Reimagining India: Unlocking the Potential of Asia’s Next Superpower (25 page)

For example, why not set a tax of 10 percent on the 25 percent of vehicles with lowest energy efficiency and offer a subsidy worth the same dollar amount for the top 25 percent of cars with the highest energy efficiency? That way, the companies at both the top and bottom have an incentive to keep pushing, and as technology advances, the standard ratchets up. That’s much better than the U.S. approach of saying, “Let’s set fifty-four miles per gallon efficiency standards for 2025 even though we don’t know what technology will be available.”

More broadly, India has a major opportunity, thanks to its massive domestic market, to change the rules of its future development. For example, R&D tax credits encourage more R&D; a fat depreciation tax credit encourages very large capital-intensive facilities. The first favors distributed development and a more level playing field. The latter is more rigid and centralized and favors fewer, bigger players. Every policy contains some kind of bias in one direction or another. The question is: What do you want to bias your system toward?

If the environment is changing rapidly, then you want to bias your system toward change, flexibility, and adaptability. You want to foster what I call “innovation capitalism” versus “incumbency capitalism.” Incumbency capitalism relies on generous depreciation rules that favor big established players, those who have the most capital and can pay for $400 million plants. Innovation capitalism offers generous R&D tax credits that favor start-ups, people with ideas who are willing to experiment and create.

India needs more innovation capitalism. Take education. In Kenya,
Khosla Ventures has funded a start-up called Bridge International Academies, which is operating hundreds of schools that break even at $5 per child per month, a price even the poorest can afford. We’re opening one or two new facilities a week. The model combines physical schools that can take up to three hundred kids, but instead of using textbooks, the pedagogy runs off mobile phones. We compete head-to-head with public education provided for free by the Kenyan government and are winning—both in outcomes and in the minds of low-income parents who willingly choose the Bridge option over others.

The shift to online education is slashing costs and transforming traditional approaches to teaching. Instead of a prescriptive system that specifies a strict time (four years of high school) and variable results in terms of learning, we’re moving to a world of fixed learning (the set of things you master and skills you acquire) and variable time. The increasing sophistication of online assessment tools allows each student to advance at his or her own pace.

So when India plans for education in 2025, it may still want to build many more Indian Institutes of Technology. But it also needs to think about how it can leverage the technology revolution to reshape education at all levels and rethink its physical infrastructure. It needs to be sure it is creating policies that encourage these trends and funding lots of experiments.

One thing we’ve learned with Internet start-ups is that everything needs to be iterated continuously. A successful venture like Pinterest went through three hundred evolutions before it caught on. With online education, it will be the same. Like any biological system, it won’t be perfect at first, but it will keep on getting much better.

The same principles apply to health care. Today, if you compare the doctor-to-population ratio in the United States and India, India’s is ten times lower. The resource-intensive answer is to say we need to build ten times the number of medical schools we currently have. A better alternative is to accelerate the adoption of new computer diagnostic systems, delivered via cell phones and cheap tablets. I believe such systems can eventually replace 80 percent of doctor visits and deliver results with better and more consistent quality of care.

Happily, India, despite its painful shortages in physical infrastructure, is well on its way to creating a massive adaptive advantage by building out the foundations of a twenty-first-century electronic infrastructure through its Aadhaar program and its growing success in establishing universal digital identification. Having these fundamentals in place enables far more than simply authenticating that a person requires a government service from the National Payments Corporation of India, which in turn avoids the need for a physical visit to fill out forms in triplicate. With the right authentication system and new regulations to spur things like electronic contracts, you can build out a new digital reputation system. Just as an eBay seller has a reputation and people always migrate to the person with the most stars, every one of a billion people can have a reputation tied to his or her digital ID. That will fundamentally increase trust in the system, which in turn reduces risk and transaction costs (both major burdens in doing business in India today). In this way, India is establishing a framework that the private sector can build upon in myriad ways.

I’m not arguing India doesn’t need more and better physical infrastructure—roads, ports, power plants, and the like. I’m saying that the size of that future increase can be reduced through scaling out an alternative electronic infrastructure, which is also cheaper to build.

Despite India’s well-known problems, I am optimistic about its prospects. Its enormous young English-speaking population is a huge advantage. Its democracy, despite its messiness, adds resilience and stability to the system and gives it an advantage over planned-and-directed economies like China, despite China’s reputation for “getting things done.” The overseas Indian community is increasingly emerging as a great resource for seeding—not only capital but also a desire to experiment and try something different. And frankly, new ideas are more important than capital.

The critical missing link is to marry that leapfrogging mind-set to a better policy framework that sparks innovation and experimentation—one that reimagines the future by encouraging instead of prescribing.

Jean-Pascal Tricoire

Jean-Pascal Tricoire is chairman and CEO of Schneider Electric.

Venture into one of India’s remote villages, where paved roads and power lines have yet to reach, and in the evening you may find people using one of our company’s products, called the In-Diya. Launched three years ago, the In-Diya is a home lighting appliance, powered by solar energy plus rechargeable batteries, with some models including mobile-phone-charging capacity and small fans. We have high hopes for it, considering that the main alternative for many low-income villagers is kerosene lamps—with all the attendant pollution, danger, dimness, and inconvenience involved in keeping them filled—or just settling down in the darkness.

If we are to reimagine India, products like In-Diya are going to have to be a lot more pervasive than they are now. Even if In-Diya doesn’t take off—and we recognize that it still has a long way to go—India needs technologically ingenious solutions to provide on-site, widely distributed renewable energy generation at the end-user point. The country’s continued development and prosperity depend on it.

The world learned in late July 2012 that India has a serious energy problem, when the largest power outage in history—affecting more than six hundred million people—struck in twenty-two of the country’s states, spawning chaos on roads and trains, and shutting down hospitals and even water supplies for millions who rely on wells with electric pumps. Shocking as the blackout’s extent was, Indians themselves already considered unreliable electricity a fact of life; outages occur almost daily, if
only for brief periods, even in well-to-do areas. And for us at Schneider Electric, the outage provided dramatic (if regrettable) reinforcement that our company—with its broad lines of business focused on making energy safe, reliable, efficient, productive, and green from plant to plug—has important work to do in India.

The real issue is not what happened in July 2012—that kind of accident in the grid could conceivably occur in almost any country—but much more deep-rooted worries about whether India can close the gap between its surging demand for power and its lagging supply of reasonably clean, dependable energy sources and power-generating capacity.

India has less than 1 percent of the world’s proven oil and gas reserves, so it depends on overseas sources for most of its petroleum, which weighs heavily on the trade balance. Despite having the fourth-largest coal reserves in the world, the country has not yet been able to exploit this resource to good effect, and in any case, using more coal would generate significant additional carbon emissions. That is a problem India cannot possibly ignore; it is more vulnerable than almost any other country on earth to the consequences of climate disorder, in the form of droughts, floods, and typhoons. Although there is plenty of wind and solar energy potential, and some progress has been made over the last decade in the renewable-energy-generation sector, a combination of factors prevents such renewables from extensive development. These include the current electricity costs for these sources, the small installed base of renewable-generating capacity, and political difficulties that often complicate the acquisition of land needed for the development of wind farms and other infrastructure.

Moreover, an appalling amount of the electricity that India generates goes to waste because of what we in the industry call T&D losses—transmission and distribution problems that cause power to leak, or be diverted, somewhere between generation and the intended end user. India’s 25 percent rate of T&D loss is three to five times the rate in China, the United States, and Britain. One major reason is the issue of governance
and the inability of public distribution companies to collect money owed and clamp down on illegal connections. This fact, coupled with the Indian government’s propensity to distribute free power, leads to massive cross subsidies and financial distress for public sector distribution companies—a huge dampener on the economy. Poor infrastructure is another important contributor to higher losses in power transmission and distribution.

Around three hundred million Indians have no access to electricity in their homes, and another four hundred million or so have access only four to six hours per day. (To put those figures in perspective, the number of people in India with fewer than four to six hours a day is well over the entire population of the European Union.) For those who do have access—both consumers and businesses—prices are among the highest in the world, in terms of purchasing power parity.

Add to those issues the imperative of ensuring that India’s leading industries, information technology in particular, get the quality and reliability of energy supplies that they need to thrive. Mission-critical facilities such as data centers cannot serve global customers cost-effectively on an uncertain and unreliable grid or with very expensive power backup based on pollution-spewing diesel generators.

Here’s the grim result once all the numbers are totted up: To keep pace with burgeoning demand and prevent its economic growth from being derailed, India needs to add almost six hundred gigawatts of power-generation capacity to its current installed capacity of around two hundred gigawatts. That is equivalent to bringing one six-hundred-megawatt power plant online every week for the next twenty years. Along with the transmission and distribution infrastructure upgrades required, this translates into a cumulative investment of approximately $1 trillion—more than half of the nation’s annual GDP at current levels—over the next twenty years.

Daunting as this arithmetic is, reasons for hope abound. Most important, being a late mover may bestow enormous advantages on India.
The country will be making its major investment in energy at a time when energy and power-generation and -transmission technologies are changing more than they did in the past century. The use of the Internet and digitization to enhance energy efficiency, the exploitation of distributed and renewable energy technologies at affordable prices, plus smart grid, smart city, and smart storage technologies, are transforming the world of energy as we know it.

Marrying India’s strength in IT to its energy sector could result in these technological changes providing substantial benefits much more rapidly than elsewhere. Of course, the country will also need to make large investments in power plants and transmission lines. But conceivably, India can address many of its energy challenges in a very different and innovative manner, without incurring all the costs and collateral damage of the traditional model.

A first priority must thus be to increase efficiency at the point of end use. Commercial buildings offer one of the best examples. Studies have shown that typical office buildings in India consume approximately 250 kilowatt-hours per square meter per year, even as some IT companies are cost-effectively constructing and occupying new buildings that operate at around 75 kilowatt-hours per square meter per year. Consider too that air-conditioning of typical office buildings in India has been found to cool fifteen to eighteen square meters per ton of refrigeration, whereas state-of-the-shelf technology coupled with thoughtful design approaches, available at competitive costs, can easily reach air-conditioning utilization of fifty square meters per ton of refrigeration. In both cases, cost-effective approaches offer savings potential of as much as 70 percent; similar potential is likely there for the taking in the residential, industrial, and agricultural sectors. Capturing energy savings downstream offers three to four times the benefit in terms of generation capacity upstream, thanks in part to the savings that can be achieved along the entire transmission and distribution infrastructure.

A second priority is to make India’s national power grid much
“smarter”—that is, with as much interactivity as possible between the point of generation and point of end use, so that the amount of electricity generated closely matches demand. This is an especially challenging prospect for India, but it is badly needed, because of the state governments’ penchant for maximizing power consumption within their own borders and the difficulty faced by power producers and load dispatchers who do not have effective tools to halt illegal power draw. India also currently lacks utilities that can impose the widespread use of smart meters to capture information. To be realistic, it is difficult to harbor much optimism about the likelihood that India will progress far in the smart-grid direction anytime soon. But overcoming those obstacles could provide big payoffs; smart grid technologies make it possible to do much more with less.