This is the year of net­work power

IN LPG, WE’RE AT 16-CR TRANS­AC­TIONS P.A. AL­READY; 140 M MO­BILE IN­TER­NET USERS IS SE­RI­OUS SCALE; AK­SHAY PA­TRA COOKS 1.3 M MEALS A DAY AND IT’S FULLY SCAL­ABLE

The Financial Express - - FRONT PAGE -

IN­DIA’S bad macros are well known, but what makes me bullish is all the stuff that’s hap­pen­ing un­der the hood, the cre­ation of net­works and plat­forms which are crit­i­cal if we want to fix In­dia’s prob­lems — fix the high-fre­quency, low-value trans­ac­tions that af­fect mil­lions, and you’ve fixed In­dia.

Net­works and plat­forms needn’t nec­es­sar­ily be an IT thing, they could be ru­ral roads — In­dia has built 3.5 lakh km of ru­ral roads in the last decade — that help peo­ple move to other ar­eas to get jobs, to sell their goods and ser­vices. The fact that we have 600 mil­lion peo­ple with mo­bile phones helps peo­ple to sell their wares.

An ICRIER study found that states with a 10% higher mo­bile phone pen­e­tra­tion had, on av­er­age, a 1.2% higher GDP growth; another found ev­ery 10% hike in in­ter­net and broad­band pen­e­tra­tion raised GDP by 1.08%.

Take Aad­haar, another great ex­am­ple of net­works and plat­forms. We gave out the first Aad­haar on Septem­ber 29, 2010, we had 21 crore en­rol­ments in Novem­ber 2012 and we have 51 crore to­day — we will be at 60 crore by June. LPG was the proof of con­cept. Over 1.8 crore peo­ple in 184 dis­tricts have been given Rs 2,000 crore of LPG sub­si­dies since June — that’s 16 crore an­nual trans- ac­tions that can be done since nine cylin­ders are to be sub­sidised, and we’ve just cov­ered 10-15% of LPG users. This is the tip­ping point, and we haven’t touched other trans­ac­tions yet.

Look at the spinoffs. Once you ex­tend this to all LPG, you can get a Shell or an RIL back into LPG dis­tri­bu­tion. Do this for diesel and kerosene and, sud­denly, while peo­ple con­tinue to get sub­sidised, the en­tire mar­ket is freed up and you have pri­vate sec­tor play­ers mak­ing in­vest­ments in the pro­duc­tion and dis­tri­bu­tion net­works that the PSUs alone can­not pos­si­bly han­dle.

You don’t no­tice th­ese changes ev­ery day, but sud­denly they be­come so big, the net­work im­pact be­comes large. A mo­bile in­ter­net user base of 30-40 mil­lion a year is one thing, but when you reach 140-200 mil­lion users as we have now, the im­pact is very dif­fer­ent. That’s when the laws of in­creas­ing re­turn kick in — the more peo­ple with cell phones, the cheaper it be­comes to con­tact some­one; the more Aad­haar num­bers you have, the eas­ier it be­comes to trans­fer money us­ing Aad­haar num­bers.

Go­ing dig­i­tal also plays very well into the mo­bil­ity of In­di­ans. In the old days, the sys­tem was geared to­wards lack of mo­bil­ity. You lived in one place so you had one fixed line, you had one job so your EPFO ac­count was linked to that, you got your ra­tions from one ra­tion shop, your health records were with your GP, your bank ac­count was in the neigh­bour­hood…

The mo­bile phone lib­er­ated peo­ple from their lo­ca­tion, the New Pen­sion Scheme will change the face of old age in In­dia since your pen­sions will fol­low you. Aad­haar­based trans­fers mean you will get your PDS wher­ever you live...

Since all th­ese changes are about con­ve­nience, they lower trans­ac­tion costs — you don’t spend a day try­ing to find out if your pen­sion has ar­rived. Make a bil­lion peo­ple more pro­duc­tive, and the jump in GDP growth is ob­vi­ous. This is the year of fix­ing low-value-high-fre­quency trans­ac­tions. Prob­lem-solv­ing is rel­e­vant only if you have scale, and scale hap­pens with sim­plic­ity — com­plex­ity cre­ates lead feet.

This brings me to the next crit­i­cal part, that of cre­at­ing plat­forms. Whether it is the in­ter­net or GPS, th­ese were built with pub­lic money — this is the plat­form on which you have Google and Face­book. That’s what we’ve done with Aad­haar — we al­ready have peo­ple de­vel­op­ing mi­cro-ATMs that use Aad­haar or scan­ners for as lit­tle as Rs 2,000, once again based on Aad­haar. The iPhone 5C, for in­stance, has a fin­ger­print scan­ner... It is just a mat­ter of time be­fore there are apps for this on other phones. Imag­ine the rev­o­lu­tion in apps that this will spawn.

Or take Ak­shay Pa­tra, which pro­vides 13 lakh meals a day to chil­dren in 9,000 schools across nine states from 20 cen­tralised kitchens. The in­no­va­tion lies in the use of ma­chin­ery to make food, in the hub-and-spoke ap­proach to dis­tri­bu­tion and, most im­por­tant, the model is com­pletely repli­ca­ble and scal­able.

2014 is the year of net­work power, whether in elec­tion cam­paign­ing/fund­ing or else­where, and the good news is that we’ve reached tip­ping point. ( as told to Su­nil Jain)

NAN­DAN NILEKANI

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