Inclusive Growth and New Business Models

Why is inclusive growth important? India already is projected to have the world’s second largest GDP growth rate for 2008-2009 and will surpass the world’s largest economies in the next 25-50 years. However 800 million are still to participate in the country’s growth and benefit from it directly and therefore we still need solutions to mainstream social change, to enhance people’s productivity and their wealth creating capabilities and these solutions need to be designed for scale, executed at scale and sustained at scale.

The pace of government reforms and work done by NGOs is still very slow (today India has 1.7 million NGOs)  –  and the slow growth is evident when one considers the last 50-60 years. When one talk about public access to healthcare, education, food and water, power and energy and even infrastructure,  what we have missed out on is getting people involved and bringing the power of markets to the grassroots. The solution, in my view, lies in getting the private sector involved, and ensuring that its participation goes much beyond that of the traditional approach of CSR.

SMEs, for example (the largest employment generators in the country), face various challenges: firstly, they face a severe problem in accessing financial resources (either debt or equity) and secondly, they also lack access  to knowledge networks and to good managerial talent.

Also, let us consider urbanization: clearly the world is getting urbanized. In 1800 – 3% of the world’s population were in cities; in 1900 it went up to 10% and in 2000 it has gone to over 50%. And a bi-directional linkage between urbanization and growth has been clearly proven without doubt. People in cities are more than 20 times productive than their rural counterparts. China has 138 cities with a million plus population, while  India today has only 35 cities, and that is where I think lies both, India’s challenge in urbanization, as well as its greatest opportunity – we can today build for a population of 600 million an entire infrastructure from scratch and that is not something available to the US cities. And cities in the developed countries are notoriously inefficient in terms of sustainability or resource use.

If we really talk about new business models, there are several organizations that are doing fantastic pioneering work in achieving large scale social change. The Bill and Mellinda Gates Foundation spent about USD 260 million on only their HIV intervention program in India and they used standard business principles in achieving this change. They formalized data capturing and made the process so simple that even their frontliners could use. They also had a very strong focus on measuring the social impact that they were attempting to achieve, as evidenced by the 10% spending (amounting to about USD 25-26 million) on just measuring the impact.

Another example: Pratham is another organization with what someone would call an audacious target of reaching out to 200 million children and the good news is that last year they have been able to reach out to 20 million /children across 300,000 villages. And they have done this in just 14 years.

Yet another example: IFMR Trust is a strongly mission driven organization whose rates of lending are much lower than others. They have a CCD or franchisee approach that keeps the costs of operations much lower than others operating full-fledged branches. They also remove the physical paper aspect from the entire process and drive down costs of serving a customer as much as possible.

Thus, there is a potential for big ideas to work, if one has courage and conviction and a firm belief in oneself, and that is India needs more of today.

There is this quote by Confucius that comes to my mind often: “a superior man knows what is right, an inferior man knows what will sell”. Today I think most of what management teaches us or what politicians try do is how to sell. What we need is to first do what is right and then know how to sell it.

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