We have the Nano, we have mastered the art of low-cost surgery, we know how to engineer sports utility vehicles at a fraction of the cost of a multinational corporation, we send spacecraft to the moon and launch satellites at a third of the cost, we have the world’s cheapest mobile phone, we’re the world’s IT champs… So why haven’t we been able to devise cost-effective ways of delivering education and healthcare to the majority of our people?
This is the short point that C K Prahalad repeated at the Confederation of Indian Industry’s India@75 presentation last week. He likes to call it the “bottom of the pyramid approach” and expressed surprise that it hasn’t achieved for India’s social infrastructure what it has for business enterprises.
Business developments since Prahalad wrote his book in 2005 have slightly negated his theory. The “bottom of the pyramid” on which businesses have focused is actually the bottom of the middle class pyramid. For instance, as much as we fete the Nano for expanding the car market to people who couldn’t afford one before, the Tata group is not looking at converting poverty into an opportunity as Prahalad had prescribed. Ratan Tata said as much at the Nano launch last month — “I am not in this for philanthropy,” he told reporters.
Like any shrewd businessman, Tata has spotted the opportunity in those segments of the middle class known as aspirers and climbers — people who are beginning to earn higher incomes as a result of faster economic growth and aspire to the accoutrements of middle class living. These are among the fastest-growing sections of the middle class, so consumer goods companies can ignore them only at their peril.
Still, the idea of leveraging India’s innovative capabilities for healthcare and education delivery systems is a good one, especially given the country’s abysmal social indicators.
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Despite this, the concept hasn’t been applied in critical mass by any political party in power — not even the Bharatiya Janata Party which did much to evolve the liberalisation agenda when it was in power and prides itself on its IT-savviness.
The reason is two-fold. The first is universal. The impulse for innovation is inherently commercial so it is unlikely to blossom in a major way when profit isn’t involved. One index lies in the pilot experiments using IT by the odd private sector company here and there mostly to fulfil corporate social responsibility obligations. Many have demonstrated that such solutions do have immense promise in delivering education and health services to the remotest corners of India. Tragically, these are the first projects to be jettisoned in cost-cutting binges when times are bad.
This problem can be overcome if the political leadership has Rajiv Gandhi’s singularly visionary passion for change (despite many other flaws in his governance style). The reason this passion is in short supply is that in India, the poor are considered a huge political opportunity.
In a country as chaotic to govern as this one, it is difficult to garner large votes from middle class people who are increasingly moving away from traditional caste alignments to demand performance, such as the delivery of reasonable civic amenities. Sheila Dixit’s three-term election in Delhi indicated this and so did the Jyoti Basu in West Bengal — the only state to vote like a western democracy, it is said — where rural landowners kept him in power for his party’s delivery on land reforms. But promise the poor and dispossessed the earth, or so the thinking goes, and you’re through. The depressingly cynical content of the Congress manifesto released last month demonstrates this like nothing else. It commits the government to wildly expensive and improbable schemes that blatantly target the aam aadmi vote bank but hardly add up to a vision of sustainable development.
The truth is that handouts never made the poor more prosperous. If that were the case, India should have flourished in Indira Gandhi’s garibi hatao years. As Crisil’s D K Joshi rightly pointed out, the Congress manifesto proposals are “gap-filling measures”. Far more important, he said, was to create the conditions for long-term growth.
But doing that is so much tougher and less enriching electorally than competitive populism which, paradoxically, keeps the poor in poverty. So on the whole, corporate India will probably do the country a favour if it keeps its eye on cost-effective commercial innovation. The more it caters to the bottom of the middle class pyramid, the more aspirational those below them will become. As the history of western democracies has shown, the real impulse for change comes when people become more aspirational.