Inter-State Migration: Demography & Economy

Read Time:8 Minute

There are many questions around inter-state migration/migrants. These pertain to the changing demography and consequently, social structure, and also outward remittances of migrant workers to their parent-states. These have socio-economic and politico-electoral consequences for both the donor and recipient states, especially the latter, particularly in the context of prevailing and evolving political dynamics and their influence on the society – and hence, the policies of the governments, both in the states and at the Centre.

Dr Bernard D’ Sami

Senior Fellow

Loyola Institute of Social Science Training and Research

When we talk of migration, we include both internal migration within the state and inter-state migration.  All of us may be wondering about the number of inter-state migrants. In 2017, the Economic Survey of India was presented by Mr Arvind Subramanian, the then economic advisor. In that report, he mentioned that there are 9 million people who are migrating from one state to the other for two things: one for job and another for education. The data was pertaining to five years ending 2016. For data collection, they had relied on the people who had travelled in the unreserved compartments in inter-state trains. The 2011 census also captured migration. It is estimated that there are about 450 million migrants in India.   

According to 1991 census, of the total migrants, 55% constituted inter-state migration and 33% was internal migration (within the states). In 20 years, the situation reversed. Less than 33% was inter-state migration and 58% was internal (intra-state) migration.

What is the type of work they do? All of us see them in the construction sites but many migrant workers are working in the manufacturing sector too. When the twin-tower residential building collapsed in Moulivakkam in Chennai some years ago, many migrant workers died and that was the time when Tamil Nadu government decided to take a census of migrant workers. They came to the conclusion that there were 10 lakhs of inter-state migrants in Tamil Nadu and more than 50% of them were living in and around Chennai.

Migration happens both due to push factors and pull factors. Socio-economic disparity that exists in our country, particularly in the northern side of India is a trigger for migration. The migration is of two types: forced migration and distress migration. People move out of their places due to various compelling reasons. There are young people who are 17 or 18 years old among them. Youngsters leave their parents for some reasons and move out. They also move for education. 

Working Group on Migration

In 2015, the Ministry of Urban Development set up a working group on inter-state migration. The working group made many recommendations in the study. They suggested that migrant workers must be enrolled in the Social Security Boards. There is a Welfare Board for every sector. For example, construction workers have a welfare board. One of the things the working group strongly advocated is having data on the number of the inter-state migrants but it is very difficult to capture the exact number of migrants. Tamil Nadu government has tried it out many times.

One of the recommendations by the working group is self-registration. Everybody has a mobile phone and they can do a self-registration through mobile apps, emails, or WhatsApp. They also looked at the portability of social welfare schemes. When the migrant workers move out, they surrender their public distribution system (PDS) quotas in their home state. They should have access to PDS in their destination states. This led to one nation-one ration card scheme.

The working group did not recommend any particular law or laws for the migrant workers. Already, there is an inter-state Workmen’s Act 1979 and there are many other acts. The Labour Department has made all the 44 labour laws into four codes now. The working group suggested that migrant workers be included in all the four codes. But the inter-state Workmen’s Act applies only when people move in groups of more than five. Most of the contractors are bringing migrant workers in numbers of two or three.

Guest, not Migrant

A small state like Kerala has 3.5 million migrant workers. They were the first state to use the term ‘guest worker’ to refer to ‘migrant worker.’ They said that the term migrant worker is derogatory because we have migrant professors, migrant doctors, migrant engineers and so on but we don’t refer to them as migrants. Kerala considers them as replacement workers to replace their own people who have moved to Gulf countries. They receive the workers and take care of them very well.

Today, we see an exodus of people and mass migration. Villages are getting vacated. The migrants lose their voting rights. In the new labour codes, the threshold of workers in a group has been expanded from 5 to 10. So, migrant workers will never be captured hereafter for legal benefits.

The Best States

In my opinion, the best sending state for migrant workers is Orissa because they have everything in place to take care of their workers who move away from their state. All departments—health, education, home and police—work together in addressing the migration. They have established seasonal hostels in many places, so that the children of migrant workers can pursue their education while their families are away. They maintain a very good database, particularly of children on the move. Orissa sends educational volunteers to the destination states like Tamil Nadu to teach the Odisha children in Odiya. Books are coming from their states. 

Undoubtedly, Kerala is the best receiving state. When COVID started, they had more than 15,000 community kitchens and many other programs in place to cater to the needs of the migrant workers. The worker can go to any community kitchen and take his/her food. They get the best wages. Their schools admit children with open arms. Their own population is declining. From six lakhs children per year, it is now reduced to only three lakhs.

Dr Lora Deve Prasana

Assistant Professor

Department of Social Work, Stella Maris College

I would like to cover the findings of many of the case studies done by me of migrant families in Tamil Nadu, as part of my research work. In the studies, I focussed on the plight of women and children, as not many studies were carried out on them. They face lots of discrimination.

Apart from construction and manufacturing industries, there are other types of migrants as well, like doll makers, who make beautiful dolls. They live in pathetic conditions—with plaster of Paris coated all over their bodies. When asked about their health, they say, “When we don’t have a place to stay, when we don’t have even food to eat, how can think of our health?”  

There are kalakutadis—nomadic street performers. They go to the nearby temples and perform folk art, etc. Many of these people are from Bellary, Karnataka.  When asked, many of the migrant women said that they have only three goals in their life: Meals, marriage and children. Having a second meal or third meal seems to be a luxury for them. They always face stigma as migrants. They’re always seen as outsiders, though they may be here for the last 20 years. They are the first targets for the community people and the police. They can be easily cleared from their place of stay. “Do we have a permanent place in this world? Do we even belong here?” is what one migrant woman said. 

We need specific, need-based interventions. When we study social work, we always say that we must move from micro to macro but I think that in this inter-state migration, we have to go from macro to micro. All of us need to be there. We cannot put responsibility only on the government or the NGOs. We all have a very important social responsibility towards these migrants and their families.  

Mr Arun Viknesh

Independent Researcher

I want to cover the plight of migrant children on the move.  Migrant children in India refers to children who have migrated from their place of origin to another place, often due to economic or social reasons. Typically, there are three classifications of child migration: one, migration with parents; second, migrating alone and the third, left behind migrant children.  

The issue of migration in India has gained significant attention due to the pandemic, which left many of them stranded and struggling for survival. One out of every five migrant is a child, according to census 2011. There are 9.3 crore migrant children, with girls constituting more than half. It is observed that girl children migrate more to rural locations and boys migrate more to urban locations. 

According to census 2011, children of zero to 14 age group go to Goa, Kerala, Maharashtra, Tamil Nadu and Andhra Pradesh. 15 to 19 age group go to Goa, Kerala, Arunachal Pradesh, Maharashtra and Andhra Pradesh. In fact, during the 2017 Goa assembly elections, some candidates even floated their election manifesto in Marathi and Kannada to appeal to the migrant voters. The major problems they face are dropping out of education, exploitation, lack of access to health care, gender-based violence and trafficking.

Major policies and programmes of the government are:

  • National Policy for Children 2013
  • Right to Education 2009
  • Integrated Child Development Services 2009
  • Juvenile Justice Act 2015
  • Samagra Shiksha Abhiyan

To quote an ILO 2013 report, “Despite the magnitude of the problem, the needs and interests of migrant children are largely absent from mainstream debates on child protection, child labour and migration.”

Decarbonising India

Read Time:20 Minute

The physical manifestations of climate change are increasingly visible across the globe, and India is not untouched. More than 75 percent of India ’ s districts – home to 638 million people, or 1.4 times the population of the European Union (EU) – are categorized as hotspots for extreme climate events already. India has acknowledged this threat in multiple forums, has set ambitious targets and is taking bold measures to address the risks. A team of eminent panellists discuss McKinsey’s Report on “Decarbonising India”.

Mr Naveen Unni

Senior Partner, McKinsey & Company and Co-author of the Report

In our report on ‘Decarbonising India,’ we took a lot of very deep sector views using the insights of experts from various fields. There are five core messages that we give as part of this.

  • Three quarters of India is yet to be built: This is a massive message of optimism. India is in quite a unique position. Almost no other major geography or economy has the advantage that India has, because three quarters of India is yet to be built. Even if you take a GDP growth rate anywhere between 4 to 5%, we’ll end up with an economy that is three to four times as large as now by 2050. India has a net zero target by 2070. We did in our analysis what it would take to do it by 2070 and also, if we do it sooner—before 2070.  That three quarters of India is to be built means that if we build more green economy now, we have the benefit of not having to retire assets. In most developed countries, the demand has flattened. If I switch from coal based power to renewable energy, then I have to retire my coal based power plant and this has an economic impact on the country. In India, we don’t need to do that. A coal plant has a life of 40 years. The average age of our coal plants is 12 to 15 years. So, for another 25 years, we have to keep burning coal. Because there is 3x more growth, we can start building all the additional growth in green.
    • Tailwinds in mobility and power: Power and mobility are the two largest sectors in terms of emissions. With a lot of good news, the likelihood of getting to decarbonisation in those sectors is quite large. But there are a few other areas where we need a big push, like, in steel and cement. In the process of making steel and cement, carbon dioxide is released and it’s very hard to replace that. In steel, at least, there is a different technology that uses green hydrogen instead of the classic blast furnace process. But in the case of cement, there is no alternate technology as such. Here, material circularity is an important dimension which we need to push.  
    • Challenges of capacity growth and management: The economics are favourable in many instances. The technology is also there. The challenges are in adding renewable capacity into the grid, getting enough land and financing. We are an energy import dependent economy and it makes a lot of sense to go green. There is a lot of energy security linked into energy transition and we have an opportunity to take advantage of.
    • More benefits: The benefits will exceed the downside, even without factoring the climate challenge. 
    • Need to act now: We are already going through digital transformation. The other big transformation now is sustainability. The digital transformation is a services transformation. There is some infrastructure and capital required, but it’s a people intensive transformation. Sustainability, on the other hand, is a capital intensive transformation. The amount of capital we need, by our estimate, is something between $7 and $10 trillion. This means that 3x of current India’s GDP has to be spent over the next 30 years to decarbonize. But if we don’t invest that capital wisely, we’ll have problems later. If we don’t make it green in every investment we make from here on, there is a cost to pay.   

    The following five industries in India contribute to 72% of our emissions currently: power, iron and steel, cement, agriculture and automotive. If we can arrest the 72%, then we have gone a long way in getting to decarbonisation. There is a lot of demand growth expected in each of these sectors. Our current emissions are about 3 Giga tons of carbon per year. If we do nothing, this will grow to 11.8 Giga tons per year by 2070. The good news is we’re doing a lot. If we continue this and make the right set of actions, we won’t get to net zero by 2070 but we’ll get to 1.9. This, we call as a Line of Sight (LoS) scenario. Then we estimated an accelerated scenario where we put more efforts, introduce new technologies, invest more capital and shift agriculture methods. Here, we would get to 0.4 Giga tons and still we won’t get to net zero. In 20 to 30 years, human innovation will hopefully get this to zero. It is not easy, but doable. 

    Decarbonisation themes

    Some of the themes like adoption of renewable energy, faster penetration of electric vehicles, use of green hydrogen, carbon capture, utilization and storage are the well understood ones. But material circularity and the whole idea of waste to wealth is a massive lever for decarbonisation. Because waste to wealth means that we don’t need to produce that much. Also, landfills generate a lot of methane, which has many times higher greenhouse gas warming effect than carbon dioxide.  

    Sustainable farming: Agriculture is one of the largest contributors of carbon dioxide in India, thereby contributing to greenhouse gas warming. Sustainable agriculture is thus very important. We need an additional 15% of India’s landmass for solar panels, sustainable agriculture and for urbanization. One of the biggest challenges is land availability.

    In automotive, there are a few ideas worth putting on the table. Is there a subsidy potential for electric vehicles? Is there a localization that we can do? In the tax we pay per litre of fuel, there is already an implicit carbon tax. In power, the biggest issue is not economics but it’s all the supply side stuff. We need more infrastructure and we must strengthen our grids—both distribution and transmission.  To accelerate the power market and discom reforms, we need stronger distribution companies. 

    India’s Panchamrit: Prime Minister Modi, in the previous COP, had spoken about Panchamrit (Five Point Agenda) as India’s gift. The number one was that renewable energy will go to 500 GW by 2030. We have not done more than 10 GW a year of renewable energy build. We now have to do 40 to 50 GW for the next eight years. We also need to focus on localized manufacturing capability. Most of the photovoltaic cells we buy come from China, which has 80 to 90% of the global share. We must have indigenous capacity and capability to put up these plants ourselves. In the energy mix, coal continues to be a big part of the mix, even in our accelerated scenario. We can have a battery car but a battery plane is a big challenge. So we need sustainable aviation fuel. We must incentivize people to invest and innovate and do research around sustainable aviation fuel. There are other fuel sources, like municipal solid waste, which can be converted to fuel.  We must do the right targeting. For example, there’s a lot of sugar distillation. We do ethanol distillation from sugar plants. Is ethanol the right fuel? Or is it sustainable aviation fuel, which is a much harder problem to solve? This is a real question and we must set the right incentives to get to the right solution.

    We need a lot more new capacity in electrolysers and batteries in electric vehicles.  We saw that the benefits of decarbonisation exceed the downside and challenges. In electrolysers, solar panels and battery cells, we have an opportunity to leapfrog. In some sectors, we have a natural endowment. The sun is a natural endowment. We can do something on green hydrogen and be the green hydrogen leader, which is hopefully what the green hydrogen mission will start to catalyse. There are some spaces where India has an advantage if we invest right and now.

    Inflation: Are we, as a household, going to spend more or less in the future, in a decarbonized world? Housing costs will go up, because steel and cement will cost a little bit more, but fuel and mobility costs will go down. So on the whole, we’re about the same. So from a household spend standpoint, going green in India is not a bad thing to do unlike in the West. It’s very important to keep that context in mind. 

    5 action points

    We have a 10 point agenda in our report but I want to list out five things that are important:

    • National plan: We don’t have a national plan and a roadmap to give us the markers, like how much green hydrogen we should be going for or what do we do as an alternate for cement. We need that at a macro level and sectoral level.  
    • Compliance carbon markets: There are several market mechanisms and technologies that need to be accelerated for compliance carbon markets. India is the largest issuer of carbon credits globally. But we’ve only scratched the surface and there’s a lot more that we can do in this space and more so, for industries that are hard to evade like cement, aviation and steel.  
    • Green bank: Because of the capital requirement that we have, we can create a Green Bank. A few countries are experimenting with this. Some have created a Green Bank and a Transition Bank, which are built for green financing and transition financing.  
    • Land use policy & circularity: We must create certain policies or missions that are very much driven around the challenges like land use policy. We are short of 45 million hectares. India’s total landmass is about 350 million hectares.  We have to find ways of incentivizing people to do the right thing with land. We need to plant crops for feeding people. We need renewable energy and we need to house all. Everything is important and we must make the right choices. The circularity mission is very important. We must focus on the hydrogen mission and also on carbon capture, utilization and storage mission. We’ve identified five potential industrial hubs where we can have carbon capture, utilization and storage. 
    • Accelerate renewables and an enhanced hydrogen mission. Our optimism comes from the demographic dividend and growth opportunity that India has. Now, it is ours to use or lose this dividend. Whether we like it or not, the next decade will see how much of this we can get right and how much we can decarbonize.  


    Mr Ravichandran P

    President, Danfoss Industries Pvt Ltd

    Energy Efficiency: One of the key pillars of decarbonisation is energy efficiency. On the demand side, there have been tremendous initiatives done by the Bureau of Energy Efficiency. One of the biggest examples is the use of LED bulbs, which has cut down the energy footprint in cities and houses. Energy efficiency is less understood and it needs to be fully harvested. Today, India has got 500 GW of connected load. I believe that 30% of this energy can still be harvested and we already have technologies for that.  

    Leadership: We need a leadership direction, not just at a national level, but at a state level too. When Denmark had the oil crisis in the 1970s, they decoupled GDP growth and energy intensity. That’s how wind energy was born. Every state government must be made to think about a carbon neutral journey plan. A state like Tamil Nadu which has 40% renewable in the mix, can lead the way. We need visionary leadership at the grassroots level for fully harnessing the decarbonisation opportunity.

    Ecosystem:  We need to build the ecosystem. Decarbonizing has to be part of a social transformation. It has to start with the entire population of India. India needs quite a lot of water, if it aspirationally wants to be in the semiconductor business, data centre business and battery business. Today, we are starved of water. We don’t have clean water across India. We must first disrupt water in every urban city of India. Water and energy have a close nexus. If you want to pump water, you need electricity, for which we depend on coal. In 2023, we will be overtaking China in population and water becomes a very important per capita consumption story.

    Agriculture: There is a nexus between food, water and energy. In agriculture, we need to mandate what to grow, how much to grow and where to grow. The biggest disease in India is diabetes and we still grow a lot of sugar which consumes a lot of fresh water. We need a policy regulation and a lot of education and directional shifts in agriculture.  

    Digital: If we want to decarbonize anything, digital is the core of it, because we need to measure carbon consumption. India has a very strong position in digital and IT sectors. We can use this as an opportunity to pivot and lead the world in what I call as the digital decarbonisation. We can create digital twins of a building or a factory. Using digital, we can go down to the smallest element where leakages happen and fix them using technology.  As an ecosystem in India, we can create 3 to 5 million jobs, only on decarbonisation.


    Dr Arunkumar M Sampath

    Principal Consultant, Tata Consultancy Services

    • Every country has its own growth path and it peaks differently for different countries. We have to take independent decisions and strategies that work for us and we have to look at things from our perspective.  
    • The biggest impact on energy efficiency will come from human behavioural change rather than technology.  
    • About a month ago, on the sidelines of COP27 in Sharm el Sheikh in Egypt, about seven companies came together—GE, GM, Bechtel and a few others—to work on cross industry, cross sector collaboration and open innovation. What they said is that just because I did a fantastic engine or car, it doesn’t mean that I am going to do a fantastic job; because if the roads are bad, you cannot drive beyond the second or third gear. So innovation in one sector can be leveraged by the others through collaboration. 
    • The next one is the triangulation of three things: one is open innovation; second, the energy intensive industries like cement, power and steel; and the third, carbon capture, utilization and storage. If you draw a Venn diagram with three circles representing these three areas, we must operate at the intersection of the three circles to get the best results. 
    • The data must be reliable and auditable. Unfortunately, there is no global standard and template for data gathering.
    • During Covid, India took the lead of not only producing the vaccine but also giving it to over 150 countries literally free of charge, even though we had challenges in getting a license or patent. Similarly, we must have an agreement to help the poor countries to reach the emission standards by providing them with technology or footing their bills for developing/acquiring technology.


    Dr Kanakasabapathy Subramaniam

    Sr Vice President, Ashok Leyland Ltd

    Human body is an engine that burns carbon. We exhale CO2 and inhale O2. This is exactly what an internal combustion engine does, and this tells me that there is probably nothing wrong with carbon based fuel. To me, it sounds like nature has honed in on carbon based fuels for all life forms. Converting carbon to carbon dioxide may be the most efficient way to use a fuel and convert it to energy. There is nothing comparable to petrol or diesel even today. What nature does is it reverses carbon dioxide back to carbon. We can call it carbon capture or sequestration. To convert carbon dioxide back into carbon and oxygen, we have to give exactly the same amount of energy that we used to burn it in the first place. Nature does that using solar energy and we call it photosynthesis, which is the process by which plants use sunlight, water, and carbon dioxide to create oxygen and energy.  The leaf inhales carbon dioxide and gives out oxygen and keeps the carbon to grow the plant. To me, the answer to decarbonisation lies in finding a way to extensively use solar energy to capture carbon. A carbon based fuel has many advantages.  It gives the highest amount of energy density. This is one part.

    Managing traffic

    The second part lies in the concept of keeping things simple. The automotive sector is one of the culprits for emissions. By saying that petrol and diesel are the culprits, we may be using a brute force solution. The process of making green hydrogen is expensive. With battery vehicles, we are worried about the environmental cost of mining lithium, making batteries and disposing them at the end of life.  

    We know from Newton’s law that F = ma (force equals mass x acceleration). You consume energy only when you accelerate. If acceleration is zero, there is no force and no energy consumption, provided the road is good and you don’t brake. So the problem of fuel consumption is a problem of traffic management and it’s not changing the fuel. This can be a right idea for a traffic management startup. Can you manage the traffic so nicely that you optimize the flow and don’t brake? Then you will literally have a free ride without fuel. Even with electric vehicles, you will keep braking if the road is bad. Changing the fuel is the wrong way. The correct approach is go back to the fundamentals and getting close to ideal driving conditions.


    Naveen Unni: What is India’s leadership in this space? How do we take the suggestions to action, over a 10 to 20 year period?

    Ravichandran: When we build a future, it has to be a full ecosystem approach. In the last four or five decades, we have not tried to solve the problem. We need a holistic approach to problem solving. We need to build India centric solutions with deep value chain where we don’t rely on imports and build open source technologies, which can be easily scaled. The speed at which you can scale using digital platforms is more cost efficient. For example, Amul is a company which is almost decarbonizing the dairy industry. Amul was built using a circularity model embedded in everything they did. Amul is an ecosystem play. They can measure the temperature of the cow. They are online and in digital. The farmer gets money in digital. The quality of milk measured is digital. The technologies and the solutions have been done indigenously. So if India wants to lead, we need an ecosystem approach.

    Dr Arunkumar M Sampath:  Technology can only take you so far. The behavioural change is very important. Sustainability must have inclusive growth. If you want technology or solutions to succeed, there must be a community buy in. 

    Dr Subramaniam: You can learn technology on YouTube. We have the brains. All we need is to realize that if we have the confidence, we can do it. We just need to bring the people together and focus the brains with the right degree of confidence.  

    Q: With our roads, it’s impossible to drive without frequent braking. How do we get over this problem? How do you see the adoption of hydrogen as a fuel?  

    Dr Subramaniam:  With regenerative braking, you can recover 20% of the energy. There’s a lot of technology that’s coming up with which you can recover up to 70 or 80%. Of course, it will take a little longer. Hydrogen is a very nebulous sort of thing. To me, hydrogen is not a fuel because a fuel has to have an inherent energy content.  There are many ways to make hydrogen but let’s take splitting water. You have to put in energy from somewhere and get hydrogen. Hydrogen can be a storage medium like a battery. It’s better than a lithium battery. We can convert water into hydrogen and store that energy for later use.  

    Q: In energy efficiency, we had the LED revolution. Why is it that the concept of energy efficient fans has not caught up in a big way in India?

    Ravichandran: Initially, the focus was on heavy industries that were guzzling up energy like steel, cement, mining and paper.  In phase one, they came up with a PAT scheme—Perform, Achieve and Trade, thanks to which, we have one of the world-class cement plants in India and in terms of the energy that we consume to produce a ton of cement, we are the world leaders. EESL is now providing energy solutions for the government. Multiple products have been looked at including fans, grinders, etc. We also have the energy labelling program for appliances. There are great initiatives already in place. Technology agnostic thought process must also be there.  

    Q: Coal is a major source of power in India and it is available in abundance. Why should India avoid it?  

    Naveen: We still are going to burn a lot of coal. We need a lot of power and we don’t have sufficient renewable energy. It is going to be a coal driven economy, even in our accelerated scenario. By 2040, quarter of our energy is still coming from coal. This is not to say that coal is bad or good. There’s no judgment here. All we’re saying is decarbonisation is good. Just as much as we have abundant coal, that coal is not the best quality. The idea is to get a mix of energy so that we are more resilient, going forward. Coal continues to be a part of the mix.   

    Q: Do we look at nuclear power as an option, considering issues like safety?

    Ravichandran: There are so many different technologies and nuclear is certainly not rolled out. If we shut down coal plants, there will be a big NPA in the banks and joblessness in mining. We need to craft our choices carefully.

    Q: Will G20 leadership give us leverage to gain leadership position on sustainability?

    Ravichandran:  It is a great opportunity to position India. After the Paris Agreement and Glasgow, it is India that has actually met quite a lot of climate commitments. This is exactly where we need to lead the discussions. India needs more funding. Technology is not an issue. Our Prime Minister should use this as a great opportunity to reposition India as a superpower in decarbonisation.

    Naveen: Indonesia was the previous host country of G20. Right at the end, they managed to get a $20 billion in funding through four years for decarbonisation and sustainability. So there is a real opportunity to put something concrete, especially around technology transfer. A lot of commitments have been made on capital transfer but they haven’t materialized. So we can use this as an opportunity to canvass for the Global South, not just for India.  

    Q:  What are the solutions we are looking at to minimise transmission losses? 

    Naveen: We need more copper and more transmission capacity. The bigger issue than transmission losses right now is lack of transmission.  

    Ravichandran: We can also have more and more micro grids, especially in remote parts. 

    Naveen: It’s a good idea for remote places where the cost of getting a transmission line is so high. But everywhere else where there’s some reasonable density, micro grid is not the best option. 

     Dr Subramanian: We also have HVDC transmission to reduce transmission losses. 

    Towards A Green Economy

    Read Time:19 Minute

    The transition towards a Green Economy presents a tremendous scope for India to not only achieve the SDGs and advance its lowcarbon development objective but also with a vision for an ‘inclusive green economy’. A look at some of the issues, challenges and opportunities present in the sector.

    Prof S Janakarajan

    President, South Asia Consortium for Interdisciplinary Water Resources Studies (SaciWATERs), Hyderabad

    The UN organizations have been extensively discussing green economy. For achieving growth and development, there is competition within the country between the states and also between countries. However, growth should not come at the cost of sustainability. We have to think of feeding about 800 billion people in the world. If we don’t ensure international biodiversity and food security, feeding these people will become a huge challenge. For transitioning towards green economy, we must sustain life systems on the earth and convert to low carbon economy, thus making the planet more livable, sustainable, renewable and friendly towards life systems. That’s the core of the green economy. The most important aspect is to work towards rebuilding, rehabilitating, recovering and restoring the health of planet earth, as we have contributed to a great damage to our planet.

    Caring for the biosphere and atmosphere

    15 years ago, the concept of green economy did not exist. But today, everybody is talking about greening. This has major implications for the entire biosphere and atmosphere, healthy lifestyles, biodiversity, food security and protection from disasters. Biosphere includes lithosphere, hydrosphere and also the soil systems. Prioritization and implementation of the green economy initiatives need more attention; more so, in the Western Europe, North America, Russia, Japan, China and India. The 17 Sustainable Development Goals (SDGs) of the UN provide clear cut pathways towards achieving green economy. SDG 7 focusses on affordable and clean energy; SDG 11 on sustainable cities and communities; SDG 12 on responsible production and consumption pattern and SDG 13 on climate action.

    India’s strides in wind and solar

    To make energy transition to renewable energy such as solar, onshore and offshore wind power and green hydrogen, we require investments. India had the set the target of installing 175 GW of wind and solar energy by 2022. Though we are slightly behind target, we are expanding pretty rapidly in energy generation from wind and solar, which is a laudable achievement. India now stands fourth in the world in installed renewable capacity—fifth in solar and the fourth in wind. India has set a target of achieving domestic renewable energy of 450 GW by 2030. 40% of India’s cumulative electric power installed capacity will come from non-fossil fuel-based energy by 2030. Now 70% of our energy is generated from coal, which is fossil-based but we have to reduce it.

    Secondly, India wants to reduce the emission intensity of its GDP by 33 to 34% of the 2005 level by 2040. Is it achievable? India will create an additional carbon sink of 2.3 to 3 billion tonnes of CO2 equivalent to additional forest cover. These are tough targets but let’s look at them positively.

    Challenges from green hydrogen

    Green hydrogen is now widely talked about globally and the Government of India is quite serious about using it as a source of energy. The union cabinet has recently allowed an outlay of Rs.19,744 crore towards the National Green Hydrogen Mission. It means that India wants to be a global hub for production, utilization and export of green hydrogen. The green hydrogen policy aims to generate 5 million tons of green hydrogen annually from 2030 onwards, which is the quantity of hydrogen consumed by the industry today. Green hydrogen is produced by splitting the water (H2O) into hydrogen and water. For that, we need electrolysers of 32 GW capacity; it will consume 150 million litres of potable water. We must set up 90 GW of solar or wind power to feed the electrolysers, which in turn would need 3,40,000 hectares of land. If we use regular energy for powering the electrolysers, it will not be green anymore. The benefit of using green hydrogen is that we can avoid 30 to 40 million tons of CO2 emission and also purchase of 60,000 crores of LNG. But how is that going to be possible and do we need green hydrogen at all are the questions that come up, more so because hydrogen storage is hazardous and its distribution through a leak-proof pipe system and end-use acceptance are further challenges.

    The higher growth rates and India’s vision of $5 trillion economy are based on the usage of conventional carbon-based energy. When we switch to renewable energy, there can be a conflict with this target of $5 Tn economy. Indian economy is growing at a much faster rate compared to most of the world economies. We are growing at 7 to 8% and expect further growth, which means we are going to use more energy. According to the International Energy Agency, India’s energy demand will go up by 3% annually. The International Energy Agency also predicts that coal based energy generations will go up from 240 GW to 2000 GW in 2030.

    Making agriculture efficient

    Substantial energy can be saved by making the Indian agricultural practices more efficient. At the moment, Indian agriculture is extremely inefficient. If we make it more efficient, we can reduce a lot of methane emission and also electricity use for agricultural purposes. When we shift to electric vehicles, we still use the fossil energy to recharge batteries. The batteries’, being hazardous, disposal becomes a challenge. More people switching to electric vehicles will increase traffic congestion. So we must shift towards public transport.

    If we have dedicated bus lanes, then people will be tempted to use the public transport. That is the best way to reduce CO2 emission. China and many European countries are shifting towards bicycles. There are extremely well made bicycles available. If we have dedicated bicycle lanes, people would like to go by bicycle. Now we are scared to ride a bicycle on the road, as we can be hit by any class of vehicle. These are unconventional methods and ways of looking at greening and transitioning towards green economy.

    Waste management

    Waste management is another serious issue. We generate huge biomedical waste, solid waste, debris from buildings, industrial waste, liquid waste and other kinds of waste. These wastes generate quite a lot of methane. Our solid waste tradition has gone up by 20% because of online purchases that use so much of packing materials. With higher growth rates, we will also end up using more natural capital, land and water. Domestic sewage problem and unscientific disposal of industrial solid waste effluent can also create serious problems. While working on infrastructure development, we encroach water bodies and create further problems. It is also important that we work on more responsible production and consumption. SDG 12 says that we must work on making every industrial unit energy positive and water positive. They should generate their own energy and use their own water.

    The sunlight and the rain that falls on your roof and plot of land are your resources. Use them to the greatest and be kind to mother earth. That’s the easiest way to move towards green economy.

    Dr Shankar M Venugopal

    Vice President, Mahindra & Mahindra Ltd

    Does green and economy go together? That’s a very first question that many of us may have. The other day, I thought of taking my cycle out and going to work. I happen to live in the same campus and my home is just ten minutes away from my office. So cycling is possible.

    Green economy an oxymoron?

    When I said this to my neighbour, he looked at me very disapprovingly and sent me a WhatsApp forward. It said that a cyclist does not contribute to the economy in any way. He doesn’t buy a car, has no car loan, doesn’t buy fuel, doesn’t pay road tax or parking fee. If there is somebody who can do more damage to the economy, it is the guy who walks. On the contrary, if you look at fast food outlets, they create a big impact on the economy, because people eat junk food, they fall sick, buy medicines, go to doctors and the economy booms. This is really put in a humorous way but it’s supposed to make us think. I come from the world of mobility, where unless we move things and people, there is no economic growth. We have to do it in a responsible way, where there is no tailpipe emission and it is energy efficient. I work for Mahindra, so I’m very excited about building electric vehicles where there is no emission. There are still problems to be solved with EVs as Prof Janakarajan pointed out. How do we solve them?

    Almost every week, I have to go from Bangalore to Chennai and back. For the last few weeks, I have been using the Vandhe Bharat Express. Train, I think is the greenest way to go. I am also able to work during those four hours of travel. It’s pretty nice. But it’s a fundamental change and it needs a mind shift to see is there an alternative to traveling. In tourism, there are virtual things that are coming up with AR, VR and metaverse.

    The world is one

    Six months ago, I was in Delhi. Almost every house has multiple air conditioners. Even during the night time, when I stepped out, it was pretty warm outside, like the day in Chennai. For the person inside the house, it’s very cool and comfortable. But for the person outside, it is horrible. That’s what happens, when it comes to green. When we talk about green economy, one thing that we should remember is the phrase Vasudhaiva Kudambakkam, which means the whole world is one family. Whatever we do, we are all connected. There is no way one can avoid the butterfly effect. We need to understand that it’s a system level problem that we are trying to solve. It’s not a local problem. What happens in one end of the globe is definitely going to affect something at the other end. 

    The lithium story

    Coming back to the electric mobility, one thing that have all recognised is that we cannot continue to use coal powered electricity to charge electric cars. We’re looking at solar and wind in a very big way. But the catch is that solar or any renewable needs storage. You need a battery, typically a lithium ion battery to store the energy and you need the same battery also for the electric vehicles. Certainly, there is double the demand for lithium ion batteries.

    There are only four places in the world where lithium is available in plenty—Argentina, Bolivia, Chile and Australia. China is not there in this picture. All that China has is a long term trade agreement with these countries to process lithium and make batteries. For a vehicle which needs instant energy, lithium battery makes a lot of sense. There could be alternatives soon, but today, that’s the best. This is the story around lithium. We need to mitigate some of the supply risk around lithium before we start scaling it up.

    The second point is in terms of battery wastage, because battery has a finite life. There are multiple things that people are trying to do around this. One is what we call a second life of the battery. Once the battery health deteriorates to less than 80%, it can be used for the home inverter kinds of applications and it can serve for another five to six years in a home inverter.

    We have companies, which can retrieve almost 90% of the material that goes into a lithium ion battery. One such company is Redwood Materials. There are quite a few companies who have metallurgical processes in place to retrieve and reuse these scarce materials to make fresh batteries. That is possible. That’s a big business opportunity for a country like India, so we can really recycle and reuse these batteries. Traditionally, we are good in materials and metallurgy technologies. This is a strength area for us and we can very well look at it. There’s a lot of money around that.

    The third is, just because we have an electric car, the traffic congestion does not come down. It is still there. How can we address this? The electric car will also be a smart and connected car, since it has IoT. It can talk to other cars, to traffic signals, to parking lots, to charging stations and so on. That’s going to solve two big problems. One is to streamline the traffic flow, so that the signals and the vehicles talk to each other and they can plan. Second, the car being connected, it can talk to the charging station and find out the availability of the charging slot. The charging station will also know how much charge is remaining in the battery of the car. The OEM serves like an umbilical cord for all these electric cars, so you will never be alone even on a highway or any new place. You are always connected and there is always help available. So we have to look at electric not as standalone, but as connected and shared mobility.

    A shared vehicle can be used for longer hours. That’s faster and better utilization and faster return on investment. That’s why a lot of the shared mobility providers like the Olas and Ubers are very excited about electric. Electric car can also be semi-autonomous where it can drive to some extent by itself and optimize, so you can get better efficiencies.

    Think green, speak green, act green

    It’s very important for us to look at public transportation and how to make them electric. Sustainable mobility means that it must be sustainable at all levels including design, manufacturing and end of life disposal. India has a true potential to be a global leader, when it comes to green technologies. Green economy is the opportunity that we just cannot afford to miss. For that, we have to think green, speak green, spread the awareness and enable green. We need to practice green habits right from home. All of us have a chance to contribute to this and we can all come up with innovative ideas. I’m sure there are a lot of people who are ready to invest, looking for green technologies and green ideas.

    Mr Arjun Bhargava

    Consultant, UN Global Compact

    Launched in 2000 by former UN Secretary General Kofi Annan, the UN Global Compact was initiated to bring business and the UN together to give a human face to the global market. As a special initiative of the UN Secretary General, the United Nations Global Compact is a call to companies everywhere to align their operations and strategies with 10 principles of the UN Global Compact in the areas of human rights, labour, environment and anti-corruption derived from international agreements and conventions. With more than 17,000 companies, and 3000 non-business signatories based in over 160 countries and 69 local networks, the UN Global Compact is the world’s largest corporate sustainability initiative, uniting business for a better world.

    As India transitions to a net zero economy, we have to ensure that we keep people and job creation at the heart of this transition. The green economy focuses on the economy, investment, capital and infrastructure, employment and skills and positive social and environmental outcomes. And therefore, to move towards a green economy, we must ensure that any transition is inclusive.

    According to the International Labour Organization,  a ‘Just Transition’ means greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind. A Just Transition involves maximizing the social and economic opportunities of climate action while minimizing and carefully managing the challenges, including through effective social dialogue among all groups impacted and respect for fundamental labour principles and rights.

    Guidelines for a ‘Just Transition’

    To avert catastrophic climate change, we need to halve the global emissions by 2030. If we fail to do so, we will not have a fighting chance of keeping temperature rise to 1.5 degrees and avoid the devastating impacts of climate change. It’s important for companies in the decarbonisation journey to set a science based emission reduction targets in line with climate science. 110 Indian companies from India have either committed to or have set science based targets out of over 4000 globally.

    Now, as companies in all sectors work to drastically reduce pollution from fossil fuel use, they must also simultaneously ensure there will be positive impacts for their employees, workers and communities. It’s important to equip labour market to the high level skill sets needed for greener jobs. This includes services that are available and easily accessible to all, including adequate training and professional development services and reskilling workers.

    Think lab on ‘Just Transition’

    According to the ILO, 25 million new jobs can be created with the loss of only about 7 million. With people at the heart of the transition, we at the UN Global Compact launched a Think Lab on Just Transition at COP 26 in Glasgow. We have brought 27 companies from across the world, in which three are from India, namely ReNew Power, Wipro and the Mahindra Group, along with over 15 civil society and international organizations such as the ILO, International Organization of Employers, the International Trade Union Confederation, among others.

    Sustainable development means harnessing opportunities to generate green jobs with decent working conditions, to reskill and upskill the workforce to promote gender and social equity and inclusion, to reduce poverty and to contribute to the Sustainable Development Goals. Just Transition also means fairly managing the transition’s economic and social impacts and risks. This includes risks to business assets and infrastructure, job losses, and decent job deficits, risks to human rights, including land rights and indigenous people’s rights and other negative impacts, especially in society’s most vulnerable groups.

    Assessing, preventing and mitigating negative impacts on workers, frontline communities, and enterprises should be an integral component of climate action. So by embedding a just process into the net zero transition, harnessing its social and economic opportunities and fairly managing its impacts on people, a Just Transition facilitates a speedy transition. Moreover, private sector support for a Just Transition benefits people. It also benefits business. Just Transition can help companies reduce risks and costs, enhance productivity, improve stakeholder alignment, including with customers, policymakers and investors and mitigate systemic risks.

    Brief for businesses: 7 key actions

    In September 2022, the Think Lab on Just Transition launched its first deliverable, The Introduction to Just Transition—A Brief for Businesses, which builds on the ILO guidelines and provides an introduction to the central role of the private sector in ensuring a Just Transition for all. Climate change and climate transition affect geographies, industries, and individual companies in different ways. It’s important to note that the principles of Just Transition are universal. But companies and business functions apply them differently. Our introduction to Just Transition highlights some of these differences and outlines seven priority actions to help all companies understand Just Transition’s principles, identify gaps in current practices, and generate ideas for improving alignment.

    1. Make a map of internal touch points and priorities on Just Transition.
    2. Set a foundation through robust policies and practices to respect rights at work and other human rights and ensure responsible business conduct.
    3. Engage with your worker organizations, governments and all stakeholders affected about these transition plans.
    4. Make long-term business plans that integrate these Just Transition principles, mitigate negative impacts and maximize opportunities for your key stakeholders.
    5. Take action to carry out Just Transition plans.
    6. Partner with governments, employer organizations, regional and sectoral initiatives and across supply chains for more coordinated action.
    7. Measure and report actions, challenges and impacts related to Just Transition to promote learning and accountability even with your peers.

    India’s Grand Vision

    India’s vision is to achieve net zero emissions by 2070. In addition to attaining short-term targets, which include among others increasing renewables’ capacity to 500 GW by 2030, and meeting 50% of energy requirements from renewables, India updated its contribution to the Paris Agreement, which is also called the Nationally Determined Contribution or NDC in August 2022 and has embarked on new initiatives in renewable energy, e-mobility, ethanol blended fuels and green hydrogen as an alternative energy source. Sustainable lifestyles and climate justice to protect the poor and vulnerable from adverse impacts of climate change are also addressed in the NDC.

    It is important for the private sector to plan for a people-centered response to support India’s bold and ambitious renewable energy targets and broader climate commitments. Planning for a Just Transition is more critical for some industries, such as those in the energy sector. For example, there’s a need to reskill automotive workers for electric vehicle industry as well.

    Climate adaptation

    A Just Transition for climate adaptation is also needed as the impacts of climate change are not just. The poorest and already vulnerable and are most affected by these impacts. They also have the least means to adapt and are less likely to benefit from adaptation action due to structural inequalities and limited political and economic capabilities. Climate change exacerbates existing inequalities including those related to gender, income, age and ethnicity.

    Historically, adaptation action has been seen as the responsibility of local and national governments. But globalization provides daily examples of how climate adaptation is actually a broader global concern, when floods disrupt the production of semiconductors or the export of minerals and metals; when heat waves and droughts make wheat yields shrink and prices rise. Businesses are directly affected by climate impacts cascading through supply chains.  

    Climate change and misguided adaptation action can cause resource scarcity and affect human health, hunger, crop yields and mining and processing facilities. They can jeopardize jobs and livelihoods, exacerbate conflict and cause supply chain disruptions. This is why adaptation action is important for large multinational corporations that aim to achieve a Just Transition. A Just Transition strategy for businesses that integrates climate adaptation; it can help reduce unequal burdens and leave no one behind.

    7 ways for climate adaptation

    A second business brief titled Just Transition for Climate Adaptation developed by the Stockholm Environment Institute with inputs from partners and company participants in the Think Lab on Just Transition makes recommendations for businesses to achieve a fair and inclusive journey to a net zero and resilient future. This brief also outlines seven recommendations for businesses to achieve a Just Transition for climate adaptation. They are:

    1. Integrate social and environmental objectives into business strategy through social dialogue.
    2. Build coalitions, including with your competitors, because you face similar challenges.
    3. Improve data collection and sharing.
    4. Strengthen supply chain resilience.
    5. Finance a Just Transition on climate adaptation.
    6. Partner with local and regional governments to devise adaptation strategies that advance a Just Transition.
    7. Advocate for clear division of responsibilities for a Just Transition and support climate adaptation.

    In December, we launched financing a Just Transition, a third business brief, which explores how financial functions within companies and institutions can advance a Just Transition by addressing four core elements of operations & strategy, governance, risk management and metrics & targets.

    India in 2047: The Amazing Rise of a Modern Nation

    Read Time:21 Minute
    MMA-KAS with the support of Read Write Productions organised a discussion on the book “INDIA in 2047: The Amazing Rise of a Modern Nation” authored by CA V Pattabhi Ram and Dr Anbuthambi Bhojarajan, Head – Strategy & Partnerships – L&T Edutech.

    Hon’ble Dr Justice Anita Sumanth

    What struck me, as I read India in 2047, was that this book is a repository and a ready reckoner of dreams. We must identify those dreams that align with our sensibilities, gather our resources and make sure that they don’t remain just on paper; we must make them a reality. I would like to share a small anecdote which has its genesis in a couplet in the Upanishads. It has been elaborated in great detail in the seventh chapter of the Panchadasi by Vidyaranya.

    The story goes like this. Ten men, during their travel, crossed a river and took a head count to ensure that all in the group had reached safely. The first man counts one to nine and then he says, “Oh my God, one of us is missing.” Each one of them counts and comes to the same conclusion. While they were all in a state of panic, a wise man comes along and asks, “What’s the problem?” They reply, “Look. We were ten to begin with and now one of us is missing.” He takes a quick count and says there are ten people. As they don’t agree, he suggests that one of them does a head count again. The person who counts again says, “See, we told you there are only nine.” The wise man turns his hand to the person counting and says, “Thou art the tenth man.”

    This is vedantic, advaitic thought. What is its relevance here? This is a philosophy that is espoused by all Indic religions and faiths and some Abrahamic faiths as well. The authors of the book have touched on various areas of the economy that call for development—from technology to infrastructure; education to agriculture; and fitness to employment. There is one overriding feature that is necessary to catalyse and enable all those dreams. That feature is ‘us’ or ‘the individual.’ That individual or self must be one of unshakable integrity, full of empathy and fairness and conforming to a set of superior values and principles. It is the development of the self that is going to be critical to ensure that the other dreams happen.

    Selling the concept of mediation to society

    The institution of justice delivery is one of the elements which is critical to the development and maintenance of the society at an optimum level. I was elevated after practicing for about 22 years. I look at justice delivery as a service. With that elevation, my focus became more broad-based and I tend to look at the ills that plague the system and see what we can do to reduce them. Two of those would be the docket explosion and the inexplicable pendency of matters that we have today. The volume of cases pending before the courts is mind-boggling. One of the very effective remedies that one looks at as a countermeasure to that is alternate methods of dispute resolution, particularly mediation. There is a Mediation Bill on the anvil, and it is important for ensuring that disputes are resolved in an amicable fashion.

    But as a concept, how do we sell mediation to society? We as a society look at litigation as a means to win fully, absolutely, unconditionally and without compromise. That is the anti-thesis of what mediation requires. Mediation is an effort which requires the parties in conflict to be able to sit across the table with a neutral negotiator and work out a remedy which would satisfy all of them, not just one of them. Each individual must rise to the occasion. This is the relevance of the vedanta story.

    Many of our dreams at first seem impossible, then they seem improbable, and when we summon the will, they become inevitable. Let us summon that will. India and Bharat will converge into one unified, invincible, indivisible force.

    Panel Discussion

    Raghuvir Srinivasan: I would like to look back from 1947 to 2022 and separate it into three quadrants: 47-72, 72-97 and 97-22. In the first 25 years, we put man on the moon and explored the outer reaches of space. We invented the jet engine which could fly us across the world in hours. The next 25 years (72-97) saw the computer being put into mass commercial use. It has transformed people’s lives and economies. The quarter from 1997 to 2022 has been the most mind-blowing period. Who would have thought that the mobile phone would be invented and that it would take over our lives? It has ushered in a communication revolution. Who would have thought that software would become the driving force behind the development of every industry including medicine?

    With the advent of battery storage, electric vehicles have threatened fossil fuels, which has till now been the uncrowned king. Could any of us imagine that something called WhatsApp would dominate our lives completely? Technology is driving everything and there’s nothing that can be done without a computer or a microchip. In the last few months, the shortage of chips has affected the output of everything from cars to computers and consumer durables to cell phones.

    How do you see the financial services sector transforming itself to meet the challenges of the next two decades? How do you think that banking and insurance will evolve in the next two decades? 

    Akhila Srinivasan: I come from the financial services industry and I have about 35 years of experience both in the financial services entities as well as insurance. According to me, we can increase our national income, national output and GDP growth by laying emphasis on non-corporate, small businesses of India. Banks and asset financing companies are into financing of big assets. The fact is, small businesses in India constitute 6 crore business units. 90% percent employment is created by this sector, which is also called the non-corporate sector or the unorganized sector. It contributes to 52% of the GDP of our country, whereas the so-called corporate sector contributes only 12% of the GDP. This humongous fact has been ignored for decades. About 46 crore people are employed in this sector, out of which 26 crores are self-employed. This sector includes micro, small units and traders. There is a body called the Confederation of All-India Traders’ Union and it has six crore traders as members and 20,000 State Associations all over India. About 60% of them are SC, ST and OBCs. But only 4% of their financial needs are met by the banks.

    We have Banks, NBFCs, Regional/ Rural and Cooperative Banks. The way forward should be the creation of small business financing entities which are a little different from the traditional NBFCs. Banks will have to route their funds to NBFCs, who in turn will route it to Regional Cooperative Banks. The last mile deliverer will be the micro enterprises who can deliver funds to the marginalized trader who needs funds at reasonable rates of interest. Otherwise they land in the hands of the money lenders. South Korea and China have created something on these lines. Columnist Mr S Gurumurthy has been talking about a rainbow model of financing, because India is such a diverse country with diverse business enterprises, requiring diverse kinds of credit at very reasonable rates of interest.

    The present government brought in Mudra. But in my opinion, Mudra is a reclassification of loans that were already given to the priority sector. Nothing new has been created. When the insurance industry opened up, IRDA was created as both a regulatory and development agency. Like IRDA, a small business financing agency should be created, which should focus on the development of finance to small traders of this country. By doing that, this sector will get a huge fillip and unimaginable growth can be achieved.

    The government must solve the credit needs of small businesses. The rich easily get loans and even manage to get away not repaying them and escaping to other countries. It is the small man on the field who doesn’t have access to credit. My heart goes out to the millions of poor people in this country who are marginalized and whose villages have no access to roads, electricity, basic education and health care. But we always talk about urban India where the intelligent and educated elite have a say on the matters. India is a rural economy and an agrarian economy. 50% of the Indian population consists of women and out of that 48% live in rural India. If we keep those 48 percent of the rural India poor and illiterate, then India can never grow.

    As development happens, there is a constant clash between development and environment. Very often, development takes precedence over environment. As India is rapidly industrialising, how can we ensure that environment doesn’t become a casualty? For instance, we need a second big airport for Chennai but the location chosen can displace many poor farmers who have cultivable lands. How do you draw the line between these two?

    Unnikrishnan: The first and foremost thing that we need to look at is urbanisation. We are right now around 30%, and it is expected to become 45% by 2030. Urban planning is not one of our strengths and as a country, we need to recognize that. I’m happy that in the recent budget, a small amount has been set aside to work on urban planning. It’s a good step. Institutions, large organizations and architects need to work on that and come out with a good model on urban planning. There are already very good codes and standards on green / sustainable buildings. We see a lot of electrification of mobility with EVs coming in.

    By 2070, India has committed to be carbon neutral. This has to be aligned to many sectors. The management practices must percolate down to the last person in the organizations. In Saint Gobain, we have an objective that by 2050, we will be carbon neutral. It doesn’t matter if we are in France, Germany, India, China or US. What we do in the next four to five years in our business, in our investments and technology will determine whether we will achieve that objective in 2050. Cities and States must put in the right policy framework and enable that. India as a country is still poor and we need development. There is no doubt on that. We have less than $2000 per capita income.

    Can we have economic development without disturbing the environment? It is very much possible thanks to many countries that have done all the mistakes in the past. We can learn from them. China is now tightening on the environment norms. Not 30 years back. Their norms today are much tighter than what it is in Europe or US.

    ESG is now widely spoken about as a big deal in organizations. It is nice to preach but we should also practise. In our Sriperumbudur factory, nine months of our operations are run from rainwater collected from the roof. We don’t take any water from the ground. We have over a lakh trees planted over there. We have enough roof and we have put solar modules to have renewable power. There are things that we can do at home and we should do that. Some of these will be a little costly to start with.

    We need a lot of skilled people as we go forward to achieve our dreams—be it in technology, manufacturing or services. You come from an engineering background. What do you think we lack in terms of skilling? What do we need to do to take India forward in producing the right kind of engineers, architects and planners? 

    Dr Gopalakrishnan: Education is a knowledge-based industry. We are not focusing on skills because it’s a kind of a pyramid. We have school education. When we go for higher education, there is a huge drop. After the higher education, people go for post-graduation and doctorate. At every level, there is a drop. There are two kinds of jobs—blue collar and white collar. There is a big competition for white-collar jobs than blue collar jobs. If you take engineering and compare it with the diploma, the diploma holders will get a placement easily because their focus is more on skilling and laboratory work. We must focus on activity-based learning; that is, learning by doing. The new National Education Policy 2020 talks a lot on this learning by doing and there is a chance for giving more importance for T type of learning. We call it as horizontal exposure and vertical expertise. That is missing now.

    There are 43 subjects in engineering. If I get some 170 credits, I will be an engineer. Unfortunately, the deep dive in any one subject is missing. It is not about blaming. The faculty’s role, particularly during the Covid, changed a lot. We have realized that. Their role in future will be totally different.

    So, in education, transformation is highly needed. Now it is all about imagineering. In technology, we first talked about IOT. Later, it became the Internet of Everything. Now, it is AIOT (artificial intelligence of things). For all these developments, content for teaching is available. To handle that content, faculty members should be enabled and for that, we need a lot of support from the industry. In the US and other developed countries, the education industry is governed by industries. Example: Stanford and the Silicon Valley. Training and placement is the buzzword everywhere. We talk about dream packages and super dream offers. But a skilling officer is missing. Students are not able to meet the expectations of the core industries, though IT industries can make up for this gap.

    Apart from training and placement, we must also emphasise on students becoming entrepreneurs. To become an entrepreneur, money is not the only factor. More than that, students should be highly skilled. For that, a lot of incubators are needed. So more than making them employable, we must also make them employers, for which, again, skill-based education is highly demanded. Forget about 2047. Even after five years, we don’t know what changes will happen in the industry. We are discussing SpaceX and Hyperloop. We must incorporate all these in our syllabus. My submission to the government is that more number of autonomous institutions should come. That will make some difference. 

    The greatest disruptor is technology and that’s also the foundation of everything as we go forward. Are we investing enough in research and development in India? We find that most of the scientists fly abroad and they do better than what they would do in India. What should we do to ensure that we become a hub of R&D and advancement in technology? 

    Lakshmi Narayanan: There are many people in the past who thought about things that are making a difference now. Satyendranath Nath Bose, a famous scientist, talked about Boson, the fundamental particle that makes matter. He just theorised it. It was proven only a few years ago through experimentation. Likewise, Einstein dreamt of gravitational waves. That is being proven. Alan Turing in the 1950s talked about artificial intelligence. They evolved the test called Turing Test, which says, artificial intelligence would have arrived when you cannot make a difference between a person and a computer in logical, rational thinking and not emotional thinking. This was formulated in 1950 when computers were not popular at all. It is expected that by 2030, the Turing Test will be proved.

    Homi Bhabha in our country talked about three-stage nuclear program. The third stage of thorium-based nuclear power is now underway. The fuel has been formulated and it’s undergoing tests. So there are many people who made predictions with good knowledge. They not really dreamt but had some fundamental knowledge and did a lot of research.

    Coming to genetics, people said it would take many decades to do the entire human genome sequencing. Now it’s done. In 2002, it was predicted that brain mapping would be very difficult. Brain mapping will tell which part of the brain contributes to which kind of emotion, memory and intelligence. In the next four or five years, we will have an entire map of the brain, so much so that it is possible to replicate a human brain or simulate the human brain on a computer. We have heard of digital twins for machines. Very soon, we will have digital twins for individuals like us. Our personal identity will be in the digital form, which you can keep under lock, and key, as there’s so much of information that we use and leave in the net. The digital twin can track human habits. For example, if you’re regularly buying a particular type of toothpaste every 20 days, in future, your digital twin will take care of that. The challenge is that someone may create a deep fake.

    Many of the new creations like the blockchain and cryptocurrency are all things that were created by people under 35. They have nothing to lose. They are fearless. They don’t carry any baggage. If we look into the future, we must take care of a few things. They always say that the purpose of an education system is to shift the burden of education to the individual. They have to take ownership and responsibility and learn. Digital learning is helping self-learning in the areas of critical thinking.

    There are so many changes that are happening thanks to computing devices and the computing power that is at the hands of the people and the communication devices that are there. Nobody would have imagined about the Google Maps and the Google Earth. There are already about 6,000 satellites in space. This number is expected to increase to 1 million in the next 20 years. Companies are worrying about how to avoid collision of satellites and traffic jams. The US is preparing to put 5 million drones in space by 2027-2028. There is a system evolved by NASA that will give priority to the drones. It will have an ambulance zone and clear the way for medical emergency drones.

    In such a scenario, we in India are in a very good place, going by just two or three data points. We are no longer a poor country, based on a study published by UNDP. They looked at 10 different parameters like nutrition, school going years, child mortality, sanitation, cooking fuel which adds to climate change, etc. They have said that from 2005 to 2015, 415 million people have come out of poverty in India.

    The future is going to be better and faster. Computing power is going up so dramatically. The AI algorithms that people develop are doubling every three or four months. In another five years, the rest of our population can come out of poverty.

    Regarding R&D investments, it is the highest in high growth industries. If we can find a way of storing energy for long periods of time, we would have cracked the climate change problem and it is possible. There are people who are using ice batteries that store usable energy. Apart from renewable energy, a lot of research is going on in the areas of space, aviation, computing and healthcare.

    You talked about the unbanked—the financially excluded. Don’t we have microfinance companies that are doing this job pretty well?

    Akhila Srinivasan: Given the size of the country and the underserved population in terms of credit, the number of microfinance entities are very, very less. There are both well-run and poorly-run microfinance institutions. Considering the population, the penetration that has to be achieved is really big. When formal credit is denied, people go to money lenders who charge very high interest rates. Reading history, we can see that during the period of Raja Raja Cholan who ruled in the south India, they had a system whereby the poorest of the poor would get access to credit at very less interest rates, because they wanted to preserve the dignity of the people. Water management was also at its peak at that time. We all talk about technology, advancement in education and so on. But I would also think that by 2047, are we going to be a happy people?

    Talking about energy, a lot of money is being put into solar. Wind power has been there for many years. Do you really see these renewable sources replacing fossil fuel anytime in the future? What do you have to say about the hypocrisy that we are witnessing in the west? When they are in a crisis, they throw away their climate goals and go back to reopening of closed nuclear and coal-fired plants, because gas is not available.

    Unnikrishnan: Countries are a replica of human beings. We behave in one way when we are in a comfortable situation and very differently when we are under stress. Regarding renewables, I think the stars are aligned for India. We have a lot of sun. Our overall installed capacity in India is less than 50 GW. This is nothing compared to our objective of 300 GW by 2030. This industry has caught the imagination of different stakeholders starting from the government to investors to everybody. Thanks to certain right investments and policies, the market has discovered a good price level. Today, a viable solar renewable power can be obtained under 4 rupees per unit.

    By 2026, 100 percentage of the electricity that we use in our manufacturing facility which runs into many megawatts will be renewable. We are already in that path and we have now reached 40%. So for a country too, it’s very much possible and also a necessity. Thanks to renewables, the energy is closer to the users and this overcomes distribution problems. Also, on hydrogen, it is good that India has identified it as a key source of energy.

    We have three issues: affordability, security and economic impact. We spend Rs.6 lakh crores on importing energy. Big businesses are investing large amounts of money on R&D in usage of hydrogen as a fuel. One challenge here is transportation because of the explosive nature of hydrogen. It is an opportunity as well. We are working on converting some of our manufacturing plants to use hydrogen. It is not easy though and it requires decades of work.

    When we look at universities in the US, the linkages with industry are very strong and mutually beneficial, whereas in India we don’t see that happening. Is that a reason why we are churning out graduates who are unemployable and who need further training? How do we change this? 

    Earlier we were talking about employability. Now, it is about deployability. Our faculty should go to the industry. We call it as sabbaticals. It may be for a week, a month or six months. We have a scheme called—‘one faculty, one industry.’ The faculty should have contact with the industry. We have more than 25,000 alumina working in different industries who can be approached. We also make internship as mandatory for six to eight weeks. In a year or a semester, students should have at least 40 hours of industrial relevance. Third, to make the students industry ready, we must bring the industry culture to the institution. We can set up a Center of Excellence. People with industry experience can join our faculty as adjunct faculties. They can be on the board of educational institutions. And finally, earlier we were talking about interdisciplinary and multidisciplinary approaches. Now it is going to be trans-disciplinary. You should have the flavour of industry in the institution for that. The faculty should be highly connected with the industry and collaboration should happen.

    Will technology lead to displacement of jobs?

    Lakshmi Narayanan: It may destroy jobs but it will create new jobs too. In the last 25 years, formal employment in the country has not reduced at all. If anything, it has increased and unemployment has come down, both due to the growth in the new opportunities as well as informal sectors moving to formal sector, etc. So the myth that automation will increase unemployment is long forgotten. Even the trade unions don’t buy that argument anymore.

    The demand for skills is the challenge. Because of open innovation, if I innovate something today anywhere in the world, it becomes available to the rest of the world at that same moment for them to exploit. That’s the level of collaboration that’s happening. It is one of the reasons why millions of people are coming out of poverty. Globalization means free flow of capital, ideas and people. As long as we have globalisation, free trade and entrepreneurship, we don’t need to worry about employment.

    Does GDP Growth Reflect the Real State of Economy?

    Read Time:17 Minute

    In the developed world, GDP-linked growth is linked to ‘social security ‘, but in India, the government has flagged an early end to what is commonly branded as ‘freebies ‘. The Supreme Court too is now seized of the matter.  The following participated in the discussion: Dr D K Srivastava, Chief Policy Advisor, Ernst & Young India, Dr Venkatesh Athreya, Adjunct Professor, Rajiv Gandhi National Institute of Youth Development (RGNIYD) and Mr KT Jagannathan, Business & Financial Journalist.

    Dr D K Srivastava, Ernst & Young India 

    The topic, ‘Does GDP Growth Reflect the Real State of Economy,’ is both intriguing and challenging. It is true that making reference only to the magnitude of growth numbers can be quite misleading. One has to be very careful in understanding and appreciating growth numbers which come out routinely as summary indicators of a country’s economic performance. I would argue that it is useful to appreciate growth numbers by placing them in a suitable context. For example, given the current situation, we can look at India’s contemporary growth performance and prospect by placing it in a global context; or in the context of domestic economic challenges; or in a time perspective. Recently, the IMF has come up with its forecasts covering medium term prospects of India’s growth in a global context; it is highlighting that India over the period from FY 23 to FY 28, which translates roughly to calendar years 2022-2027, will grow at an average above 6.5 percent. If you look at world growth, it is only 3.2 percent, which is to say that India is going to perform in growth terms, nearly double that of the global growth. Advanced economies are going to perform much worse. By end of 2027, their performance would be less than 2% – Japan at about 0.4%; Russia at 0.7% and China at 4.6%. So India is probably in a very significant phase of growth and prosperity.

    Ten Mega Threats

    But we must recognize the kind of turmoil through which the global economy is now passing through. Nouriel Roubini, an Italian macro economist, who had correctly predicted the 2008 global crisis, has come out with his recent book in October 2022, titled ‘Mega Threats: The 10 trends that imperil our future and how to survive them.’ These threats include climate-related environmental risks, risks pertaining to economic and financial global instability, geo-political challenges such as the supply-side barriers in the wake of the Russian-Ukraine conflict, risks pertaining to pandemics and epidemics, risks from excess money supplies and debilitating country debt profiles which have rendered both monetary and fiscal policies ineffective globally. Thus whatever growth rate India is able to achieve, it should be interpreted in the perspective of the global economic environment which is challenged by these mega threats which are unfolding. Those also include technological changes including AI and robots, which may throw human population out of employment. And India may not be immune to that. We are possibly going to go through one of the best phases of sustained, high growth. But at the same time, these mega threats can be interpreted in two ways: One is that global growth even at 3.2% on average maybe an over estimate, because many economists are now predicting that some of the large advanced and large emerging economies may crash shortly in the wake of these challenges. In fact, the US and the Chinese economies measure much lower growth than what is being predicted here.  The IMF may even be generous on this account. And, therefore, in that global context, India may do very well if we can sustain a growth rate of about 6.5 percent for five years or beyond. But then, it is also imperative that we recognize these megatrends and build cushions and buffers against these challenges.

    The first quarter growth in FY 23 provides a very high real GDP growth estimate.  If you look at just one quarter, that growth is 13.5 percent. That’s a very excessively high growth. In a normal year, this does not look to be that high. In fact, the most problematic sectors—trade, hotels, transport, etc—have a growth figure of 25.7% in the first quarter. It is the contact intensive and employment intensive sector that had suffered the largest during Covid. This is a sector in which it is still showing in negative growth as compared to the corresponding growth in 2021. This is why some people argue that India is getting a K-shaped growth with some part of the economy shooting ahead and a large segment of employment /contact intensive sectors still suffering from unemployment and shocks suffered during Covid time. So when we are able to emerge out of the immediate impact of Covid and assume a normal growth profile, then only this 6.5% IMF growth projection would have some promise.

    Let us take a much longer perspective and this will allow us to bring together a global as well as domestic set of constraints. Let us say we talk about India’s Amrit Kaal, which is 25 years from now or even beyond. The outstanding feature of this period is very special for India because we have an emerging demographic dividend and that gives us an advantage as compared to most of our peer countries including China and other emerging markets, as well as the advanced economies. Growth is yet to be determined and it will respond to the policy initiatives that will be undertaken during the period that is going to unfold. There are a number of perspectives that we can consider. First, we argued overall global growth is going to slow down and our exports also will go down. We will have to depend largely on domestic demand and domestic growth dynamics. Whether we will be able to show that kind of growth through domestic growth dynamics is an open question.

    Capital Inflow

    Another perspective that we can draw is that if everybody else is going to grow at a relatively subdued rate, then global capital will flow towards those countries with high growth and India would be one. So with India’s high growth prospects and a stable currency, we will be able to attract foreign investment and foreign capital into the Indian economy and we might then be able to enjoy the benefits of shifting supply sources, from our neighbouring countries to our domestic economy. Therefore, we may be able to sustain the possibility of a high level of growth. Third, we can also question if the technological progress takes place such that it becomes quite a challenge to take advantage of the burgeoning working age population that India is going to experience and employ them productively. This burgeoning working-age population can be employed only if we can educate and keep them in good health.

    One outcome of growth, which was not so much of a constraint for many of the peer countries, is the fact that we have to be climate conscious. We have to go for a growth which is characterized by a non-polluting set of characteristics. One possibility is that we focus on service sector growth / exports which is less carbon emission intensive.

    In order to understand the performance of growth and promise of growth, we have to be conscious of the context in which we are discussing this and in the emerging context for India, we have to go for a profile of growth which is much different from other countries. It is going to be internally oriented. It is going to be dependent largely on domestic demand and domestic growth dynamics. It is going to be dependent on service sector growth and it is going to take advantage only on service sector exports, whereas exports of goods may be highly competitive. The growth has to be climate-friendly, which would mean that we have to aim for a lower growth than what was hitherto experienced by our peer countries.

    Dr Venkatesh Athreya, Adjunct Professor, RGNIYD

    What is the point of just some numbers of GDP growth without understanding its impact on the various sections of the population? What has high growth in the reform period meant for a vast majority of Indians? A very pleasant prospect of urban growth is pretty nice to hear. But I’m afraid that is not the entire picture. If you take a larger picture of Indian growth over thirty years and particularly over the last eight years, there’s some very disturbing features of the growth, which is why the question arises: What is GDP growth on the one hand and the state of the real economy on the other? The state of the real economy is about how people, farmers, factory workers, service sector people are doing. We also have Zomatos and a whole new tribe of gig workers who have extremely precarious conditions of employment. We want to get rid of labour laws and let capital rule supreme. There is a tendency to abandon all regulations necessary for ensuring a minimum level of welfare for the population and focusing solely on some metric called growth or profits. Profits or growth is not bad but are we going to take an uncritical attitude to growth?

    The growth of the Indian economy in the 1980s—that is the decade before the reforms—was about 6% per annum. According to Mr Chidambaram, then Finance Minister, the rate of growth of the Indian economy from 1980-81 to 2013-14 was 6.1 percent. So my first proposition is that there is no distinct increase in the rate of economic growth, post reforms. Six percent growth rate for about 30 years is very impressive and it is nothing to be dismissed but to pretend that liberalization was the magic potion that delivered fantastic growth will be misleading.

    Reforms & the Three Arms

    The reform period consists of three main elements: Deregulation (Liberalisation), Privatisation and Globalisation. Liberalization is a nice word. But the intent was not liberalization, but to remove all the regulations and let big capital—domestic and foreign—be free to pursue its profits.

    Privatization consists of two parts. One is the disinvestment in public sector enterprises—something which is continuing to this day and, in fact, with increased vigour under the present regime. But the other part of privatization, which is not often noticed, is that the state abdicated its responsibility for domains like education, infrastructure and health care, all of which was essentially commercialized. Privatization means commercialisation which made access to education, infrastructure and healthcare far more difficult for the poorer sections. That’s a fact of life. Then finally we had globalization, which as an economist, I see it in two ways. One is the trade. We liberalized imports and exports. We have a huge merchandise trade deficit, year after year in the last 30 years. That is the difference in the value of exports of physical goods from India, as against the value of imports of physical goods from abroad.  We are partly managing it because we have a net earning of foreign exchange in the service sector, especially IT enabled services and tourism. We also have remittances into India by ordinary people working in the Middle East, sending what little savings they make and helping the families build a house or educate their siblings. This has been a huge factor in helping us with our BOP, but it is hardly recognized as such in official circles. But even that is not sufficient. So we still have a large deficit. This year, the current account deficit (CAD) is likely to be of the order of about 2.5 to 3 percent of GDP. That’s a huge amount. What does it entail? As a nation, we are desperate for constant influx of foreign exchange. Our survival depends on being able to attract Capital to the extent of about 2.5 to 3% of the GDP.  That’s also very important because it has policy implication that we will do anything possible to keep foreign Capital happy. Even if it is merely speculative finance capital that comes and plays in the stock or commodities market and goes out, you don’t want to offend them.

    Three Macro Worries

    There are at least three macro data sources which suggest that the growth that has occurred both in the longer span of 30 years and in the present ultra-liberal, neoliberal regime.  The PLFS Survey done in 2017-18 or 2018-19 as compared with the 2011-12 survey shows a huge increase in unemployment. That’s important because in India, unemployment is not an easy thing to deal with.

    First of all, ‘half our workforce is self-employed.’ There’s no social security.  They have to survive somehow. This segment of the population has done quite badly and the numbers have increased over this period.  All these data are from the pre-pandemic period. There are various components of the workforce. So the demographic dividend that is often talked about can be a demographic disaster as well, if we are not able to create employment adequately and quickly across the board. That’s a challenge we face as a nation.

    The second important report for the government is the consumer expenditure survey. Between 2011-12 and 17-18, you have data from the consumer expenditure survey carried out by NSSO. It tells you that the per capita monthly household consumer expenditure declined in rural India by 9%. Even in urban areas, the rise in per capita monthly consumer expenditure was only 2.2%.

    The third aspect is the agricultural distress. Large-scale suicides of farmers reflect the sustained rural distress. These three aspects—of the decline in consumer expenditures of household in general, the decline in purchasing power of our population during a period with a fairly high growth and agricultural distress brook some doubt about the growth numbers we have. It also says something about the nature of the growth.  That the market will take care of everybody is just not true for us. We need to question the model of economic of growth we have had. As if all these were not bad enough, the present dispensation also added its own bit – demonetization and the absolutely unprepared management of GST introduction. There is a prohibition of cattle trade, which has had an impact on assets of farmers in large parts of the country side.

    GST Taxes the Poor

    GST is basically an indirect tax and falls heavily on the poor. That’s more than 65 percent of total tax revenue—paid in a large part by ordinary people including the poor. We come down on so-called freebies but don’t look at the concessions by tax cuts to the corporate sector. We have not done any cost-benefit analysis till this day, for the concessions given.

    GDP as you all know is the annual value of output of goods and services produced in a given territory / nation. Usually the period is a year. Post-2014, the government made an important change, which was planned earlier. We moved from GDP at factor cost to GDP at market prices. The present regime has repeatedly increased indirect taxes. So the apparent growth in the last 8 years is illusory.  What we need to do is to look at the nature of the growth.

    One of the important consequences of all these is that we cannot have a large fiscal deficit. But we can live with fiscal deficit for some time. The US used to have a much higher fiscal deficit. We are obsessed with the fiscal deficit because foreign Capital might leave. The consequence of this has been that our fiscal deficit management has been mainly driven by expenditure reduction and not by effective taxation of the rich. As a result, the government has had less and less to spend on key infrastructure. We need to have a more balanced economy, where the government is able to spend on all activities which are more profitable to the private sector and for which government must raise resources from the rich and not from the poor. It also means that we need to introduce some Capital controls and restructure our economic policies. We need to make sure that our market is accessible to the poor and the working poor because one thing we must remember is that the poor in India cannot afford not to work. The only people who can afford not to work is the rich. That is the reality of our economy.

    Mr KT Jagannathan, Journalist

    Does GDP growth reflect the real state of the economy? There was a famous Indian Express ad line in those days. It says that the truth lies somewhere in between. This sums up the position of India in the global stage. More than anything else, the sheer size in terms of the population has compelled many to convince themselves to take a positive view of India. India indeed, has edged out the UK to become the world’s fifth largest economy. A single number of GDP figure alone cannot assure all of us a sense of comfort and calmness for people at the bottom of the pyramid, which is very huge in Indian context. When viewed with other numbers, which are even more critical for the ground level happiness, the excitement over the GDP figure just evaporates. Retail inflation was five-month high of 7.41 percent in September, disconcertingly above the upper tolerance limit of 6 percent fixed by the RBI. The food inflation which has a political implication was 8.6 percent, which is even higher than 7.62 percent in August. The rising price hurts a common man more than anything else.  We have seen governments fall because of onion price escalations. The RBI is very keen on holding the price.  Inflation is like the Aladdin genie. It is difficult to put it back into the bottle. It is rather simplistic to assume that answers to the problem of inflation lie with the Reserve Bank of India and not the North Block, where the finance ministry sits.

    Sliding down the Hunger Index

    Look at the other disconcerting numbers. India’s rank in the global hunger index went down to 107 from 101 in 2021, out of 123 countries surveyed by the European NGOs. Though we may keep debating these numbers, they tell us a significant tale. A single GDP number does not tantamount to all round happiness at the ground level. In a rising inflation situation, the RBI has little option, but to increase the interest rate further. This will have a cascading effect down the line. The EMI for home loan and vehicle loan goes up. There is considerable erosion in people’s disposable income and this will have a negative fallout on the demand for industrial goods and a multiplier negative effect on the economy as a whole. India’s drop in the rank in the global hunger index requires seriously introspection. The central stockpile of 44.1 billion tons of food grain at the end of the September 22 is down from 49.28 billion tons before September 2022. This depleting food grain stocks indeed rises a lot more concern.

    The Double Whammy

    Indirect tax is the most regressive tax.  Everybody knows that such a tax is collected from even the poorest of the poor. GST is higher and there is inflation. All these have a double whammy on the poor. With the new unfolding global dynamics, the rising fuel price is a significant factor of pain for a common man. The visible impact aside, the invisible cost of fuel is also loaded on the common citizen, as it is passed down across the purchases, resulting in the prices of consumer goods escalating considerably.

    GDP just measures the production capacity and economic growth. It is an aggregate measure that improves the value of goods and services produced. GDP measures everything but it does not discount for the value of forests they replace. The Delhi winters are increasingly filled with smog. The Chennai streets are inundated with water during the rainy season. But GDP does not say anything about them nor can it explain all these.

    GDP is a flashy term that the common man may find it hard to comprehend. What a common citizen wants is a sense of happiness and a feeling of comfort. It requires more than a robust GDP number to get him this privilege. 

    Why Some Companies Make a Huge Leap and Others Don’t?

    Read Time:9 Minute

    Ms Sangeeta Shankaran Sumesh, business & leadership coach, speaker & author; Independent Director, IFB Industries Ltd., in conversation on the theme of the book with  Mr Murugavel Janakiraman, Founder and CEO, and Dr Aravindan Selvaraj, MS FRCS Ortho, Co-founder and Executive Director, Kauvery Hospitals.

    Sangeeta: Have you ever wondered why some companies make a huge leap and others don’t? What are the differentiating factors for such companies? How do you turn a good organisation into one that produces sustained results? As part of a research, the team led by the author Jim Collins scoured 1435 companies and came up with just 11 companies as Good to Great. According to the findings, the 11 great companies turned an investment 6.9 times more than normal companies. They achieved sustained results for 15 years. So it’s not just good performance in one or two years. What made them different from the other companies that they were compared with? They came up with seven concepts that the good-to-great companies followed.

    Level 5 Leadership: It is a blend of personal humility and professional will. Level 5 leaders have the larger goal of building a great company and the ambition is to put the company first and not the individual. The five levels of leadership are:

    • Level 1: A highly capable individual
    • Level 2: A contributing team member.
    • Level 3: A competent manager
    • Level 4: An effective leader.
    • Level 5: The Executive

    First who? Then what? Get the right people and figure out what they will do with it. Take the wrong people off the bus. It is important to put the right people in the right seat and that’s when the business will keep growing. The right people keep motivating themselves. They are focused in their work and giving their best.

    Confronting the brutal facts: To make a great company, you need to make great decisions and for doing that, you need to know the brutal facts of your company and accept the harsh truths. Lead people with questions. Don’t give the answers. Engage in dialogue and debate and do not coerce your people. Do not play the blame game. Build red flag mechanisms. Whenever something is not right, the system should automatically be able to pick it up. The good-to-great companies use the Stockdale paradox, which is accepting the brutal facts and navigating the challenges with unwavering commitment and faith that they will prevail and get over that.

    The hedgehog concept: The fox knows many things but the hedgehog knows one big thing and manages to win despite the fact that the fox is cunning. It is a very simple concept and it reduces all the challenges and the dilemmas to see what is really relevant for the business. It ignores the rest. The hedgehog concept is the intersection of what you can be the best in, what all you do, what drives your economic engine and what you are deeply passionate about.

    A culture of discipline: Having a right culture of discipline helps to solve business problems. Great companies build a culture around the idea of freedom and responsibility. They give the people the freedom they want. At the same time, they make them responsible. The culture of discipline is not to be confused with tyrannical disciplinarian approach. One small step that is added to other smaller steps and doing that consistently gets you into a super discipline mode.

    Technology as an accelerator: Good-to-great companies avoid the tech fads. They don’t go totally by tech. They ask the right questions like how can technology help my business to grow? How does it enhance my cash flow, my top line and bottom line? Use technology as an accelerator but remember technology alone cannot build great results. So don’t rely totally on technology.

    The flywheel and the doom loop: Good-to-great companies come up with a cumulative process. It’s not just one single thing that overnight changes them to be successful. But it’s step by step, action by action or decision by decision process that turns the flywheel and leads to spectacular results that they produce. The doom loop is a misguided use of acquisitions and selection of leaders who undid the good work of the previous leaders. They want to do things by themselves and reinvent the whole thing.

    It is much easier to become a great company. But the challenge is to remain great.

    Murugavel Janakiraman: The level five leaders may be very quiet and sometimes even shy but in terms of executing things, they are relentless. One of the key learnings for me is the Stockdale paradox. In the last 22 years, our organisation went through various challenges but we always had the belief that at the end, we would prevail and become much more successful. At the same time, we faced the brutality of the facts. The hedgehog concept talks about focussing on the area where you are the best. As an organisation, we may be good at doing many things but we need to find out what we are really the best at doing. I posed this question to my leadership team as to why we are the number one in the world. They were not able to come up with answers. We need to brainstorm and figure this out.

    Dr Aravindan Selvaraj: When this book was written, technology was used mainly as an accelerator. That is very relevant to our healthcare industry. But today, a lot of new age companies have come as technology disruptors. The other reservation I have on the findings is using market capitalisation as the lone benchmark to judge a company.

    We started our hospital as a small 30 bed hospital in Trichy in 1999. In 2011, we came to Chennai and it was our first city, outside Trichy. We had the best of tertiary and clinical care at an affordable cost. Healthcare—though a service industry—has to be run financially well, so that it can be expanded. The care has to be world-class but the cost has to be optimal.

    We had a few high profile hires at the CXO level. They wanted to change everything and bring in new ways of delivering health care. As founders, we were not exposed to those ways. Their approach set off the doom loop phenomenon. The promoter directors intervened and decided that the doctors are the best in running the institution. Now we don’t have high profile, flamboyant CEOs with us. Cultural fit is very important.

    At the same time, in an organisation which is used to one culture, we need change management as well. It has to be handled carefully. Any organisation is complex and more so, a multi-speciality hospital. If change management is not monitored properly, it will lead to chaos. Between 2012 and 2016, we needed a personal branding for people to accept us. So I stepped in and did that. According to us, a Level 5 leader has to be home-grown within the company.

    Murugavel Janakiraman: In, we are passionate about people getting married and leading a happy married life. But we are not sure if we are implementing the hedgehog concept. We have not figured out what the best metric would be to correctly measure our profitability/growth. But in one of my friend’s companies, I can see that they are doing what they are good at doing. They are also passionate about doing it and the unit economics are great. In their industry, they are world-class.

    Sangeeta: What would be a good economic indicator for your business?

    Dr Aravindan Selvaraj: Even a charitable institution has to be financially run well. We started our hospital in 1999 with four doctors. At that time, we did not start a business organisation. We started the hospital to practise the art and science of medicine and to deliver the highest quality of healthcare. If I am a good doctor, my expertise should reach as many people as possible. So, the number of beds occupied is the single economic indicator for us.

    Sangeeta: Would you relate yourself as a doctor or an entrepreneur?

    Dr Aravindan Selvaraj: When we started in 1999, all four of us hardly knew about entrepreneurship. We were doctors. As we grew, we realised that it had to be run like an institution. We brought in people for finance, operations, audit and so on. I still practise my orthopaedic surgery and also manage the organisation and lead its expansion. My profession is still the core. Entrepreneurship is the key to growing our organisation.

    Sangeeta: Technology alone cannot produce great results. How would you relate this to

    Murugavel Janakiraman: Those days, technology was a mere disturbance but today it is a disruptor. If we don’t adapt to the evolving technology, chances of our survival will become a question mark. Twenty years ago, who would have thought that Apple would get into the phone business? Nokia missed the smartphone evolution and we know what happened to them. The storage medium evolved from floppy disk to CD to USB drive. The leader in floppy disks did not become the leader in CD drive. The leader in CD drive did not become the leader in the USB drive. When technology changes, you need a different set of mindset and approach.

    Companies that provide services to meet the core needs of people like a pharmacy or grocery can adopt technology and grow. We started as a desktop-based internet company. We have now adopted mobile technology. If you look at the petrol car-to-EV evolution, you can see that hardware is the key in a petrol car while software becomes the key in an EV. There is a fundamental shift happening in the business.

    As an organisation, we must be equipped to handle this fundamental change. For example, you now have both online and offline companies. I feel that in the long run, online companies supplemented by their own offline companies will be much more successful than offline companies supplemented by their online companies. Technology is no longer a mere enabler or accelerator but it can be a great transformator also.

    Sangeeta: Do you have any stop-doing list?

    Dr Aravindan Selvaraj: Once we become a good organisation, a lot of opportunities like expansion or an allied vertical, keep knocking on us. As leaders, we get carried away by these. Periodically, a good leader must revisit the things they are doing. The stop-doing list is a very important part of any assessment in any organisation and for leadership.

    Covid gave us unsurmountable challenges and it also gave us many opportunities. At that time, digital disruption was also happening in our healthcare industry. After Covid, we started 15 new initiatives like remote monitoring, home delivery of medicines, etc. We revisited all these digital initiatives and asked the questions, “Are these really making a difference to the patients? Are these really making a difference to the doctors and healthcare service-providers? If both these boxes are ticked, are they really cost-effective?” With this approach, we narrowed down to just 5 initiatives. We scrapped the other ten initiatives. We are just going to focus on the 5 big digital initiatives.

    Also, during the peak of Covid, we started a small centre in Rwanda based on the request from a delegation from Rwanda for a gastro surgery hospital. We sent our doctors periodically but after 18 months, we noted that it was not fitting into our overall organisational perspective. We stopped that as well. We have occupational health centres in many industries. We are revisiting this also, as it is not our core. The stop-doing list has to be prepared periodically. Every three months, a good organisation must revisit their list.