As the global economy continues to nervously watch the slowing pace of China’s growth, its neighbor India recently launched a significant campaign to boost technology growth and entrepreneurship in the country. Start-up India, an initiative launched by Prime Minister Narendra Modi, is aimed at promoting innovation by fostering its start-up ecosystem. According to NASSCOM, one of India’s leading trade organizations, India has the 3rd largest community of start-ups in the world. With over 4,200 young enterprises in India, only the U.S. and the U.K. outrank it in terms of numbers.
What is noteworthy about this latest government initiative is the fact that it comes almost 25 years after India announced its economic liberalization policy. In 1991, the Indian government for the first time reduced regulations and restrictions to help boost the economy. It opened up its economy for Foreign Direct Investment (FDI) and greater participation from private entities. But there were still many policing and licensing regulations that made it difficult for the young entrepreneurial community to thrive. That’s why Prime Minister Modi’s latest initiatives for start-ups are getting so much attention. The new policy initiatives promise swift approvals for starting enterprises, easier exits, tax and fiscal incentives, faster registration of patents and protection of intellectual property rights.
On Jan 15th, on the eve of Prime Minister Modi’s big launch, a select few Silicon Valley technology leaders were invited to an exclusive interactive session with India’s President, Pranab Mukherjee. The event was held at the Rashtrapati Bhavan – the president’s official residence. The goal of the session was to reiterate the Indian government’s commitment to making India a hub for innovation, design and start-ups. Imagination’s president Krishna Yarlagadda was part of this elite panel of invitees.
In his remarks, Yarlagadda talked about how it was imperative for India to diversify its technology offerings. He pointed out that in the 1990s while China had taken the low-cost manufacturing route and reaped the benefits of the telecom and mobile boom cycles, India had evolved into a low-cost software services hub. China, he highlighted, was able to take advantage of these boom periods to create major semiconductor companies, while India continued with its software outsourcing model.
India needs to move away from a services industry to becoming a manufacturing hub
“The waves of telecom and mobile are past, but new waves are coming. IoT is the next big wave and it is going to last another 20 years – and India should not miss this wave to create new multi-million dollar companies. India cannot afford to be just a services industry – we needs to start making products,” Yarlagadda added.
According to Frost and Sullivan, the Indian electronics product market which was $57bn in 2014 is projected to grow to $90bn by 2018. But only $4bn of this market is manufactured locally. In spite of this burgeoning appetite for electronic goods, India has struggled to become a major semiconductor manufacturing force. And let’s not forget that India has an advanced software industry and highly skilled and extensive hardware engineering capabilities. So why does India lag when it comes to manufacturing?
Yarlagadda points out that just external capital and policy changes alone are not sufficient to write this new chapter in India’s technology roadmap. “It requires significant investment from the Government. If you just look at the semiconductor industry, the Chinese government has decided to manufacture a great deal of the semiconductors it consumes, and has dedicated tens of billions of dollars to making this a reality. India needs to improve its product manufacturing capabilities. We have the talent. But we (the government) need to do more that say come invest here.”
With Indian electronics consumption set for explosive growth, there is a great opportunity for domestic electronics manufacturing. Yarlagadda points out that India’s enormous software success can be repeated in semiconductor design and manufacturing. “India has all of the assets needed to drive the next wave of industry innovation,” he said.