going back to Maslow’s hierarchy of needs, the Indian population majorly falls into the bottom three layers with very few people in the top two layers. From the 1990s, with globalization, the upward growth of the population has created an ever-increasing upper middle class and middle-class population in the country. While entrepreneurs come from every class of society, innovative entrepreneurs majorly arise out of the top two layers of Maslow’s pyramid. The sheer growth of the population in these layers increases the talent pool that wants to take a dig at the innovative entrepreneurship.

While brain drain is still a great debate, the number of Indian expats returning back is rising. Tighter immigration policies in the west and growing opportunities in India(by remuneration, career growth, and improving work culture) are accelerating the return. This understanding of global technology and market landscape brought back into the country will significantly boost innovation in the upcoming years.

Successful entrepreneurs from the first phase have kickstarted mentorship and investments into more challenging areas which again pushes the boundary.

Scope:

India is primarily driven by the unorganized sector. This furnishes a lot of room for new ideas and areas to innovate. There are also unique challenges posed by red tape and unshakable consumer behavior. The learnings from successes in the first phase will play a vital role to take advantage of the opportunities and address the challenges in the second phase of the innovation-driven ecosystem.

With growing investor interest, talent pool, and the area to operate are good for innovation growth inside the country, how will that become a global phenomenon?

General wisdom will point to the world-class talent, mobile global diaspora, lower cost to build, and the internal push to increase exports. But there is one inherent advantage that is often overlooked and even seen as an obstacle for growth - the rich diversity of the country, in language and culture.

A product built for India should account for the intricacies posed by diversity. Inclusion will be a core part of the decisions as innovation seeks to penetrate and disrupt the lower rungs of the disintegrated and unorganized society. This will result in the development of a core stack that can scale faster into new markets. Replication of this core stack into global markets will be less complex as companies grow global.

For instance, Japanese carmakers have found tremendous success around the world over American and European makers for their relentless pursuit of vehicle quality. Japan's long-sighted focus on manufacturing quality after World War II made them replicate the same strategy on quality supremacy in new markets which put them atop even the homegrown carmakers. In the innovation-driven service economy, global growth will rest with those companies that can localize the products to the culture they enter. This inclusion, being part and parcel of Build and Scale for India, will put a significant advantage on the global growth of Indian products.

The government policies in India evolve in a reactive manner over a proactive one. The political policies resist market forces to a level and I don’t see it change going forward. Regardless of government policies and irrespective of the political power at the center, the truly market-driven force is much powerful right now that it will push for favorable policies and keep expanding the innovation base.

Another advantage for India is its friendly environment with technology hubs and economies. India’s leaning towards co-opetition over competition will make the advancement smooth, even receiving support from leaders in the space.

As India is entering the second phase of entrepreneurial innovation, the realization that the solutions built here are cheaper and can speak to multiple audiences will push global expansion towards the end of phase two.

Every growth comes with its own consequences and India’s growth is not going to be immune to that. What will be the trade-offs and blind spots that will take a front seat as India pushes for expansion?

More in the final part.

Disclaimer: I don’t claim that these opinions are right, I just claim that these are mine! I have taken the liberty to use data, without fact-checking, from what I remember through reading numerous news articles, books, renowned scholar opinions, and debates.