The geometry of empowerment

Is India Inc deliberately turning its face away from the hard realism of have-not India?

N. Chandra Mohan Delhi

What indeed can India Inc do to change the face of the country? If such a question is posed to sound byte-savvy CEOs, one would normally expect a welter of one-liners on what can be done. Strangely, however, when this writer asked Nandan Nilekani, CEO and president of Infosys Technologies, at the recent India Economic Summit 2006, as to what corporates can do, he was somewhat circumspect in his response, “Expecting corporates to resolve the inadequacies of governance is not fair. There is a role for the government to deliver and it cannot cop out from its responsibilities.”

This hasn’t prevented the government from reaching out to corporates in a big way to bring about a more inclusive pattern of development. While there is cause for celebration in India’s explosive growth trajectory — eight per cent growth during the last four years — we are aware that this isn’t sustainable unless it radically transforms the lives of 600 million of its people who live in rural areas. Sonia Gandhi, president of the ruling Congress, who addressed the India Economic Summit, argued that business, civil society and government should collaborate more for India’s social development.

However, is India Inc ready to pursue a socially inclusive form of capitalism to transform India? It appears so, from the rhetoric of leading industrialists, such as Mukesh Ambani, of Reliance Industries, and Sunil Bharti Mittal, of Bharti Enterprises, who are leading the charge of India Inc into rural India in the retailing business. “The retail revolution, especially in food, offers a huge opportunity to create purchasing power at the bottom of the pyramid,” argued Ambani, adding that this opportunity offered an interesting means to re-configure the “geometry of empowerment” in rural India.

The reference to “bottom of the pyramid” is, of course, the obeisance India Inc pays to the theories of leading management guru, CK Prahalad, who has been preaching from the pulpit that the poor have the right to be treated as consumers. That it makes good business sense rather than charity if businesses target the bottom of the pyramid as a market. Prahalad, in fact, rejects the notion that only governments and NGOs can reduce poverty. The private sector can play a major role in this regard by providing cheap goods and harnessing the entrepreneurial talent of India’s poor, he argues.

Ambani, for his part, was only driving home the point that through the retailing opportunity it was not just food items that could be delivered cheaply but also affordable health, micro-credit, education and entertainment to rural India. To be sure, some corporates, like the agri-business giant Indian Tobacco Company (ITC), are already targeting the bottom of the pyramid in rural India by cutting out intermediaries and buying agri-products directly from farmers at e-choupals. Soyabean farmers in Madhya Pradesh also visit e-choupals to check up Chicago market prices, since the latter is the global hub for soyabeans.

Prahalad’s favourite examples also include the Tamil Nadu-based Aravind Eye Hospital’s provision of cataract eye operations that costs less than two per cent of the US rate, and the Jaipur Foot, which is the world’s biggest provider of artificial legs, that costs a fraction of the $12,000 cost in the US. Microfinance, which views the poor as potential entrepreneurs lacking capital, now also reaches millions of poor rural women. Vikram Akula, founder and CEO of SKS Microfinance Private Limited, received the social entrepreneur award of the year recognition at the India Economic Summit.

Based in Hyderabad in Andhra Pradesh, SKS Microfinance applies global business practices to the field of microfinance. The company has been hailed as the ‘Starbucks of Microfinance’ for adopting global best practices, standardising microfinance processes and using technology to accelerate growth. SKS’'s lending has been growing by 300 per cent a year, with total loans now over $71.6 million, benefiting approximately 1.5 million individuals. Doubtless, such examples can be multiplied as the Grameen Bank model has indeed been replicated in various parts of the country.

Another important area where corporates can make a big difference is on the HIV/AIDS front. Around 5.2 million people in India are afflicted with HIV/AIDS. Drugs for combating AIDS cost barely $200 per year in India, against $15,000 per year in the US — another bottom-of-the- pyramid opportunity. But what has been the track-record of India Inc?  It remains in a state of denial although it is a problem that will ultimately affect their its bottomlines. The number of HIV cases is expected to quintuple to 25 million by 2010 and can reduce India’s GDP by 1.5 percentage points in 10 year’s’ time!

A similar sense of skepticism surrounds the bottom-of-pyramid strategies of India Inc in impacting on rural poverty. As leading columnist Swaminathan Aiyar has pointed out, “Yes, corporations have indeed played a role in reducing poverty… The total number of people below the poverty line is 300 million, not much lower than India’s entire population at Independence. It would be wrong to think that private initiatives are useless. Rather, they are insufficient to offset the massive impact of stagnating agricultural output in a country where 60 per cent of the workforce is still in agriculture.”

If a more inclusive form of capitalism is to radically transform India’s future, the government must do its bit as well. There is need for roads, telecom and electricity in every village in the country — set up through partnerships between India Inc and the government. Unless the government also delivers by reforming the processes of governance through greater transparency and suchlike, asking the Nilekanis to outline a 10-point agenda to transform India will only be met by a stony circumspection.