In a remote tribal village in Dumarthar in the state of Jharkhand, Sapan Patralekh, the headmaster of a middle school, has come up with an innovative teaching method in a region plagued by poor connectivity. He has converted the walls of adjacent houses into blackboards, allowing 300 students to continue learning while maintaining social distance.
In crowded cities, traditional mom-and-pop convenience stores and pharmacies have begun to provide contactless home delivery. Startups such as Near.Store are rolling out plug-and-play solutions to digitize traditional neighborhood convenience stores, allowing them to accept orders and payments online for groceries, medicine, and healthcare essentials, as well as making offline inventory digitally searchable by customers who live within walking or biking distance. OkCredit is using digitization to send collection notifications to customers who have delayed or missed payments, decreasing the burden on shop owners of maintaining business accounts.
On the B2B front, Bulk MRO, a venture-backed startup in Mumbai, has created a seamless marketplace interface that allows corporate customers to meet MRO (maintenance, repair, and operations) needs — in a touchless mode with only a single vendor. With its business growing at an annual rate of 200 percent, Bulk MRO serves nearly 250 large companies, 40 of which are in the Fortune 500.
In ways large and small, the pandemic has radically accelerated the pace of innovation and transformation in India, prompting organizations of all types and sizes to reconfigure their relationships with their customers and stakeholders. Indeed, with more than 480 million internet users and 1.17 billion mobile phone subscribers, India stands at the precipice of a national digital transformation. The pandemic, while spurring innovation, has highlighted a perennial challenge: Powerful systemic and structural frictions continue to hamper the development of demand, supply, resources, and institutions. However, we believe that India’s economy — powered by digital technology, augmented by physical infrastructure, and supported by an alliance of government, citizens, and enterprise — can steepen its growth trajectory. By drawing on a full-potential mindset, the country can seize this opportunity as it approaches the 75th anniversary of its independence.
Full-potential mindset
What do we mean by the full-potential mindset? Why does it matter? And how do we achieve it? The answers to these questions can be found in a recent comprehensive PwC India report, Full potential revival and growth: Charting India’s medium-term journey, from which this article is adapted. In our report, we examined the nine key sectors that make up 75 percent of India’s GDP, and discussed government policies and social and economic trends. We believe that in every individual, organization, and country there lies hidden potential that can be brought to light through a new event, shock, or sudden change in circumstances. The COVID-19 pandemic has been one such shared event. The Reserve Bank of India projects the Indian economy will be found to have shrunk by 10 percent in 2020. (The highly informal nature of much of the Indian economy implies the contraction was actually deeper.) A stringent lockdown amounting to 175 billion person-days may have contributed to this decline, but it has also ensured that the country’s COVID-19 caseload was relatively contained. As was the case elsewhere, the unprecedented health crisis and the shared experience of 1.35 billion citizens triggered deep introspection among citizens, organizations, and governments.
As a first step, all sections of society — government, enterprise, citizens — have now begun to focus on reviving and boosting demand. The International Monetary Fund expects India’s economy to grow by 11.5 percent in 2021, making it the only major country with a double-digit growth forecast. But there’s something potentially deeper at work. The national and regional lockdowns resulted in visible changes in consumer psychology and demand patterns, which have driven the need to innovate. Shifting operating models and supply chains are also much in evidence. And given the slowdown, new resources and tools have been marshaled for unlocking new growth avenues. Across all segments, sectors, and geographies, this crisis has brought to light frictions that beset the Indian economy. Overcoming these frictions can trigger rapid revival and subsequent growth.
Several years ago, in Future of India: The winning leap, a report published by PwC India, we forecasted (in collaboration with Oxford Economics) three economic growth scenarios for a 20-year period starting in 2014. These scenarios included a 6.6 percent annual rate, driven by basic infrastructure investment; a rate of 7 percent, based on additional spending on physical and digital development; and a 9 percent “winning leap” growth rate that rested on unlocked productivity, stronger R&D, and financial reforms.
In the five years before COVID-19, India’s economy grew at a 6.8 percent annual rate — somewhere between the first two scenarios. We believe that the largest democracy in the world, a US$2.9 trillion economy with a median age below 30, can create growth that is higher, more inclusive, and more sustainable. If India can maintain the full-potential growth rate between 2024 and 2034 and grow at 9 percent per year, it would create an additional cumulative $10 trillion of economic activity and set an example for the world. And it would help fulfill India’s near-term vision of building a $5 trillion economy more rapidly.
We identify five key frictions that are holding India back — all of which were exposed by COVID-19. The first is the lack of depth — the extent to which the economy remains concentrated in urban and metropolitan centers. The second friction is a lack of width in the economy. States mostly in the west and south of India, with 48 percent of the population, account for about 70 percent of GDP, while others, the central and eastern states that we refer to as the hinterlands, account for only 30 percent of GDP, even though they are home to 52 percent of the population. Even within states, distribution of economic activity is concentrated in selected top districts. A third friction is what we refer to as the height of the economy. India exports plenty of goods and services, but its efforts are limited by infrastructure, and only certain parts of the country truly participate in the global economy. India, like many other countries, suffers from a substantial digital divide — the fourth friction. The final friction is the extent to which India’s economy remains informal; this informal economy represents about 50 percent of GDP.
By Shashank Tripathi, Kushal Sinha, and Vishnupriya Sengupta
Read the full article at https://www.strategy-business.com/article/How-India-can-live-up-to-its-full-potential.
