Out Look Business 05052008

20 APR-3 MAY 2008

ANNIVERSARY ISSUE

Insights: Kishore Biyani, YC Deveshwar, Corinne Figueredo, Sunil Mittal, Shiv Nadar, CK Prahalad and Raman Roy

www.outlookbusiness.com

25IDEASTHATWILL

CHANGE OUR

WORLD

IN THIS ISSUEMay 3, 2008 VOLUME 3 | ISSUE 9www.outlookbusiness.comFEATURES16 Chindia This century, the US and EU will have to make way for China and India. Together, the Asian powerhouses can dominate the world economy

24 The $3,000 CarFrom mobility to frugal engineering, from infrastructure building to transport policy...

28 Rice Intensifi cation SystemA method of rice cultivation that can double rice yieldsthat too at lower costs

32 Smart Cards Rural Indias knight in plastic armour will improve delivery of government schemes, eliminate middlemen, and ensure the poor also benefi t from advances in technology

38 Aerotropolis In many towns, the airport will be the hub around which sub-cities will come up

40 Rs 5 Lakh House Aff ordable housing on the periphery of cities for low-income folks is fast becoming a reality

46 Rural BPOs Companies cut costs; villagers dont have to leave the comfort of home for work

50 Piped Gas Ecosystem Soon, youll just need to turn a knob to get gas in your kitchenstraight from the basins

62 Micro-pension Schemes Finally, poor workers in the unorganised sector are getting access to some social security

66 Mobile Wallet In the near future, technological leaps will see the mobile phone graduate from being just a communications device to a payment device

72 Commodities Aggregators Farmers can now use various models of aggregation to get better prices for their produce. They can also hedge their price risk

As we begin our third year, we look at 25 disparate ideas that have thepotential to transform thelives of millions of Indians

The Pull Of An IDEA10

IN THIS ISSUE

6 OutlookBusiness | May 3, 2008

Kishore Biyani

YC Deveshwar

Raman Roy

Shiv Nadar

Corinne Figueredo

CK Prahalad

Sunil Mittal

ILLUSTRATION BY ARINDAM

74 Migration Services Agencies that help migrants enter urban economies with protection and with dignity have begun cropping up

78 Coal to Oil With oil prices reaching astronomical levels, this conversion method may be the only way India can work towards self-suffi ciency in oil

82 Work From Home India Inc is gradually awakening to the benefi ts of letting employees clock in from home. The best part is: every stakeholder will benefi t into the bargain

84 Solar For Poor With solar power, villagers without

access to electricity no longer have to remain in the dark

88 Other Ideas

122 Ideas That HaveChanged Our Lives

126 Ideas That Failed 128 Accidental Ideas130 RewindThe good, the bad and the ugly. A snapshot of some of the key issues, strategies and opportunities we covered during the year gone by ILLUSTRATION & COVER DESIGN: ARINDAM

InsightAn idea is a powerful force that can turn the world upside down. We get a team of leading luminaries from the world of business to dissect this piece of creativity and show us what it can do. This elite panel of entrepreneurs and thought leaders take us through the lifecycle of an idea, right from its genesis to the time it comes to fruition. Along the way we get to know how an idea is born, developed, funded, executed and scaled up

NILOTPAL BARUAH

More ExposureThis is with reference to the article The Rise And Fall Of Greenhorn (5 April, 2008). IIT and engineering graduates are more in demand these days. The schools do a good job of giving them a solid foundation in theories. But when it comes to managing people, they fall short. So, the only way for engineers to manage technology with manpower is for them to opt for management courses.

Mahesh Kumar Dadrwal, e-mail

Power-LessIt is a shame that the FCRA Bill has not yet seen the light of day (Toothless Regulator), as it will give the Forward Mar-kets Commission (FMC) more power. Obviously, the gov-ernment doesnt believe in it and is still sitting on the fence. The FMC, in that sense, is like Sebia regulator that should be given more freedom to deal with policy hurdles. The impending elections should

be no excuse for the govern-ment to be delaying the Bill.

Arun Narayanan, Bangalore

Spread The WealthAnd, fi nally, sectors other than IT are getting their due (The Playground Just Got Bigger). VCs are playing it safein fact, hedging their bets. It is likely that they are expecting a slowdown or maybe even a bust in IT, and channeling their funds into other profi t-able businesses.

R Vijayanand, Mumbai

Snipping It Off Taking the income tax break away from IT companies now would be a huge mistake (The Taxman Cometh). Now, when the industry is under a margin squeeze from an un-favourable currency, retaining the tax holiday is a good idea. Otherwise, IT fi rms will cease to be major contributors to the countrys GDPcurrently 5.5%. After all, IT is the face of India. At the same time, the Fi-

nance Ministry would also do well to cut down the tax ex-emption limit, instead of do-ing away with it completely.

Shyam Govil, New Delhi

Lights OnThe column by Dr Pachauri, UMPPs Need Some Oomph (22 March), has come at the right time. India needs to look at providing healthy, clean pow-er to all households. In the telecom domain, the Univer-sal Service Obligation Fund is created to roll out telecom services in areas that arent fi nancially viable otherwise. Can we push for a similar fund to light up the lives of 82 mil-lion homes?

AV Gopal, Bangalore

Sea ChangeAnother important factor in gaining consulting mileage is brewing a quick adapta-tion culture among employ-ees (Consult, But Use New Boatmen). As they deal with mature businesses, consult-ing insights will have to be gathered on the run. This is where the existing IT project mindset will have to undergo a dramatic change.

Krishna Mony, e-mail

MAILThe JLR deal has given the Tatas nothing but headaches. Although no debt will be transferred to the Indian buyer, managing the UK plants will mean a huge dent in the Tatas pockets. Only time will tell if the deal is a profi table one or not.

K VIJAYALAKSHMI BANGALORE

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TALK BACK

8 OutlookBusiness | May 3, 2008

IDEA

M ANAND

C APITALISM IS changing. Cash, the currency of capitalism and its prime driver, no longer rules. Today, successful capitalism is all about successful ideas. Ideas, not cash, spawn new businesses. Ideas help companies grow. Ideas create wealth. Ideas burn cash and produce billionaires. But most importantly, ideas change lives. And ideas build the nation.

Cash exists, but merely to serve good ideas. It is just the means to the end. Often, the wealth that capitalism creates is a byproduct of the end. It is no longer the end in itself.

This shift in the balance of power away from cash and towards the idea, which has happened gradually over the last 10 years, is one of the reasons why capitalism is changing. If cash-driven capitalism was all about creat-ing wealth, ideas-driven capitalism is about changing lives.

The ideas victory over wealth, and therefore entrepreneurships ascension over capitalism is having a profound impact on business, economy, society and mankind. That is why Outlook Business has chosen to celebrate The Power Of The Idea in its second an-niversary issue. These 25 ideas have been picked on their ability to change lives, not on their profi t-making or wealth-creation potential.

and how it is now forcing capitalism to look beyond wealth creation and towards transformation of lives

OutlookBusiness | May 3, 2008 11

OPENINGESSAYIDEA

ILLUSTRATIONS BY ARINDAM

OutlookBusiness | May 3, 2008

OPENINGESSAYIDEA

The example that best demonstrates this point is the $3,000 car (See Page 24). We picked this idea not because of the Nanos ability to make profi ts for Tata Motors (many, in fact, believe it wont), but because of its promise of providing an affordable and comfort-able personal mobility solution. In this particular instance, greater common good has been put above short-term profi t of a private enterprise. Entrepre-neurship has risen above capitalism.

Last anniversary, our theme was The Power of India. The issue you now have in your handsour second-anniversary is-sueis all about the power of the idea; the power of Indias ideas, to be more precise. After all, it is ideas that are going to build India this century.

Our second anniversary is-sue also epitomises the iden-tity of Outlook Business. At its very core, this magazine is all about thought leader-shipthought or thinking being the precursor to the idea. Without thinking, without thought leadership, there would be a definite dearth of good ideas.

Second, though we are a business magazine, we look beyond business. Dare we say that we have led the rest of the Indian media in its coverage of corporate social responsibility and social en-trepreneurship. Unlike the rest of the pack, we are in step with the new, changing identity of capitalism. (Sometimes, it helps to be a fresh, new player in a jaded market.) This issue has the proof of concept. A majority of ideas showcased here are in the realm of development, governance and the welfare of society; a few of the ideas are about creating profi t for a private enterprise, but even there, the benefi t for society at large is signifi cant.

These ideas are not about profit. Yes, it is entrepreneurship that is driv-ing these ideas, but not capitalism. Changing lives is the prime motive behind these ideas and their ideators;

not wealth creation.Not that Capitalism 2.0 ignores or

abhors wealth creation. But transfor-mation of the nation and mankind at large is now taking precedence over mercenary wealth creation.

What would you call Vinod Khos-laa capitalist or an environmental-ist? Doesnt he fl it between the two roles with effortless ease? In fact, hasnt he actually merged the two roles into one? Or how would you ex-plain Bill Gatess actions? Many con-sider him profanely capitalist in the

way he built and guards Microsofts turf. But now, others are equally free in their praise of some of the path-breaking work of the Bill and Melinda Gates Foundation. Or consider Warren Buffett, perhaps the worlds most suc-cessful wealth creator of all times. He spends a lifetime perfecting the art of making money in the markets, only to give almost all of it away to charity.

The latest chapter in the lives of these icons suggests that, in the end, capitalism is pointless, without any ultimate purpose. The unselfi sh phi-lanthropy in the latter part of their

lives defeats all of the unbridled capi-talism they had pursued earlier on. It is almost as if they are deliberately undoing all that they created as cash-hungry capitalists.

In fact, the fruit of their capitalism has now become the seed for greater common good. But they are still riding on the spirit of entrepreneurship and the power of ideas to ensure that this seed will eventually bear good fruit. The foundations they have set up run on ideas, not rules. They have ceased to be capitalists, but they continue to

remain entrepreneurs. The subtle change evident here is that as social entrepre-neurs, they mostly harness the power of their ideas for greater common good, rare-ly for the profi t of their own private enterprise.

Look at their lives. It is al-most as if the free spirit of entrepreneurship has com-pletely overwhelmed and subdued though, not es-chewedthe profi t-minded DNA of capitalism.

Make no mistake about it: entrepreneurship was a child of free markets and capitalism. It could not have grown without the fertile and nurturing environment that capitalism created. But now, you could say that the child is stronger than the parent. Entrepreneurship is rising above the petty, prof-it-minded nature of capital-ism. Todays entrepreneurs want to give and to change

lives, not just build their market capi-talisation or bank balance.

In the former ways of capitalism, an idea that is not a commercial success or an idea that does not create wealth would be considered a failure. Such ideas would no longer attract cashand would eventually die. But in its new avatar, money is available and willing to serve ideas that improve lives; ideas do thrive even if they dont create wealth for the ideator.

More power to the idea. Ultimately, only ideas can change lives. Not gov-ernments. Not businesses .

If cash-driven capitalism was all about creating wealth, ideas-driven capitalism is about changing lives

12

CHINDIAiIDEAASHISH GUPTA

T HE 21ST century may usher in a multi-polar world order, catalysed by the staggering economic success of two key regions that have been reshaping the global economic paradigm in recent years, much like Japan and the East Asian economies did from the sixties to the nineties.

China and India, or Chindia, will likely determine the contours of this world, now dominated by the eco-nomic might of the US and the Euro-pean Union. If the burgeoning growth rates of these neighbouring economies are any indication, we could well be on the threshold of what many are calling, the Asian Century.

The facts are overwhelming. Chindia now represents two continental-sized

economies with a total size exceeding $5 trillion, and growing at phenom-enal speed; China grew by 11.4% and India by 9.6% in 2007. Their com-bined two billion plus populations (of which, the consuming middle-class represents the chunk), a relatively cheap yet skilled workforce, surging foreign exchange reserves and boom-ing domestic companies with multi-national appetites, are just pointers to its coming clout in the economic pecking order.

Given these realities, Chindia is al-ready on par with the US, the worlds largest economy, in certain respects, contends Surjit S Bhalla, Managing Director, Oxus Research and Invest-ments, and a keen China watcher.

For instance, the two Asian giants already contribute 20% to the global gross domestic product growth, the same as that of the US. And by 2020, Chindias share in global growth is likely to go up to 40%, while the US share will hunker down to just 12-15%, Bhalla says.

No MorePaper Tigers

Annualised GDP Growth in %

1950-1980 1980-2006 2006-2025*

West 2.9 1.9 2.1Asia 3.3 4.0 5.3

Latin America 2.8 0.7 1.8Africa 1.5 -0.1 1.7China 2.7 7.1 6.2India 1.7 4.2 8.3

World 2.5 1.9 3.4

Their Time Has Come In terms of economic growth, the next two decades be-long to China and India. And India is tipped to grow even faster than China.

* Projected Source: Penn World, IMF 2006

China and India together have the potential to reshape the economic world order in the 21st century

HARD HATS, SMART HEADS: By 2020, Chindias share in global GDP growth will be 40%

MAXPPP

GRAPH

ICS BY SUM

EET GU

PTA


CHINDIAiIDEA

The next 20 years, he says, will come to be known as the period when the world changed into a truly multi-polar world again, because of the de-velopments in these two countries.

Incidentally, these Asian giants have achieved higher rates of growth for longer periods. For instance, between 1985 and 2005, Chindia recorded a growth of 5.3% per annum. This closely parallels that of Japan dur-ing 1960-85 and is only 1 percentage point less than what Korea and Tai-wan achieved during 1970-95.

The big difference, of course, has been that Chindia has had a popula-tion that was several times larger than Japan, Korea or Taiwan.

Again, what will also help these two countries shape the Asian Century is their demographic profi le. Remem-ber, by 2020, India will be the young-est country in the world with around 547 million people below the age of 25, although China will have a much larger aging population, says Amit Mitra, Secretary-General, Federation of Indian Chambers of Commerce and Industry (Ficci), an industry lobby.

What this means is that India and China will have a much larger, more fl exible and innovative labour force than the rest of the world. This is like-ly to result in greater productivity. In addition, the dependency ratiothe ratio of the working population to those dependent on the government for grantswill also be much lower.

Rivals or Partners?Given all this bargaining power, the reality is that China and India have al-ways seen each other as rivals, chiefl y for resources that help power their re-spective economic engines. Even so, whenever these two countries have come together, they have formed a formidable third front to counter the might of the US and the EU.

Take, for instance, the case of the World Trade Organisation. The duo has effectively blocked any move by the West to drag any non-trade issues like labour standards onto the nego-tiating table. They have also resisted

the opening up of their agricultural markets, unless the West reduced do-mestic support to its farmers.

Experts say the scope for coopera-tion can be further expanded. Nagesh Kumar, Director-General, Research and Information Systems for Develop-ing Countries, says that the two can

play a signifi cant role on issues such as climate change, WTO and reforma-tion of the international fi nancial ar-chitecture. It is time the Asian voice was heard, he says. They are the real drivers of global growth today.

Although Chindia by itself is a huge enough entity to get noticed, what can really change the world is a larger South-South nexus. This could take the form of an East Asian Summit that will not only include the 10 As-sociation of South East Asian Nations (Asean), but also the six dialogue partnersJapan, China, India, Korea, Australia and New Zealand.

The combined strength of the 16 fastest-growing economies of the Asia-Pacifi c region would make it a sure third pole of the world economy. It could end up challenging the might of the North American Free Trade Agree-ment (Nafta) and the EU.

With roughly half the worlds popu-lation, a combined income exceeding $18 trillion (on a purchasing power parity basis) and forex reserves of more than $3 trillion, this grouping will be bigger than the NAFTA or the EU in some respects.

18

Heavy Metal At current size, China and India consume one-third of key metals. And the rate at which they are growing, their ap-petite and share will only increase. India is a poor second at the moment, but it will play catch-up.

ZincNickelLeadCopperAluminiumFigures show Chindias share (in %) in world consumptionSource: World Business of Metal Statistics

36.226.632.229.636.0

YOUNGISTAN: In 2020, 547 million Indians will be below the age of 25

SANJOY GHOSH


CHINDIAiIDEATrade liberalisation in the

EAS region could produce wel-fare gains of up to $178 billion for participating countries, with proportionately higher gains for poorer nations, representing scope for economic convergence. It would also help Asia play its due role in global economic gov-ernance, Kumar says.

But the key question is whether Chindia alone can be the driver of global growth. Paul Rawkins, Senior Director, Fitch Ratings thinks so. Thanks to Chinas robust growth, the world as a whole escaped recession after Americas stock market bubble burst in 2000-01. So, China alone can easily be the driver of global growth. And with India joining in, things can only get better.

Deep ImpactSuch phenomenal growth, how-ever, has resounding implica-tions for the global economy. It has a direct impact on global food, commodity and crude pric-es; more so, from the perspec-tive of developments in China. The reason: China has a 13-year headstart over India when it comes to liberalising its economy. Also, China has largely emphasised on its manufacturing prowess, while India focused more on the services sector.

Hence, it is no coincidence that the blame game for high crude, commod-ity and food prices is being increas-ingly attributed to the gluttonous demand from India and China. After all, China consumes one-eighth of the worlds energy, one in four tonnes of steel and aluminium, and almost half of the worlds cement.

Chinas unprecedented growth-it has accounted for 40% of the worlds crude oil demand since 2000not only makes it a driver of a long-term increase in energy prices, but also the most vulnerable to rising oil prices, says Rajiv Kumar, CEO, ICRIER.

Moreover, Chinas staggering exports (worth $1,218 billion in 2007) and im-ports of $956 billion have much to do with the fact that most multinational companies have set up manufacturing

base in the Dragon kingdom. Today, China produces nearly two-thirds of all photocopiers, microwave ovens, DVD players and shoes, over half of all digital cameras and two-fi fths of all personal computers. Its unrivalled position as the toy maker of the world and cheapest producer of textiles and garments still remain largely intact.

But Chinas real importance lies in its ability to change the relative prices of various items. Products that China makes generally see a fall in prices, while those it imports rise. It has already pushed down prices of labour-intensive manufactured goods and boosted the real incomes of its consumers. For example, the average price of shoes and clothing has fallen by 30% in real terms over the past 10 years, thanks in large measure to Chi-na, says a recent World Bank report.

Yet, its import of capital, raw mate-rial and skill-intensive goods and ser-vices has also hiked prices of these goods, ensuring a bonanza for export-

ers in Australia, Brazil and South Africa.

For the rest of Asia, Chinas huge domestic market has be-come a locomotive for growth, accounting for nearly 50% of the total export growth of other East Asian economies. Analysts be-lieve the rise of China has played a big part in Japans recent eco-nomic recoverytwo-thirds of Japans exports are to China.

Moreover, it has been ploughing back a large portion of its export earnings into dollar-denominated fi nancial assets, especially in US Treasury securities. This has en-sured that bond yields and inter-est rates have remained low.

In contrast, Indias impact has been far more muted, although its status as a knowledge econo-my hub has never been in doubt. Its leadership position as an off-shore information technology (IT) and business process out-sourcing (BPO) destination has helped global majors cut costs and move their R&D activities to India. For instance, Samsungs R&D division in India developed the hybrid phone that operates

across different mobile technologies. As India Inc improves its global foot-

print, either by taking the acquisition route or starting greenfi eld projects, Indias stature as a manufacturing powerhouse will gain traction. In-dias biggest surprise could be its in-dustry. Five years from now, it could be a major player on the global scene given the kind of entrepreneurial tal-ent available here, says Bhalla.

Still, its early days yet. The two Asian tigers will have to travel a bit more before they become models of development for others to emulate .

The EU concept rst arose in the 1920s

when French PM Aristide Briand and German FM Gustav Stresemann tried to heal the rift between their countries and create a basis

for lasting peace in Europe

20

THE INFLUENCER: Chinas real importance lies in its ability to change the relative prices of various items

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$3,000 CARiiIDEA


Fits To A Model T The idea of a mass-produced car has an ancestry that goes back to the Ford Model T developed a century ago. One of the less-celebrated impacts the Ford vehicle had was on daily wage and, therefore, labour policies. At a time when daily wages were $2.34 for a nine-hour day, Ford announced $5 for an eight-hour day.

With the increasing production num-bers Ford Motor had to clock, and the need to train its workforce to handle assembly lines and carry out repetitive skilled tasks, Henry Fords car mis-sion made a difference to the hands that built the Model T. It changed the lives of blue-collar workers.

India now has a reputation for being a low-cost labour base. The mass-car

projects will boost employment and pave the way for a range of relation-ships with auto-component suppliers. The Nano project alone has close to 100 vendors on board. Our invest-ments here will create thousands of skilled job opportunities in India, both direct and indirect, says Carlos Tavares, Executive Vice-President of Nissan. With the Chennai infrastruc-ture (capacity of 400,000 units) at our doorstep, India will truly become a global business hub for Nissan.

By 2012, Nissan will have eight products in India, ranging from the entry-level car to higher-end sports utility vehicles and sedans; again, half of these models will be made in India. Analysts who have worked closely with the company assert that

the ULC has required Nissan to change its mindset when it consid-ered how to go about building a car at such a low price-point.

The demand for Indian engineers will also go up commensurately. In early April, German Ambassador Bernd Mutzelburg had emphasised this particular aspect. As much as there is a crunch of engineering talent in Germany, our country is becom-ing more open than ever to countries with the quality and size of Indias engineering HR base, he said.

Nissan has already begun sending its engineers to learn from Bajaj. It is what Nissan CEO Carlos Ghosn calls frugal engineering, sparked off in no small measure by the $3,000 car project. Indian and other emerging

KUNAL N TALGERI

BENEATH ALL the specs and frills, an ideas success depends on answers to two questions. First, what does the idea require the user to do? And second, what value does it give the user? This has been a litmus test for many an idea in the corridors of the Massachusetts Institute of Technology, one of the best research institutes in the world.

With a $3,000 car, an automaker in-nately addresses the second question, which pertains, quite relevantly, to the price point of a car.

Until recently, several automakers considered such a minimalist project, proposed by Tata Group honcho Ratan Tata, outrageous. Well, that changed soon after the Nano was unveiled in January this year.

At least four global automakersNissan, Renault, Toyota and Honda have since acknowledged the merit and scope of producing an ultra low-cost car (ULC). The entire product

portfolio of original equipment manu-facturers (OEMs) is set to change in favour of more fuel-efficient, envi-ronment-friendly and smaller cars, believes Kapil Arora, Partner, Ernst & Young. For starts, this May, Nissans mid-term plan will spell out how the Renault-Nissan ULC, along with its electric vehicle, will be key growth drivers for this $89 billion OEM.

By breaking the cost barrier, Tata Motors has now made several other seemingly insurmountable engineer-ing and design hurdles look more vulnerable. This might just embolden other automotive companies to try and break barriers in the realms of performance, fuel consumption and emissions. It could also force global auto majors to eye India as an en-gineering hot shop, much like how IBM, Accenture and EDS saw India as a talent pool.

The change in manufacturing mind-set globally is an indication of the ideas potential at a time when emerg-ing markets are vibrant. While the $3,000 car will come from the Indian

market, it could cater to other emerg-ing markets like sub-Saharan Africa, East Asia and even some of the more mature markets, says Arora.

The finest cars have struggled to demonstrate scale in the Indian mar-ket, which has had less than 10 mil-lion motorcars registered between 1951 and 2004, according to the Department of Road Transport and Highways. Another 3.6 million new passenger vehicles have hit the road between 2004 and 2007.

But, a car sold on price and perfor-mance opens the Indian car market even furtherto touch tier-II cities and even rural areas. Between Tata Motors and Nissan-Renault-Bajaj, there could be 450,000 ULCs pro-duced annually. Along with a sales spike, the $3,000 car will bring to bear issues of roads and infrastruc-ture, environment, fuel consump-tionand even policy matters. This is what makes the ULC idea truly transformational.

Apart from giving wheels to a lot more people, the $3,000 car is an idea that can catalyse change in

road infrastructure, environment and policy

Henry Fords genius was responsible for bringing together brilliant men and encouraging them to de-

velop innovations like the moving assembly line, branch assembly plantsand of course, the Model-T Ford

The $3,000 car will compel governments to review the state of infrastructure and trigger reforms to cope with the greater traffi c

Small Car,Big Change ALL IN THE FAMILY:A car sold on price and

performance will help companies make inroads

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$3,000 CARiiIDEAmarkets will drive product develop-ment for the next 20 years or so, given the current state of the US and Euro-pean economies, says Arora of Ernst & Young. The focus of developing the $3,000 car (or a sub $3,000 car) is to eliminate all ineffi ciencies in the value chain. It calls for a 360-degree under-standing of its intricacies, from the raw material to the roll-out stage.

Increasingly, with the $3,000 car, foreign OEMs understand the value of catering to different customers with a smaller, more frugal offering. The shift is reminiscent of the Model T

again. By making the car affordable, Fords output shot up from 170,211 units to 501,462 units between 1911 and 1915, around which time Henry Ford considered further price reduc-tions at $300 levels.

Driving The EnvironmentIn equal measure, history also deems the Model T to be Fords folly. In tak-ing his cars to the masses, Ford trig-gered a trend of mobility at a consid-erable cost to the environment. Timemagazineborn fifteen years after the Model Trated the Ford vehicle last year as the second-worst car of all time. This was an indictment of the air over our cities and putting every living soul on gas-powered wheels.

It is a familiar argument in India al-ready with the $3,000 car conceptand an opportunity to drive change on environmental policies. It isnt just the question of a small and affordable car, notes Anumita Roychowdhury,

Associate Director at the Centre for Science and Environment (CSE). It is also about governments planning mo-bility within cities. People must buy cars, but there should also be policies to ensure that mobility needs are met by public transportation, she says.

Roychowdhury cites CSEs 2006 re-search on Delhi. More than 80% of Delhis road space is occupied by cars and two-wheelers, which address less than a quarter of the travel demand in the city. On the other hand, buses occupy only 5% of the roads and meet 60% of the travel requirement.

Such a situation is unsustainable, she says.

Fuel consumption also becomes a critical issue with personal mobility for the masses. Between 1980-81 and 2003-04, fuel consumption grew at 5.7% per annum, though it has mod-erated to 3% in the past four years. For most of this period, personal motorised transport and increase in vehicle population have contributed to the rise in fuel consumption. The Nano has been a concerted effort to provide more kilometres (20 km) per litre. Still, the spread of any $3,000 car will need to be balanced with a robust public transport system to moderate fuel consumption.

The solution lies in monitoring (even monetising) passenger car usage

through congestion-pricing and road-pricing systems, which have yielded reasonable results in the UK. Conges-tion charges discourage people from taking cars into busy sections of the city. They have helped in reducing traffi c in targeted areas of London by 30%, says Roychowdhury.

The infl ux of more small cars in In-dia should spark off a rethink on simi-lar lines, especially on parking charg-es, excise duty rates on buses (which are much more than on passenger cars) and other subsidies on cars.

The rapid entry-level expansion of the auto sector will be accompanied by a shift among buyers, who will move from smaller to bigger cars. Giv-en the size of the market by then, en-vironmentalists see the period as the best time to raise emission standards and fuel economy regulations. We will have to do a technology leapfrog to cope with such a rise in vehicle population, says Roychowdhury.

Roads and infrastructure will be pushed just as much by the $3,000 car. Less than 50% of the 16 lakh kilo-metres of available roads in the coun-

try are surfaced, as of 2002. About one-fifth of these available roads were in urban areas. With the $3,000 car, governments will be compelled to review the state of infrastructure. From road widening and introduction of more lanes to bridges and fl yovers, the idea will trigger reform to cope with the volumes of traffi c.

The concept of the $3,000 car comes bang in the middle of the green move-ment in the global auto industry. Giv-en the clout that emerging markets have in the global economy, the idea is relevant. However, one century on, the $3,000 car still poses a valuable opportunity of doing what the Ford Model T failed to do beyond becom-ing an affordable carto evolve into a truly transformational idea .

Small cars might embolden other auto companies to try and break barriers in the realms of performance, fuel consumption and emissions

26


IDEA

NAREN KARUNAKARAN

R ICE IS a staple food in India. Once a plank for bragging rights, this pride of place for rice in Indian diets is gradually turning into a burden. The root cause for concern is the stagnation in the annual growth in rice productivity at 0.5%. According to the World Wide Fund for Nature (WWF), India needs to increase its rice production by 2.5 million tonnes a year to meet its requirement in 2050. Put another way, rice output needs to increase by 92% from the current 140 million tonnes to meet demand in 2050. If production fails to keep pace with demand, rice prices will continue to rise at an uncomfortable rate and the government will have to increase its dependence on imports. A food security issue is looming.

More Rice Per Hectare Yet, the leviathan agricultural research apparatus is shockingly cavalier about the silent wave sweeping rice-grow-ing regions of the world: the system of rice intensifi cation (SRI). Devel-oped 20 years ago by Father Henri de Laulanie, a Jesuit priest in Madagas-car, SRI is a designer innovation in which younger and fewer seedlings are transplanted with wider spacing and no continuous fl ooding.

By merely changing how plants, soil, water and nutrients are managed, SRI can increase rice yields to up to 15-20 tonnes per hectare. Given that Indias average rice yield is 3.1 tonnes per hectare, SRI has the potential to bring about a manifold increase in rice pro-ductivity and productionthat too with fewer inputs and at a lower cost. Says Dr Biksham Gujja, Policy Advi-

sor, Living Waters Programme, WWF International: A change in mindset is required. The green revolution was a high-input, seed-centred approach. Farm practices were never given im-portance, which SRI does.

Rice is a thirsty crop. About 45 million hectares are under the crop and about 5,000 litres of waterone persons daily water needs for four monthsis required for just one kg of rice in the conventional fl ooding of the fi eld method. SRI uses 25-50% less water. Instead of fl ooding pad-dy fi elds, SRI requires only the root zones be kept moist. It also cuts seed requirement by an astonishing 95%. Fewer seedlings are planted, with more space between them (See table: A Rich Tradeoff).

Cost savings and greater produc-tivity improve profitability. Studies show that the net returns per hectare of rice farmers who adopted SRI was 67% higher than those who followed

This new method of rice cultivation can increase output dramaticallywhile using fewer inputs and at a lower cost

... More Shall You Reap

SYSTEM FOR RICEINTENSIFICATIONiiiIDEA

RICE BOWL: SRI can increase rice yields by 64% from current levels

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the conventional method. A farmer in Andhra Pradesh achieved a rice yield of 17.3 tonnes per hectare. Al-though such super yields are more of an exception, an increase of around 2 tonnes per hectare64% more than current levelsis achievable.

Weeds In The Way If the establishment is looking away from this revolutionary method, its because of inertia, reluctance to stray into new territory and vested inter-ests. Says Gujja: Seed companies have been deploying SRI methods to grow seeds for years, but didnt en-courage its use in rice cultivation.

Other countries too went through a similar phase. SRI was met with hostility by the western agricultural establishment when it fi rst breached the borders of Madagascar around 1999. It was derisively described as agronomic UFOs (unconfi rmed fi eld observations). However, now, criti-cism is muted, as farming communi-ties from China to Peru have begun to root for SRI.

Much of the credit for this change can be attributed to the global SRI evangelist Norman Uphoff, Director of the US-based Cornell International Institute for Food, Agriculture and Development (CIFAD). He briefed the Prime Ministers Offi ce recently

to emphasise the urgency for SRI in India. Says Uphoff: An increase of two tonnes per hectare is all that is needed to meet the food needs of most countries.

Only after the Uphoff briefi ng is a sceptical Indian Council of Agricul-tural Research waking up to SRI. Even then, the inclination is to discredit it, says Ravi Chopra, associated with two NGOs popularising SRI in India, Pradan, in the plains, and Peoples Science Institute, across the Himala-yan ranges.

SRI has been included in the Nation-al Food Security Mission, which talks about increasing rice production by 10 million tonnes by 2012. Admits Dr BC Viraktamath, Project Director, Direc-torate of Rice Research, Hyderabad, ICAR: SRI has to be encouraged.

The pace of change could use a con-certed push. So far, SRI has found acceptance in scattered areas in just three states: Andhra Pradesh, Tamil Nadu and Tripura. Says Viraktamath: About 100,000 hectares is under SRI, which can be scaled up to 500,000

hectares in the next fi ve years. Still, thats only 1.1% of the total rice area under cultivation, though SRI is said to have a presence in 130 of the 500 rice-growing districts.

Today, the policy response is piece-meal. For instance, some governments are looking to give a subsidy on weed-ers, which currently cost around Rs 1,800; some governments are looking to motorise it. For a truly transforma-tional impact, SRI needs a ground-swell of support. That means training and building awareness among farm-ers, agricultural extension workers, policymakers and scientists. Says Gu-jja: There is a crying need for a well-thought out, comprehensive policy initiative on SRI, with national-level, time-bound targets.

SRIs potential to alter Indian agri-culture can extend beyond rice. We are trying this system for other crops, like wheat and madua (ragi), says Chopra. Experiments with wheat in Dehradun saw yields increase from 18 quintals per hectare to 21 quintals per hectare. Similarly, traditional methods of growing sugarcane, another thirsty crop, require 10 tonnes of seed buds per hectare, SRI methods require only one tonne; as for the yield, it can in-crease from 65 tonnes per hectare to 144 tonnes. For India, intensifi cation ought to be a war cry .

Conventional Method SRI MethodYield 3.1 tonnes per hectare 5 tonnes per hectare

Seed requirement 50-60 kg per hectare 5 kg per hectareTransplanting Seedlings about 30 days old Seedlings about 8-12 days oldClump density 30-40 per sq m 16 per sq m

Seedlings 3 or more per hill 1 per hillFertilisers Chemical fertilisers, pesticides,

herbicides and insecticidesOrganic fertilisers; pesticides, insecticides usually not needed

Water management Continuous fl ooding Moist conditions onlyWeed removal Manually With a weeder

A Rich Tradeoff Be it costs or benefi ts, SRI scores over the traditional method of rice cultivation

Each aspect of Laulanis technique was already in use in Madagascar before SRI was labelled. What

the Jesuit priest did was to draw these variables together into a single suite of agricultural techniques

Source: WWF studySource: WWF study

30

FARM LESSONS: SRI uses 25-50% less water than the conventional method (above)

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SMART CARDSivIDEA


ery citizen has such a card for health insurance. In Asia, smart cards are most commonly used in bus and suburban train systems in countries like Japan, South Korea, Singapore, Taiwan, Malaysia and the Philippines (even Kolkatas Metro and Mumbais BEST bus service have begun using smart cards).

In India, the Gujarat government was the fi rst to embrace this technol-ogy, introducing a smart card driving licence in 1999. However, the technol-ogy has not become ubiquitous and has largely been confi ned to use in the ID cards of security agencies.

All that is about to change however,

and rural India could well be at the vanguard of the smart cards wide-spread adoption in India. The smart card has proved to be the ideal tool for the furtherance of e-governance initiatives and delivery of government schemes, as well as in spreading for-mal banking, as highlighted in the case of Chander and Khan earlier.

The Central government, as well as states, have begun to realise the power of the smart card to spur de-velopment. The Finance Ministry will launch a pilot project using such cards for PDS in Haryana and Chandi-garh, hoping to cleanse the system of corruption. The Labour Ministry has

already begun extending its health insurance scheme using smart cards, helping people like Ramesh Chander. Smart cards are also being used on a pilot basis for social security pen-sions and the National Rural Employ-ment Guarantee Scheme (NREGS) in Andhra Pradesh.

Again, in its recent budget, the Ra-jasthan government has announced the use of smart cards in a fi nancial inclusion plan for 5 million families living below the poverty line (BPL). Apart from a savings bank account, the smart cards will be used to access other benefi ts like health insurance, old-age pension and NREGS wages.

Says development economist Jean Dreze: Information technology (IT), including the use of smart cards, can indeed be of great help in imparting transparency and preventing cor-ruption in programmes such as the NREGS. However, he cautions: IT-based solutions are not problem-free, especially in the early stages where a largely uneducated population will struggle to get familiar with them. They are certainly no substitute for the strict implementation of all trans-parency safeguards.

As part of a pilot project, the Union Home Ministry has issued 1.2 million Multipurpose National Identity Cards (MNICs) in select sub-districts of 12 states and one union territory. The secure card has a chip containing per-sonal data, photographs and fi nger-prints, along with a 16-digit National Identity Number (NIN). The pilot project will study the complexities of integration of data, verifi cation of citi-zenship as per the Indian Citizenship Act, 1955, preparation of a National Population Register, and establish a sound base for implementation na-tionwide. The scope and methodology of nationwide implementation will be

SEBASTIAN PT

IT IS mid-afternoon and the sun is burning brightly in Ghatog village of Rajasthans Jalawar district. Ramesh Chander, 38, and his wife and children, are however, unperturbed by the heat as they pose for a photograph. The excitement on Chanders face is obvious as he happily fl ashes his gingivitis-ridden teeth to the camera. His enthusiasm is understandable, given that hes about to receive something that will change his life for the better.

The photograph of Chander and his family is embossed on a biomet-ric card issued by the Union Labour Ministry and handed to him. It will enable the family to avail the ben-efi ts of the ministrys health insur-ance scheme, the Rashtriya Swasthi-ya Bima Yojana, with ease.

About 300 km away, 18-year-old Im-ran Khan, a resident of Manoharpur Kacchi Basti on the outskirts of Jai-pur, has already come face to face with technology. A daily wager with an irregular income, this marble ma-son is beginning to cultivate the habit of saving for a rainy day, thanks to a pilot project run jointly by ICICI Bank and an NGO. The project aims to bring people on the fringes of society

into the formal banking system.Imran, like many others in his

slum, has had no formal education. Ordinarily, this would have discour-aged the illiterate lad from operat-ing a bank account because of the amount of writing involved. All that has changed thanks to this biometric card. Whenever Imran wants to de-posit or withdraw money, all he has

to do is get his fi ngerprint authenti-cated by a biometric device wielded by a mobile banker. The banker, who makes the rounds of suburban slums with his handheld biometric device, then completes the transaction. This project has huge potential for expan-sion into the hinterland.

A Simple SolutionAt the centre of this technological revolution that is gradually spreading across rural India is the smart card. The card seems a lot like a debit or credit card in appearance. However, the similarity ends there. Debit and credit cards (at least most of those is-sued in India) have a magnetic stripe at the back. A smart card, on the oth-er hand, usually contains an embed-ded microprocessor and a memory chip. The microprocessor allows data to be added, deleted and edited on the cards memory. Some smart cards, such as prepaid cards issued by tele-com firms, have only the memory component and can only undertake one particular operation.

Smart cards are being used widely in Europe, particularly in the banking, public transport and health insurance sectors. In Germany, for instance, ev-

The government has woken up to the power of the smart card to implement rural development schemes and eliminate corruption in the pipeline

The Card Trick

PLASTIC POWER: Ramesh Chander displays his familys health insurance card

POCKET HISTORY : A health insurance card given to a poor family in Rajasthan

32 33

The need of the hour is convergence. Instead of separate cards for each scheme, the government should issue a single card embracing all of them

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SMART CARDSivIDEAstudied by a Group of Ministers after the projects completion.

Says Veerappa Moily, who heads the second Administrative Reforms Commission that recent-ly recommended the early imple-mentation of the MNIC project: The corruption and harassment of the target group for any gov-ernment scheme is mainly at the identification stage. The deliv-ery system cant be perfected till there is an MNIC in place.

The MNIC idea was initially conceptualised by the Vajpayee government in 2003 to check il-legal immigration. However, its scope has now been widened. According to offi cial sources, the MNIC will even be able to serve as proof of identity while open-ing a bank account, securing a passport and so on.

Again, it is not only in the rural space that smart cards are chang-ing things. The Indian passport too will soon get smart, thanks to a 64 KB microchip implanted in its back cover. Apart from per-sonal details, the chip will con-tain biometric data, making manual immigration clearance a thing of the past. The Ministry of External Affairs plans to commence an e-passport pi-lot project in May.

The passport will contain biometric data as recommended by the Inter-national Civil Aviation Organization (ICAO). BN Shetty, head of the Ex-ternal Affairs Informatics Division, points out that the Indian passport already has several visible and invis-ible security features. The biometric version will prevent impersonation and prevent a person from holding multiple passports.

Now, For Some IntelligenceHowever, while its all very well that the government is going the smart way, it needs to be smarter in ex-ecuting its plans. As things stand, various ministries, both at the Central and state levels, are individually is-suing cards to promote their various schemes. The need of the hour, how-ever, is convergencea single card to embrace different schemes.

Shetty says that it is technically pos-sible to integrate all the schemes into one card. However, lack of coordina-tion among the various departments of the Union government with each other and with states is an obstacle.

That is indeed true. Multiple gov-ernment agencies and institutions are working in parallel, but without cohe-sion. For instance, there is no clarity on whether the MNIC will replace the election card distributed by the Elec-tion Commission.

Meanwhile, funds are still being expended on making election cards. Again, while the Labour Ministry is going ahead with its health insurance smart card, the scope to introduce other schemes using the same card is limited as the cards microchip has a capacity of only 16 KB. If any other

schemes are to be clubbed with the health insurance scheme, a new card will have to be issued as the old one cannot be upgraded. This will result in needless dupli-cation and a waste of resources and manpower.

Again, it must be noted that the use of smart-card technology can have a downside. One of the pri-mary concerns is data security; if this is compromised, it could lead to fraud, not to mention loss of an individuals privacy. The pos-sibility of personal data falling into wrong hands, despite assur-ances by the government to the contrary, could have dreadful con-sequences. Such incidents have, in fact, taken place in several de-veloped countries. In the UK for instance, a government agency recently lost discs containing data on about 25 million people who were recipients of a government benefi ts scheme.

There is also the fear of corrupt offi cials leaking classifi ed infor-mation to unscrupulous elements. And, no doubt, as technology

becomes more sophisticated, crimi-nals will fi nd new ways of commit-ting crimes. New technologies must therefore be adopted with adequate safeguards in place. But adopt them we must if India is to go ahead.

While it must be lauded for ensur-ing that the poor also benefi t from technological advances, there is much more the government can do. If it pro-ceeds with some foresightedness, the day may not be far when all Indians have a single social security card.

This smart card, if it comes into being, could also do away with the PAN card and election card, among others, unifying them under one um-brella along with ones PPF account, EPF account, medicare, and so on. When that day comes, we can indeed say we live in a smart society .

34

The rst smart card was developed in 1974, by French independent inventor Roland Moreno. He

mounted a chip on a card and devised a system to use the card for transaction payments

ACCESS TO A NEW WORLD: Imran Khan gets his fi ngerprint validated for a banking transaction

OutlookBusiness | May 3, 2008 OutlookBusiness | May 3, 2008

companies have booked space in the SEZ, including TCS, Wipro and L&T. Around 30,000 fl ats are being devel-oped. And annual passenger traffi c in the airport, which currently sees only 20 fl ights a day, is projected to grow from 500,000 to 14 million.

In Hyderabad, the GMR Group is looking to develop assembly hubs for gold and jewellery units and for medi-cal tourism, besides IT, pharma and fi nancial services, around the new air-port it built. Says V Jayaraman, Chief Operating Offi cer (Property Develop-ment), GMR Group: The artisans in similar assembly units in the Gulf are mostly from India. Working closer home can reduce the lure of travel-ling overseas. In Kochi, Cochin Inter-national Airport Limited is planning to invest Rs 5,000 crore in a 450-acre aerotropolis, which will include an aircraft maintenance, repair and over-haul (MRO) facility, aviation training

school, hotels, amusement park, golf course and an IT park.

Air Pockets Given the huge contiguous land re-quirement and project cost, an aer-otropolis, in its truest form, is likely to come up around non-metro cities and towns. Like the Bengal Aerotropolis project, a Rs 10,000 crore greenfi eld project across 2,375 acres in the mid-dle of the Durgapur-Asansol industrial belt. This will trigger a reverse fl ow of businesses from cities to towns, and spread the fruits of economic success, across regions and people.

For now, though, aerotropolis plans in India are either on the drawing board or in early stages of execution. A lot more needs to happen for it to become a reality. Says Albert Brun-ner, Chief Executive Officer, Ban-galore International Airport: The aerotropolis concept will succeed in

India, but we dont know how long it will take. The question marks are less over attracting business and more over getting supporting infrastructure like water and power in place. Sev-eral agencies need to work together, which may take time, he says. Adds GMRs Jayaraman: The government should create a single-window clear-ance system. Many dots need to be joined to complete the circle, but the idea is taking wing .

With Kunal N Talgeri and Supriya Kurane

SUDIPTO DEY

P ICTURE A dot and three circles around it, each larger than the preceding one. The dot in that picture is the Suvarnabhumi Airport, in suburban Bangkok. The innermost circle, a stones throw away from the airport, will house businesses and facilities that feed the airport and feed off itlike trade zones, warehouses and logistics hubs. The middle circle will house companies and other things business like convention centres and hotels. The outermost circle, 20 miles from the airstrip, will have clusters of high-rises for people who work in the two inner circles, and their other necessities and indulgences.

In terms of size, the airport is dwarfed by everything around it. Yet, its the primary reason the three circles can create a bustling, self-con-

tained ecosystem. Suvarnabhumi is the shape and logic of our future cit-ies. The essence of this thought is that rather than shunt an airport to the pe-riphery of the city, put it in the middle and build everything around it.

Flights Of Fancy Aerotropolis is the concept the mak-ers or renovators of Nagpur, Durgapur, Kochi, Hassan, Hyderabad, Delhi and Bangalore airports have in mind as they build or modernise their airports. While their projects may not have the scale and sophistication as a Suvarn-abhumi, the idea is the same.

They are being built not just as junc-tions for fl ights to take off and land. They are being designed to shape and drive economic activity in a region. They will alter the cityscape. They will change where and how we live, work and play. Says Professor John D Kasarda of Kenan-Flagler Business

School, University of North Caro-lina, who conceived the aerotropolis model: Airports will shape business location and urban development in the 21st century as much as highways did in the 20th century, railroads in the 19th and seaports in the 18th.

Since business linkages are para-mount to make an aerotropolis viable, special economic zones (SEZs) are an obvious catalyst. Without the SEZ, the airport will not be viable. Without the airport, nobody will come to an SEZ, says RC Sinha, Managing Direc-tor, Maharastra Airport Development Company (MADC), which is develop-ing a cargo hub and an SEZ in Nagpur over 4,000 hectares at a cost of about Rs 5,500 crore over the next 20 years.

When fi nished, the SEZ and the hub will employ 120,000 and give indirect employment to another 300,000. Ac-cording to Sinha, fi ve million will set-tle in and around the hub. About 35

Airport CityAEROTROPOLISvIDEA

The new paradigm: rather than shunt an airport to the periphery, put it in the middle and build a bustling city around it

Amsterdam Airport Schiphol is the rst

aerotropolis, though it wasnt conceived like that.

Its makers kept on develop-ing it, till someone pointed

out the grand design.

THE SUCCESS of an aerotropolis rests on the extent of air connectivity. And connectivity is determined by the number of markets served by the airport and the frequency of the ser-vice, which, in turn, depends on the strength of the respective markets. The small airports in India are just inactive World War II era airstrips in weak markets. An aerotropolis also assumes good surface transport access to the airport, and skilled labour for aviation-dependent businesses. The small city airport region has to measure up on both fronts.

Only a few airports can become aviation hubs. There are examples of an aerotropolis evolving around smaller city airports: Campi-nas (Brazil), Fort Worth (Texas, US), Louisville (Kentucky, US) and Subic Bay (Philippines). In each case, air cargo was the driver, and was tied to the airport being selected by an air ex-press or air cargo airline as a hub. The bottom line: aerotropolis has to be more than a build it and they will come dream. Success rests on market realities, good surface transportation accessibility and adequate air service.

Ground Realities

RIPPLE DEVELOPMENT: A Google Earth image of the aerotropolis built around the

Hong Kong International Airport

38 39

Dr John D KasardaARCHITECT OF THE AEROTROPOLIS MODEL


PRASHANT MAHESH

THERE IS nothing remarkable about the town of Karjat, Maharashtra, except perhaps its proximity to the popular hill station, Matheran. Situated about 80 km from Mumbaia 2-hour drive by roadthe town is home to about 220,000 people. Karjat has now become the focal point of an innovative low-cost housing experiment that may offer a solution to Indias urban housing problems.

Matheran Realty, promoted by Mum-bais Silva family and the London-

based Eredene Capital, is laying the fi rst bricks in a 100-acre settlement that will eventually have 200,000 low-cost houses. The idea is to sell these houses at Rs 999 per square feet, or roughly Rs 3 lakh to Rs 5 lakh per house. The fl ats will come in three si

Documents

Out Look Business 05052008