The Innovation Route

The Innovation Routeto Development

Indo-US Perspective, 2020

The Innovation Routeto Development

Indo-US Perspective, 2020

Published by

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Edited by:Udai S Mehta

Deputy Executive Director, CUTS Internationaland

Prashant Sharma

Senior Programme Officer, CUTS International

© CUTS International, 2020

First published: March 2020

Citation: (2020), Mehta, Udai S and Prashant Sharma (Eds.), ‘The Innovation Route to Development:Indo-US Perspective, 2020’, CUTS International, Jaipur

CUTS would appreciate receiving a copy of any publication, which uses this publication as asource. No use of this publication may be made for resale or other commercial purposes without

prior written permission of CUTS.

ISBN 978-81-8257-282-9

Printed in India by MS Printer, Jaipur

#2005

Abbreviations 5

Editors Note 7

POPULAR REFLECTIONS ON INNOVATION 9

Innovation in IndiaShashi Tharoor 11

Inclusive Innovation: Reinventing the WheelArun Maira 18

Hyperlink a Grand AlliancePradeep S Mehta and Robert D Atkinson 21

Secrets to Success for India’s Budding Entrepreneurs and StartupsFrank Islam 24

DISRUPTIVE AND DIGITAL INNOVATION LANDSCAPE IN FOCUS 27

Gear Up to Lead Disruption in the Digital EraRita McGrath and M Muneer 29

The Task Ahead of Us: Transforming the Global Economy with Connectivity,Automation, and Intelligence

Robert D Atkinson 32

Digital Manufacturing InnovationSumit K Majumdar 40

Transition from Industry 2.0 to Industry 4.0 in India:Challenges and Opportunities with Special Reference to Indo-US Collaborations

SP Sharma and Megha Kaul 45

Fostering Innovation-Based ManufacturingVivan Sharan and Yamini Jindal 54

Contents

The Innovation Route to Development

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Ecosystem of Innovation Needed to Boost AI in IndiaManoj Kewalramani 60

As AI Makes Inroads, People, Companies and Nations Must Digitise orWatch their Prospects Die

Andrew Sheng 67

SECTOR-SPECIFIC DIMENSIONS OF INNOVATION 71

Building Agristack for the Benefit of Indian FarmersHemendra Mathur 73

The Right Ways to Take US-India Energy Cooperation to the Next LevelKartikeya Singh 79

Infrastructure and Innovation Partnership for a Sustainable FutureNatasha Jha Bhaskar 82

A Collaboration Model to Accelerate High Quality Healthcare for the WorldGopala Krishnan 87

Bilateral Cooperation for Innovation in Defence between US and IndiaVikram Mahajan 91

Towards Realising the Indo-US Defence Partnership PotentialYusuf T Unjhawala 95

Time to Boost Innovation based Indo-US Energy Storage Cooperation Arvind Mayaram, Garima Sodhi and Rinki Singh 99

Sustainable Infrastructure Development in the India-US Indo-Pacific NarrativeKrithika Subramanian 109

MISCELLANEOUS 115

A Long March to High-Tech Self-Reliance would hold back ChinaJames Crabtree 117

Building Smart and Sustainable InfrastructureVijaya S Iswara 121

Creating US-India Bridges through Service, Social Impact and Innovation:Lessons for the Future

Nishant Pandey and Katja Kurz 125


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AbbreviationsABES : Advanced Battery Energy StorageACES : Advancing Commonwealth Energy StorageADB : Asian Development BankAI : Artificial IntelligenceAMP : Advanced Manufacturing PartnershipAPMC : Agricultural Produce Market Committee

BFSI : Banking and Financial Services IndustryBHIM : Bharat Interface foe MoneyBMW : Bavarian Motor Works

CAES : Compressed Air Energy StorageCII : Confederation of Indian IndustryCPUC : California Public Utilities CommissionCSIS : Center for Strategic and International Studies CSR : Corporate Social ResponsibilityCVD : Countervailing Duty

DBT : Direct Benefit TransferDDD : Discovery Driven DisruptionDPU : Department of Public UtilityBTM : Behind The MetreDRDO : Defence Research and Development OrganisationDTTI : Defence Technology and Trade Initiative

EV : Electric VehiclesFDI : Foreign Direct InvestmentFERC : Federal Energy Regulatory CommissionFES : Flywheel Energy StorageFOGSI : Federation of Obstetric and Gynaecological Societies of India

GCC : Gulf Cooperation CouncilGDP : Gross Domestic ProductGHG : Greenhouse GasGVCs : Global Value Chains

IFC : International Finance CorporationILO : International Labour OrganisationIoT : Internet of ThingsIPRs : Intellectual Property Rights


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ISTAR : Intelligence, Surveillance, Target Acquisition, and ReconnaissanceITC : Investment Tax CreditIUSSTF : India-US Science & Technology Forum

JCERDC : Joint Clean Energy Research and Development Centre

MeitY : Ministry of Electronics and Information TechnologyMNRE : Ministry of New and Renewable Energy

N:P:K : Nitrogen, Phosphorus and PotassiumNDAP : National Data and Analytics PlatformNESM : National Energy Storage MissionNIIF : National Investment and Infrastructure FundNWSHP : National Wind-Solar Hybrid Policy

OEMs : Original Equipment Manufacturers

PACE : Partnership to Advance Clean EnergyPCBs : Printed Circuit BoardsPFs : Pension FundsPHS : Pumped Hydroelectric StoragePHS : Pumped Hydroelectric StoragePMFBY : Prime Minister’s Fasal Bima YojnaPMP : Phased Manufacturing ProgrammePMS : Portfolio Management ServicesPPPs : Public Private Partnerships

R&D : Research and DevelopmentRoA : Return on AssetsRoI : Return on Investment

SDGs : Sustainable Development GoalsSECI : Solar Energy Corporation of IndiaSERIIUS : Solar Energy Research Institute for India and the USSHC : Soil Health CardSTA : Strategic Trade Authorisation

TA : Technical AssistanceTDS : Tax Deduction at Source

UI-ASSIST : US-India Collaborative for Smart Distribution System with StorageUSAID : United States Agency for International DevelopmentUSFDA : US Food and Drug AdministrationUSISTEF : India-US Science & Technology Endowment Fund

VIN : Vehicle Identification Number


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The notion of Innovation is making strides in all spheres of economic and developmentactivities in India. Given the size of its population of 1.37 billion which is slated to

surpass China’s 1.43 billion by 2027, only to become the world’s largest, it deems to beessential. The mainstream thinking is to generate jobs, improve skills and livelihoods aswell as address development challenges confronted by the country.

Innovation is an apt response to address these challenges. With initiatives, such asStartup India, Skill India, Tinkering Labs at schools other than establishing New, Emergingand Strategic Technologies (NEST) division at Ministry of External Affairs, Governmentof India among others, the scope of expanding innovation and entrepreneurship in Indialooks promising. However, it is going to be a daunting task to even mobilise the vitalsupport, let alone helping entrepreneurs realise their full potential unless the Whole-of-Government approach and efforts are backed by vibrant innovation ecosystemsencompassing silos.

In this quest, it is required for India to not only develop wide arrays of such ecosystemsbut also integrate them globally to ensure greater flows of capital, knowledge, talent, andtechnology. In doing both, India can gain a lot from the US. The US has been an apostleof innovation and entrepreneurship for decades. Attributing the unparalleled might of thecountry to that spirit will not be an exaggeration. Not only did the US attract the best ofthe talents but ensured an enabling environment which in return helped the country remainon top of the innovation ladder. As a result, the US continues to be a progressive landdriven by ideas, skills and collective efforts.

Silicon Valley in the country is touted to be the greatest ecosystem for innovation andentrepreneurship. It enjoys being the global hub of emerging and disruptive technologies.Also, the US has the highest numbers of startup unicorns in the world, a startup valuingmore the US$1bn, among many other such distinctions. Around four million IndianAmericans have contributed remarkably (and continue to do so) for America to remainahead of the curve. This is a strong foundation available for the two countries to boostcomparative linkages and develop innovation ecosystems in India. Not only will thatcomplement in scale but also aligns well with the newly construed level of partnership,i.e. Comprehensive Global Strategic Partnership between the two countries.

At the two Indo-US innovation roundtables organised by CUTS (and in partnershipwith the leading Indo-US Business Associations)1 in Washington DC and New Delhi inOctober and December 2019 respectively, innovation was recognised to be a catalytic

Editors Note

1 Report of the Roundtables on Fostering Indo-US Innovation Cooperation for Mutual Prosperity, available at:http://cuts-wdc.org/pdf/event-report-roundtable-on-fostering-indo-us-innovation-cooperation-for-mutual-prosperity.pdf

Udai S MehtaDeputy Executive

DirectorCUTS International

Prashant SharmaSenior Programme

OfficerCUTS International


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factor for taking bilateral relations to even higher levels. The participants in those twomeetings urged that mutual concerns involving Intellectual Property Rights (IPRs) shouldbe settled, without sacrificing individual development interests. A recent memorandum ofunderstanding on IPR between the two countries signifies the efforts made in that direction.

As some IPRs may be perceived as a public good while others may not, the Indian andUS authorities need to find several common grounds. An approach such as this is needed toenable the two way public and private sector partnerships to scale across India’s economicand development landscape.

Above all, to develop innovation ecosystems in India, enabling narratives and deliverables(in terms of policies, incentives, capital, infrastructure, skills, technology, etc.) continuesto be the need of the hour. Not to say that India is not doing enough but this can further beemboldened by strengthening cross-fertilisation of knowledge and learning between the USand India. Not only will that sustain the Government of India’s efforts to boost the Indianeconomy but also provide the country’s youth access to contemporary skills and technology.

This policy volume in this context draws a collective response by eminent experts andyoung scholars who provide some ‘food for thought’ for boosting innovationcomplementarities between the two countries. As a whole, it covers philosophical, sectoraland technological underpinnings and is comprised of fresh and adapted contributions frompeople from all walks of life. It includes reflections from well-known stalwarts, such asShashi Tharoor, Arun Maira, Robert D Atkinson and Pradeep S Mehta along with manyother experts and young scholars invested in driving the change. Moreover, the volumedovetails in-depth perspectives about fostering Indo-US innovation cooperation in agriculture,energy, education, defence, healthcare, infrastructure, investment, digital and 4IRtechnologies, manufacturing, etc.

Other than marking our sincere thanks and appreciation for these valuable contributions,we would like to also acknowledge the large number of submissions that we received inresponse to the call for papers in mid-2019. Regrettably, we could not accommodate allbut convey our sincere gratitude for efforts put by everyone. Furthermore, we areoverwhelmed by the invincible confidence and zealous trust of final contributors in CUTSas we tried to give the volume a holistic flavour over the past few months.

Last but not the least; this volume would not have been a reality without the constantguidance provided by Pradeep S Mehta, Secretary General, CUTS International. Ourheartfelt thanks to him for showing us the way and keeping us motivated during theconceptualisation and implementation phases. We convey our gratitude to Bipul Chatterjee,Executive Director, CUTS International for all his inputs and critical support in helping usmake this happen.

Furthermore, we greatly appreciate the support provided by Madhuri Vasnani and ourformer colleague Nimra Khan; other than colleagues who were, on many occasions, partof various reviews of submissions and discussions, mainly Amol Kulkarni, Shagufta Gupta,and Abhishek Kumar. We are also thankful for the diligent support provided by MukeshTyagi and Rajkumar Trivedi as well as Gyan Chand Jain and Sudharshan Jain, respectivelyfrom our publications and accounts & finance teams.

Let us conclude by acknowledging the support provided by Rajasthan State IndustrialDevelopment and Investment Corporation (RIICO) Limited in the form of their advertisementinside the back cover of this volume. We encourage and look forward to your readership,feedback, and support in wider circulation while assuring that CUTS will continue to takethis treasure to relevant Indian and the US authorities.


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POPULARREFLECTIONSON INNOVATION


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As a policymaker and someone who iscaptivated by the subject of innovation

it is clear that with its capacity ofovercoming and efficiently challenging ourproblems through critical and out-of-the-boxthinking, innovation is poised firmly tobecome a significant driver of change in the21st century. This is particularly true inIndia, where I believe that innovation holdsthe potential to transform the socialtrajectory of our 1.3 billion-strongpopulation. India’s example, as anincreasingly innovation-driven economythat looks towards both innovation andentrepreneurship as the path to the future,where answers are being found through freshideas and fresh thinking, is one for the worldto take note of.

The evolving technological space in theera of big datasets, blockchain and artificialintelligence, as well as burgeoning demandfor new products and services within thedomestic market, has been driven by factors,such as the availability of both domesticand international funding and consolidationactivities by several firms. Startups havepermeated our landscape, where Indians

have disrupted mainstream ways of thinkingand embraced innovation with enthusiasmand spirit, finding new ways to answer oldquestions.

When one studies the etymology ofinnovation, one finds its interestinglyturbulent history. Innovation was once aderogatory term, not a complimentary one.Its redemption came with the influential 20th-century economist Joseph Schumpeter, whosaw it as the greater end-product of anysuccessful invention and as the precursor todevelopment, locating entrepreneurship asthe pathway between the two. Thephraseology of disruption is now followingthe same roadmap.

However, the key terms here, innovationand disruption, have a long history in thedevelopment of India. In the land ofAyurveda, the country that invented the zero,making the decimal system possible; the landof the first recorded instance of rhinoplastysurgery over 2000 years ago; and the sourceof considerable innovation in fields rangingfrom astronomy to metallurgy the traditionof innovation is not a new one. But that isancient history. One could argue that the

Innovation inIndia Shashi Tharoor

Member of Parliament(India), Lok Sabha

Startups have permeated our landscape, where Indians have disruptedmainstream ways of thinking, and embraced innovation with enthusiasmand spirit, finding new ways to answer old questions.


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contemporary interest in innovation in theIndian context stems from the remarkableand proven record of Indians in globallyrecognised innovation hubs such as SiliconValley, which, towards the end of the 20th

century, saw the proliferation of severalstartups helmed by Indians.

In an interesting statistic I read recently,13.4 percent of startups that originated inthe Valley in the 1980s, 1990s and early2000s were founded by Indians, many ofwhich have gone on to become householdnames across the world. It is said that 40percent of all Silicon Valley companies haveIndians among their founders or in theirleadership. Together with our historicaptitude for adaptability and entrepreneurialstrengths, Indians succeeded in the US, andin a ‘reverse brain drain’, their spirittransferred itself to India. Today, the Indiancity of Bengaluru is recognised as the‘Silicon Valley of India’ and, if the city ismore of a ‘Silicon Plateau’, I also know ofa place near Mumbai that is jokingly called‘Powai Valley,’ for the increasing numberof startups that are located there.

From OYO to Ola, Indian startups aretaking on strong competition on the globallandscape. Many of these have now joinedthe prestigious ranks of ‘global unicorns,’— the nomenclature for privately heldstartups valued at over US$1bn, a termcoined by Aileen Lee because of their rarity,or rather the mythicism of their possibility.But India’s unicorns, unlike the ones oflegend, seem likely to proliferate rather thanbecome extinct.

We have invented our club for smallbusinesses and young, but ambitious,ventures that we call ‘nano unicorns.’ Thispilot project launched in the Indian state ofOdisha promotes skill development andbusiness capacities for individuals whodisplay distinct entrepreneurial traits,whether it be the owner of a manufacturingunit or a roadside Indian street-food vendor.At the same time, we can boast of a 50percent increase in start-ups concerned withadvanced technology, especially the Internetof Things (IoT) and data analytics, settingthe pace globally in tandem with theamplification of entrepreneurial diversity inIndia. How there is now a proliferation ofstartups within the country, a country thathas emerged as the world’s third-largeststartup ecosystem (not less than 11,000 by2020 from the reported 4700 startups in2016), tells a much larger story.

India is the youngest major economy inthe world. At a time when many of ourpotential competitors — China, Japan, SouthKorea — are facing a serious demographicsqueeze, and of course, the rest of the worldis aging (in Europe the average age is goingto be 46 in 2020, in Japan it is going to be47, in even youthful immigrant- fuelledAmerica, it is going to be 40), the averageage in India will be 29. So, we have thishuge young population: almost 50 percentunder 25, and approximately 65 percentunder 35. A young country where freshgraduates will be joining a dynamic,competitive, productive, youthful workforce,which could be an engine of the world,primed to take over that role from China.

We need to cultivatean ecosystem of

innovation, as theright mind-set is

often half the battlewon in finding the

right solution

“

”


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The International Labour Organisation(ILO) has predicted that by 2020, we willhave, in India, 116 million workers in thejob-starting age group of 20 to 24, whereasChina will only have 94 million. Thesenumbers suggest that we will have the labourforce that could change the world. Oursituation compares well with theindustrialised world — as its labour forcereduces by 4 percent by 2020 and that ofChina goes down by 5 percent, India’s willincrease by 32 percent. So as far as the agestructure and potential are concerned, it’s ahuge competitive advantage and this is thetime for us to seize that advantage.

These are promising statistics, but theydemand proactive approaches to truly tapinto their potential. Leaping towards agolden age of internationalinterconnectivity, the Gulf CooperationCouncil (GCC) countries are host to someof the largest numbers of migrant workers,who contribute greatly to the economicvitality of these nations. The vital aspect,as this displays, are the people and themovements they make. But, as I have saidseveral times, ease of mobility, workforceadvantage, and the demographic dividendwill only work in our favour if we can

educate and train our young people to seizethe opportunities available to them in the21st century. And there we are failing: ‘skilldevelopment’ has remained a mantrawithout a method, and the alarming drop-out rate from our government schools hasnot been compensated for by any significantincrease in vocational training opportunitiesto cater to their needs.

The onus of harnessing our nation’spotential, bringing about the social andeconomic transformation we haveenvisioned, requires leadership across allsectors of our economy. The greatestweapon in our national arsenal is theburgeoning entrepreneurial ambition whichis now on the front-lines, especially innations like India with their robustdemographic potential. A distinctive ‘BrandIndia’ has already been achieved in part dueto a phenomenal rise of Indian businesspossibilities, but even more so, due to theproliferation of micro, small and medium-level entrepreneurial ventures in the recentyears. Some will succeed, and a number willfail, but they will all energise our economicspaces and throw up the best available mindsand talents to lead the economy and to leadthe country. We need to cultivate an


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ecosystem of innovation, as the right mind-set is often half the battle won in findingthe right solution.

However, to continue to overcome thechallenges, unique and collective, that weface in this century and beyond, we mustcount upon the inherent creativity and spiritof enterprise in our nation. In evaluatingour national experience and expertise, onegauges how small the world is, but howimmense is the magnitude of the potentialit holds. It is encouraging to see how casestudies of Indian grassroots initiatives likethe ‘Dabbawallahs of Mumbai’ or ‘SulabhInternational’, or even innovative practicesthat were introduced into the IndianRailways (environment-friendly kulhadchais, innovative financial management)have all been introduced in the curricula ofvarious institutions of higher education, notjust in India but around the world, giving ataste to students of how indigenous businessmanagement practices have worked.

Our Indian principle of ‘jugaad’ (a termfor inexpensive innovation to solveproblems) is becoming institutionalised.Critics give it a negative connotation as amethod that people use just to twist theirway around the system to get things done

by cutting corners. I am also aware thatsome say jugaad is not good enough,because it is about simply ‘making do’whereas we should be striving forexcellence. But I think jugaad is much morethan that. To me, it is about new ways ofthinking out of the box, to re-purpose things,to make do with what you’ve got withinyour resource constraints, to create solutionsfor seemingly intractable problems, to thinkcreatively about overcoming obstacles andmost importantly, to bring non-traditionalsolutions to traditional issues.

Let me give you the example of an Indianvillager who constructs a makeshift vehicleto transport his livestock and goods byrigging a wooden cart with an irrigationhand pump that serves as an engine.Common machines and household objectsare reincarnated in ways that their originalmanufacturers never intended. Everythingis reusable or re-imagined. If you cannotafford your mobile phone bills, you inventthe concept of the ‘missed call’ – a briefring that is not answered but that signalsyour need to speak to the recipient. Duringthe summer, the demand for lassi goes up,and normal mixers are not enough forDhaba-owners to meet demand. So one


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Punjabi entrepreneur repurposed hiswashing machine into a gigantic mixer tomake lassi, and now sells the stuff in vastquantities!

Another thing about jugaad: Instead ofcomplicating or refining their products,Indian innovators strip them down to theirbare essentials, making them affordable,accessible, durable, and effective. If yougoogle the phrase ‘frugal innovation’, youwill find that the first 20 hits all relate toIndia. We are path-breaking leaders in‘frugal innovation,’ and, keeping in mindour poorest, we have systematised what canbe called ‘Innovation’ (for Indianinnovation) — achieving success within ourlocal resource constraints. Indeed, workingwith the widest of opportunities at thebottom of the pyramid is the way up tobecoming a super-economy. Our outlooktowards innovation across the spectrum,textile to technology, community tocommerce, has been such a trailblaser that,in 2011, the University of Toronto instituteda dedicated ‘India Innovation Centre’ on itscampus, which continues to studyinnovation.

Indian entrepreneurial ingenuity hasproduced a startling number of world-beating innovations, none more impressivethan the Tata Nano, which, at US$2000(when it first came out on the market) or Rs1 lakh, cost roughly the same as a high-endDVD player in a Western luxury car. Ofcourse, there’s no DVD player in the Nano(and no radio, either, in the basic model);but its innovations (which have garnered34 patents) are not merely the result of doingaway with frills (including power brakes,air conditioning, and side-view mirrors).Reducing the use of steel by inventing analuminum engine; increasing space bymoving the wheels to the edge of the chassis,and relying on a modular design that enablesthe car to be assembled from kits was inmany ways groundbreaking. Thoughadmittedly the Nano was not necessarily amarketing success (as its makers misjudged

the prevalent perception of the ownershipof a car in Indian society as a symbol ofstatus rather than an engine of economicutility), it certainly proved that you coulddo more with less.

Similarly, the Indian Mission to Mars,Mangalyaan, cost approximately Rs 492crores (US$70m), which was less than thebudget of the Hollywood spacemovie Gravity! This was about 11 percentof the cost NASA incurred for its own latestMars programme at Rs 4,500 crore(US$690m). Then there’s the GE MAC 400,a handheld electrocardiogram (ECG) devicethat costs Rs 50,000 or less than US$800(the cheapest alternative costs more than Rs1 lakh or US$2000). The GE MAC 400 usesjust four buttons, rather than the usual dozen,and a tiny portable printer, making it smallenough to fit into a satchel and even run onbatteries; it has reduced the cost of an ECGto just Rs 50 (less than a US$1) per patient,making it affordable to very poor Indians.Equally remarkable is the Tata Swachh, Rs1,500 water purifier (ten times cheaper thanits nearest competitor). The Swachh uses ricehusks (one of India’s most common wasteproducts) to purify water. Given that somefive million Indians die of cardiovasculardiseases every year, more than a quarter ofthem under 65, and that about two milliondie from drinking contaminated water, theseinnovations have proved to be nothing lessthan groundbreaking. And they correspondto the real needs of real Indians.

That is also the distinguishing feature ofthe annual Mashelkar Award for Innovation,given by the eminent scientist in memory ofhis late mother. The very first prize was anexample of rewarding an innovative solutionto an Indian problem. About 15 million ofour compatriots are blind, most forpreventable causes. There are simple testsavailable for glaucoma and cataract, butthey require the dilation of the pupils of theeyes, which lead to a fizzy vision for severalhours afterward. The bulk of India’s poorare daily wage workers, and if they can’t


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see for several hours they can’t work thatday; if they don’t work that day, they haveno income, and their families don’t eat thatday. So they avoid the eye tests, leading toincreasing glaucoma and cataract, andeventually blindness. The first Mashelkarprize went to an Indian innovation thatpermitted eyes to be tested swiftly andcheaply without dilation. The innovation,now sold under the name 3-Netra, is a hugesuccess and has enabled many poor peopleto take steps to ward off preventableblindness.

My argument here is that thinking out-of-the-box, resolving colossal problemswithin limited resources, in touch withIndia’s realities and necessities, with newinnovative solutions is what we can really,truly call disruptive. The more we disruptconventional ways of thinking, traditionalmethods of practice, and orthodoxapproaches to existing problems, the morewe are likely to succeed. India gave theworld the zero, all those thousands of yearsago. But today, all we are inventing, itsometimes seems, is zero. That needs tochange and we need to have more world-conquering, socially-useful inventionscoming not just from India or California butfrom across the world.

Globalisation, which we see today as acommonplace term, offers us bothchallenges and opportunities. The end of theCold War, the narrowing of globalboundaries, and the communicationsrevolution have rewarded us withglobalisation. It is a complex, controversialand synergistic process, in whichimprovements in technology, especially ininformation technology and transportationhave combined with the deregulation ofmarkets, formulation of free tradeagreements, liberalisation, the free flow ofcapital and open borders generallyspeaking, except for workers sadly, to bringabout a vastly expanded flow of managers,money, goods, services, and information.This process at its minimum integratespeople, businesses, non-governmentalorganisations, and nations into largernetworks, and at its best promotesconvergence, harmonisation, efficiency,growth, and, perhaps, even goodgovernance practices around the world. Forinnovators, globalisation offers all thenecessary ingredients for success.

But it has a dark side too. Globalisationproduces economic and social dislocations.It arouses concerns over job security, thedistribution of economic gains, the impactof volatility on families, communities, and

We need aninternational

commitment to creategenerations of suchindividuals who can

design qualitysolutions that can

work across all theseareas, create

awareness, promoteeffective

implementation andcontinually improve

them as we go along

“

”


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nations. Economic growth is vital, indeedindispensable. But the magic of the marketwhere entrepreneurs can thrive will notappeal to those who cannot afford to enterthe market place at all. We need to extendthe benefits of globalisation andliberalisation to the poor and vulnerable bysupporting growth and also distributing thefruits of that growth to those who have beenexcluded or marginalised, so that they toocan become consumers and expand themarket.

According to the latest Oxfam WorldInequality Report, the assets of just 26 ofthe richest people in the world are more orless equal to the combined wealth of 50percent of the world’s population, whoaccount for just 1 percent of total wealth,as indicated by the Credit Suisse GlobalWealth Report 2018. A mere 1 percent ofthe fortune of the world’s richest men isequivalent to the whole health budget forthe country of Ethiopia, with 105 million.This great imbalance is the millstone aroundour necks, as leaders of industry and policy.We need to remember that even if ourglobal growth rate is 3.6 percent, we cannotforget that the focus our development mustbe on the bottom 25 percent of the worldwho are currently living in extremeconditions of poverty.

As an Indian Member of Parliament, aformer Minister of State for HumanResource Development, and as aninternational civil servant at the UnitedNations, I have had the privilege ofinteracting with many young people,potential future leaders. I have beenimpressed by their enthusiasm, enterprise,and the idealism that they have shown indealing with problems exclusive to theircountry or shared between us all, and thatis why I am hopeful that they will helpidentify quality solutions across the boardto our long-standing international problems.These are problems that have not changedfor decades. But our power of disruption has.Our problems of providing necessities to all

our citizens, what was once famouslyphrased in India as Roti, Kapda aurMakan (food, clothing, and shelter) havenow been elevated to bijli, sadak aurpaani (electricity, roads/connectivity, andwater) — and one can add kitab,naukri (education and employment) andperhaps these days broadband internet aswell to the basic wish-list that everyordinary Indian or global citizen must-have.The exigency now is to find innovative waysto tackle these shortfalls.

In other words, it is time to set aside theold stereotypes of who can and cannot excelat what in our globalising world. In this newdisrupted world, we need entrepreneurs whocan lead, who can innovate, who caninspire, who can reach out beyond the limitsthat their forerunners have lived with andcreate systems that hold explosive potentialfor our mutual good. We need aninternational commitment to creatinggenerations of such individuals who candesign quality solutions that can work acrossall these areas, create awareness, promoteeffective implementation and continuallyimprove them as we go along.

Today, it is important that we continueto venture into the world to display theunparalleled talent and intelligence of whichIndians are capable, and set up challengingnew endeavours. If this is done it will makesignificant contributions to the advancementof our knowledge-base and the economic-social growth of the world.

Mahatma Gandhi once said, “It is thequality of our work which will please Godand not the quantity ‘. He, of course, morefamously declared, ‘Be the change that youwish to see in the world.’ Since quality willnot come without change, I think, both hisexhortations apply here — to changeourselves, our patterns of thinking and ournetworks of creating, and to do so with workand values of the highest quality.

Adapted from his Keynote Speech to the Indo-US

Entrepreneurs Summit, California, May 2019


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InclusiveInnovationReinventing the Wheel

Arun MairaFormer MemberPlanning Commissionof India

India needs to develop innovations that will produce more socially inclusive and moreenvironmentally sustainable growth.

“Why do Indians want to reinvent the wheel?” a US businessman asked,

in a discussion on innovation, at a US-IndiaBusiness Summit in New Delhi in 2012. TheUS and other developed countries havefound the solutions. India should open upits markets to Western solutions morequickly if it wanted to progress faster, hesaid. The response from the Indian side was,the US-designed wheel of progress is puttingtoo much pressure on the Earth, and the cartis leaving too many people behind. That iswhy India needs to develop innovations thatwill produce more socially-inclusive andmore environmentally-sustainable growth.Therefore, we must go back to the drawingboard to rethink the purpose of innovation,the concept of innovation, and thegovernance of innovation.

The Purpose of InnovationThe Indian view was that the purpose of

innovation must be to produce inclusivegrowth, more quickly and more visibly.Whereas the US model (sometimes described

as the ‘Silicon Valley model’), which hasproduced remarkable technologicalinnovations, produces more billionaires andis increasing the distance between people atthe top and the bottom of the pyramid. Thebelief is that more wealth produced at thetop will provide more wealth to trickle down.The problem is that the pace of accumulationat the top has been exceeding the pace oftrickling down, increasing wealthinequalities, not only in the US but in allcountries that have adopted US-led conceptsof innovation and economic growth.

The Concept of InnovationSince the invention of the internet 30

years ago, followed by rapid advances incommunication and computationtechnologies, ‘innovation’ has becomeassociated in the public imagination almostentirely with ‘technology’; and the term‘technology’ with telecommunication andcomputation techniques. In this paradigm,a new ‘app’ to expedite delivery of pizzaswith a smart-phone is celebrated as an


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innovation, and its inventor expectsinvestors to provide millions of dollars tosell it.

Beyond its association with informationtechnology, innovation is also associatedwith intellectual property rights(IPRs).Pharmaceutical companies that makebillions of dollars by selling new molecules,which are ring-fenced by intellectualproperty monopolies, ever-greened andextended for long periods, are called‘innovative’ pharmaceutical companies.These ‘innovative’ companies prefer toinvent medicines to improve the lifestylesof the rich who can pay high prices ratherthan discover drugs for treating theafflictions of the poor.

In this popular concept of innovation,its purpose has been reduced to theproduction of patentable products andservices and to the production of profits forinventors and investors in their ventures.Whereas, a broader view of innovationreveals that greater impacts on business andsociety are produced by innovations inbusiness models and forms of institutions.For example, the invention of the limitedliability company has had enormousimpacts on economies. And institutions ofelectoral democracy have changed shapesof societies more than any app on asmartphone can.

The Governance of InnovationThe US and India are champions of

democracy. India is the world’s largestdemocracy; and the US is democracy’sglobal beacon, with its Constitution foundedon the principle of ‘government for thepeople, by the people, of the people’.

Capitalism and democracy are the twoforces that have shaped economies andsocieties in most countries of the world sincethe collapse of the Soviet Union 30 yearsago. These two forces operate on verydifferent principles. Capitalism is based onthe principle of property rights; democracy

on the principle of human rights. In capitalistenterprises, your voting rights are based onhow much you own. One dollar equals onevote; a million dollars equals one millionvotes. In a democracy, everyone rich orpoor, whether they have a billion dollars orno dollars, is supposed to have an equal voteand an equal voice in how society isgoverned.

Capitalism and democracy run ondifferent types of electricity. If you plug anappliance designed for AC electricity into asocket that supplies DC electricity somethingwill blow up.

Just as institutions of government mustbe reformed to create an inclusivedemocracy, institutions of business andcapitalism must be reformed to create an

Just as institutionsof government must

be reformed tocreate an inclusive

democracy,institutions ofbusiness and

capitalism must bereformed to create

an inclusive economy

“

”


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inclusive economy. Therefore, businessesmust be not only For the People, they mustalso be By the People, and Of the People.

For inclusion, we need innovations toprovide affordable and accessible goods andservices, especially at the bottom of theeconomic pyramid. This is the businessopportunity for ‘profit at the bottom of thepyramid’ that C.K. Prahalad wrote about,and that many entrepreneurs are pursuing.By producing products and services forpoorer people, they can expand theircustomer base. For example, a shampoosachet enables even poor people to buy abig company’s products. The profit from thebottom of the pyramid goes to theshareholders of the capitalist enterprise.

But this does not address the root causeof poverty. People are poor, and cannotafford to pay much, because they do nothave incomes. They need jobs and incomesto lift themselves out of poverty. Therefore,they must be engaged in the processes ofproducing goods and services for themselvesand others. And therefore, we needinnovations in production models thatprovide more jobs, so that Business is Bythe People too.

Employees in enterprises owned byothers have incomes but do not have a sharein the creation of wealth, the fruits of whichwill go entirely to the owners. For a fullerinclusion in the benefits of growth, we needmore enterprises in which the producers and

workers share the wealth created too. Thisrequires innovations in enterprise design andgovernance models to shape the Businessesof the People.

Indeed, this was Mahatma Gandhi’svision. His spinning wheel was a symbol.In his vision for India, all people would-beproducers of goods and services that thecommunity and the market need. Theywould be earners and also owners of theirenterprises, even if tiny.

Two areas of governance of economiesthat need innovation to make innovationmore inclusive are the design of cooperativebusinesses, and the governance ofintellectual property. Businesses owned byproducers, rather than remote investors, willenable accumulation of wealth at the bottomof the economic pyramid. This will reduceinequalities of wealth between financialinvestors and workers, which is a principalreason for increasing wealth inequalities inIndia, the US, and elsewhere too, in the last30 years.

Reform of the rules of IPRs will be morecontentious, though essential to makeinnovation more inclusive. Governance ofIPR must return to its original intent, whichwas to enable the spread of knowledge morerapidly, to enable innovators to build upondiscoveries made by others, makingtechnological progress faster and moreinclusive. As a quid pro quo for sharingknowledge, inventors would be provided areasonable period to recover theirinvestment and earn a fair return. However,the rules of IPR have progressively beendistorted to favour those who have IPR andwealth against those who do not yet haveany IPR and wealth.

The wheels of innovation are ripe forre-treading to make economic progress moresustainable and inclusive. The US and India,the world’s largest democracies mustcollaborate to lead the way.


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Hyperlink a GrandAlliance

If India and the US don’t want to live in an increasingly bipolardigital world, it is time for a high-level digital alliance betweenIndia and the US.

Pradeep S MehtaFounder Secretary

General,CUTS International

Robert D AtkinsonPresident, Information

Technology & InnovationFoundation, US

With two of largest economies in theworld — the European Union (EU)

and China — developing their own digitaleconomy frameworks and governancesystems, and seeking to export those to theirrespective spheres of influence, the US andIndia risk being isolated.

With its comprehensive digital economyregulatory regime, including limits on cross-border data flows, onerous privacy rules andaggressive anti-trust enforcement directedat US internet companies, EU is seeking toexport its digital governance modelglobally. China is doing the same.

China’s strategy of a protected domesticmarket, coupled with a State that is amassive provider of data to Chinese ITfirms, is being exported through its digitalSilk Road initiative.

If India and the US don’t want to live inan increasingly bipolar digital world —with some nations in the EU digitalregulatory block and others as digitalcolonies of China — it is time for a high-level digital alliance between India and theUS.

Today, the two countries are alreadypartners in areas ranging from trade andinvestment, defence and counterterrorism,science and technology, and energy andhealth. Goods and services trade betweenthe two countries topped $142 billion in2018, with a joint resolve of taking it to$500 billion by 2024.

As India is a leader in IT services, fieldingglobal leading companies like Wipro, TataConsultancy Services (TCS) and Infosys, andthe US is home to the world’s leading digitaleconomy firms, becoming partners in digitalis the next logical step.

However, increasingly, economic policyin the two countries is fuelled by ‘nation-first’ rhetoric. Such an approach has thepotential of putting both countries atloggerheads.

For instance, India’s position on localstorage of sensitive data of its citizens,particularly in payments, e-commerce andsocial media sectors, has raised the hacklesof American companies, as have a series ofrestrictions against US firms from enteringthe ecommerce market.


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Mutual Strengths Yet, apparent discordis no reason to weaken the resolve ofdeepening engagement in existing areas andexpanding in others. In fact, such episodesmust prompt a course correction throughcomprehensive review of causes, anddesigning of mechanisms to prevent andpromptly resolve possible discords in future.

One key Indian position is primarilyinformed by the difficulty of its lawenforcement agencies to get timely accessto data of potential rogue elements that maybe stored outside India.

Yet, rather than ban cross border datatransfers to the US, a well-negotiatedarrangement between the two countries thatinter alia minimises restrictions on cross-border data flow, maintains high levels ofdata protection, and does not compromisethe ability of GoI to access necessary data

in genuine cases, will be a win-win situationfor both countries.

Resolving these kinds of existing andpotential disputes through formalisedmechanisms like advance notification andstructured consultation could go a long wayin deepening the partnership.

However, the scope of digital allianceneed not be limited to dispute resolution.The emerging new IT-based innovationwave is bringing stakeholders acrossjurisdictions closer than ever.

A range of intermediaries has emergedto increase convenience, safety, speed andeconomy of digital experience, within andacross borders. Regulation onaccountability, dominance, grievanceredress and taxation in digital economy willneed greater cooperation amonggovernments than ever before.


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India and the US can lead the way inworking towards establishing best practicesby entering into early engagements at seniorgovernment levels on these issues, under abroader digital alliance. The ongoing 2+2dialogue on defence and security issues couldbe a good template.

The digital alliance can also benefit fromclose partnerships between industry and civilsociety of the two nations. Finally, eachnation leads in certain areas, with Indiaahead of the US in programmes like smartcities and digital identity systems.

Also, India has taken important steps infighting digital piracy, with the Delhi HighCourt’s recent decision that provides a newtool for rights-holders to better protect thecreativity tied up in their copyright.

Digital PartnersThe US leads in broadband and progress

to 5G and e-government. When it comes tothese kinds of digital policy innovations, aformal partnership can help two-waylearning and implementation withappropriate customisation.

India and the US are not only naturallyplaced to develop a shared global visionfor digital economy, but they are alsoequally equipped to present an optimalalternative to the Chinese or EU approaches.The leadership in both countries needs toactively work towards achieving this beforeit’s too late.

The article was published in Global TradeMagazine and The Economic Times, on June 10 &21, 2019 respectively.

India and the US arenot only naturally

placed to develop ashared global visionfor digital economy,but they are also

equally equipped topresent an optimalalternative to the

Chinese or EUapproaches

“

”


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Secrets to Successfor India’s BuddingEntrepreneurs and StartupsFrank Islam

Chairman and CEO, FIInvestment Group

The question is what can be done to reduce the number of failures?What are the secrets to success for India’s budding entrepreneurs andits business start-ups?

India is blessed to be the third-largest start-up economy in the world. Unfortunately,

there is a curse that comes with thatblessing. That is, as indicated in a 2016report issued by the IBM Institute forBusiness Value and Oxford Economics, 90percent of Indian start-ups fail within fiveyears.

The question is what can be done toreduce the number of failures? What are thesecrets to success for India’s buddingentrepreneurs and its business start-ups?There are many. But based upon researchfindings and my own experience as anentrepreneur, I would like to highlight acritical few.

The IBM/Oxford report cited the lackof innovation as the primary reason forfailing start-ups. A 2017 report by KMPGIndia and the Confederation of IndianIndustry (CII) cited innovation, along withscalability and digitisation, as one of thethree pillars for building a sustainablebusiness.

So, what does an entrepreneur do toinnovate? Here is the surprising answer that

The focus forentrepreneurial innovationshould be encompassing –

considering potentialimprovements in the areasknown as the seven P’s of

services marketing:Product, Pricing, Place,

Promotion, People, Processand Physical Evidence

“

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25

Vivek Wadhwa, a noted American ITresearcher, academic, writer andentrepreneur, gave in an article in theWashington Post on April 30: “In a video-conference hosted by Indian start-up websiteInc42, I gave Indian entrepreneurs someadvice that startled them. I said that insteadof trying new things, they should copy andsteal all the ideas they can from China,Silicon Valley and the rest of the world.”

Wadhwa goes on to explain that thereason that Silicon Valley is theinternational leader and hotbed forinformation technology is that there isconsiderable ‘knowledge sharing’ asengineers move from company to company.He observes that tech giants such asFacebook and Apple borrow and build onthe ideas of others.

The KPMG/CII report makes a similarpoint on innovation, stating: “Not allinnovation is radical or breakthrough.Innovation can also be incremental, yetsmall materially significant changes to the

current operating model or products orservices.”

I would extend that even further torecommendations that the focus forentrepreneurial innovation should beencompassing — considering potentialimprovements in the areas known as theseven P’s of services marketing: Product,Pricing, Place, Promotion, People, Processand Physical Evidence.

Besides, based upon my experience asan entrepreneur who took an informationtechnology firm, the QSS Group, that Ipurchased in 1994 for $45,000 and oneemployee — me — to sales of overUS$300mn and 3,000 employees when I

• Believe in yourself and your business.Pursue your end goal with drive,determination and a passion tosucceed.

• Find and focus on your niche market.Figure out early on who will be yourtarget customer segments and key


26

customers within those segments andbuild your business model aroundthem.

• Deliver quality products and servicesthat exceed customer expectations.Merely satisfying your customers isnot good enough. They need toreceive the unanticipated to becomeloyal. This is as true for theneighborhood kirana stores as forApple and Google.

• Surround yourself with talentedpeople. Pay them well. Listen tothem. Learn from them. And workclosely with them. Remember,business is a team sport and not anindividual one.

• Have no fear of failure. India is amarket where investors have littletolerance for failure. But fear can becrippling. Put your faith in your planand yourself and carry on.

While the strategies and tactics willdiffer given the nature of the business, Ibelieve that addressing those five factors,along with the need for ongoing innovation,are cross-cutting and can be used by anentrepreneur to provide the framework forbecoming successful in any start-up line ofbusiness.

There is no single formula for success,however, and the future is promised to no-one. Therefore, I will close with this finalthought.

In a commencement address at StanfordUniversity, Steve Jobs advised thegraduates: “Your time is limited; so, don’twaste it living someone else’s life.”

For budding entrepreneurs and ownersof start-ups, I would modify Jobs’ adviceand say: “Your time is limited; so don’twaste it trying to emulate someone else’sbusiness. Don’t be a mere ‘me too’ business.Don’t be a clone. Find your innerentrepreneur. Chart your path. Create amission, vision and set of values that areunique to your enterprise. In other words,make it your journey. By doing so, you willdefine those secrets to success that willenable you to grow your small business oftoday into the big business of tomorrow.”

The article first appeared in The Economic Times,on June 08, 2018


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DISRUPTIVEAND DIGITALINNOVATIONLANDSCAPE INFOCUS


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Gear Up to Lead

Disruption in the

Digital Era

Rita McGrathProfessor at Columbia

Business School

What is visible is the ineptitude of Indian companies tolead disruption from inside out.

M MuneerCo-Founder and Chief

Evangelist, MediciInstitute Foundation

Just a year ago, one of the leading Indiantelcos approached one of us to deliver a

keynote address. Mission? Motivateexecutives in the wake of reddening bottom-lines and imminent layoffs induced by theJio effect (Reliance Group had launched adisruptive mobile and data services that hadseverely affected the leading telcos). Wemarvelled at how lethargic and complacentthese leading telcos had become even thoughthey were cognizant of the Jio launch atleast a year earlier.

What is visible is the ineptitude of Indiancompanies to lead disruption from insideout. While all the existing players imaginedJio to commence a price war, they werestruck by a disruptive vicissitude in the unitof business itself: By making calls free (andnominal charge for data) in a market thatso far focussed on telephone services, Jiocreated consternation for Airtel, Vodafoneand Idea by igniting mass frenzy. Not

content with a massive subscriber base inthe shortest time ever, Reliance Jio took itsdisruptive juggernaut to related markets ofmobile handsets and data services with thefree phone offer and free Wi-Fi for collegestudents.

Ever since the iPhone and thecommercialisation of Android, the world hasbeen reverberating from the radical changesbrought by the smartphone. Cameras, GPS,watches, alarm clocks, music systems, TV,travel agents, banks and lately, even gyms,have faced disruption as customers aregetting their “jobs done” via smartphone-enabled software. Incumbents are right tobe worried about the next threat to their pastcompetitive advantages. And yet, for mostin India, the innovations that are essentialto staying competitively relevant remainhostage to inertia, risk-repugnance, and theinheritance of copy-paste culture.


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Disruption is everywhere: From telecomto retail, financial services to IT, andpharma to travel. Take for instance thebanking and financial services industry(BFSI). With the regulatory thrust for betterliquidity and digitisation postdemonetisation, financial institutions needto think differently now more than ever. Thesector is also seeing incursions into itstraditional business by new entrants that areoffering services that are either cheaper ordelivered differently. Payments, sharetrading, money management, forex,investments and Portfolio ManagementServices (PMS) are all seeing the impact.From Bitcoin and Paytm to Bharat Interfacefor Money (BHIM) and Freecharge, Indiais following the world.

Disruption is at its every-day best inanother industry, arguably the world’sbiggest: Travel. Technology is making iteasier for travellers to get information,compare prices and make theirarrangements today. Third-party advicesites such as TripAdvisor, Yelp and Zagatmake and break businesses – a few badreviews can radically trim business. At thesame time, new entrants such as Airbnb,Uber, and Lyft have the potential to replacetoday’s middlemen with themselves at thecentre of the most critical transactions.

Increasing Competition andDecreasing Performance

It is incomprehensible how few firms canmake ongoing innovation an internalproficiency. In the developed world, thereis a continual decline in return on assets(ROA) in the last 40 years. The ‘topple rate’– a measure of the rate at which companieslose their leadership positions – hasincreased by 39 percent. Share buyback andstock incentives are creating “profitlessprosperity”, in which executives andinvestors reap rich rewards, whilecorporations are hollowing out basiccapabilities. The tenure of companies on theS&P 500 has declined from 61 years in 1958to 18 in 2012. Two decades from now, 75percent of the S&P 500 companies will haveturned over. The bottom line is that companyleaders understand they need to innovate andadapt, but they seem to be stumbling on justhow to make this happen in reality.

Most companies in India stick to abusiness model and execute against itrepeatedly albeit shoddily. Worse, they payonly lip service to corporateentrepreneurship in finding “transientadvantages” while their employees continueto ignore competition from other industries,the need to manage both cyclical andstructural changes, and the need to obtainearly warnings and make decisions fasterat their peril.

The remedy to ride the disruptive waveis to mount disruption itself. We proposeDiscovery Driven Disruption (DDD) as ameans to scout for opportunities or “transientadvantages” and framing options. For mostfirms, the core business is largely abouttoday’s offerings for today’s customers. Theidea is that “Platform Launch or Horizon2” is tomorrow’s potential core business. Inthe outer edges of uncertainty, or Horizon3, are what Rita calls “options” – whichare small investments an organisation makestoday that give them the right but not theobligation to make future investments.

It is incomprehensiblehow few firms can

make ongoinginnovation an internal

proficiency

”

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The DDD will help firms to draw theirnew strategy playbooks that willcontinually reconfigure, engage anddisengage in new opportunities for horizon3, allocate resources between projects deftlyas options evolve, build innovationproficiency and entrepreneurial mindset.This will also lead to managing careers ofemployees in radically different ways akinto movie making. The DDD framework usesa five-step process viz., creating a climatesupporting continuous opportunity-hunting,establishing the entrepreneurial frame,creating a well-stocked opportunity register,building real options, and driving adaptiveexecution.

Just as entrepreneurs orchestrate theopportunity to search and scale-uppersonally, DDD will pave way for“entrepreneurship”. The process forestablishing a frame involves workingthrough certain expectations of variousstakeholders and looking at what minimumrevenue and Return on Investment (RoI)targets the firm will consider as a majorwin. Reverse income statements will analyseresultant possibilities. The opportunityregister will inventory all new business ideasidentified for funding and it will have a richset of prioritised items. Companies may use

tools such as Marketbusting, ConsumptionChain and Attribute Mapping during thisprocess. Just as in investing in financialoptions, real options reasoning involvesmaking small investments that give you theright to make a decision later. The idea isto limit your downside exposure until theupside potential of the opportunity isdemonstrated. In conjunction with limitingrisk, an options approach allows you tocreate focus and strategic alignment acrossa portfolio of initiatives.

We would imagine a group like Tatathat has been “experimenting” withinnovation in multiple ways, to leaddisruption in many industries globally.Instead, 70 percent of its profits come fromjust one company: TCS. The trouble is thatmost companies invest in setting upinnovation teams, building incubationcentres, sending teams to Silicon Valley andso on but do not follow a seamless approachas DDD or address systemic issues uniqueto India such as risk-aversion, the copy-and-paste culture and jugaad. The DDD adaptsthe “if-you-have-to-fail, fail-cheap-and-fast”policy that encourages more disruptiveinitiatives at lower downsides.

Bottom line: If you don’t disrupt yourown business, someone else will!


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The Task Ahead of UsTransforming the GlobalEconomy with Connectivity,Automation and Intelligence

Robert D AtkinsonPresident, InformationTechnology & InnovationFoundation, US

The next wave of digital innovation is coming. Countries can welcome it, prepare for it, andride it to new heights of innovation and prosperity, or they can ignore the changing tide andmiss the wave.

The Next Wave of DigitalInnovation is Coming

Economies are complex productionsystems with myriad subcomponentproduction systems around the world.Today, the most important and widelyshared technologies are digital informationtechnologies that have evolved from themainframe and mini-computing systems ofthe 1960s and 70s. They include an arrayof personal computing devices, back-officeservers, IT-embedded machines, and cloud-based services that are connected ordynamically provisioned to users overprivate networks or the Internet. But theworld is now beginning to transform into anew kind of digital system, one that willnot only build on existing devices andsystems, but also increasingly willincorporate emerging technologies such assensors, robotics, and artificial intelligenceas they improve in price and performance.This next digital economy will besignificantly more connected moreautomated, and smarter.

This pervasive connectivity, combinedwith machine-driven automation andintelligence, will signal a new era for theeconomy. While transformative, this nexteconomy will not be the so-called ‘FourthIndustrial Revolution’— a term some haveembraced to trumpet an epochaltransformation akin to the rise of steampower and electricity. Rather, thesetechnologies represent more of an evolutionof our current digital system; albeit one thatwill bring significant advances, particularlyin applying digital technologies to thephysical world and using software systemsto generate intelligence.

Although this evolution could bringwidespread economic and societal benefits,obstacles and challenges must be overcometo realise its full potential—and thereforegovernment will have an important role.This primer briefly lays out the nature andbenefits of the new technology system thatis taking root; what is involved in bothdeveloping the new technologies andimplementing them across most industries;


33

the implications for global competitiveness;the political economics determining the paceand extent of the evolution; and finally, theappropriate role for government toaccelerate it.

Getting this right is critical for two mainreasons. First, countries’ competitiveadvantage in the global economy willincreasingly be based on the extent to whichthey are home both to the industries thatare developing these new technologies andto the industries that are adopting them,particularly in globally traded sectors.Second, nations that lead in adoption ofthese technologies will experience greaterincreases in living standards and quality oflife. But success in both development andadoption of these new digital technologiesis not assured; in fact, many forces todaywork against it.

Perhaps the most important policyquestion for any nation or region is whetherand to what extent its economic policies arefocused on overcoming obstacles andaspiring to be a leader in the next wave ofdigital evolution. Those that choose to doso will benefit from more competitiveindustries and a more prosperous economy.

Overcoming GlobalCompetitiveness Challengesto Digital Implementation

• A central question regarding digitalprogress globally will be whethernational desires to gain advantagesin next-wave technology industriesand traded-sector industriestransformed by the technologies willspur progress or retard it.

• Virtually all nations are competingfor an advantage in emerging digitaltraded-sector industries, from AIsoftware to fintech to autonomoussystems.

• Europe and Japan largely missed thelast two digital transformations, inpart because they remained wedded

to the older technologies and onlyweakly embraced the newtechnologies and business modelsthey enabled. China was a latecomerthat closed the gap largely throughunfair mercantilist policies thathandicapped US leaders andfavoured domestic champions.

• Today, most nations understand theevolving contours of the new digitalsystem, and if they fail to capturecompetitive advantage it will likelybe either for lack of broad-scalesupport for rapid transformation orbecause of a failure to executeeffectively.

• Some of the things nations are doingto support next-wave digitalc o m p e t i t i v e n e s s — i n c l u d i n gsupporting skills development, digitalinfrastructures, research anddevelopment (R&D), andgovernment adoption of digitaltechnologies—is positive-sum and

Pervasive connectivity,combined withmachine-drivenautomation and

intelligence, will signala new era for the

economy

”

“


34

helps both the nations themselves andthe world.

• Some of the things nations are doingretards digital advancementglobally. This includes imposingrestrictions on cross-border dataflows, lavishing subsidies thatgenerate digital industry over-capacity, engaging in theft orcoercing transfers of intellectualproperty, conducting overlyaggressive antitrust enforcement,limiting foreign market access, andmaintaining overly restrictiveregulatory systems.

• Large economies, especially those ofthe US and China and potentiallyIndia—have significant advantagesin next-wave digital developmentand adoption. This is partly becauseeconomies of scale, enabled by largeintegrated markets, are key to digitalinnovation. For example, havingaccess to large data sets is useful for

artificial intelligence. Large marketsalso enable companies in industrieswhere there are high fixed costs indeveloping a technology (such asR&D) to gain sustainableadvantages over competitors withaccess only to smaller markets.

• Many small nations have advantagesrelated to agility, cohesion,coordination, and smaller-scaleinstitutional, political, andbureaucratic hurdles to overcome.These nations have an opportunityto succeed by specialising inparticular emerging digital areas.This is because the challenge inmany emerging digital areas is oneof coordination, including chicken-or-egg issues, wherein successdepends on multiple players in anecosystem acting together. Smallernations are often better able to fostersuch coordination.


35

• A core area of competitive advantageis data: Nations that enableinnovators to compile and accesslarge public and private data sets,including personally identifiabledata, generally outperform nationsthat limit data collection and sharing.This does not mean that nations withno privacy protections will gainadvantage; rather, laws need tobalance individuals’ privacy needsand expectations with the broadersocietal need for data innovation—something the world’s most stringentprivacy regimes currently fail to do.

• The emergence of new technologyeras in the past has almost alwaysled to different firms and regionsdisrupting incumbent leaders. Thiscould very well happen again withnew firms potentially disrupting theestablished leaders, and with thegeographic centre of gravity for thenext wave of digital technologydevelopment shifting, perhaps toChina. These geographic shifts couldvery well happen within nations. Thelast digital wave led to bicoastalleadership in the United States, withmuch of the heartland lagging. Thenext wave, with its increased focuson integrating “bits and atoms,”could lead to a rebalancing ofeconomic activity. Some traditionalindustrial regions could rebound,especially if there are favourablenational and regional developmentpolicies.

• This raises a host of issues about theUS digital leadership and thedomestic prosperity that leadershipenables. The US dominated most ofthe information technologycomponents that drove past periods’evolutionary leaps, in part becauseof a long tradition of governmentsupport, including procurement andsupport for R&D. Maintaining that

leadership now with much stiffercompetition will be significantly moredifficult than overcoming thecompetitiveness challenges fromEurope and Japan in the 1980s andearly 1990s.

• To the extent lagging nations seek toleap forward, they should aspire toleadership in emerging digitaltechnologies (e.g., artificialintelligence, IOT, robotics, etc.), notpast or current ones (e.g., cloudcomputing, Internet search, socialnetworks, etc.), as the US and Chineseleadership in these areas is quitestrong, if not overwhelming. It makeslittle sense for a nation to try tosupport the creation and expansionof its own Google, Baidu, Facebook,or Tencent, either by favouring itsown champions or by attackingforeign champions. Nations shouldinstead “skate to where the puck isgoing” by focusing on emergingindustries where global leadership isnot yet established.

• Successful nations will have the mostcompetitive companies, the mostskilled workers and entrepreneurs,and the best policy systems. Havingone or even two of these componentswill not be enough.

• Nations that fall behind indeveloping and implementing next-wave digital technologies will sufferlower rates of economic growth.

Why Government Has a KeyRole

• Markets and firms will play thebiggest role in developing andimplementing next-wave digitaltechnologies. But governments needto remove institutional and regulatorybarriers to implementation whileencouraging citizens to embrace, notresist, digital evolution.


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• Governments also need to activelysupport next-wave digital evolutionby supporting R&D, digital skills,and digital infrastructures;transforming the operations ofgovernment itself; embracing globalmarket integration; and encouragingthe transformation of systems heavilyinfluenced by government (e.g.,education, healthcare, finance,transportation).

The Tasks for Government• The role of government is

straightforward: Make next-wavedigital evolution a central policygoal. Governments that choose to doso will benefit from morecompetitive digital technology-producing industries and a moretransformed and prosperousdigitally-enabled economy. To dothat, governments need to enactpolicies that support digitaltransformation and resist policies thatlimit it. While there are both broadand specific policy areas involved,

and each issue area is complex, theyall fundamentally boil down to asimple question: Will the policy spurdigital transformation or limit it infavour of another goal?

• There is a large set of policy areaswhere the benefits are largelyunequivocal. All governments shouldmove forward expeditiously in theseareas, such as in supporting digitalskills; freeing more radio spectrum;1

supporting broadband rollout to high-cost areas;2 funding R&D; supportingvoluntary, global, and industry-leddigital standards; prosecutingcybercrime; enacting trade policiesthat prohibit data localisation andsupport foreign direct investment;3

expanding and deepening e-government and open-data policies;and crafting industry transformationpolicies. While some of these policyareas might involve trade-offs withincumbent economic interests, theyinvolve few trade-offs withcompeting social priorities.

• Perhaps the most straightforwardstep nations can take is to ensure theiragencies and institutions ofgovernment are up to date,sophisticated, and deep users ofexisting and emerging digitaltechnologies. Yet governments inmost nations are falling furtherbehind private-sector leaders.

• Where there are trade-offs with socialissues, governments should favournext-wave digital implementation bydesigning policies that spurinstallation in ways that minimisetrade-offs. Many policies affectingdigital technologies can either helpor hinder transformation, dependingon policy design. For example, bylimiting access to data and raisingcompliance costs, overly stringentprivacy policies, such as the EU’sGeneral Data Protection Regulation,

Policymakers should beskeptical of claims thatadvancing social policygoals such as privacyprotections can also

spur digital innovation

”

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come at the cost of faster digitaltransformation.

• In almost all cases where there aretrade-offs with social issues, policiescan and should be designed tosupport digital implementation whilestill addressing social policy goals.For example, giving users the rightto opt out of data collection willprotect privacy while limitingnegative effects on digital innovation.Other areas where policymakersshould seek balance include netneutrality;4 free speech andregulation of social media content;5

protection of intellectual property;6

copyright enforcement;7 competitionpolicy;8 Internet platform policy;9

industry subsidies;10 patchworks oflocal and state versus national orsupra-national regulation;11

regulation of specific technologies(e.g., drones,12 ride sharing,13 andother gig and sharing-economyservices); and algorithmic bias.14

• Policies that seek to regulate digitalservices to limit illegal or unethicalactivities do little or nothing to limitdigital transformation (and in mostcases advance it), but they achieveimportant social goals. These areissues policymakers should continueto actively pursue.

• Policymakers should be skeptical ofclaims that advancing social policygoals such as privacy protections canalso spur digital innovation15.Policymakers and their civil societyallies often frame regulatoryproposals as “win-win,” because theyrealise their chances of succeedingdiminish whenever their policies areseen as hurting digital progress. Butin most cases, including privacy,these “win-win” claims are false,especially when the policy proposalsare rigid and poorly suited to thetechnology environment.

• Governments should eschew policiesthat limit digital transformation.Some policies, such as discriminatorytaxes on digital services orcompanies, unneeded regulations,and technology bans e.g., onautonomous weapons,16 ride-sharingapplications, autonomous deliveryrobots,17 self-checkout systems,18

facial recognition systems,19 andalgorithmic decision-making20 willseverely limit next-wave digitalprogress.

• Policymakers should craft regulatorysystems that do not unduly penalisecompanies for attempting toimplement digital technologies ingood faith, because successfulimplementation will requirecompanies to take risks. As such, akey question is whether regulationwill be punitive, especially for risktakers.21 To date, digital industrieshave been lightly regulated, at leastin the US, which has been a keyfactor in the success of the digitalrevolution. Abandoning thisorientation and punishing allmistakes equally and severely,regardless of harm or intent, will slowdigital transformation

• Policymakers and other elites needto encourage the public to supportdigital transformation. One of thebiggest risks standing in the way ofdigital transformation is neo-Ludditeopposition. Nations that embracechange, welcome technologicalinnovation, and do not fall into thetrap of paranoia toward “Big Tech”and emerging technologies will bemore successful. Governmentofficials and other elites need toembrace and advance an optimisticnarrative about how digitaltransformation will lead to increasedliving standards and better quality oflife, and actively counter self-


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promoting fearmongers seeking toinstigate techno-panics.22

• Policymakers need to support not justtechnological innovation, but alsoinstitutional innovation. IT andbusiness in general are evolvingtogether, which requires newmanagement practices and newbusiness models. This is true ingovernment and non-profit sectors aswell. As digital technology evolves,societies need to embrace not just thetechnologies, but also institutionalinnovation to enable new governancemodels. For example, 3D printingtechnology will likely lead to entirehouses being printed, but unless localzoning and building codes arereformed, innovation will be limited.

• Policymakers need to avoid favoringpolitically influential incumbents.Existing firms and new firms, big andsmall, domestic and foreign, all canbe digital innovators. Whereverpossible, policymakers should enableinnovators to enter markets.

• Policymakers and elites need to rejectanti-technology narratives that hold,wrongly in most cases, digitalimplementation creates challengessuch as inequality; loss of jobs andworker rights; addiction;surveillance; algorithmic bias andmanipulation; cybercrime; social

media coarseness and polarisation;lack of diversity; political bias;concentrated economic and politicalpower; and tax evasion. The truth is,digital technologies are not theprincipal cause of most of thesechallenges; and where theycontribute, measured responses canoften provide effective solutionswithout harming innovation.However, falling into the trap of anti-technology groupthink will limitdigital transformation, in turnmaking it much harder to achieve thevery goals most critics of the digitaltechnological innovation support,such as increased living standards, acleaner environment, increasededucational opportunity, and the like.

• At the end of the day, nations’ successin embracing next-wave digitaltechnologies will depend on acombination of awareness andstrategic action. Each nation needsto ask itself where it stands on bothfronts. Do policymakers trulyunderstand the technologies andcompetitive strengths, weaknesses,opportunities, and threats theypresent? Such an assessment requiresan honest, non-ideologicalevaluation, and a rejection of mythsand self-reinforcing ideas that soundgood but are in fact false.

Groupthink should not trump thoughtful,objective analysis, painstaking though itmay be. In taking strategic action, arenations focused on learning from global bestpractices in the wide range of policy areasaffecting next-wave digital technologies,and then ensuring they adapt those lessonsto fit the realities of their own nations?Getting this right will have a significant,positive impact on the living standards andquality of life of future generations.

Abridged from a paper which was first publishedby Information Technology and InnovationFoundation in January 2019


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Endnotes

1 Doug Brake, “Spectrum Policy and the EU Digital Single Market: Lessons from the United States” (InformationTechnology and Innovation Foundation, December 2015), https://itif.org/publications/2015/12/07/spectrum-policy-and-eu-digital-single-market-lessons-united-states.

2 This is assuming government funds do not support “overbuilders.”

3 Nigel Cory, “Cross-Border Data Flows: Where Are the Barriers, and What Do They Cost?” (Information Technology andInnovation Foundation, May 2017), https://itif.org/publications/2017/05/01/cross-border-data-flows-where-are-barriers-and-what-do-they-cost.

4 Doug Brake “Why We Need Net Neutrality Legislation, and What It Should Look Like” (Information Technology andInnovation Foundation, May 2018), https://itif.org/publications/2018/05/07/why-we-need-net-neutrality-legislation-and-what-it-should-look.

5 Nick Wallace, “EU Should Not Make Platforms the Judges of Free Speech,” EU Observer, March 29, 2018, https:// itif.org/publications/2018/03/29/eu-should-not-make-platforms-judges-free-speech

6 Nigel Cory, “How Critics of the ‘TPP’ Trans-Pacific Partnership Muddle Facts, Fictions and Fears,” Entrepreneur, October7, 2016, https://itif.org/publications/2016/10/07/how-critics-tpp-trans-pacific-partnership-muddle-facts-fictions-and-fears

7 Alan McQuinn and Daniel Castro, “Stopping Online Piracy Is Not Censorship,” The Hill Times, February 14, 2018, https://itif.org/publications/2018/02/14/stopping-online-piracy-not-censorship.

8 Widespread deployment of connectivity, automation, and intelligence will require vast sums of capital. In many cases, itwill be large firms that will have requisite resources and capabilities to make these investments.

9 Joe Kennedy, “Don’t Regulate Internet Platforms, Embrace Them,” Euractiv, November 13, 2015, https://itif.org/publications/2015/11/13/don%E2%80%99t-regulate-internet-platforms-embrace-them.

10 Subsidies are often in support of connectivity, automation, and intelligence (e.g., providing subsidies to doctors to adoptelectronic medical record systems), but can limit it—particularly the development of better technologies if they supportfirms that otherwise would not be viable in global markets. Doing so reduces overall profit rates and in turn reduces abilityto invest in R&D.

11 In most areas of digital policy, including broadband, local and state government regulatory actions should be preempted, asthe interests of these governments often are at odds with national interests.

12 Alan McQuinn, “Don’t Rush to Regulate,” Washington Monthly, October 30, 2015, https://itif.org/ publications/2015/10/30/dont-rush-regulate-drones.

13 Joe Kennedy, “Three Paths to Update Labor Law for the Gig Economy,” (Information Technology and InnovationFoundation, April 2016), https://itif.org/publications/2016/04/18/three-paths-update-labor-law-gig-economy.

14 Ibid

15 Daniel Castro and Joshua New, “How Policymakers Can Foster Algorithmic Accountability” (Center for Data Innovation,May 2018), https://itif.org/publications/2018/05/21/how-policymakers-can-foster-algorithmic-accountability.

16 Alan McQuinn and Daniel Castro, “Why Stronger Privacy Regulations Do Not Spur Increased Interned Use” (InformationTechnology and Innovation Foundation, July 2018), https://itif.org/publications/2018/07/11/why-stronger-privacy-regulations-do-not-spur-increased-internet-use.

17 Daniel Castro, “’Ban the Killer Robots’ Movement Could Backfire,” Computerworld, November 13, 2015, https:// itif.org/publications/2015/11/13/%E2%80%98ban-killer-robots%E2%80%99-movement-could-backfire.

18 Alan McQuinn, “One San Francisco Official’s War on R2-D2,” StateScoop, August 21, 2017, https://statescoop. com/one-san-francisco-officials-war-on-r2-d2.

19 Daniel Castro, “Bill to Ban Sale of Alcohol through Self-Service Checkout Terminals Cloaked in Falsehood,” Los AngelesDaily News, August 17, 2011, https://itif.org/publications/2011/08/17/bill-ban-sale-alcohol-through-self-service-checkout-terminals-cloaked.

20 New and Castro, “How Policymakers can Foster Algorithmic Accountability.”

21 Daniel Castro and Alan McQuinn, “How and When Regulators Should Intervene” (Information Technology andInnovation Foundation, February 2015), https://itif.org/publications/2015/02/02/how-and-when-regulators-should-intervene.

22 “Daniel Castro and Alan McQuinn, “The Privacy Panic Cycle: A Guide to Public Fears About New Technologies”(Information Technology and Innovation Foundation, September 2015), https://itif.org/publications/2015/09/10/ privacy-panic-cycle-guide-public-fears-about-new-technologies.


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A principal cause of India’s poverty, orrather a significant lack of economic

success relative to her peers, has been dueto her not ever being a manufacturingnation. Such a contingency fullyimpoverishes a country, and leads to de-industrialisation, as happened in Indiaduring colonial times. Well before such de-industrialisation, however, the inventor ofcomputing Charles Babbage had writtenabout India that: ”The cotton of India isconveyed by British ships round half ourplanet, to be woven by British skill in thefactories of Lancashire: it is again set inmotion by British capital; and, transportedto the very plains whereon it grew, isrepurchased by the lords of the soil whichgave it birth, at a cheaper price than that atwhich their coarser machinery enables themto manufacture it themselves.” Of course,India got cheaper cloth, but the amount oflost wealth was immense. The inference isthat a nation wishing to be rich mustbecome skilled in the use of machinery andits economy is driven by the value additionemanating from manufacturing. India has

lost out in energising the key driver of acountry’s development.

To be wealthy, a country must haveparticipated in the scientific and industrialrevolutions. There has been a directrelationship between scientific and industrialrevolutions. Machinery and manufacturingprocesses have always incorporated the mostrecent and relevant scientific principles intheir design throughout human history.Furthermore, the changes wrought bymanufacturing-driven industrialisation havebeen transformational. Such changes are notmerely scientific and industrial, but alsosocial and intellectual. These changes havecommercial, financial, agricultural andpolitical ramifications. These changes couldbe revolutionary because they bring aboutintellectual changes that enable otherchanges to occur.

Modern manufacturing involvesmachinery usage. The usage of machineryis the primary approach towardsengendering productivity for the samehuman effort. One of India’s mostdistinguished post-independence civil

DigitalManufacturingInnovation

Sumit K MajumdarProfessor of TechnologyStrategy, The Universityof Texas at Dallas

India’s domestic market is potentially very large for embedded software items that alter thefunctionalities of other goods and services consumed by the public at large.


41

servants, the late H. M. Patel, hadwritten: ”I will only make one rather anobvious point. A country with limitedresources of men, money and material thatwishes to improve its standard of livingquickly must ensure that there is no wastagein the utilisation of its resources.”

Manufacturing matters in engenderingproductive resource utilisation. When anindividual works with a machine, heengages in a transformative act. Often,some chemical and metallurgical processeschange the raw material into somethingmore valuable. There is a rearrangementof the key natural elements. Thereafter, theresulting product is combined with otherrearranged items to create a final productcompletely different from the basic rawmaterials that the process began with.Hence, a transformative process alters theconstitutive components into a productproviding functionalities that constitutivecomponents separately could not.

Embodied KnowledgeIn engendering the transformative

process, machinery within themanufacturing sector incorporates bothembodied and embedded knowledge. Thesetechnologies have incorporated scientificprinciples. By definition, machinery makeswork smart and reduces overall costs. Thatoutcome is a function of the knowledgeapplied to the design of the machine, as wellas of the intelligence embodied within themachine itself. Capital equipment, of whichmachinery is a key component, is valuednot for the visible physical metal but theideas embodied in the functionalities of themachine, and the activities then madefeasibly.

This logic of embodiment can be takenfurther. The item or product, as generatedby the use of machinery, will incorporatesome or all of the knowledge originallyembodied in the machine itself, thoughindirectly. Machinery in the manufacturing

sector incorporates a considerable amountof intellectual capital, a-priori, and the workof each individual is influenced by thisincorporated knowledge. As each workswith machinery, not only is output enhancedby the contribution of such capital, but thequality of the human capital pool improvessince it has now to work with physicalcapital that embodies knowledge. As such,the presence of a large manufacturing sectordramatically improves the human capitalpool in an economy as a whole.

Embedded KnowledgeNevertheless, it is the logic of

embeddedness that is crucial forcontemporary manufacturing-drivengrowth. An example serves best to make this

India is now a globalinformation

technology power,it can leapfrogother emerging

economies into thenewest generation of

flexible digitalmanufacturingfunctionalities

”

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crucial point. While visiting a BavarianMotor Works (BMW) plant some years ago,a unit was situated next to BMW’s worldheadquarters, in Munich, I observed themanufacturing of the 3-series BMW cars inthe plant. The plant is one of the oldest inthe BMW family, and it is quite a smallplant by BMW standards. It is situated nextto BMW’s main offices and research center,and the BMW World, which is a museumand display unit. It is located in what hasbecome the congested residential andcommercial northern part of Munich, nearthe Olympic stadium. As such, a plant suchas this can hardly be considered as a serioussource of manufactured goods.

But the statistics of the plant are centralto my thesis. The plant is 400,000 squaremeters in size, though located in a smallland area. The plant employs 9,000 persons.It operates three shifts in the press shop,where car bodies are made, and two shiftsin the assembly operations. On average,900 BMW 3-series cars are assembled inthe plant daily, and the annual productionof cars from the plant is over 200,000 cars.The annual production value is over $8billion from such a small plant.

Because of space constraints, theassembly line, which in aggregate is almostfour km long, is constructed on many levels.The plant consumes 600 tonnes of steel perday, made up of approximately 20 coils ofsteel. A coil of steel goes into the plant atone end, and it is cut and shaped into severalbodies. About 66 bodies are cut and shapedby the giant presses located in the plant perhour, so that is over one body per minute.All of the body parts required for a car arethen stored.

Subsequently, according to theproduction plan, then the required bodyparts, which had been stored for the interim,are brought together to be spot-welded to a1/10th millimeter precision; then, othercomponents are added, the body is marriedto the power train consisting of the engineand transmission, and a week later a finished

BMW 3-series car emerges for sale anywherein the world. The coil-to-car time for a coiledsheet of steel that has arrived at the plant isless than a week.

The plant makes every variant of the 3-series BMW car in the world. An assemblyprogram at a particular time can consist ofa very large variety of cars, with no onecar ever similar to another. All cars aremade only per customers’ orders and thereis no production for inventory. A customercan change the order up to 6 days beforeproduction commences. Each of the over200,000 cars produced annually in that plantis unique. There is an infinite number ofvariations in the composition of the carpossible, based on body style, steering wheellocation, pollution requirements, number ofdoors, light placement requirements andmany other features. Yet, the rejection rateof finished products is nil. An Americanvisitor had asked what the rejection ratewas, and the respondent did not understandthe question as he did not know whatrejection meant!

Digital ManufacturingInnovation

How does this happen? The explanationis that it is through the extensive use ofinformation and communicationstechnology and embedded software. Theshaped body parts, which are cut from thesteel coils, are generic. They are all basedon the current product and model designs.These cut body parts are stored in the bodyshop awaiting assembly. Once an order isplaced, a vehicle identification number(VIN) is given. After the generation of a VIN,everything is specific. Each car becomesunique. Based on a detailed productspecification sheet, the production plan forseveral days is spelled out in advance. Thespecifications for each car, that have beendigitally coded, are then placed in a digitaltransponder box for each car. The digitaltransponder box is a device containing the


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specific details of each car. The processorin every digital transponder box has thesame computational power contained ineach Apollo space vehicle used on lunarmissions. It is attached to the largest bodypart kept in the body shop that willeventually become part of a finished car.

Production is fully automated, thoughthere are 3,000 employees per shift. Theseemployees change tools and die, and keepa check on the quality. The plant uses 650robots, in mobile production cells, witheight robots per cell on average. Theserobots can conduct operations on six planesor axes. Some robots can also operate alongseven axes, the seventh axis being the lateralone. The robots are pre-programmed withspecific instructions as to what to do whenfaced with a specific car variant. When acar of a particular variant, say a 4-doorsaloon car for the right-hand drive Britishmarket comes to a robot station for aspecific bodywork task, the robot hasexplicit clear instructions, digitally

embedded in its software, as to whatoperation to conduct for such a car and bodystyle.

The production plan and every ordervariation are pre-programmed in the robots’software, and the digital transponder boxassociated with a particular VINcommunicates with the robot so that exactlythe correct operation required is carried out.Thus, the exact activity required is matchedto model specifications. As the next VIN tobe processed by a robot may be for acompletely different order, say for a left-hand drive two-door convertible for theAmerican market, the robot has to changecertain tools, and these tool changes arecarried out in five seconds.

Eventually, a completed 3-series BMWcar will also contain twenty-two pounds offiber optic cabling. It will contain fortydifferent electronic controllers, coordinatingand controlling every aspect of theautomobile’s operations. The productionprocesses for the cars and the subsequent


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operations of cars in day-to-day ownershipare based on embedded software. Theembedded software has made the processesof manufacture and operational handlingof BMW cars extremely efficient. Thus,BMW cars are justly prized for their buildquality, handling and operations. The veryhigh retail prices that BMW cars commandare a function of the knowledge that hasbeen embodied and embedded, via digitalmanufacturing innovations, in these cars.

Embedded software items are productsthat may not be visible when used for generalpurpose commercial or entertainmentactivities consumed en-masse. They are,nevertheless, digital goods used for theproduction of other goods and services intoday’s society. These embedded softwareitems are ubiquitous in today’s world. Theyare continuously updated and re-developed.The use of embedded software products isfound in consumer items, manufacturingprocesses and service delivery processes.

A Digital Manufacturing NewAge for India

India’s domestic market, which isburgeoning in all sectors, is potentially verylarge for embedded software items that alterthe functionalities of other goods andservices consumed by the public at large.Embedded software will find a major

market in modular new-age manufacturingprocesses in all types of manufacturingplants across India. India’s companies haveto immediately emulate the likes ofmanufacturing companies, such as BMW,so that India may become one of the keymanufacturing nations of the world.

While it is too late for Indian informationtechnology and software firms to becomeleaders in branded consumer softwareproducts, there are opportunities for firmsto become global market leaders in specificembedded software domains. Theintellectual energies of India’s army ofinformation technology and softwareprofessionals have to be channelised intoembedded software development. BecauseIndia is now a global information technologypower, India can leapfrog other emergingeconomies into the newest generation offlexible digital manufacturingfunctionalities. Based on embedded softwareproduct development, she can enter a newage of digital manufacturing. India canbecome a global player in producingembedded software products to create digitalmachines because this is what machinerywith embedded software is. This ‘digitalmanufacturing new age’is the only way thatIndia can become a rich nation, skilled inmachinery use, and only then can hereconomy be driven by value additionemanating from manufacturing.


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Industry 4.0Industry 4.0 essentially refers to

optimisation of smart and flexible supplychains, distribution models and factorieswhere machines capture and provide datafor making business quicker, ensuringefficient utilisation of all resources andmaximising gains in minimall costs. Themajor components of Industry 4.0 areAdditive Manufacturing,1 ArtificialIntelligence,2 Augmented Reality,3 BigData,4 Cloud Computing,5 Cyber Security6,Internet of Things (IoT),7 Simulation,8

System Integration,9 among others.

Industry 4.0 is expected to transformexisting technologies and capabilities in themanufacturing and industry sectors. It is anamalgamation of traditional manufacturing

with state of the art technology to providereal visibility of the complete value chainallowing for better decision-making to leadto greater efficiency in the productionprocess.

The various benefits that accrue to themanufacturers with the adoption of Industry4.0 are as under:

i. Higher returns to businesses throughcost reductions and efficiency:Digitalisation of manufacturingprocesses can ensure decentraliseddecisions, thereby reducing delays andenabling faster processes. Thus, withbetter utilisation of resources, digitaltechnologies would ensure increasedefficiency, reductions in turn-aroundtime and subsequently reduce the cost

Transition fromIndustry 2.0 toIndustry 4.0 in IndiaChallenges and Opportunitieswith special reference toIndo-US collaborations

SP SharmaChief Economist, PHD

Chamber of Commerceand Industry

Industry 4.0 is expected to transform existing technologiesand capabilities in the manufacturing and industrysectors.

Megha KaulEconomist, PHD

Chamber of Commerceand Industry


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of production processes, therebyincreasing cost-price margins to thefirms.

ii. Value addition: Digital manufacturingtechnologies, such as 3D printing, lasercutting and robotic assembly enable theproduction of goods in small batches,thereby facilitating bettercustomisation and value addition.

iii. Health and safety of workers: Digitaltechnologies can enable elimination ofthe need for human presence andintervention in certain high-risk tasksand environments, thus facilitating themanufacturers to avoid exposing theirworkers to health hazards and reducefatalities in the factories.

Opportunities to India fromIndustry 4.0

Currently, the manufacturing sector inIndia contributes around 17 percent to theGDP from the last five years which is wellbelow the average share of themanufacturing sector in the GDP in manydeveloped and emerging economies. This

is because the manufacturing sector has beenplagued with various challenges that impedeits growth. Apart from structural challenges,these challenges range from lack of state-of-the-art infrastructure; unease in doingbusiness due to high cost of capital,unavailability of land, stringent labour laws;unavailability of skilled workforce; lowlevel of research and development andunavailability of high-end technology tointroduce innovations and solve basicproblems in the production processes.

These issues can be addressed byIndustry 4.0 as it has the capability to leadto higher efficiency, thereby leading to anexpansion of production possibility frontiersof the firms. The digital technologies thatform the core of Industry 4.0 would enablethe manufacturing units with valuable datato give insights on customer profiling, thetype of products in demand, the quantity indemand and the supply profile. The 4.0vision would facilitate in providing connectthat goes beyond the manufacturing plantwalls. This would allow the customer tohave complete visibility of themanufacturing process, thereby making thesystem more transparent, interactive andefficient.

The application of digital technologiesin infrastructure projects would speed up thedevelopment of state-of-the-artinfrastructure. These technologies canprovide effective solutions to projectmanagement systems, building smart cities,building smart highways and effectivemanagement of freight logistics, therebygiving a push to industrial and economicgrowth, going forward.

A reliable, robust and efficient logisticssector is essential for the growth of industryand making Indian goods competitive in theinternational markets. The logistics cost inthe country is as high as 13-14 percent ofthe GDP, in comparison to eight percent inthe US and nine percent in Europe. India’sranking in the Logistics Performance Indexof the World Bank has declined from 35th

With increaseddigitalisation and

adoption of Industry4.0, new skills

required for jobswould evolve

”

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in 2016 to 44th in 2018 out of 160economies. India ranks low due to slowtransit time for the movement of cargothrough road and shipping networks due tolengthy custom clearances procedures,unavailability of well-developedinfrastructure, among others. The Ministryof Finance estimates that a 10 percentdecrease in indirect logistics cost couldincrease exports by 5-8 percent.10

The application of digital technologiesin the logistics value chain can facilitateroute optimisation, live updates on the statusof shipments, informing about trafficconditions and real-time inputs on theloading of trucks to ensure efficiency andbetter delivery. The usage of varioustechnological tools such as Blockchain,11

automated booking and algorithmic priceswould give substantial results in thetransportation process, thereby providingsignificant gains to the manufacturing andindustry at large. Further, digitalisation cancontribute significantly to the manufacturingsector by modernising the manufacturingprocesses and optimising the business cycles,

thereby creating higher value and newbusiness offering which could stimulate thegrowth of the sector, going forward.

Thus, with innovation in productionprocesses, optimum utilisation of resources,application of hi-tech tools supported byenabling infrastructure and researchecosystem, it is estimated that the end-to-end digitalisation of the factory can lead toa rise in the productivity from around 12 to20 percent. Currently, the averagemanufacturing sector growth is 10 percent(at current prices for FY18 and FY19),assuming the 12-20 percent increase inmanufacturing productivity leads to anaverage growth of 14 percent of themanufacturing sector (at current prices) andassuming nominal GDP to grow at 12percent, the manufacturing output isexpected to more than double from thecurrent level of around US$400bn to aroundUS$900bn in 2024-25.

Further, the share of the manufacturingsector in the GDP is expected to increase byan additional 2 percentage points in FY2025.With the rise in productivity, ample


48

employment opportunities to the tune ofaround 12-14 million12 would be created inthe manufacturing sector in the next 5 yearsto cater to the growing job marketeffectively as more than 8 million jobs areneeded in the country every year to keepthe employment rate constant.13

Thus, with the implementation of digitaltechnologies in the manufacturing andindustry sector, the share of the manufacturingsector in the GDP would increase by anadditional 2 percentage points in the next 3-4 years to create higher employmentopportunities for the growing workforce.

Challenges of Industry 4.0The benefits of Industry 4.0 are

widespread for the Indian economy ifimplemented in true letter and spirit.However, there are a few challenges in theimplementation of Industry 4.0 in the Indianmanufacturing processes. At the macro-level, there is a need to develop an enablinginfrastructure to support the adoption ofdigital technologies by the industry.

Thus, to build a conducive infrastructure,the present government has taken variousreform measures to usher Digital Revolution

in the country and accordingly Digital IndiaProgramme was launched on July 01, 2015.A National Rural Internet and TechnologyMission for services in villages and schools,training in IT skills and E-Kranti forgovernment service delivery and governancescheme has been initiated by thegovernment. In the Union Budget 2019-20also, the government has taken a slew ofmeasures to promote digital payments in thecountry. The government has proposed tolevy Tax Deduction at Source (TDS) of twopercent on cash withdrawal exceeding Rs 1crore in a year from a bank account.Further, to encourage digital modes ofpayment, the government has proposed thatthe business establishments with an annualturnover of more than Rs 50 crore shall notcharge or provide Merchant Discount Rateto customers as well as merchants using lowcost digital modes of payment.

These reform measures are giving visiblefruitful outcomes as over two crores ruralIndians have so far been made digitallyliterate under the Pradhan Mantri GraminDigital Saksharta Abhiyan. Further, tobridge rural-urban digital divide, Bharat-Net is targeting internet connectivity in localbodies in every Panchayat in the country.14


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These measures at the macro-level area step in the right direction and have to bematched with the pro-active initiatives ofthe business firms to identify and utilise thevast amount of opportunities provided bydigital technologies in their businessapplications.

The manufacturing firms must prioritiseidentifying the right digital technology fortheir businesses and invest in them tosmoothen and fasten the entire value chainand augment decision making. There is aneed to upskill the talent within the factoriesand industry by investing in capacitybuilding to make them job ready in thedynamic industry scenario.

There is a widespread belief that Industry4.0 is expected to disrupt labour markets inthe country. These impacts, however, willbe felt in niches. The broad structure ofIndian labour markets is unlikely to changein any significant way in the next decade15.There are various reports which haveestimated the potential impact of digitaltechnologies on job scenario in India. Areport by McKinsey16 notes that theeconomy can create enough new jobs tooffset the automation and employ moreworkforce. The report further notes thatthere would be a mass shift of workers todifferent sectors and occupations, instead ofa mass job displacement driven by theadoption of digital technologies.

It may be noted that various reports statethat the workforce in India is not job-ready.The India Skills Report 2019 states that only47 percent of the graduates haveemployable talent. Though this is anincrease of over 15 percentage points in thelast 5 years, there is still a wide scope toincrease the number of employable talentin the country. Thus, the government hasto make concerted efforts to identify theskills required by the industry, the gaps inskilling and direct the institutes to alter theircurriculum according to the industryrequirements and changing economicenvironment.

Thus, with increased digitalisation andadoption of Industry 4.0, new skills requiredfor jobs would evolve. On the macro-front,an overall policy shift is required withchanges in the education curriculumcomplemented with reforms in labour lawsand business regulations and ensuringeducation, skilling and work opportunitiesfor all.

Opportunities for Indo-USCollaborations for Adoption ofIndustry 4.0 in India

At this juncture, it becomes imperativethat the general consensus of thepolicymakers, business firms, think tanksand organisations need to shift towardsensuring smooth adoption of Industry 4.0.According to the World Economic Forum’sFuture of Production Readiness Report 2018,India displays a low level of readiness forthe future of production as it is considered aLegacy Country.17 Legacy countries facethe risk of losing traditional manufacturingshares to other countries that can offer evencheaper labour. Hence, the economy mustgear up to invest significantly in technologydevelopments to control premature de-industrialisation.

As identified in the previous section, thegovernment needs to build its HumanCapital base and develop state-of-the-artinfrastructure to facilitate the industry andthe manufacturing sector to integrate digitaltechnologies in their businessapplications. The collaborations with theUS economy can provide greater benefits tothe economy as the US economy has beenmarching towards Industry 4.0 with fullvigour and enthusiasm.

The India-US bilateral relations haveevolved into a global strategic partnershipas both the nations share democratic valueswith the increasing convergence of interestson bilateral, regional and global issues. Theever-expanding dialogue and regularexchange of high-level government visits


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have established a sound framework forIndia-US engagement in various fieldsranging from agriculture, cybersecurity,defence, education, environment, energy,health to trade and investments and sciencetechnology.

India’s bilateral trade in goods with theUS is growing rapidly from 13 percent in2017 to 21 percent in 2018. The volume oftrade with the US has also increasedsignificantly from US$62bn in 2016,US$70bn in 2017 and to US$85bn in 2018.

The share of the US in India’s bilateraltrade in goods has increased from ninepercent in 2017 to 10 percent in 2018whereas India’s exports with the US grewby 13 percent and India’s imports from USgrew by 38 percent in 2018.

The India-US Science and TechnologyCooperation has been growing steadilyunder the the US-India Science andTechnology Cooperation Agreement signedin October 200518. The Indo-US Science &Technology Joint Commission is co-chaired

by the Union Minister of Science andTechnology in India and the Science Advisorto the US President. India-US Science &Technology Forum (IUSSTF) wasformulated in 2000 to support and foster jointapplied Research & Development togenerate public good through thecommercialisation of technology developedthrough sustained partnerships between theUS and Indian researchers andentrepreneurs.

Further, the US government in 2016announced financial support of US$121mnfor expansion of low cost and rapidlyscalable wireless broadband networks acrossIndia. This is expected to provide wirelessInternet access to around 6.5 millionresidential subscribers.19 Recently, a UStech-multinational signed an agreement withNiti Aayog to take forward the AtalInnovation Mission20 and to develop usecases for 5G in services for the citizens andmodernisation of the transportationnetwork.21

Opportunities

The US has a huge opportunity, particularly in the rural areas whichconstitute 67 percent of the population inhabitation and has low internetpenetration, to develop and modernise the existing digital infrastructure

There is a massive need for upskilling and reskilling of the Indian workforceto make them digital-ready. The US can, therefore, leverage this vastopportunity by providing opportunities for skilling by developing sector-specific training modules and implementation of best practices in skilling.

The increasing implementation of digital technologies would require securityand protection. The US firms dealing in cyber-security have a huge scope inIndia. This can be promoted by Consortiums for developing partnershipsbetween US firms and Indian firms as well as Central and state governmentmachinery.

The Start-ups have come up in a big way in the India Industry ecosystem.The US firms can tie-up with the manufacturing start-ups for technologicalupgradation, support and sharing of best practices.

The US firms can collaborate with Indian companies for technology transferand adoption of Digital Payments in India

S.No. Areas for Collaboration

1 Upgradation ofInfrastructure throughtechnology transfer

2 Skill Development

3 Promoting Cyber-Security

4 Collaborations withStart-ups

5 Digital Payments

Snapshot of Opportunities for Indo-US Collaborations for Adoption of Industry 4.0 in India


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These collaborations can be useful infacilitating India to adopt Industry 4.0 andfoster the high growth of the manufacturingand industry sector at large. The NetworkReadiness Index22 2016 ranks the US at 5th

position while India is ranked 91 out of 139countries. According to the World EconomicForum’s Global Competitiveness Index2018, USA ranks 1st out of 140 economieswhile India ranks 58th. The US is the closesteconomy to the frontier of the GlobalCompetitiveness Index, with the countrytaking a lead in the Business dynamismpillar, labour market and financial systempillars and has achieved a good score inthe Market pillar. All these factors contributeto the country’s vibrant innovationecosystem, making it a ‘super innovator’.23

The US is characterised with state-of-the-art technology and a conducive environmentfor the growth of research and developmentthat has promoted innovation in theeconomy. For every US$1 spent inmanufacturing, another US$1.89 is addedto the economy, where it has the highestmultiplier effect of any economic sector. Thegovernment realises the importance ofIndustry 4.0 for leapfrogging into the future.Thus, in 2011, the US President BarackObama announced the formation of theAdvanced Manufacturing Partnership(AMP), a national effort to bring togetheruniversities, industry and the governmentto invest in the emerging technologies forcreating high quality manufacturing jobsand enhancing global competitiveness.24

Thus, the US government is pursuing anaggressive policy to support the newdevelopment path of manufacturing andensure the ability to innovate and invest inthe US, promoting ‘Made in the US’ brand.

The report titled ‘Industry 4.0 Market& Technologies: Focus on the US – 2018-2023’ forecasts that the US Industry 4.0market will grow at a CAGR of 12.9percent.25 The US is pursuing Industry 4.0aggressively as the US manufacturers areseeing a real return on investments with

increased productivity, mitigating risks withbetter quality control from new techniques.

The US manufacturers continue to stepup investments in their operations in 2019.Further, the private equity interest in USmanufacturing firms developing Industry 4.0technology is growing. According to theInternational Federation of Robotics, theadoption of robotics in the US industrycontinues to grow, as it was revealed in its2018 World Robotics Report that there wasa six percent increase in industrial robotinstallations to 33,192 units in the US. Thiswas driven by a rising demand to automateproduction, keep manufacturing in the USand in fact re-shore from abroad.

Thus, India stands to learn immenselyfrom the Indo-US collaborations,particularly in Science and Technology.Consequently, the government may utiliseits present India-US Science & TechnologyForum (IUSSTF) to engage in an effectivedialogue inviting Indian entrepreneurs andrepresentatives from leading manufacturersin the US to come on a shared platform(Seminar/Conference/Symposium) and sharetheir views and best practices for adoptingIndustry 4.0 in India. The IUSSTF canfurther act as a facilitator by forming aConsortium of industries from the US whichare pioneers in Industry 4.0 and Indianmanufacturers which are working towardsintegrating technologies in their businessapplications.

The Indian government may partner withUS firms and invite the leading digital firmsof the US to come and set up digitalinfrastructure in India. These Americanfirms may be provided with incentives interms of a tax cut for R&D spending forimplementing their technical applications inthe country. The Science and TechnologyDepartment of the Ministry of Science andTechnology in India can work in closecoordination with these American firms toensure speedy delivery of the much-requiredinfrastructure to support digitaltechnologies. Further, the government can


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facilitate skill development of workforce inIndia by tying up with the SkillDevelopment Centres in the US. TheAmerican institutions would providetechnical know-how and upskilling of theIndian workforce required for digitaltechnologies, thereby enhancing capacitydevelopment in the workforce in the country.

Conclusions and the WayForward

Industry 4.0 is the new game-changerand has begun to revolutionise the entireglobal ecosystem with significant changeswitnessed across the world. TheIndustrialisation in India has undergoneremarkable changes and the policy focus ofthe government has changed accordingly.Presently, the government aims at increasingthe share of manufacturing in GDP. Industry

4.0 is the answer to achieving this giganticshift in the manufacturing share in the GDPfrom the current level of around 17 percent.There is a vast literature that supports theidea that the manufacturing sector in thecountry would grow remarkably throughIndustry 4.0. Further, high returns to businessthrough cost reductions, value addition andsafer workplace are the other major benefits.

At this juncture, it may be mentionedthat Industry 4.0 poses a challenge to jobcreation in the country. However, the broadstructure of Indian labour markets isunlikely to change in any significant wayin the next decade. In addition, new jobswould be created that would require newcompetencies and new skillsets. The rightsets of skills to perform the tasks arebecoming complex and would evolvefurther, requiring present and futuregenerations to train and re-train, goingforward. Soft skills such as communicationskills, teamwork and management are likelyto grow in importance in the emergingworld.

Further, the state-of-the-art infrastructureneeds to be developed to support the fourthrevolution of industrialisation. The financialinfrastructure must also be strengthened inthe economy in order to move towards aless-cash economy. The MSMEs inparticular need to be supported in terms ofeasy access to capital in order to supportthe digital infrastructure and ensure thatthey are part of India’s digital growth story.

In addition, the government needs toensure strong cyber-security and intellectualproperty laws in order to safeguard theinventions as well as innovations made bythe industries in the country. Thus, there isa gigantic plan of action that the governmentneeds to implement to accelerate industrialgrowth, thereby fostering innovation andspillover effects on each and every sector ofthe economy. The government may seekfacilitation from economies like the US,which is a leading nation in theimplementation of Industry 4.0. The

The Indian governmentmay partner with theUS firms and invitethe leading digitalfirms of the US tocome and set up

digital infrastructurein India

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Endnotes1 Additive manufacturing is used in small batch applications or for the production of individual parts or customised products. It is used

directly with the customers or by suppliers to improve designs for increased performance and cost efficiency.

2 Artificial intelligence (AI) is the simulation of human intelligence processes by machines, especially computer systems. These processesinclude learning (the acquisition of information and rules for using the information), reasoning (using rules to reach approximate ordefinite conclusions) and self-correction

3 Augmented Reality provides real time information in an effective manner such as using simulations and 3D views to allow people tointeract with electronic systems

4 Big Data refers to large volume of structured, semi-structured and unstructured data that can be mined to produce interesting insightsto improve the performance of businesses exponentially.

5 Cloud Computing refers to on-demand availability of computer system resources particularly storage of data and computing withoutdirect active management by the user.

6 Cybersecurity is the protection of internet-connected systems, including hardware, software and data, from cyberattacks.

7 Internet of Things describes the idea of everyday physical objects being connected to the internet and being able to identify themselvesto other devices.

8 Simulation is the approximate imitation of the operation of a process or system which helps in assessing the scenarios for developingcost effective measures for production

9 System integration (SI) is an IT or engineering process or phase concerned with joining different subsystems or components as one largesystem. It ensures that each integrated subsystem functions as required.

10 "Industry and Infrastructure”, in Economic Survey 2017-18, Ministry of Finance, Government of India, January 2018

11 The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financialtransactions but virtually everything of value

12 Authors’ calculations

13 World Bank’s South Asia Economic Focus Spring 2018, Jobless Growth

14 Union Budget 2019-20 Speech

15 ILO, June 2018

16 James Manyika, Susan Lund, Michael Chui, JaquesBughin, Jonathan Woetzel, Parul Batra, Ryan Ko and Saurabh Sanghvi, “Jobs Lost,Jobs Gained: Workforce Transformations in a Time of Automation,” McKinsey, December 2017

17 Legacy country refers to those countries which benefitted immensely from globalisation as they received high foreign directinvestments due to low labour costs which helped them strengthen their structure of production.

18 Ministry of External Affairs

19 FACT SHEET: U.S.-India Economic Cooperation and People-to-People Ties. Retrieved on 22nd August 2019

20 Atal Innovation Mission is a flagship initiative of the Government of India to develop new programmes and policies for fosteringinnovation in different sectors of the economy

21 Pace, breadth of digitalisation in India is unmatched, Times of India, September 21, 2018

22 World Economic Forum

23 Klaus Schwab, World Economic Forum, The Global Competitiveness Report 2018

24 https://obamawhitehouse.archives.gov/the-press-office/2011/06/24/president-obama-launches-advanced-manufacturing-partnership

25 https://www.prnewswire.com/news-releases/the-us-and-china-invest-heavily-in-industry-40-technologies-to-be-the-worlds-largest-manufacturer-300589461.html

government can leverage the synergies developed over the years with the USand utilise the partnerships made in the recent times to develop consortiumsand sign MoUs for sharing of best practices and technical know-how betweenthe business establishments in India and US.

Above all, a holistic approach to adopting Industry 4.0 would be requiredto transition from Industry 2.0 for the benefit of not just the industry andmanufacturing sector, but also the entire nation.


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IntroductionAdvancing bilateral relations through

digital economy manufacturingcollaborations is mutually beneficial to theUS and India. One specific area wherecomplementarities are yet to be fullyrealised is in new electronics value chains.This chapter shall identify variousinterventions that are essential for makingIndia an electronics innovation hub, with aspecific focus on the role the US can play.Smartphone manufacturing will be used asa reference to substantiate the mutualbenefits that the countries can derive bydeepening their participation in electronicsvalue chains.

Smartphones and their components(including high-value parts such assemiconductors and Printed Circuit Boards)serve as critical last-mile infrastructure for

a well-functioning digital economy. In recentyears, India has focussed on localisingsmartphone manufacturing. However,evidence shows that its tariff-baseddevelopment approach has failed to catalysethe envisaged local ecosystem. Achievingoptimal outcomes necessitates the adoptionof a holistic, innovation-based developmentmodel involving transfer, absorption andincubation of technology, all of which canbe accelerated with US participation andsupport.

India’s Phased ManufacturingProgramme

Electronics imports account for thesecond-largest component of India’s tradedeficit after oil and mineral fuels. In 2018-19, more than half of the deficit from the

FosteringInnovation-

based Manufacturing

Achieving optimal outcomes necessitates the adoptionof a holistic, innovation-based development modelinvolving transfer, absorption and incubation oftechnology, all of which can be accelerated with USparticipation and support.

Vivan SharanPartner, Koan AdvisoryGroup

Yamini JindalEconomics Associate,Koan Advisory Group


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import of electronics was on account ofsmartphones and related components.Notably, several high-value componentsused in smartphones are widely used in othersegments of the electronics industry.Therefore, localising manufacturing ofsmartphone-related components is a leverto achieving a greater comparativeadvantage in new electronics supply chains.Local manufacturing of high-valuesmartphones parts such as printed circuitboards (PCBs) and semiconductors, whichare core components in several electronicdevices, is particularly important.Moreover, the Indian Government hasrecognised that developing localmanufacturing capacity in semiconductortechnologies is of national securityimportance as well.1

The Digital India initiative identifieselectronics manufacturing as a central pillar,within which smartphone manufacturing isa large subset, owing to large domesticmarket demand. To promote and incentiviselocal manufacturing of smartphones, thegovernment has taken a tariff-led approach.This started with the announcement of aduty regime in the 2015-16 Union Budget.A countervailing duty (CVD) of 12.5 percenton imported handsets and an excise duty of1 percent without input tax credit ondomestically manufactured handsets wereimposed – to introduce differentiation intreatment between local and imported

handsets.2 Additionally, importedcomponents/sub-components were exemptedfrom basic custom duty and CVD/exciseduty. However, this initial approach failedto catalyse local manufacturing and onlyled to the proliferation of Assembly,Programming, Testing and Packagingoperations, which capture limited valueaddition. For instance, Pathak et al. (2016)state that the assembly of imported semi-knocked down level components captureda value addition of only 6 percent.3

Recognising the failure of its initialapproach, wherein imported componentswere not charged additional duties butimported handsets were, the Ministry ofElectronics and Information Technology(MeitY) notified the Phased ManufacturingProgramme (PMP) on 28 April 2017. Underthe PMP, imports of components/sub-components were subject to customs dutiesin a phased manner (starting from low-valueand gradually moving to high-valuecomponents).4 However, the PMP too failedto achieve desired outcomes. While importsof smartphones decreased by 75 percent,imports of smartphone-related componentsincreased by 119 percent – offsetting allgains (Figure 1).5

A 15 percent duty was levied under thefirst phase of the PMP on components suchas chargers/adapters, battery packs andwired headsets. Consequently, compared tothe year preceding notification of the PMP

Note: Values are Inflation-adjusted; Source: Export Import Data Bank, Directorate General of ForeignTrade, Ministry of Commerce and Industry

Figure 1: India’s Imports of Smartphones and Smartphone-Related Components


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(2016-17), the imported rate per unit of thesecomponents declined by 46 percent forchargers, 37 percent for batteries and 5percent for wired headsets in 2018-19. Thisindicates that offshore suppliers managedto absorb the tariff shock imposed by thePMP by adjusting margins on thesecomponents. It is also important to note thatthe components covered in the first phaseof the PMP contribute only a smallproportion to the overall manufacturing costof a smartphone, and thus suppliers wereable to absorb additional tariff costs byreducing margins.

Another challenge has been the lack offocus on exports in the PMP, which hasstymied local manufacturing. From the all-time peak of US$2.7bn in 2012-13, India’ssmartphone exports almost halved toUS$1.4bn in 2018-19 (Figure 2).

The failure of successive tariff regimesto localise low-value componentsdemonstrates that localising higher valuecomponents may prove even tougher. Partof the reason for this is that high valuecomponents are typically produced incountries that are already part of GlobalValue Chains (GVCs) for electronics. Theseare countries like Japan, South Korea,Taiwan, the US and China. High-valuecomponents require significant localresearch and development (R&D) focus andtherefore are produced in bulk in such

countries and exported to different parts ofthe world. By limiting the focus of the PMPto import substitution, India has precludeditself from catering to the global market forsmartphones, as evidenced by the declinein exports. Adoption of an innovation-basedlens is critical for India to be a meaningfulpart of electronics and smartphone GVCs,which in turn, requires incentives for globalcompanies to localise in India.

Towards an Innovation-basedDevelopment Model

The US can play a vital role inaccelerating India’s transition into aninnovation hub at every associated stage ofsupply chain development, includingtransfer, absorption and incubation oftechnology. This is detailed below.

Transfer of Technology

Development of a local ecosystem forhigh-value components demands transferand acquisition of technology from the globalmanufacturing ecosystems (or‘motherships’). Enhanced foreign directinvestment (FDI) by global companies canfacilitate organised supply chaindevelopment. Attracting FDI from the USin high-value components such as PCBs andsemiconductors is critical, as thesecomponents are building blocks of

Figure 2: India’s Exports of Smartphones

Note: Values are Inflation-adjusted; Source: Export Import Data Bank, Directorate General ofForeign Trade, Ministry of Commerce and Industry.


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smartphones and many other advancedelectronics products. In fact, PCB assembliesconstitute approximately 40-50 percent ofthe value of an average smartphone, withcritical sub-components like semiconductorsconstituting 25-35 percent of the value.6,7

In any case, international trade rulesprohibit India from employing a tariff-ledapproach India towards localisation ofsemiconductor manufacturing.8

In 2015, American companies accountedfor approximately 50 percent of globalsemiconductor sales.9 American companiesare leaders in multicomponentsemiconductors, a type of semiconductorwidely used in smartphones, tablets, etc.With the world’s largest fablesssemiconductor companies such asBroadcom, Qualcomm, NVIDIA andAdvanced Micro Devices, the US is well-suited to partner with India in setting uppure-play foundries or fabrication plants,thus facilitating technology transfer. TheIndia-US ICT Working Group can beleveraged to initiate meaningful discussionstowards this.

Absorption of Technology

Technology absorption is contingent oneducation, knowledge, skills, experience andtraining – and the US can play a significantrole in facilitating each of these. For

instance, Indian universities can partner withAmerican universities specialising insemiconductor technologies andmicroprocessor development (such as TheUniversity of Texas at Austin, Texas StateUniversity). Such collaborations will helpIndia in the adoption of best practices incrucial areas like curriculum design,teaching resource development, andbenchmarking of occupational and skillstandards. Additionally, Americanuniversities and companies specialising inadvanced semiconductor technologies (suchas wafer processing, laser technologies, etc.)can encourage student/employee exchangesand provide internships and apprenticeshipopportunities.

Incubation of Technology

Realisation of value in smartphonemanufacturing demands incubation oftechnology. Investment in R&D is crucialfor this. However, India fares poorly in R&Dactivities. Gross R&D expenditure (i.e.public and private) as a percentage of GDPis only 0.6 percent – significantly low whencompared to the US.10

India must leverage bilateral relationstowards enhancing R&D focus. Thegovernments of both countries can establishan R&D fund that supports research-relatedpartnerships between government,


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academia and industry, by awarding grantsfor co-developing innovative products/processes in semiconductor and PCBtechnologies, amongst others. Existing R&Dcollaborations such as the US-India Science& Technology Endowment Fund (USISTEF)can be leveraged.11

The USISTEF is currently limited tobiomedical sciences, ICT-linked researchaimed at reducing the digital divide in areaslike agriculture, energy, etc. Deliberationscan be initiated on expanding its scope.

An R&D collaboration agreementestablishing strong intellectual propertyright frameworks (including ownership,licencing to third parties, etc.) and othernecessary provisions to conductcollaborative R&D may accelerateresearch-based cooperation. For instance,International Semiconductor ManufacturingTechnology, which is a US-based researchconsortium of semiconductor companies,could co-develop cutting edgesemiconductor technologies with India’sCentres of Excellence in Nanoelectronicsunder MeitY.12,13

Finally, a dedicated US-India researchforum for discovering opportunities forresearch collaboration in smartphone and

related components can be established. Byorganising joint exhibitions, seminars andworkshops, such a forum can serve as anetworking platform for connecting researchcommunities. Existing forums like the IndoUS Science and Technology Forum (IUSSTF)could also be leveraged towards this.

ConclusionBuilding manufacturing capacity for

high-value electronics components in Indianecessitates the adoption of an innovation-based lens through which R&D isencouraged and incentivised. Engaging withthe US in research, technology transfer andmanufacturing of high-value componentssuch as semiconductors and PCBs offers suchan opportunity for India. This involves notonly passive cooperation wherein India candraw on the US’s experience, but also activeengagement towards transfer, absorption andincubation of technology. Given that the USis already a major strategic partner, adeeper innovation partnership is muchwarranted.

Further, amidst global trade tensions, anIndia-US partnership in electronicsmanufacturing presents a strategicopportunity for the US. In July 2019, Japanimposed restrictions on the export of threechemicals/materials to the South Korea(photoresists, hydrogen fluoride andfluorinated polyimides), all of which arewidely used by South Korean semiconductorindustry.14

Export restrictions imply that Japaneseexporters have to obtain licenses to exportthese chemicals/materials to South Korea.Japan has also removed South Korea fromits ‘white list’ of favoured trade partners.15

Moreover, in 2019, the US placed fiveChinese firms engaged in supercomputingwith military-related applications in its‘entity list’, citing national securityconcerns.16 Reasons for such flux include amismatch in political and economic valuesbetween countries. These are not constraintswithin the India-US bilateral.

The US can play a vitalrole in accelerating India’s

transition into aninnovation hub at every

associated stage ofsupply chain development

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Endnotes

1 Ministry of Electronics and Information Technology (2019). National Policy on Electronics 2019. Available at: https://meity.gov.in/writereaddata/files/eGazette_Notification_NPE%202019_dated%2025022019.pdf

2 Ministry of Finance (2015). Union Budget 2015-16. Available at: https://www.indiabudget.gov.in/budget2015-2016/ub2015-16/bs/bs.pdf and Ministry of Electronics and Information Technology (2017). Phased Manufacturing Programme to promote indigenousmanufacturing of Cellular Mobile Handsets, its sub-assemblies and parts/sub-parts/inputs of the sub-assemblies thereof. Available at:https://meity.gov.in/writereaddata/files/Notification_PMP_Cellular%20Mobile%20Handsets_28.04.2017.pdf

3 Pathak, T., Chatterjee, C., & Shah, N. (2016). Maximizing Local Value Addition in Indian Mobile Phone Manufacturing: A PracticalPhased Approach. IIM Bangalore Research Paper, (528).

4 Ministry of Electronics and Information Technology (2017). Phased Manufacturing Programme to promote indigenous manufacturingof Cellular Mobile Handsets, its sub-assemblies and parts/sub-parts/inputs of the sub-assemblies thereof. Available at: https://meity.gov.in/writereaddata/files/Notification_PMP_Cellular%20Mobile%20Handsets_28.04.2017.pdf

5 The Harmonised System (HS) codes for smartphones and various smartphones-related components are mapped using CustomNotifications (various years), Finance Act (2018) and PMP Notification.

6 Pathak, T., Chatterjee, C., & Shah, N. (2016). Maximizing Local Value Addition in Indian Mobile Phone Manufacturing: A PracticalPhased Approach. IIM Bangalore Research Paper, (528).

7 S. Ronendra, Singh (2013). Semiconductor units will leapfrog India’s manufacturing capabilities. The Hindu Business Line. Availableat: https://www.thehindubusinessline.com/info-tech/semiconductor-units-will-leapfrog-indias-manufacturing-capabilities/article20660314.ece

8 Components like semiconductors are covered under the Informational Technology Agreement (ITA-1) to which India is a signatory.

9 Platzer, M. D., & Sargent, J. F. (2016). US semiconductor manufacturing: Industry trends, global competition, Federal Policy. NewYork: Congressional Research Service.

10 World Development Indicator 2015

11 Administered by the Indo-U.S. Science and Technology Forum, an autonomous bilateral organization jointly funded by India and US,USISTEF supports R&D related collaborative initiatives between stakeholders in the two countries.

12 To combat competition from Japanese semiconductor manufacturers in 1980s, Semiconductor Manufacturing Technology(SEMATECH), an industry research consortium funded by the US government was formed in 1987. In 1995, the first wave ofglobalisation of SEMATECH was witnessed wherein international members were permitted to collaborate with consortium’s 300 mmwafer technology and this led to the formation of International SEMATECH. However, in 1999, the SEMATECH restructured as anactive ‘global’ consortium cooperating with European and Asian companies on all of its programs including interconnect technologiessuch as copper and low-k dielectrics, and front-end wafer processing R&D.EE Times (1999). Sematech restructures as a globalconsortium. Available at:https://www.eetimes.com/document.asp?doc_id=1187881

13 MeitY Website. ‘Nanotechnology Initiative Division under R&D in Electronics’. Available at:https://meity.gov.in/content/nanotechnology-initiative-division

14 Lee, Yen Nee (23 July, 2019). The Japan-South Korea conflict could push up the price of your next smartphone. Here’s how. CNBC.Available at: https://www.cnbc.com/2019/07/23/japan-south-korea-dispute-impact-on-semiconductor-supply-chain-prices.html

15 CNBC (August 1, 2019). Japan to remove South Korea from ‘white list’ of favored trade partners. Available at: https://www.cnbc.com/2019/08/02/japan-south-korea-trade-fight-tokyo-to-remove-seoul-from-white-list.html

16 Business Today (June 22, 2019). US blacklists five Chinese firms working in supercomputing. Available at: https://www.businesstoday.in/current/world/us-blacklists-five-chinese-firms-working-in-supercomputing/story/358183.html


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A number of countries around the worldhave devised strategies to harness the

economic potential of Artificial Intelligence(AI) while mitigating its risks. Studies tellus that AI could potentially deliver anadditional economic output of aroundUS$13tn by 2030.1 For India, it is estimatedthat AI could add US$1tn to the economyby 2035.2 Beyond GDP growth, AIadvancement will deepen the permeation oftechnology in daily lives, requiring newperspectives on education, employment,social organisation, ethics and law.

Given such stakes, it is important forIndia to adopt a strategic approach towardsthe advancement of AI. Early steps inframing such an approach can be tracedback to August 2017, with the formation ofan AI task force led by the Ministry ofCommerce and Industry.

The task force’s report described AI as a‘game-changer’ that was to be a “key factorin economic development” in the future.3 Itstudied the potential impact of AI across 10specific domains identified as relevant toIndia. These were examined from the point

of view of the role of government, thepotential of technology to solve problemsand improve quality of life and impact onemployment generation and growth. Finally,it made a set of six broad recommendations.

The task force’s report was followed bya Niti Aayog discussion paper in June 2018,which outlined the pathway for a potentialIndian AI strategy.4 Niti Aayog describedits approach as #AIforAll, which it says“implies inclusive technology leadership,where the full potential of AI is realised inpursuance of the country’s unique needs andaspirations.” The report identified fivesectors that can benefit the most from AI insolving societal needs and outlined thebarriers that need to be addressed in orderto reap the benefits of AI in India.

Both these documents did well to identifythe core constituents of AI development, i.e.,investing in technological advancement,support for research and enterprises, skillingand talent development and the need toeffectively leverage data. However, seizingthe opportunities that AI offers requiresdecision-makers to devise a comprehensive

Ecosystem ofInnovation Neededto Boost AI in India

Manoj KewalramaniResearch Fellow,The TakshashilaInstitution

AI advancement will deepen the permeation of technology in daily lives,requiring new perspectives on education, employment, socialorganisation, ethics and law.


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approach. This entails crafting policiesacross a range of areas, such as incentivesto boost R&D spending, devising AI-specificeducation, legislation on data protection,ownership and access and enhancing IPRprotection and judicial capacity, all of whichfeed into advancing an ecosystem ofinnovation.

The rest of this article examines fivemajor policy areas where immediateattention is warranted.

Enhancing R&D InvestmentAlthough there has been an increase in

absolute terms, as a percentage of GDP,India’s spending on research anddevelopment has remained at around 0.7percent over the past few years.5 This isamong the lowest when compared withBRICS countries and far from the desiredgoal of two percent of GDP by 2022, asoutlined by the Economic Advisory Councilto the Prime Minister.6 In addition, theIndian government has not allocated an AI-specific research budget. Allocation for AIresearch is clubbed with other sectors, suchas robotics, IoT and quantumcommunications, under the broader DigitalIndia umbrella.7 Moreover, the privatesector’s contribution to R&D expenditurein the country remains rather low and hasbeen declining.8

While public R&D spending is critical,it is also important to incentivise the privatesector to spend more. Doing this requires atwo-pronged approach. First, governmentsmust ease the cost burden on enterprises viatargeted tax breaks along with the creationof special zones or sandboxes. With regardto the former, there have been some stepstaken over the past few years, such as taxdeductions on expenditure incurred inapproved in-house R&D facilities and theintroduction of a 10 percent tax rate onincome from worldwide exploitation ofpatents developed and registered in India.9

However, as analysts have pointed out,the eligibility rules to avail tax deductionsare quite restrictive and neither does itincentivise transfer of existing foreign IP toIndia.10 The latter refers to establishingsector-specific zones where trials and testingare permitted in a controlled environment,somewhat akin to pilot zones established inChinese cities and provinces.11 In thiscontext, the RBI’s regulatory sandbox forfin-tech sector is a step in the rightdirection.12 Second, it is important to shiftaway from protectionist approaches, suchas price controls in the drug and medicaldevices sector, and upgrade IPR regulationand enhance IP protection for innovations.Failure to do so will only diminish theincentive to innovate.

AI-Specific Institutions &Planning

The February 2019 interim budgetspeech by the Indian finance minister sawthe government committing to theestablishment of a national centre forartificial intelligence as a hub, along withother centres of excellence.13 This was

it is important forIndia to adopt a

strategic approachtowards the

advancement of AI

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largely in line with one of therecommendations of the AI task force, whichhad called for the establishment of an Inter-Ministerial National Artificial IntelligenceMission. N-AIM will be the nodal agencybuilding synergies between academia,industry and government. It will alsosupport AI-focussed centers of excellenceand coordinate projects of nationalimportance. What remains unclear iswhether this center will operateindependently, given that the governmentalso wants Niti Aayog to direct AI researchand development efforts.

Multiple planning and coordinatingagencies are likely to divide resources andcultivate bureaucratic interest silos.Already, there are rumblings of a turf warbetween Niti Aayog and the Ministry ofElectronics and Information Technology.14

Further, while the Indian government hassaid that it is working towards establishinga national AI hub, there has been nomovement on the recommended budgetaryallocation. The AI task force hadrecommended that N-AIM should enjoy anallocation Rs. 1200 crore (approxUS$171mn) over a period of five years. TheIndian government, however, has notannounced any specific allocation.

Education & TalentDuring her July 2019 budget speech,

Indian Finance Minister NirmalaSitharaman promised that the governmentwill “lay focus on new-age skills likeArtificial Intelligence (AI), Internet of Things,Big Data, 3D Printing, Virtual Reality andRobotics.”15 That’s an important statementof intent, but specifics remain sketchy.Talent is one of the key components of astrong AI ecosystem. This entails a rangeof individuals, from those conducting coreresearch, those building products and finallydownstream talent. Factoring this holisticperspective in the country’s education policyis critical.

The draft National Education Policyappears to echo some of this. It states that“a robust ecosystem of research is perhapsmore important than ever with the rapidchanges occurring in the world today,”citing machine learning and AI as criticalto future development.16 For starters, interms of skilling the future workforce, thepolicy calls for India to take the lead “inpreparing professionals in cutting-edgeareas...such as artificial intelligence.”17

Although the specifics are sketchy, doing thisis critical, given the potential for AI-relatedindustries to support job growth. This isevident in the expansion of the datalabelling and annotation industry in India.18

Greater focus on specialised short-termcourses that foster skill development inspecific sectors would further aid suchindustries.

On the other hand, in the context ofresearch in AI, the policy proposes a three-pronged approach that the NationalResearch Foundation should adopt withregard to disruptive technologies like AI.19

This is important, given that India lagsbehind key competitors in terms of thenumber of researchers, publications andpatents.20 In fact, a recently concluded studynotes that India is home to merely 50 to 75principal AI/ML researchers.21 In order toexpand fundamental research in the country,the study recommends an increasedinvestment, attracting high-quality facultyand introducing undergraduate students toAI/ML courses. This echoes one of therecommendations of the AI task force, whichcalled for devising AI-related curriculumsand AI education strategy.22

What would further facilitate this isopening up the Indian education sector toforeign universities and capital.23

Legislation to this effect has failed tomaterialise despite over a decade ofdebate.24 Second, there needs to be a greaterfocus on school and university incubators.The Atal Innovation Mission through whichtinkering labs and innovation centres are


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being established is a step in the rightdirection.25 Progress, however, has beenslow. As of March 2019, out of the selected5441 Atal Tinkering Labs, which are beingestablished in schools, only 2171 receivedthe first tranche of grants.26 Thecorresponding number for Atal IncubationCentres, focussed on universities andindustry, was 31 out of 101.27 The key tothe success of AIM is a consistent and timelyinvestment, focussing on scale and outcomesthrough industry support. Finally, it isimportant to build industry-academiaconnections and re-examine metrics ofqualifications in the context of skillsshortage evident among Indian STEMtalent.28

Leveraging DataData lies at the heart of AI development.

It is the fuel that will drive futurealgorithms. However, the key lies indeveloping quality data sets from thecomplex mess of information produced andcaptured and effective labeling. BuildingIndia-specific data sets that are open accesscan power future innovation. Fortunately,there has been some progress in this

direction. India’s Open Government DataPlatform already provides access to a rangeof data collected by various ministries. Inaddition, NITI Aayog’s strategy proposeda national marketplace focusing on datacollection and aggregation, data annotationand deployable models.29 Since then, it hasissued a request for proposal to establish theNational Data and Analytics Platform(NDAP) through public-privatepartnership.30

NDAP will serve as a single point foraccessing data across all ministries that isavailable in the public domain, providingopen Indian data sets for researchers andcompanies. Some of the key areas whereattention is already being directed arelanguage processing, transport, weather,healthcare and agriculture. However, inorder to effectively leverage data, it is criticalthat legislation addressing key ethical issuesof ownership, copyright, privacy, consent,storage, access and protection is fast-tracked.Such issues lie at the heart of any AI strategy.In addition, it is important that regulationsalso provide frameworks for accessingprivate sector data while protecting usersand the company’s IP.


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Judicial & RegulatoryEnvironment

India jumped eight places to take the36th spot in the 2018 Global IntellectualProperty Index. The US Chamber ofCommerce’s Global Innovation PolicyCenter’s index ranks the top 50 countries.31

WIPO’s rankings for 2019 also saw Indiareach closer to breaking into the top 50innovative economies.32 This is arecognition of a series of steps taken in thelast few years to improve the regulatoryenvironment. In 2016, a new NationalIntellectual Property Rights Policy waspublished.33 The changes it envisaged are

aimed at boosting innovation andentrepreneurship. In order to do so, IPR lawsare being reassessed and strengthened. Thereis an effort to push for IP commercialisation.There is a push to reduce the time takenfrom the trademark assessment down to onemonth.34 These are positive trends topromote broader innovation, which wouldsupport AI development.

But what is also needed is a greater focuson judicial capacity when it comes to IPRprotection cases along with addressing thestructural problem of pendency.35 At presentin India, the Intellectual Property AppellateBoard is the specialised tribunal for selectintellectual property disputes. Select IPdisputes, however, do find their way to theHigh Courts. One pathway to enhancejudicial capacity in terms of IPR protectionand dispute resolution could be eitherestablishing specialised IP courts, akin tothe kind of system being established inChina.36 Some analysts have also suggestedthe possibility of establishing specialised IPbenches in High Courts in India.37

The above underscores what constitutesa holistic approach towards developing aninnovation ecosystem, which can power AIdevelopment. It is important that Indianpolicymakers devise laws, regulations andpolicies that nurture the foundations of aninnovative society and economy. Specificsteps need to be taken across a range ofdomains discussed above, beginning withAI-specific planning and budgetaryallocations along with incentives to expandR&D investment. The cumulative effect ofsuch enabling measures is likely to begreater commercialisation of scientificresearch. Therein lies the key to a winningstrategy.

It is important thatIndian policymakers

devise laws,regulations and

policies that nurturethe foundations of aninnovative society and

economy

“

”


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Endnotes

1 Jacques Bughin, Jeongmin Seong, James Manyika, Michael Chui & Raoul Joshi. ‘Notes from the AI frontier: Modeling the impact ofAI on the world economy.’ September 2018. McKinsey Global Institute.

2 Rekha Menon, Madhu Vazirani & Pradeep Roy. ‘Rewire for Growth: Accelerating India’s economic growth with artificialintelligence.’ 2017. Accenture.

3 Report of The Artificial Intelligence Task Force. DIPP, Ministry of Commerce and Industry, Government of India. March 2018.

4 National Strategy for Artificial intelligence. June 2018. Niti Aayog.

5 ‘R&D Spending In India Less Than China And Brazil: Education Ministry.’ NDTV. July 22, 2019. https://www.ndtv.com/education/hrd-ministry-r-d-expenditure-in-india-less-than-china-and-brazil-2073497

6 ‘Growth in R&D expenditure to be targeted 2% of GDP by 2022: PM economic panel.’ PTI. July 24, 2019 https://www.businesstoday.in/current/economy-politics/growth-in-rd-expenditure-to-be-targeted-2-of-gdp-by-2022-pm-economic-panel/story/367312.html

7 Rajesh Kurup. ‘Govt doubles Digital India allocation to 3,073 crore; telecom sector disappointed.’ The Hindu BusinessLine. February 1,2018. https://www.thehindubusinessline.com/economy/budget/govt-doubles-digital-india-allocation-to-3073-crore-telecom-sector-disappointed/article22620283.ece

8 ‘India Inc’s expenditure on R&D declines to lowest level in six years.’ Business Standard. August 3, 2019. https://www.business-standard.com/article/companies/indian-companies-r-d-spend-declines-to-lowest-level-in-five-years-119080202058_1.html

9 ‘Harnessing private sector investment in R&D.’ FICCI report. April 2017. http://www.ficci.in/spdocument/20884/R&D-Industry-Report.pdf

10 Gaurav S. Ghosh. ‘Incentivizing private sector R&D in India.’ Livemint. November 26, 2018. https://www.livemint.com/Opinion/9cJ0w68CdgCkybtzZEKwpN/Opinion—Incentivizing-private-sector-RD-in-India.html

11 ‘China to build 20 new AI innovative development pilot zones.’ Xinhua. September 06, 2019. http://www.xinhuanet.com/english/2019-09/06/c_138371122.htm

12 Neha Alawadhi & Romita Majumdar. ‘RBI finalises regulatory sandbox framework for innovation in fintech firms.’ BusinessStandard. August 27, 2019. https://www.business-standard.com/article/finance/rbi-finalises-regulatory-sandbox-framework-for-innovation-in-fintech-firms-119081400067_1.html

13 ‘Budget 2019: National Centre for Artificial Intelligence to come up soon.’ Economic Times. February 01, 2019. https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/budget-2019-national-centre-for-artificial-intelligence-to-come-up-soon/articleshow/67788227.cms

14 Surabhi Agarwal & Yogima Seth. ‘Niti Aayog, MeitY spar over Rs 7,000 crore AI mission.’ The Economic Times. August 27, 2019.https://economictimes.indiatimes.com/news/politics-and-nation/niti-aayog-meity-spar-over-rs-7000-crore-ai-mission/articleshow/70851052.cms

15 ‘Speech of Nirmala Sitharaman Minister of Finance.’ July 5, 2019 https://www.indiabudget.gov.in/doc/Budget_Speech.pdf

16 Draft National Education Policy 2019. Ministry of Human Resource Development. Accessible here: https://mhrd.gov.in/sites/upload_files/mhrd/files/Draft_NEP_2019_EN_Revised.pdf

17 ibid

18 Cade Metz. ‘Small towns in India are powering the global race for artificial intelligence.’ The New York Times. August 18, 2019.https://economictimes.indiatimes.com/tech/internet/small-towns-in-india-are-powering-the-global-race-for-artificial-intelligence/articleshow/70711704.cms

19 Draft National Education Policy 2019. Ministry of Human Resource Development.

20 http://www.prsindia.org/report-summaries/draft-national-education-policy-2019

21 ‘Landscape of Artificial Intelligence and Machine Learning in India.’ Itihaasa Research and Digital. 2018. http://www.itihaasa.com/pdf/itihaasa_AI_Research_Report.pdf


23 The draft National Education Policy evisages establishing international research efforts using AI to address key sectoral issues. Thiswould be aided by opening the Indian education sector to foreign institutions.

24 The Foreign Educational (Regulations of Entry and Operations) Bill was first proposed in 2010. There has been some indication thatthe current Indian leadership would like to revisit the bill. But there hasn’t been any tangible movement forward. More details on thelegislation can be found here: ‘Legislative Brief: The Foreign Educational Institutions (Regulation of Entry and Operations) Bill, 2010.’PRS Legislative Research. https://www.prsindia.org/uploads/media/Foreign%20Educational%20Institutions%20Regulation/Legislative%20Brief%20-%20Foreign%20Education%20Bill.pdf

25 ‘NITI Aayog’s AIM has selected 3,000 additional schools for the establishment of Atal Tinkering Labs.’ Economic Times. June 12,2018. https://economictimes.indiatimes.com/news/politics-and-nation/niti-aayogs-aim-has-selected-3000-additional-schools-for-the-establishment-of-atal-tinkering-labs/articleshow/64555619.cms?from=mdr


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26 Cabinet approves Continuation of Atal Innovation Mission. https://pib.gov.in/newsite/PrintRelease.aspx?relid=189295

27 Ibid

28 ‘Shortage of talent in Indian STEM sector due to skill gaps: Indeed data.’ Moneycontrol News. Feb 28, 2018. https://www.moneycontrol.com/news/business/economy/shortage-of-talent-in-indian-stem-sector-due-to-skill-gaps-indeed-data-2517955.html

29 National Strategy for Artificial intelligence. June 2018. Niti Aayog.

30 ‘Niti Aayog invites bids for development of National Data and Analytics Platform.’ PTI. June 19, 2019. https://economictimes.indiatimes.com/news/economy/policy/niti-aayog-invites-bids-for-development-of-national-data-and-analytics-platform/articleshow/70298261.cms?from=mdr

31 ‘India jumps 8 places to 36th on International IP Index.’ Economic Times. February 8, 2019. https://economictimes.indiatimes.com/news/economy/indicators/india-jumps-8-places-to-36th-on-international-ip-index/articleshow/67884700.cms?from=mdr

32 The Global Innovation Index, 2019. WIPO. https://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2019-chapter1.pdf


34 ‘Intellectual Property Rights regime in India: Initiatives by the government.’ DIPP, Ministry of Commerce and Industry. January 24,2018. https://spicyip.com/wp-content/uploads/2018/01/IPR-Regime-In-India-Government-Initiatives.pdf

35 More information can be found at ‘Pendency of cases in the Judiciary.’ PRS Legislative Research. Accessible here: http://www.prsindia.org/policy/vital-stats/pendency-cases-judiciary

36 Justice Tao Kaiyuan. ‘China’s commitment to strengthening IP judicial protection and creating a bright future for IP rights.’ WIPOMagazine. June 2019. Accessible here: https://www.wipo.int/wipo_magazine/en/2019/03/article_0004.html

37 Jacques de Werra. ‘Specialised Intellectual Property Courts- Issues and Challenges.’ CEIPI-ICTSD Publication. March 2016. Accessiblehere: http://www.ictsd.org/sites/default/files/research/Specialised%20Intellectual%20Property%20Courts%20-%20Issues%20and%20Challenges_0.pdf


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When Amazon bought the onlinepharmacy Pillpack last week for

around US$1bn, the stock market valuationof several large pharmacy retail chains fellby US$14bn. That is the power of clicks(online e-commerce companies) over bricks(and mortar) high street retailers.

The once-powerful GE being taken offthe Dow Jones market index is an indicationof how old-style manufacturing anddistribution companies are being markeddown on a daily basis, whereas techcompanies are valued in stratospheric terms.

The old economy is facing massivecreative destruction in the shift to the neweconomy led by the Internet ofThings (everyday objects with the onlinecapability and communicating with each

As AI Makes Inroads,People, Companiesand Nations MustDigitise or Watch theirProspects Die

Andrew ShengDistinguished Fellow of

the Asia Global Institute,University of Hong Kong

Sheng says Industry 4.0 calls for an ecosystem of universities,employers and students collaborating to meet the challenge of adigitised economy.

other), which involves digitisation and thenretailing.

Every line of business, including thebusiness of government and social services,is being disrupted. Every individual,company or nation faces marginalisationwithout a good digital transformation story.

The conventional wisdom is thatdigitisation is good for the consumer but badfor jobs. When I am told that artificialintelligence can already tell from a pictureof a human iris whether the person is maleor female, and human ophthalmologistscan’t, I know almost all jobs are now underthreat. Job insecurity across all fieldsexplains the populist votes for change andsentiments against immigrants, foreignersand globalisation.


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When Henry Ford invented the assemblyline for making cars, he basically madeworkers assemble products in linearsuccession, which was more efficient thancraftsmen who built everything from scratch.

The linear assembly line quickly evolvedinto supply chains, whereby Toyota has awhole chain of subcontractors andcomponent suppliers to enable the companyto deliver cars. Apple doesn’t evenmanufacture phones, but designs andmarkets them, leaving Foxconn and othersto do much of the research and developmentof how to produce what Apple designerswant that suits the consumer.

Amazon and Alibaba (the pioneers ofIndustry 4.0) are the architects of their owndigital ecosystems, orchestratingmanufacturing, distribution and retailingthrough digital channels, running on cloudcomputing that they own and operate. Inshort, they moved beyond linear productionto dynamic multitasking.

The common complaint by employersis that the current education system is notproducing graduates who can be useful injobs straight away. All new and old economyemployers have to spend considerableresources retraining and reskilling their newand present employees.

This is simply because the educationsystem is still based on the linear assemblyline process, whereby young people gothrough 15-20 years of sequential formaleducation from primary to university level,using curriculums that are obsolete by thetime they graduate.

Universities are producing balance-sheetemployees, assuming that their graduateswill remain on the books of a company forlife. As more companies move to flexibleproduction, subcontracting jobs out andcutting their full-time employees, thatuniversity education model is obsolete. Inthe internet era, all fixed costs are becomingvariable. Fixed jobs are disappearing fast.Anyway, people don’t stay in the samecompany for too long.

In practice, all jobsneed to be reviewed

in the new digitalworld. And thebiggest change

would not involvethings or people,

but mindsets

”

“

Governments are having a hard timecoming up with the right policies to confrontthis massive job change, even withingovernments, where digitisation can cuthugely bloated bureaucracies.

In practice, all jobs need to be reviewedin the new digital world. And the biggestchange wouldn’t involve things or people,but mindsets.

Coping with the digital revolution isreally about how you should transform yourbusiness and organising the production ofboth goods and services. Jack Ma ofAlibaba and Jeff Bezos of Amazon arethriving because they understand thischange and are making it happen.

Industry 3.0 – the current business model– is essentially linear and stability-oriented.


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To paraphrase Lord Acton, there are nopermanent friends, permanent enemies orpermanent jobs, only permanent interests.

Schools and universities also face thechallenge of massive open online courses(MOOC) that are being offered by topuniversities and teachers, often for free.Who needs second- or third-tier universitiesstaffed by professors teaching outdatedcontent, when you can access knowledgeand branding (from top universities) cheaperand faster?

This is why there is a growing marketfor short-term specialised courses run bymarket-based professionals that helpcompanies re-skill employees. Employersalso use AI to cut down hiring, becauseleading companies need fewer and smarteremployees who can be retrained faster inreal work experience.

The solution to the skilling and reskillingdilemma is an internship. The education

In the digital age, itis not the knowledgethat is the problem,but how to acquireand apply the right

knowledge thatmatters

”

“


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system should be re-geared towardsbecoming an ecosystem for continuousupgrading of skills, working together withall employers – government, business orcivil society organisations.

Taxation and education-spendingpolicies should be geared towardsuniversities as pools of cheap labour foremployers, that provide interns real-life jobskills in exchange for the opportunity toselect and retain talent. In other words,university degrees should allocate up to halfof the students’ time for an internship. Thetax and education subsidy system should betailored to allow universities, employers andstudents to be mutually interdependent toproduce better employees for the Industry4.0 age.

To some extent, this is alreadyhappening, as many interns in Silicon Valleyand elsewhere drop out of university andjoin their employers in start-up ventures,

preferring on-the-job challenges, rather thanlearning more theory from textbooks.Teachers themselves would benefit frominternships with companies, just as highlyskilled workers would benefit frominterchanging jobs to become professors (orteachers) of practice.

In the digital age, it is not the knowledgethat is the problem, but how to acquire andapply the right knowledge that matters.

But the first step to conquering the digitaldivide is to change not just one’s ownmindset, but that of decision-makers at alllevels. As the saying goes, those who know,can’t decide, and those who decide, don’tknow.

And if you don’t decide and then moveon, you become marginal.

The article first appeared in South China Morning

Post on July 06, 2018


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Sector-specificDimensions ofInnovation


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IntroductionIndian agriculture needs digitisation to

make supply chain efficient, transparent,market-driven and traceable. Digitaltechnology can play an important role inenabling access of high-quality inputs tofarmers, farmers’ linkages to the market,reduction in post-harvest losses, enablingaccess of institutional credit, insurance anddirect benefit transfer to farmers.

Farmers will benefit through improvedfarm economics with improved yield,reduced cost of inputs and ability to de-riskagainst commodity price fluctuations andmonsoon failures. Consumers will alsobenefit with improved access to safe,nutritious and affordable food. Industry andgovernment will also gain with access toreliable, timely and accurate data fordecision making.

The digitisation needs building aplatform to enable access to millions offarmers (85 percent of them being small andmarginal), which can be source of accurate

and real-time information that can be stored,used, shared and analysed – to the benefitof farmers.

AGRISTACK: A public digitalplatform to enable access tofarmers

AGRISTACK – is conceptualised as apublic digital platform for ready and almostinstant access to farmers. This platform canbe the hotbed for driving disruptiveinnovations in the agricultural sector. I willpropose an architecture involving threeessential building blocks as a starting pointfor building India AgriStack including:farmerStack, farmStack and cropStack.

FarmerStack: This is used essentially toidentify the farmer whom we want to reachout. The data can be derived from JAMtrinity. JAM refers to the government ofIndia initiative started with an objective toplug the leakages of government subsidies.“J” stands for Jan Dhan, which is the bank

Building Agristackfor the Benefit ofIndian Farmers

Hemendra MathurVenture Partner

Bharat Innovations Fund

The digitisation needs building a platform to enable access to millionsof farmers, which can be a source of accurate and real-time informationthat can be stored, used, shared and analysed – to the benefit of farmers.


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account number. “A” is for Aadhaar, whichis the unique identity number given by thegovernment. “M” is for mobile number.There is a good chance that farmer will haveat least one the above, which can establishhis identity.

FarmStack: This would include thelocation and dimensions of farm size. Thisis important to estimate farming needs andthe income potential from the farm. Thisdata exists in parts as few states in Indiahave progressed with digitisation offarmland area. The records available withlocal governing bodies like panchayatscould be one source for this data. The GPScoordinates (longitude and latitude) of thefarm can be further validated with satelliteimagery. Farmer and Farm stacks combinedestablishes who the farmer is, where is helocated, what is his input needs and howmuch he can potentially earn from his farm.

CropStack: This would include data onthe number of crops and type of crops, whichfarmer is growing. Data about croppingpattern is integral to potential interventionsneeded to improve farm economics. Forexample, the needs of a farmer growingvegetables is very different from one growingpaddy. This data can also be capturedthrough records available with localgovernment bodies, nearest market yardsand use of technology including satelliteimagery and drones.

How can AgriStack SolveProblems of IndianAgriculture?

There are several possible applicationareas of Agristack. Some of them are:

Credit to farmers: Agristack can be usedby banks and MFIs to assesscreditworthiness of farmers and then tailor-make products for each one of them. Asper the priority sector norms, 18 percent ofAverage Net Bank Credit (ANBC) forlending to agriculture. Total Agriculture

Credit Disbursement during the year 2017-18 was Rs 11.68 lakh crores. Banks abilityto reach out to farmers, judge their credit-worthiness and monitor crops for thepurpose of recovery can be facilitated byAgristack.

Crop Insurance: The number of farmers(or farm holdings) covered under the PrimeMinister’s Fasal Bima Yojna (PMFBY) isabout 47.9 million in 2017-18 (declined froma high of 57.5 million the year before).Majority of the farmers who availed cropinsurance are the ones who have taken loanfrom banks (33 million). Only 30 percentof the gross cropped area is covered underinsurance. Agristack can improve the accessof crop insurance to wider farmer bases(non-loanee farmers in particular) and helpbring more crop area under coverage. It canalso help Insurance companies to understandfarmer and farm risk profile, which is neededin deciding the premium and settling theclaims.

Direct benefit transfer (DBT): Thegovernment can use Agristack for designingand implementing schemes for farmerwelfare as well as for implementing “directbenefit transfer”. The budgetary allocationfor the food subsidy for FY 2018-19 is set atRs 1.7 trillion. The fertiliser subsidyallocation for the budget year is set at Rs700 billion. Thus, targeted food andfertiliser subsidy for the current FY standsat Rs 2.4 trillion. Given government’s intentto move to DBT, Agristack can play acatalytic role in this process. Agristack canalso be used for implementation of manyfarmer welfare schemes announced fromtime to time.

Market Linkages: Corporates selling orbuying from farmers can also benefitimmensely with direct and targeted accessto farmers. The digitisation will helpimprove farmers’ access to quality inputsto farmers and their ability to connectdirectly with multiple buyers, which canimprove their price realisation.


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Operationalising AgriStackOne can question why will farmer share

this data. The answer is that the farmer willshare data as long as he benefits from doingthis. This platform can help farmers reducethe cost of inputs, find buyers and enabletheir access to finance, market andinsurance in an efficient way.

If a farmer is concerned about dataprivacy and integrity, a consent layer onthe lines of IndiaStack can be created wherea farmer can share the information bygiving permission selectively.

The question is who and how one canbuild AgriStack? My guess is, it has to be acollaborative effort including governments(both federal and state) along with industryand innovators. Use of technology indeveloping Agristack can optimise time andcost involved. There is clearly one-timeinvestment in building this and then therewill be recurring cost to maintain andcontinuously update it. This is worth theeffort for the quantum of benefits thisplatform can offer.

Farmers can also be incentivised to sharethe data. For example, the direct benefittransfer scheme can make it mandatory forfarmers to share data. They can share itdirectly or through local government bodiesor any government-designated person in thevillage. The data can be selectively auditedor compliance tools can be built to checkand maintain the quality of data.

The basic Agristack can lead to thedevelopment of multiple applications. Someof them are discussed in the followingsection.

Building Data Layers andApplications on Agristack

A logical progression of Agristack wouldbe the creation of unidimensional and multi-dimensional digital maps specific toagriculture. Agriculture-specific weathermaps have already proven their utility.Likewise, it is important to map otherparameters, which are paramount to farm


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economics. The creation of these digitaltools superimposed on Agristack can furtherdrive many disruptions in the value chain.

Though there are multiple such mapsneeded, if I have to put my finger on thefirst four to be created, it will be – waterstress map, soil nutrition map, crop timeseries (sowing to harvest) map, mandi mapand consumption map. Let me touch uponeach of these in more detail on why theyare needed and possible ways to build thesemaps.

Water stress map

India is among the most water-stressedcountries in the world. As per the study fromWorld Research Institute, 54 percent of Indiais water-stressed (average per capitaavailability of water per year in India isabout 1,540 m3). A recent report byNABARD points to the fact that agricultureproductivity in India should be measuredin terms of per litre of water rather than perhectare of land as water is scarce anddepleting commodity as compared to land.

Over and above, the frequency ofdroughts is increasing and over 40 percentof cultivable land lies in drought-proneareas. Excessive use of groundwater forirrigation has left many aquifers dry. Thespatial distribution of monsoon has alsobecoming erratic (for example floods inKerala and deficit rainfall in northeastregion in monsoon months this year).

It is time to start building a repositoryof groundwater and surface water usedspecifically for the purpose of agricultureand monitor it on a real-time basis. Satelliteimagery can be used to measure andmonitor water availability both below aswell as above the surface. The overlap ofwater maps on Agristack can help assessthe water and irrigation requirement at agranular level (farm field, village or taluka).

These maps can be used as a guide todecide on cropping patterns in the water-stressed and water-rich areas. For example,water-intensive crops such as paddy andsugarcane need to be substituted with water-efficient crops such as millets in the high-water stress zones. Given more than 70percent of available water being used foragriculture, we should be thinking to starttracking the “water balance sheet” for thepurpose of agriculture so that water usageremains proportionate to available waterassets.

Soil nutrition map

The current ratio of key nutrients —nitrogen, phosphorus and potassium (N:P:K)in Indian soil is 6.7:2.4:1 against therecommended ratio of 4:2:1. The ratio ismuch more distorted in states like Punjaband Haryana where N:P:K use ratios standat approximately 31:8:1 and 28:6:1respectively. The higher skew towardsNitrogen in most states in India can beattributed to higher subsidy on “N” ascompared to “P” and “K” (Urea – key sourceof “N” - is out of nutrient-based scheme offertiliser subsidy, which makes N relatively”

“The development ofAgristack and digitalmaps as public goods

can be a gamechanger for

agricultural supplychain


77

cheaper to P and K). Such ratios are recipefor disaster, which is going to push downsoil productivity.

Given the significant variation in NPKratio as well as other critical nutrients (suchas Sulphur, Boron, Zinc, Iron, Copper,Manganese), it is important to map theiravailability in soil. The government’sfarmers’ portal is a good attempt to capturethe nutritional profile of soil by district. Italso captures pH values to measure acidityand alkalinity in soil; in addition to thenutrients.

The logical progression is to make thesoil nutrition data more granular, real-timeand actionable; ideally specific to farm bysuperimposing it on Agristack. One of theoptions is to start digitising soil health cards.The soil health card (SHC) scheme launchedby the government in 2015, is an excellentgovernment initiative to measure and reportsoil nutrition. About 107 mn SHC weredispatched in cycle I (2015-17) and about50 mn have been dispatched till date in cycleII (2017-19). The digitisation of SHC andlinking it to geo-tagged farms can make datamore precise, granular and real-time. Theuse of technology such as hand-held soilscanners developed by likes of Soilcares canalso cut short time and effort in measuringand reporting of soil data.

The soil nutrition map can help farmersin deciding fertiliser application ratecustomised to the nutrition deficiency intheir respective farms. The fertiliserscompanies will also be big beneficiaries asthis data will help in developing custom-made products and identifying the righttarget geographies. The availability of suchdata can also play a big role in designingthe fertiliser-specific policies of the country.

Crop-time series map

Farmer selection of the crop is usuallydriven by last year’s prices of commodities,which usually lead to glut/deficit situationsand non-remunerative prices. The “cropdashboards” depicting area under

production at any given point of time canmake crop selection more scientific. Thecrop dashboards can be displayed on statehighways, village panchayat offices as wellas sent to farmer mobile phones. Real-timeaccess to “sowing to harvest data” fordifferent crops in Rabi, Kharif and Zaid canaddress the demand-supply imbalance. Thewide variations in prices in TOP crops(Tomato, Onion, Potato), is seen almostevery year, which can be taken care of withfarmers’ access to this information.

The accuracy of the time-series data canbe further improved by using satelliteimagery and drone monitoring in additionto ground-truthing. The crop detectionalgorithms developed on the basis ofimagery by many start-ups are improvingby the day, which can over a period of timereduce the need for ground-truthing efforts.

The other aggregation/ validation pointsfor developing time-series data on area andproduction under a given crop could be theagri-input dealers who on the basis ofadvance booking and sales of seeds canpredict sowing intention of farmers.

Mandi map

The agricultural marketing in India isregulated by the Agricultural ProduceMarket Committee (APMC) Act enacted bythe state governments. There areapproximately 2,500 principal regulatedmarkets and approximately 4,800 sub-market yards regulated by the respectiveAPMCs in India. It is possible that some ofthem are not operational. So essentially,there are approximately 7,000 agriculturalmandis under APMC Act, which needs tobe geo-tagged along with arrival volumesand pricing details.

Though infrastructure at many of thesemandis has not kept pace with the increasingarrivals, still village mandis continue to bekey aggregation points for farm produce andaccount for the bulk of purchase fromfarmers. The arrival and pricinginformation across mandis on a real-time is


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of significant value to farmers in decidingon “where”, “when” and “what” price tosell. A farmer-friendly mandi digital mapcan enable this decision making. ThoughAgmarknet provides some of these datapoints, it is important to make it easilyaccessible and interpretable by farmers.

Increasing farmer avenues to sell andultimately her / his income is possible ifshe/he has the option to sell at multiplemandis, which may not necessarily be thenearest one. With improving roadinfrastructure and access to third-partylogistics company, a farmer has much betteraccess to mandis which may be located inother districts/states. In addition to themandis, the location of warehouses and coldstorages can also be mapped; which can givefarmer options to store and transport farmproduce in the most optimal way.

The mandi density analysis from suchmaps in the context of arrival volumes willalso help policymakers in re-designinginfrastructure available in existing mandis

as well as developing a roadmap for thenumber and locations of new mandisrequired.

ConclusionThe development of Agristack and digital

maps as public goods can be a game-changer for agricultural supply chain. Thechallenge is to make the data points andmaps granular, accurate, real-time and user-friendly with the least possible cost throughoptimal utilisation of technology andresources.

Given the importance of the sector, thisis a good investment in the future for makingthe supply chain more efficient andtransparent. In addition to stand-alonemaps, multi-dimensional analysis of abovedigital maps (such as mandi density xproduction, soil nutrition x crop type) canbe very insightful to all the supply chainmembers and policymakers in particular.There is a huge possibility of designing ahost of innovations and applications on topof Agristack by start-ups ecosystem inagritech as well as consumer-tech.

Agristack and its various applicationscan catapult the much-needed digitisationof Indian agriculture to pave way for data-enabled supply chain - for the benefit offarmers, consumers and policymakers.

To conclude, the digital economy cannotbe made inclusive without integratingfarmers into it and without democratisingaccess of innovations to Indian farmingcommunity. Farmers have been eitherignored or underestimated on their abilityand intent to use of digital tools. In myexperience, they are ready to embrace it anda platform like AgriStack can catalyse theintegration of farm and digital economy,which is much needed for Indian agricultureto leapfrog into a new era.

The article first appeared in yourstory.com on

December 06, 2017

Digital economy cannotbe made inclusive

without integratingfarmers into it and

without democratisingaccess of innovations

to Indian farmingcommunity

”

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Few people know of the breadth of energycooperation between the United States

and India. Historically, this cooperationspanned initiatives supported by variousgovernment agencies and covered a widespectrum of sectors from fossil fuels to zero-carbon technologies. In fact, energycooperation is considered one of the brightspots in US-India relations. Both sidesrecognise that an energy secure India is ofinterest to not only for India’s developmentneeds but is a necessary part of the US’svision for a free and open Indo-Pacific. Overthe last two years, my team and I at CSIShave been busy identifying stakeholders whocan deepen energy cooperation between thetwo nations. Now on the eve of the US-India“Two Plus Two” Dialogue between thesenior-most officials from the two countries’foreign affairs and defence departments, Ioutline some recommendations for how tostrategically bolster US-India energyrelations.

Facilitate State-to-StateEnergy Cooperation

The US and India are both collections ofpowerful states. States are the laboratoriesof innovation: from the design of newpolicies and programs to testing anddeploying new technologies. The sharing ofthese ideas and experiences of deployingemergent technologies can facilitate newavenues of cooperation in energy policy andcommerce between states that share similarenergy resources and interests. Just last year,the State Department’s Bureau of EnergyResources supported CSIS and its India-based partner, the Shakti Sustainable EnergyFoundation, to organise the first-ever sub-national energy workshop between the twocountries to discuss how states in bothcountries are facing the challenge ofmanaging the grid of the future. Insightsfrom these conversations, which can lay thegroundwork for building productive

The Right Ways to TakeUS-India EnergyCooperation tothe Next Level

Kartikeya SinghSenior Associate (Non-

resident), EnergySecurity and ClimateChange Program and

Wadhwani Chair in US-India Policy Studies

A renewed focus on energy can be leveraged to build strategicpartnerships for both countries in the Indo-Pacific region.


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subnational partnerships, need to get feedinto the bilateral dialogue run by New Delhiand Washington, D.C. Doing so, perhapsthrough a recognised forum, would trulydeepen energy cooperation between the twocountries.

Create New Task Forces Opento Private Sector andResearch Institutions

The government-to-government dialogueon the energy between the two countries usedto be closed to the private sector and hadlimited participation from those researchinstitutions that were funded by India’sMinistry of Science & Technology and theUS Department of Energy. Yet the role ofthese two stakeholder groups will be criticalto creating, testing, and commercialisingnew technologies. As the two countries chartout ways for the greater private sector andresearch institution cooperation to managetheir energy transitions, new focused taskforces should be created that allow forpublic-private partnerships to form alongthe lines of what policymakers identify aspriority areas. These task forces could focuson the following technology areas:

Power & Energy Efficiency: Bothcountries are undergoing an energytransition that includes an influx ofelectricity from renewable sources,management of stressed thermal powerassets, the rise of distributed generation, andthe strong focus on demand-sidemanagement measures. New technologicalsolutions, new business models, and learningfrom pilots in both countries can be sharedto achieve their collective energy securitygoals while managing the emergence of thisnew energy system.

Electric Mobility: All 50 US states arecreating plans for an electric mobility futureunder the Electrify America project whileIndia’s states are experimenting with thedeployment of electric buses andtransitioning their government-ownedautomotive fleets to all-electric by 2030.Lessons are being learned on both sidesabout the creation of charging infrastructure,setting up payment mechanisms andcharging tariffs, and how best to supportgrowth in manufacturing in this sector.Having strong automotive industries in bothcountries makes them natural allies tocollectively focus on this opportunity.

Standards, Regulations & Security:Strategic energy cooperation between thetwo countries can truly be unlocked ifstakeholders are developing and operatingenergy systems that function with similarsets of rules. The two sides should considerregularly convening key stakeholders fromthe US Federal Energy RegulatoryCommission with India’s Central ElectricityRegulatory Commission, the AmericanNational Standards Institute with the Bureauof Indian Standards, and those focused oncybersecurity for the respective countries’energy sectors. This can bolster bidirectionalcommercial opportunities and collectivelyimprove the energy security of both nations.

Joint Research and Development: In2009, both countries co-created truly uniquejoint research and development (R&D)programme to fund basic research in key

Energy cooperation isconsidered one of thebright spots in US-

India relations

”“


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technology areas. Both countries are alsomembers of the Mission InnovationInitiative. The US clearly has an upper handbeing armed with a well-established andwell-resourced network of energylaboratories spread across the countryfocusing on different types of technologies.At the recently concluded conference ofpower and renewable energy ministers ofIndia’s states convened by the governmentof India, it was announced that the countryis considering the establishment of anational mission on R&D. A focused taskforce on what this might look like betweenthe two countries would bolster the energyR&D capabilities of a major US ally.

Strengthen Bilateral EnergyEducation, Entrepreneurship,and Skills Cooperation

Finally, ensuring job security, especiallywhen faced with the prospects of greaterautomation in manufacturing, is a majorconcern for both countries. Endowed withabundant resources and human capital, thedynamic energy sector presents anopportunity for both countries to leverageto ensure that they are able to create newtypes of jobs. Building on the recentlyconcluded Global Entrepreneurship Summit(part of a series started by the US andrecently hosted by India), the two sidesshould create a strategy to connect US andIndian institutions that are focused on energyeducation, entrepreneurship, and skillsdevelopment for the emergence of newenergy technologies. This process mightuncover ways that can add value to eachother’s manufacturing supply chain andpossibly marry “Made in the USA” and“Make in India” a priority of ruling politicalparties in both countries.

India as a Strategic EnergyPartner

Energy security is a key pillar to furthera nation’s development agenda and fuel itseconomic growth. As a long-standing areaof cooperation between the two nations, arenewed focus on energy can not onlystrengthen ties between the two nations butbe leveraged to build strategic partnershipsfor both countries in the Indo-Pacific region.For example, India has extended lines ofcredit and technical assistance for thedevelopment of critical energy infrastructurein many parts of Asia and Africa.Meanwhile, the US recently announced theAsia EDGE Initiative, which seeks topromote energy security and expand energyaccess in addition to working jointly withJapan on critical infrastructure projects inthird-party countries. Aligning thesestrategies will take the US-India energypartnership to the next level and help realisethe shared vision for the Indo-Pacific for bothcountries.

The article first appeared in The Diplomat on

September 03, 2018


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Infrastructure &Innovation Partnership

for a Sustainable Future

Natasha Jha BhaskarGeneral Manager,Newland Global Group,Australia

Advances in technology are creating new avenues for optimisingproductivity and understanding consumer demand and preferences.

Governments today face the challengeof ensuring fiscal consolidation while

fostering growth, competitiveness andemployment. Hence, there is a strongdemand for efficiency, better governance,faster delivery and more user involvement.But the question is what does it take todeliver and fulfill the rising aspirations?What does it take to address changing needsand improve quality and accessibility forall? The answer, in most cases, isinnovation. Innovation becomes imperativewhen problems are getting worse, whensystems are not working or when institutionsreflect past rather than present problemswith outdated solutions. As the greatVictorian historian Lord Macauley wrote:‘There is constant improvement preciselybecause there is constant discontent’.

Global demand for high-value, highlyskilled and customised services and newtechnology is accelerating. Advances intechnology – including the way we generate,process and use data – are creating newavenues for optimising productivity and

understanding consumer demand andpreferences. The future prosperity, healthand sustainability of the world are closelybound to the human capacity for innovation.

The Infrastructure ChallengeThe most tangible evidence of a nation’s

progress is its infrastructure sector. Basicinfrastructure like roads, information andcommunication technologies, sanitation,electrical power and water remains scarcein many developing countries. An estimated3.8 billion people still do not have access tothe Internet, representing 80 per cent of thepopulation in the least developed countries.Three billion people worldwide lack accessto basic sanitation and three in 10 peoplelack access to safely managed drinkingwater.

If one looks at the UN’s SustainableDevelopment Goals, infrastructure andinnovation are a singular goal. Investmentsin infrastructure – transport, irrigation,energy and information and communication


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technology – are crucial to achievingsustainable development and empoweringcommunities in many countries. It has longbeen recognised that growth in productivityand incomes, and improvements in healthand education outcomes require investmentin infrastructure and innovation.

Economic growth, social developmentand climate action are heavily dependenton investments in infrastructure, sustainableindustrial development and technologicalprogress. In the face of a rapidly changingglobal economic landscape and increasinginequalities, sustained growth must includeindustrialisation that first of all, makesopportunities accessible to all people, andtwo, is supported by innovation and resilientinfrastructure.

India’s Infrastructure SectorAs India emerges as the world’s leading

economies, a key factor obstructing itsgrowth and development is the lack ofworld-class infrastructure. Estimates suggestthat this lack of adequate infrastructurereduces India’s GDP growth by 1-2 percentevery year. Fast growth of the Indianeconomy in recent years has placedincreasing stress on physical infrastructure,such as electricity, railways, roads, ports,airports, irrigation, water supply, andsanitation systems, all of which alreadysuffer from a substantial deficit. Even thoughwe have been building infrastructure, weare not able to keep pace with demand. Thatresults in huge productivity losses.

India will require investments of overUS$4.5tn by 2040 for the development ofits infrastructure to operate and thrive. Thegoals of inclusive growth and 9 per centgrowth in GDP can be achieved only ifIndia’s infrastructure deficit is overcome.Infrastructure development will also helpcreate a better investment climate in India.There are many issues that need to beaddressed in different infrastructural fields.

To begin with, the gap between electricityproduction and demand is affecting bothmanufacturing and overall growth.

Another concern is the transport sector;while road transport is the backbone of theIndian transport infrastructure, it isinadequate in terms of quality, quantity, andconnectivity. Furthermore, civil aviationand ports desperately need modernisation.It is expected that the public sector willcontinue to play an important role inbuilding transport infrastructure. However,the resources needed are much larger thanwhat the public sector can provide. Todevelop infrastructure in the country, thegovernment needs to review issues ofbudgetary allocation, tariff policy, fiscalincentives, private sector participation, andpublic private partnerships (PPPs), andaddress issues of limited outlay, moneyinvested poorly, bureaucratic bottlenecks,lack of innovation.

Advances intechnology are

creating new avenuesfor optimising

productivity andunderstanding

consumer demandand preferences

”

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Innovation in InfrastructureDevelopment

The new, rising India, which wishes tofulfill the aspirations of its citizens, needs astrong infrastructure to facilitate sustainabledevelopment. Hence, innovation ininfrastructure development has to beunderstood across three dimensions, whichare an innovation in government policies,innovation in technologies and innovationin financing.

Government policies may not always beconducive enough for infrastructuredevelopment. They may be too focused onthe short-term, not well coordinated andconstrained by too much rigidity. It isessential to develop a sound infrastructuredevelopment plan — one that serves current

and future user needs, drives improvedeconomic growth, and minimises socio-economic disparities. But doing so requirestranslating bold ideas into feasible projectsthat are politically durable and adaptablewhen dynamics change, and involvesstakeholders across spectrum.

The second area is technologicalinnovation. The world has seen a surge innew technologies that have transformedmany industries in the last decade.Infrastructure can also benefit from some ofthese technological advancements, at thedesign and planning stage, which could beutilised for better planning and betterforecast of costs and time required forinfrastructure development.

The third area is financial innovation.Infrastructure remains underfunded and thiswill not become easier in today’s climate ofausterity. How developed countries like theUS and Australia can play their role, inIndia’s growth story?

Financing IndianInfrastructure

The Indian infrastructure story iswitnessing an agonising paradox. On onehand, India needs to create fresh capacityin its infrastructure to maintain the growthmomentum. On the other hand, the banks,which have been the main source of fundsfor infrastructure projects, are saddled withmounting levels of stressed assets, whichhave almost choked their ability to lend.And incidentally, the infrastructure sectoraccounts for a major chunk of that stressedassets portfolio. Several of the projects areno longer viable due to time and costoverruns.

Hence, it is crucial to develop innovativefinancing approaches. For far too long, Indiahas depended mostly on bank finance forinfrastructure projects. Such dependence hasalways caused asset-liability mismatches. Itis high time we start exploring other long-term funds, both foreign and domestic. There


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are numerous Pension Funds (PFs) in thedeveloped nations, which are on the lookoutfor attractive investment propositions. ThePFs, with a large pool of long-term funds,will be the perfect fit for infrastructureprojects. Collaborating with governments,development finance institutions, and theprivate sector may be considered as a fewof the priorities with regard to financing.

The US-India-AustraliaInfrastructure InvestmentPartnership Opportunity

Capital is the key to advancing India’sinfrastructure sector. India will requireinvestments of over US$4.5tn by 2040 forthe development of its infrastructure. Of this,India will be able to meet about US$3.9tn,leaving a US$526bn deficit. A key goal ofIndia’s suite of regulatory reforms is toattract more foreign investment into thesector, including through new investmentvehicles and innovative financialinstruments by 2030. India’s quasi-sovereignNational Investment and Infrastructure Fundis establishing itself as one of the mainchannels of investment into Indianinfrastructure.

Most recently, AustralianSuper,Australia’s largest superannuation fund, andOntario Teachers’ Pension Plan, Canada’slargest single profession pension plan,decided to invest US$1bn each with theNational Investment and Infrastructure Fund(NIIF) Master Fund. The Fund invests inequity capital in core infrastructure sectorsin India with a focus on transportation,energy and urban infrastructure; thesignificant investments demonstrate theinternational interest in Indian infrastructureand reconfirm the many strengths of the newinnovative infrastructure financing vehiclesfor global capital.

Investment in the Indian infrastructuresector provides a diversified asset class andgeography for investors in the US andAustralia, especially for those seeking higher

returns than those available in moredeveloped markets. Economies like the USand Australia are dependent on new sourcesof growth. Hence, an opportunity exists forIndia to form regional collaboration, withlike-minded countries where the primarypurpose is to co-develop innovation as wellas investment capacity in the infrastructuresector, which can provide further impetusto India’s economic diplomacy. India canseek to pair Australian specialisedcapabilities in transport systems, water andwaste management with the US’sconcessional finance capacity to deliverlarge projects in India.

India can learn from Australian expertisein infrastructure financing including valuecapture and user charges, in issuingmunicipal bonds or green bonds, in ‘Toll-Operate-Transfer’ and ‘Build-Operate-Transfer’ models, asset recycling andprivatisation experiences.

The new, rising India,which wishes to fulfillthe aspirations of its

citizens, needs astrong infrastructureto facilitate sustain-

able development

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ConclusionPower, water, communications and

transport – all are essential parts of modernexistence. These services facilitate thequality of our lives. They connect people inways that create security and stability.

We have already seen how highwaysturned around the US economy and howAustralia has one of the world’s mostdeveloped logistics networks. India’sfundamental strengths include its very largedomestic market, young and growingpopulation, a critical mass of educatedpeople with strong science and engineeringcapabilities. India is a world centre formany digital services, a location where“anything that can be off-shored” can bedone very cost-effectively. India today isseeking to accelerate the transfer of scientific

knowledge from universities, laboratories,and individuals into the marketplace, whichcan offer solutions to its pressing problems.“In this process, we must learn from eachother”.

The changing geopolitics, the expansionof global markets, the information andcommunications technological revolution,and India’s recent economic growth andeconomic openness can surely be thefoundations of a growing US-India-Australiatrilateral infrastructure innovationpartnership, creating a network ofinstitutions in the public and private sectors,whose activities and interactions initiate,develop, modify, and commercialise newtechnologies and promote greaterinvestments in the sector for a sustainablefuture.


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Collaboration between healthcareinnovators in the US and healthcare

organisations in India is now possible at amassive scale, and there are distinct waysto make it happen. This collaboration cansignificantly accelerate the approvals andcommercialisation of promisingtechnologies and therapies.

The example of Google collaboratingwith Shankar Netralaya is merely one ofthe famous early examples. What we cando and must do is to expand the scope andscale of such collaborations significantly.We have the opportunity to extend bothtesting and deployment, to a broad base ofmillions of patients in a short period.

The solution for this is one or morespecialised accelerators that connectinnovations and pre-FDA approvaltechnologies from the US to medicalacademies in India. The establishment ofsuch an accelerator will result in tests on aready base of millions of patients bydeploying the technologies to hundreds of

clinicians. The metrics will then be compiledand analysed in a non-partisan manner bythe academies themselves.

This approach will result in rapidapprovals and commercialisation in India.The commercial availability in India willhappen even before the US FDA approvals.

Also, the India test results will help tospeed up the US FDA approval process whiledramatically reducing costs.

Collaboration - Technology hasCreated New Possibilities

The US and India have been unable toleverage their complementary strengths inmass healthcare technology effectively. Thisinability to harness the complementaritiesmust change.

The issue so far was that drugs were thecore mass healthcare technology.Collaboration for low-cost drug trials doesnot work because they often lead toallegations of abuse or exploitation. The

A Collaboration Modelto Accelerate High

Quality Healthcarefor the World

Gopala KrishnanCo-Founder, WayBeyond

Media Pvt Ltd

The US and India have been unable to leverage their complementarystrengths in mass healthcare technology effectively.


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already FDA approved drugs have been acause of market disputes rather thancollaboration. Due to the conflict betweenthe need to protect intellectual property andthe need to deliver affordable medicines tolow-income populations.

Thankfully, this does not have to be aproblem that continues to exist, goingforward. Large scale collaboration inhealthcare can be an immediate reality.

The most rapidly growing, disruptive,emerging healthcare technologies are nolonger drugs. They are diagnostic tests andpersonalised therapies. It is no longer about

the discovery of drug molecules, but moreabout devices, sensors, imaging, computing,data sets and artificial intelligence.

Across genetic, bio-chemical or bio-mechanical areas, we are seeing theemergence of a host of technologies that willsignificantly empower the frontline medicalpractitioner to diagnose and treat better andfaster.

The Healthcare TechnologyWave

A combination of technologies workingtogether is rapidly going to disrupt the worldof healthcare. These technologies willaccelerate the availability of advanceddiagnostics and personalised medicine at thepoint of care.

These include rapid innovation in thefollowing areas, usually in combination-

• Internet-connected devices andsensors

• Core diagnostic technologies

• Artificial intelligence-drivendiagnostics and personalisedtreatment

Thousands of innovative teams, instartups and within enterprises in the US areworking on new technologies. Thesetechnologies are making new diagnostic andpredictive capabilities available and are alsochanging the cost and form factor of these.

Capabilities that only large hospitals orlabs could afford to have will be availableas a result of these technologies, even insmall clinics and with individual/independent medical practitioners.

The innovators, however, struggle tobring their technologies to market becauseof costs of sample collection, trials and FDAapprovals. Therefore, many promisingtechnologies get discarded early, and theinitiatives collapse.

Collaborationbetween healthcareinnovators in the US

and healthcareorganisations in India

can significantlyaccelerate theapprovals and

commercialisation ofpromising

technologies andtherapies

”

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The Academies in IndiaMedical associations in India work to

enhance the opportunities and capabilitiesof their doctor members. They routinelyconduct professional training for theirmembers and channel research opportunitiesto them. The patient reach of some of theseassociations is extensive indeed.

For example, an association, such as theFederation of Obstetric and GynaecologicalSocieties of India (FOGSI) has well over30,000 members. Each member is anObGyn with a post-graduate qualificationin Obstetrics or Gynaecology. Assuming anaverage of 20 appointments a day by apracticing ObGyn, we are looking at about200 million patient consultations in a yearby members of FOGSI.

FOGSI will surely be keen to enhancethe diagnostic and therapeutic capabilities

available to its members. It has the powerof numbers to negotiate attractive offers forits members. Its members, in turn, benefitfrom new services capabilities, enhancedpatient outcomes and increased clinicincome by offering these services to theirpatients.

Associations like FOGSI can also helpto fast track approvals and certifications ofpromising technologies within India.

The Value of CollaborationFor most diagnostics technologies, from

the perspective of the doctor, the core valueis the ability to diagnose early and starttreatment as soon as possible. Pre-approvaltechnologies accepted as an indicative testthat enables the rapid start of treatment andwhich can be confirmed subsequently by aconventional investigation.


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Deployment of pre-approval technologyat a few hundred clinics is possible, with apatient base of a few million. There areseveral methods of ensuring activecooperation and participation of theseclinics in these tests. There are also severalways to ensure that the costs of this can bea small fraction of what it would cost formuch more modest scale trials in the US.

Besides, the Academy itself will conducta non-partisan analysis of the results andpublish it. The Academy also can make arepresentation to government and fast trackcertifications for India.

All this reduces costs and risks for manytechnologies that will otherwise fail to crossthe clinical testing chasm of death. I estimatethat over 95 percent of promisingtechnologies fail at this stage, for want ofcapital to go through these test-fix-testcycles.

How will this Work?The low cost accelerated testing makes

it possible to finance the tests in two ways.The first is risk capital at angel oraccelerator levels. The second is by

equipment financing via existing schemesof cross border agencies like United StatesAgency for International Development(USAID), International Finance Corporation(IFC) and others.

A proven approach for this will be to setup a healthcare accelerator. The acceleratorwill be a platform with at least one majorAcademy participant, a couple of leadingVC funds and deep linkages with institutions(USAID, IFC, ADB or others)

Promising technologies can score $50Kto $0.5M of funding on this platform,specifically for the India test andcommercial pilot.

Setup and StartA couple of leading Academies in India

are already keen to participate. End-to-endexecution capabilities for conducting theextensive scale tests, analysis andcertifications in India is also available.

The next step would be for a couple ofVC funds to come in, to set up theaccelerator. The institutional participationis not then a significant challenge.


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PM Modi while speaking at ‘FII2019’stated that India has become the world’s

third-largest start-up hub. There is no sectorin India that has been untouched byinnovation. The exclusive domain ofdefence has recognised the strength andpotential of innovation. Towards this, manygovernment and non-governmentorganisations, some in collaboration havestarted to promote start-ups in defence.

Defence InnovationOrganisation

In April 2017, the Indian governmentlaunched the Defence InnovationOrganisation (DIO) as a non-profitcompany, with a focus on technologydevelopment and product innovation withthe potential for commercialisation in thedefence sector. DIO has been formed withtwo founding industry partners — BharatElectronics Limited and HindustanAeronautics Limited. It is also to foster aculture of engagement with innovative start-ups, to encourage co-creation for defence

Bilateral Cooperationfor Innovation inDefence between USand India

Vikram MahajanDirector, Aerospace and

Defense, USISPF

India has become the world’s third-largest start-up hub. There is nosector in India that has been untouched by innovation.

and space sectors. The governance of theDIO sits with the Defence Ministry with onenominated Director from each of the industrypartners.

Innovations for DefenceExcellence

Innovations for Defence Excellence(iDEX) will function as the executive armof DIO, a programme started in April 2018to equip the armed forces with cutting-edgetechnology by fostering start-ups. Under theiDEX scheme of the Union Government,more than 600 applications were received.44 were finally shortlisted out of whichseven are on AI for which government isready to give financial support up to Rs 1.5crore.

Defense Innovation UnitThe US has a similar organisation called

Defense Innovation Unit (DIU, formerlyDIUx). The ‘Defense Innovation Unit –experimental’ (DIUx) was created in 2015


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India Innovation GrowthProgramme

India Innovation Growth Programme(IIGP) is a unique tripartite initiative of theDepartment of Science and Technology(DST), Government of India, LockheedMartin and Tata Trusts. Launched in 2007,IIGP has been one of India’s longest-standingpublic-private partnerships. The programmehas provided mentoring and handholdingassistance to over 400 innovators comingfrom diverse sectors from across the country;generated over 350 commercial agreementsand over US$900mn of economic value forIndia. Supporting the Government of India’smissions of “Start-up India” and “Make inIndia”, IIGP 2.0 enhances the Indianinnovation ecosystem by enablinginnovators and entrepreneurs through thestages of ideation, innovation and

by then-Secretary Carter to complement thePentagon’s existing defence Science andTechnology (S&T) system of agencies witha new focus on ‘innovation for thewarfighter’ – i.e. getting new technologicalsolutions to the frontline military morequickly. Initially envisioned as atechnological outpost in Silicon Valley andother ecosystems, the ‘experiment’ part wasremoved after the success of the organisationwas well established. For DIUx, the criticalareas of interest range from autonomy andAI to human systems, wider IT and space.

Due to the common field of interest andthe growing strategic partnership betweenthe US and India, various avenues tocollaborate between the innovators of twocountries have been established. The oldestof these is the India Innovation GrowthProgramme (IIGP).


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acceleration, to develop technology-basedsolutions for tomorrow.

During the announcement of the 2019version of IIGP 2.0 Lockheed Martin alsoannounced the establishment ofMemorandums of Understanding (MoUs)with three Indian Start-ups. The MoUs pavethe way for Terrero Mobility, SastraRobotics, and NoPo Nanotechnologies,graduates of the IIGP, to integrate withLockheed Martin’s supply chain, andcontribute to the evolution of both the Indianand global aerospace & defence industry.Through these agreements, LMCO willprovide engineering support, mentoring, andassistance in the qualification of some ofthe technologies proposed, all of whichcontribute to the mission of making in India.

Collaboration between iDEXand DIU

The collaboration between iDEX andDIU has been pondered over for a few yearsnow. The proposal was first made in 2017by the US to involve the Indian team aheadof the ‘2+2 dialogue’, which involves thedefence and foreign affairs ministries of thetwo nations. Since then, various defencedelegations that have visited the US, andalso DIU both, in Mountain View,California and in Boston to see thefunctioning of the organisations. Since then,India and the US have worked out thenuances that will enable defence teams tovisit and collaborate in cutting-edge defenceinnovation unit in Silicon Valley. The unitidentifies and funds emerging militarytechnologies including artificial intelligenceto space, robotics and informationtechnology. Towards this, IDEX is startingwork with the world-leading Stanford courseon ‘Hacking4Defence’, to attract youngengineering talent to defence innovation.

DTTIThe other avenue for collaboration

between the innovators from both the US

and India is the Defense Technology andTrade Initiative (DTTI), which started in2012. DTTI is a flexible mechanism toensure that senior leaders from both nationsare persistently focused on the opportunitiesand challenges associated with growing ourdefense partnership. One of the aims is totransform the bilateral defense relationshipinto one that is limited only by independentstrategic decisions, rather than bureaucraticobstacles or inefficient procedures. This isto be achieved by exploring new areas oftechnological collaboration from scienceand technology cooperation through co-development and co-production, and itincludes start-ups.

Over the years, the DTTI has progressedand both the countries have been workingon avenues that will exclusively beundertaken by innovators from both thecountries. One of the projects that weredecided in the last DTTI meeting to beundertaken by the start-ups from both sidesis ‘air-launched swarm drones.’ These willbe small UAVs that can be launched from

There is no simple‘one-size-fits-all’

solution for defenceinnovation nor for all

defence agencies

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transport aircraft like C-130J and C-17.There are many more avenues that the start-ups under the umbrella of DTTI canundertake which will be decided in the futurebilateral meetings.

Defence OffsetsThe Defence Offsets are used to leverage

capital acquisitions to develop the Indiandefence industry by fostering thedevelopment of internationally-competitiveenterprises, augmenting capacity forResearch, Design and Development relatedto defence products and services. Under theprovision of defence ‘offsets’, there is aproposal to invest in MoD registeredprofessionally managed SEBI regulatedfund. This fund will be dedicated to thedevelopment of start-ups and MSMEs ofdefence, aerospace and internal security-related enterprises in the country. The OEMcontributing to the fund would be entitled

to usual returns on its investment s per law.Considering that the largest offsets aredischarged by US companies, this would beanother avenue where the US OEMs willbe contributing to the development of Indianstart-ups, as and when this policy isimplemented.

ConclusionInnovation can mean many things to

many people. Government actors in theinnovation space play a range of roles:which is largely determined by the dynamicsof each nation’s state ‘system’ of agencies,the wider ‘ecosystem’ in which they operateand their specific organisational mandate.Some agencies play more than one role atthe same time, and many operate at differentstages of the innovation lifecycle.

There is no simple ‘one-size-fits-all’solution for defence innovation nor for alldefence agencies. Various countries areexperimenting with their establishedpractices for defence innovation, by adaptingthe state’s formal ‘system’ or creating newagencies and missions within it to tap thewider ecosystem. Many, if not all have asignificant number of different agencies andunits whose collective role is to meet today’sdefence innovation challenge: namely tobuild and maintain defence capabilitieswhile recognising that that cannot be donesimply through internal innovationactivities. Therefore, collaboration isimportant in innovation, the way it hasstarted between the US and India. Bothcountries have great minds which when puttogether can create avenues that have neverbeen ventured into before. Such avenueshelp, not just in contributing to the economy,job creation and overall development of thenation, but also help in strengthening thebilateral ties between the countries.

Collaboration isimportant in

innovation, the way ithas started between

the US and India

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Indo-US strategic ties have grownsignificantly in the last 15 years. India

has bought nearly US$18bn worth of defenceequipment from the US - from transport jetsand helicopters to surveillance planes toattack helicopters to howitzers. India andthe US conduct the largest number of militaryexercises with each other and the level ofinteroperability has increased over theyears. The signing of the logistics andcommunications agreement has helped thetwo countries advance their militaryrelations further.

One area that the two countries havenot made great progress is defencetechnology cooperation. India is the onlymajor country that does not make all theadvanced weapons it needs. It does not havea well developed military-industrialcomplex. India wants to change that andacquire advanced technologies. Over theyears, it has had technology transfers builtinto its defence imports from its traditionalsupplier Russia, but that has not helped itin a big way due to lack of technologyabsorption capabilities and also withholding

Towards Realisingthe Indo-US DefencePartnership Potential

Yusuf T UnjhawalaEditor, Indian Defence

Forum

India and the US conduct the largest number of military exerciseswith each other and the level of interoperability has increased overthe years.

of crucial technology that countries guardand do not want to part with.

In 2012, India and the US initiated theDefence Trade and Technology Initiative forco-development and co-production ofdefence equipment. The US also set up aspecial desk to expedite any request fromIndia. However, not much headway wasmade as it has not produced any highlyvisible product like the Indo-RussianBrahmos supersonic cruise missile or theIndo-Israeli Barak surface to air missile.

The US considers India as an importantpartner in the Indo-Pacific region. WhileIndia is not going to allow itself to be usedby any other country to balance against athird country, there is convergence ofinterests in its security partnership with theUS. It is in the interest of both countries tohave better technical cooperation which willhelp interoperability.

The signing of the “Joint Statement ofIntent” during the visit of the UnderSecretary of Defense for Acquisition andSustainment of the United States Ellen Lordto India in October 2019 on deliverables in


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the short, medium and long term shows thatlessons of the past have been learned andthere is serious intent to move forward toco-develop and co-produce weaponssystems. The choice of the products is veryrelevant for the Indian armed forces and lookdeliverable at the outset.

The near term projects which have beendefined as ones that can take off in about 6months are air-launch small unmannedaerial systems, lightweight small armstechnology and intelligence, surveillance,target acquisition, and reconnaissance(ISTAR).

There are two mid-term projects whichare maritime domain awareness solutionand virtual augmented mixed reality foraircraft maintenance. And two long-termprojects which are the terrain shapingobstacles and counter unmanned aerialsystem rocket artillery and mortar or CU-RAM. This involves developing highlyaccurate weapons systems to physicallyneutralise enemy drones or drone swarms.

The latter is especially of importance to Indiaas both Pakistan and China already haveand are developing more drones. Pakistanhas been using small drones to drop armsand ammunition into border areas of India.The drone attack on the Saudi oil facilitywhich cut half of its oil production showsthat drones can be used with devastatingeffect and there is no effective counter to itright now. Its availability to non-state actorsputs vital installations along India’s bordersat risk.

However, issues still remain ontechnology sharing between India and theUS although India was declared a ‘majordefence partner’ and also given the strategictrade authorisation-1 (STA-1) status. Criticaltechnology like jet engines that were underconsideration was shelved as the US did notneed any co-development of jet engines asit is a world leader in making jet engines.Its jet engine manufacturers will not partwith some critical tech they have like singlecrystal blades that India needs. Lord on the


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suspension of the programme said, “Wecould not come to an understanding of whatexportable technology would be useful tothe Indians. And we did run into a challengein terms of the US export control.”

India has to understand that the USmilitary-industrial complex is in the privatesector that is driven by profit. It will notshare with India crucial tech that they havedeveloped spending billions of dollars thatgive it the edge in weapons technologies.They will not help in creating competitionfor themselves by giving away criticaltechnologies. So while the US governmentmay be inclined to provide technology toIndia for strategic reasons, private UScompanies will part with it only if they seea business case.

India’s close defence relations withRussia and the access that Russia has inIndia is a concern for the Americans whofear that their advanced technology couldfall into Russian hands. The US has concernsabout India acquiring the S-400 air defencesystems which the US says can compromisethe F-35 by giving critical input about thestealth fighter. Although the sale of the F-35 to India is not under consideration, it issaid that India’s acquisition of the S-400closes that option.

Recently, a State Department official inresponse to the question on defencetechnology cooperation with India said “Wedon’t want it to be exposed because someRussians walking the shop floor decide togo walk away and put it in their handbagor knapsack and take it back to Moscow”.This clearly shows the apprehensions in theUS about India’s ability to control defencetechnologies. The cyber attacks on India’snuclear and space installations by the NorthKoreans to extract data shows India needsto tighten the security of its data. While itmakes sense for India to have diverseoptions for weapons purchase, it restrictswhat it can extract from the US which isready to work with India.

India has to work to tighten up controlon defence technologies that convinces theUS to share critical technologies. The UShas on its part has to better appreciate India’shistoric reliance on Russia for weapons.

There is more opportunity for defencecooperation between India and the US.Setting up OEM production lines in Indiaand developing local supply chain whichwill require amendments in the laws in Indiato allow 100 percent FDI. This will not onlyhelp create a defence ecosystem in India butalso integrate Indian companies in the USsupply chain. This could also be used toexport to third countries. In fact, such anoffer was made by the US with its F-16 whoseproduction line it offered to shift to Indiafor India’s fighter jet acquisition and alsofor any export orders. India did not acceptthat offer and is now running another tender.But Lockheed Martin has got orders fornearly 100 F-16 blocks 70 since the offerwas made. These could have been made inIndia and would have been a very visible

India has to work totighten up control ondefence technologiesthat convinces theUS to share critical

technologies

”

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success of Indo-US defence cooperation. Itwas a missed opportunity.

There can be joint research anddevelopment and production between the USand Indian companies for both the Indianand export markets. With the securitycompetition heating up in the Indo-Pacific,the defence requirement for the countries inthe region is growing as these countries facethe threat from China. It is in India’s intereststo fulfill the security needs of these countriesto enhance its own influence. However, itis limited by its capabilities. For example,India sourced Mi-24 helicopters from Russiaand Belarus to supply to the Afghan securityforces. Similar requirements exist inSoutheast Asia but it is possible that Indiawhich relies on Russian origin equipment,will be constrained to supply.

For example, the sale of the Brahmossupersonic cruise missile to Vietnam hasbeen pending for years. Vietnam, whichfaces increased Chinese maritime aggressionin the South China Sea, needs defenceequipment. However, the Brahmos needsclearance from Russia which has grown

increasingly close to China and relies on iteconomically. China can lean on Russia tostop any potential weapons transfer thatthreatens Chinese interests.

As Indo-US interests converge on China,it will be in India’s interests to developweapons systems with the US that canleverage its own large requirement toprovide economies of scale and provideaffordable weapons to the countries in theIndo-Pacific and beyond.

While Indian and the US armed forcesexercise regularly, there should be aninteraction between them on weaponssystems development and they should be onboard to develop qualitative requirementsfor joint R&D and production than just leaveit to the bureaucrats and DRDO. This willensure that projects undertaken are notsomething the armed forces of either countrydon’t want or falls short of theirrequirements. This is what happened withthe Raven UAV project under DTTI whichthe Indian Army did not find to itsrequirement. The DRDO has a history ofcoming up with projects that the armedforces do not need or suit their requirements.The Comptroller and Auditor General reportof 2011 said that only 19 percent of DRDOprojects went into production. So theinvolvement of the Indian Armed Forces forany Indo-US project is imperative to achievegood results.

The coming years hold a lot of promisefor Indo-US relations. While there areapprehensions in the US on sharingtechnology and hesitancies of history inIndia that slows the pace of embracing theUS as well as the pull of its decades ofsecurity ties with Russia, both sides knowthat close defence ties between them areimportant for regional and global security.The breaking of these barriers is a coupleof visible deliverables away.

The coming yearshold a lot of promisefor Indo-US relations

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IntroductionThe energy cooperation between India

and the US has been a centerpiece in thebilateral relationship between the twocountries for a decade now. Much has beendiscussed and implemented since May 2005when the ‘US-India Energy Dialogue’ wasfirst launched to enhance mutual energysecurity, promote increased energy tradeand investment, and facilitate thedeployment of clean energy technologies.1

The two countries have strengthened theirstrategic partnership in the energy sector viasubsequent collaborations to achieve sharedgoals of universal energy access, energysecurity, energy efficiency, low carbonemission, climatic change, etc. The mostrecent collaboration is the ‘India-USStrategic Energy Partnership’ convened inApril 2018.2

Time to BoostInnovation based

Indo-US EnergyStorage Cooperation

Arvind MayaramChairman

CUTS Institute forRegulation & Competition

and Former FinanceSecretary Government of

India

There is a need to promote energy storage innovation, buildhuman capital, infrastructure, and market mechanism, and tofacilitate technology transfer between India and the US.

Garima SodhiSenior Fellow


Rinki SinghFormer Associate Fellow


The countries through this partnershipseek to facilitate the engagement of industryand stakeholders in the energy sector toenhance energy security, expand energy andinnovation linkages across respective energysectors. The partnership primarily focuseson four pillars of cooperation: (1) Oil andGas; (2) Power and Energy Efficiency; (3)Renewable Energy and Sustainable Growth;and (4) Coal.3

It aims to create favorable policies andcommercial investments in support of thesegoals. The objective of reduction ingreenhouse gas (GHG) emissions provideda major impetus to transition to cleanenergy. In 2018, the US and India generated17 percent4 and 21.2 percent5 of electricityvia renewable resources respectively. Indiaaims to install 175 GW of renewable energycapacity by 2022. This includes 100 GWfrom solar, 60 GW from wind, 10 GW from


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bio-power and 5 GW from smallhydropower. Whereas, the US analysedthrough a study that with the presentcommercially available technologies witha more flexible electricity system, it will beable to produce 80 percent of its electricitythrough renewable energy in 2050 anddeliberates to further the aim.6

Although the electricity generated fromrenewable resources is eco-friendly and canhelp in the reduction of greenhouse gases,the major problem associated withrenewable energy is that it is highlyintermittent. These variations in powergenerated from renewable resources need tobe managed via an energy storagemechanism that can support the electricitygrid to maintain its stability. The ElectricEnergy Storage System embraces diversetechnologies with the ultimate aim to storeit in the form of energy and later releasingit at the time of need. Hence the optimumutilisation of the unlimited source for energygeneration by storing it in the form of energyis the need of the hour. This development atboth ends provides a pool of opportunitiesfor the US and India to strengthen theirstrategic collaboration under the currentpartnership. In this paper, the authorsprovide recommendations to bolster thestrategic alliance in the energy sectorbetween the two countries by focusing oninnovation and deployment of EnergyStorage Mechanisms by advancingcollective funds and formulating policies forthe cause.

Energy Storage in India andthe US

Globally, countries are investing inresearch and development to makerenewable energy more reliable and reduceintermittency. The US has emerged as theworld’s leader in lithium-ion storagebatteries and has contributed to manyincremental innovations in the energystorage sector.7 Recently, the Department

The two countrieshave strengthened

their strategicpartnership in theenergy sector via

subsequentcollaborations to

achieve shared goalsof universal energy

access, energysecurity, energy

efficiency, low carbonemission, and

climatic change

”

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of Public Utility (DPU) of Massachusetts hasapproved a plan that includes storagetechnologies like batteries and behind themeter (BTM) energy storage.8

The US came up with its first maidenlarge scale energy storage project in 1929with the name of Rocky River PumpedStorage Plant.9 However, the majordevelopment in the formulation of energystorage policies and technologies came inthe 1970s after the United States’ oil crisesand since then, there have been severaldevelopments in policies and technology ofenergy storage in the country. Currently,the major available technology for energystorage is: Pumped Hydroelectric Storage(PHS), Compressed Air Energy Storage(CAES), Advanced Battery Energy Storage(ABES), Flywheel Energy Storage (FES).10

The PHS approximately contributes around94 percent of total energy storage equatingto around 23.6 GW as of June 2018. TheCAES technology for energy storage in the

US is still at a nascent stage with only fouroperational plants contributing a combinedrated power of 0.114 GW.11 A significantmovement in the integration of ArtificialIntelligence (AI) with the energy storagetechnology to provide better grid stabilityand reliability has also begun.12

The US-based company ‘Stem’ has beenproviding the AI services for energy storageto businesses on a large scale. Recently, thestate of Massachusetts has partnered withStem to set up 28.2 MWh of the large energystorage project, co-located with the solarphotovoltaic plant in the state.13 India hasalso increased its endeavor for thedevelopment of lithium-ion storage batteries.It got its first MW scale grid-tied energystorage plant at Rohini in Delhi in February2019.14 India has decided to set up at least4 tesla-style factories of 10 GWh tomanufacture batteries to accomplish whattesla has done at its Gigafactory in Nevada,US.15 The bids for 3.6 gigawatt-hours of


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storage connected to 1.2 gigawatts of solaron India’s interstate transmission systemhave been called by the Solar EnergyCorporation of India (SECI).16

A 2.6 GW of pumped storage capacityhas also been established in Tamil Nadu at400 MW.17 The developments in energystorage in India is still at a nascent stageand requires government impetus. In thatdirection, on August 09, 2018, the draftNational Energy Storage Mission (NESM)was proposed to aspire for leadership in theenergy storage sector by encouragingmanufacturing, deployment, innovation andfurther cost reduction in the sector. Themission recognises three key areas for energystorage application – integration ofrenewable energy with distribution andtransmission grids; setting rural microgridswith diversified loads or stand-alone

systems; and developing the Storagecomponent of electric mobility plans.18

The government has already approvedthe National Mission on TransformativeMobility and Battery Storage to further thestrategies for transformative mobility andPhased Manufacturing Programmes forElectric Vehicles (EV), EV Components andBatteries.19 Apart from these initiatives forbattery storage, India has recently amendedits ‘National Wind-Solar Hybrid Policy(NWSHP)’20 to include storage of energyproduced by wind-solar hybrid plants in theforms of battery, pumped hydro, compressedair, flywheel, etc.21 This policy encouragesnew technologies, methods, and way-outsinvolving the combined operation of windand solar PV plants.22 These policies havetremendous potential for India and the USto collaborate and further the mandate ofthe Strategic Entergy Partnership.

India-US Energy Cooperationfor Energy Storage

In 2009, India and the US entered intoPartnership to Advance Clean Energy(PACE) as a flagship programme on cleanenergy23 which was expanded in 2017 toresearch ‘Smart Grids and Energy Storage’as the second phase under the ‘Indo-USProgramme to Advance Smart GridTechnology, UI-ASSIST (US-Indiacollaborative for smart distribution Systemwith Storage)’.24 The partnership waseffected via two components: a researchcomponent, known as PACE-R, and adeployment component, known as PACE-D. Under PACE-R, the Indo-US Joint CleanEnergy Research and Development Center(JCERDC) and the Solar Energy ResearchInstitute for India and the US (SERIIUS) wereestablished to promote clean energyinnovation by teams of scientists andengineers from India and the US.25 Whereas,PACE-D was designed to tackle multipleclean energy deployment opportunities. APACE-D Technical Assistance (TA)

The US has emergedas the world’s leaderin lithium-ion storage

batteries and hascontributed to many

incrementalinnovations in the

energy storage sector

”

“


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Programme was run by the US Agency forInternational Development (USAID) tosupport clean energy deployment assistancein India. PACE-D provided grants under theDevelopment Innovation Venturesprogramme to stakeholders to build micro-grids and stand-alone systems in rural areas.

Currently, USAID, in collaboration withthe Ministry of New and Renewable Energy(MNRE), is working on the market drivendeployment of energy storage technologies.This collaboration could be upgraded toanother phase to further the solar-windhybrid projects and other energy storagemethods under the present India-USStrategic Energy Partnership. Theagreements under PACE umbrellaconcerning energy storage could also beexpanded to further the goals and objectivesof NES. Below are some recommendationsin this regard:

1. Establishment of a Research Center forJoint Research on Energy Storage

In 2017, the scope of research underPACE-R at JCERDC was expanded to itssecond phase to research ‘Smart Grids andEnergy Storage’. It is recommended thatIndia and US, may further expand the scopeof research at JCERDC to its third phase toinclude research in the use of AI, Internet ofthings (IoT) in microgrids and energystorage, Pumped Hydroelectric Storage(PHS), Compressed Air Energy Storage(CAES), behind the meter (BTM) energystorage, Flywheels, etc. Alternatively, a newjoint research center for energy storagecould be established by the two countries.Further, skill training/knowledge sharingprograms should also be conducted forIndian students and professionals to enhanceunderstanding of the subject and further theresearch in this area.


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2. Establishment of a Finance andIncubation Centre to support Startupsfocusing on Energy Storage

Under PACE-D, a Clean Energy FinanceCenter (CEFC) was also set up in theAmerican centre at New Delhi to supportthe financing of clean technology.26 Thescope of this centre could be expanded fromthe solar power market to include assistancein the deployment of energy storage plants,PHS, CAES, etc. India and the US shouldalso collaboratively establish an incubatorexclusively for incubation of startupsfocusing on energy storage technology, topromote innovation and development in theenergy storage sector.

3. Partnership at Sub-National Level

Under PACE-D TA, the USAIDdeveloped partnerships with states in Indiato strengthen the institutional frameworkand regulatory environment at the sub-national level. A partnership between theUS agencies (like USAID) and states in Indiashould also be encouraged to the enhanceinstitutional capacities of the state nodalagencies and regulators to assist instrengthening the regulatory, planning anddesign process for accelerating thedeployment of energy storage plants, stand-alone systems, microgrids, etc.

4. Tax incentives and subsidies

Policies like tax incentives, granting ofland at discounted prices to the start-ups andsubsidies to manufacturers would supportthe development of energy storage rapidly.The US legislators introduced the EnergyStorage Tax Incentive and Deployment Actto establish investment tax credit (ITC) forbusinesses and home use of energy storage.27

Denmark became the leader in generatingenergy through wind power by offering 40percent of the initial capital investment andalso granted tax incentives to consumers forgenerating power.28

China also adopted a similar strategy in1999 and is now the world leader in solarmanufacturing with around 70 percent ofthe total panels being manufactured inChina. It did so by investing US$47bn overfive years in the grant of loans, lands andtax incentives to industries setting upplants.29 India would be required to followsimilar policies for the rapid expansion ofrenewable energy and energy storagetechnology, and to attract largerinvestments.

5. Encouraging companies to invest inenergy storage as a part of CSR

India took a bold step by becoming theonly country in the world that mandatecompanies to do Corporate SocialResponsibility (CSR) activities if the turnoverof the company is more than 1000 crore (inUS$bn pl) or are making a net profit of 5crores annually to do a mandatory CSR upto two percent of their net profits for thewelfare of the society. The CSR activitieshave seen substantial investment in thewelfare schemes with a cumulative spendingof a whopping Rs 50000 crore (in US$bnpl). in the past four years.30 The recent trendsshow that the companies are majorly focusedon spending CSR funds in two-sector i.e.education and health with total spending of2,705.3 crore and 1144.83 crore respectivelyas per FY 2017-2018.31 The government hasto create awareness among big companiesto spend CSR funds in the research anddevelopment of energy storage technologiesin the county. The Government shouldencourage corporates to install stand-aloneenergy storage plants to store energy as apart of CSR spending so that they canconsume the stored electricity and reduceGHG emissions.

6. Setting procurement targets

Procurement targets are a mandateprescribed by the State Legislation for


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acquiring a specific amount of energystorage. It helps in promoting the usage ofenergy storage by giving support toinvestors and reduce regulatory uncertaintyassociated with the new technology.32 TheCalifornia Public Utilities Commission(CPUC) has come up with the procurementtarget policy that mandates utilities toprocure 1325 MWe of energy storage by2020 in the State.33 Oregon followed thepath of California and in 2015, and set upa target for large utilities for the procurementof at least 5MWh of energy storage by2020.34

There are other states like New Jerseyand others that have set procurement targets.However, it directed the state regulators toconduct a yearlong study for optimumutilisation of energy storage beforeimplementing the targets. To promote theconsumption of energy storage in thecountry, the government has to come up witha compulsory procurement scheme for thelarge scale industries. However, thissuggestion cannot be implemented in Indiaimmediately due to a lack of infrastructurefor energy storage in the country.

7. Policies for the integration of non-conventional resources including energystorage to the electricity generation

There is a need for more inclusivepolicies such as the generation of electricityfrom non- conventional resources as well.Recently, in the US, the Federal EnergyRegulatory Commission (FERC) issuedOrder no. 841 that deals specifically withthe integration of energy storage with theUS wholesale energy market.35 The orderdirected the regional grid operators toestablish rules that open capacity, energy,and ancillary services markets to energystorage and affirmed that the storageresources must be compensated for all ofthe services provided and level the playingfield for storage with other energyresources.36

Recently, NITI Ayog and RockyMountain Institute, United States jointlycame up prepared a report on India’s energystorage mission for manufacturing energystorage batteries in India. After that, thegovernment came up with National EnergyStorage Mission in 2018 and NationalMission on Transformative Mobility andBattery Storage, 2019. However, in thepresent scenario, there are no such policiesor laws for the integration of energy storageinto the electricity grid. A joint study shouldbe conducted by India and the US to explorethe integration of energy storage with thepower grids keeping the markets’operational differences and the socio-political condition of India in mind.

A joint study should beconducted by India andthe US to explore theintegration of energy

storage with the powergrids keeping the

markets’ operationaldifferences and the

socio-political conditionof India in mind

”

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8. Setting up of energy storage andrenewable energy fund

Renewable energy technology is still avery costly affair and thus involves a hugerisk. To promote the usage of renewableenergy and energy storage, the governmentshould launch a crowdfunding programmewhere everyone is allowed to participate andthe centre should act as the custodian of thatfund. At the end of every year, the centreshould disclose the fund raised from eachstate and proportionately distribute thosefunds to them. Crowdfunding is widely usedby countries such as the US, EuropeanUnion, South Africa, etc. for generatingfunds, especially in the clean energysector.37

However, their mode of crowdfundingis different because the company that issetting up a plant for renewable energygenerates funds from the people through aregulated website where people can donatemoney online and the government does nothave any role in it. Owing to the socio-economic condition of India, and lack ofinterest of industries in this particular sector,the Government should be directly andinvolved in encouraging crowdfunding togive confidence to the industries interestedin investing in this specific field.

9. Establishing a council for collectivepartnership

The energy storage technology is at anascent stage and is far from perfection. Itrequires extensive research and developmentespecially for increasing the backup andlife38 to make it more reliable. Although

various institutions are operating forfurthering this, there is a need for a big andcooperative consortium with activeparticipation by the government in grantingfunds, collaborating with various researchinstitutions at the national level and alsoby inviting companies to be a part of it. Alarge scale collaboration for research anddevelopment has greater chances of successthan research conducted through individualeffort.39

10. Demonstration projects

The demonstration projects are the pilotprojects that help the government as wellas for the public at large to analyse the prosand cons of the energy storage programmeon an incremental basis. In the UnitedStates, there are 15 demonstration projectsfunded by American Recovery andReinvestment Act for that help thestakeholder to have a better and in-depthunderstanding for the development of energystorage projects and the stakeholders canalso predict the risk attached to it and canbe prepared for it in a much better way.40

Five other states in the US have theirdemonstration model with the latest projectbeing implemented in Massachusetts byintroducing Advancing CommonwealthEnergy Storage (ACES) wherein the stategranted US$20mn for testing various multi-usee business cases for energy storage.41 Asimilar effort is required in India.Demonstration projects would help topromote energy storage in the country byalleviating the skepticism of companies forinvestment in such technologies.


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Endnotes

1 https://mea.gov.in/Portal/ForeignRelation/India_US_brief.pdf

2 http://pib.nic.in/newsite/PrintRelease.aspx?relid=178727

3 Ibid.

4 https://www.eia.gov/tools/faqs/faq.php?id=427&t=3

5 http://www.pib.nic.in/Pressreleaseshare.aspx?PRID=1555373

6 https://www.nrel.gov/docs/fy12osti/52409-4.pdf

7 https://www.nrel.gov/docs/fy19osti/72401.pdf

8 https://www.renewableenergyworld.com/ugc/articles/2019/02/01/massachusetts-becomes-first-in-the-nation-to-make-battery-storage-eligible-for-energy-efficiency-inc.html

9 National Hydropower Association (NHA) (2012) Challenges and Opportunities for New Pumped Storage Development.

10 http://css.umich.edu/factsheets/us-grid-energy-storage-factsheet

11 Centre for Sustainable Systems, University of Michigan

12 The AI helps to store the energy when it is affordable and uses the same when the cost and demand of electricity is at the peak as it hasthe potential to optimise the size and maximise the returns.

13 https://www.energy-storage.news/news/massachusetts-policy-leads-stem-towards-28.2mwh-of-solar-co-located-energy

14 http://www.energy-log.in/indias-first-grid-tied-energy-storage-plant-inaugurated-delhi/

15 https://www.livemint.com/

16 https://www.greentechmedia.com/articles/read/indias-energy-storage-market-finally-starts-to-grow#gs.t2r5hk

17 https://www.saurenergy.com/solar-energy-news/focus-on-energy-storage-the-technologies-leading-the-charge

18 http://pib.nic.in/newsite/PrintRelease.aspx?relid=181698

19 http://pib.nic.in/PressReleaseIframePage.aspx?PRID=1567807

20 https://mnre.gov.in/sites/default/files/webform/notices/National-Wind-Solar-Hybrid-Policy.pdf

21 https://mnre.gov.in/sites/default/files/webform/notices/Amendment-in-National-Wind-Solar-Hybrid-Policy.pdf

22 Clause 5.4 of the National Wind-Solar Hybrid Policy.

23 https://www.seriius.org/pdfs/062013_indo_us_pace_report.pdf

24 http://www.dst.gov.in/pressrelease/award-announced-indo-us-smart-grids-and-energy-storage-program

25 https://www.iusstf.org/program/indo-us-joint-clean-energy-research—development-centre

26 https://www.usicef.org/about-usicef/; U.S via Overseas Private Investment Corporation (OPIC) committed investment of US$250mn infinancing to help IDFC, expand lending in renewable energy and infrastructure projects solving out the cost challenges in deploymentof projects. Also, Exim Bank provided financial support to Miasolé, California-based solar module manufacturer to provide thin-filmsolar panels to a PV project in Rajasthan to leverage the expertise.

27 However, the bill is still not passed by the Congress and was recently tabled before the Congress with some modifications. https://www.heinrich.senate.gov/press-releases/heinrich-introduces-bipartisan-bill-to-create-tax-credit-for-energy-storagehttps://www.greentechmedia.com/articles/read/congress-introduces-energy-storage-tax-credit-bill#gs.u967bw

28 Niti Ayog Paper

29 id

30 https://www.crisil.com/en/home/newsroom/press-releases/2019/02/csr-spend-tops-rs-50000-crore-in-4-years.html

31 https://www.csr.gov.in/developmentlist.php

32 Ibid

33 https://www.utilitydive.com/news/california-looks-to-next-steps-as-utilities-near-energy-storage-targets/525441/

34 https://www.world-nuclear.org/information-library/current-and-future-generation/electricity-and-energy-storage.aspx

35 http://www.mondaq.com/unitedstates/x/806632/Renewables/The+Future+of+Energy+Storage+in+the+United+States+is+Bright


108

36 https://www.ferc.gov/whats-new/comm-meet/2018/021518/E-1.pdf, http://energystorage.org/policy/regulatory-policy/overview-ferc-order-841

37 https://www.bizjournals.com/kansascity/news/2018/05/07/wise-power-energy-storage-crowdfunding.html, https://www.renewableenergyworld.com/articles/2019/01/crowdfunding-sites-that-allow-true-investment-in-renewable-energy-and-sustainability-alternatives-to.html, https://www.smart-energy.com/industry-sectors/distributed-generation/crowdfunding-an-untapped-funding-resource-for-renewable-energy/

38 Currently the discharge time of lithium ion batteries is between 1 min to 8 hours depending on the kind of batteries and the average lifeof lithium ion batteries is between 15-20 years https://www.eesi.org/papers/view/energy-storage-2019

39 The example can be taken from US when it established SAMTECH. It was a partnership between the government and all the leadingplayers in the market to help US as a leading manufacturer of semiconductors. The government was actively involved in boosting theconfidence of companies and research institute by providing the sense of both urgency and commitment. This collaborative partnershiphelped US government to substantially improve the technology of semiconductors. (Niti Ayog Paper)

40 https://link.springer.com/article/10.1007/s40518-019-00128-1#Sec5

41 https://www.masscec.com/advancing-commonwealth-energy-storage-aces


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Infrastructure and connectivitydevelopment have long emerged as an

important subject matter in India-UScooperation. More important has been theirrecent mutual resolve to promote sustainableinfrastructure. This is aptly reflected in theJoint Statement of the India-US 2+2Ministerial Dialogue that restates theimportance of promoting collectively a“transparent, responsible, and sustainabledebt financing practices” for infrastructuredevelopment with partner countries. Whileinfrastructure has been zeroed in on as akey driver that has the potential to burgeonthe uneven balance amongst various aspectssuch as economics and environment formingthe Triple Bottom Line in multipleunderdeveloped and developing nations, theneed to focus on sustainable infrastructure

SustainableInfrastructureDevelopment in the

India-US Indo-PacificNarrative

Krithika SubramanianMaster in International

Affairs Candidate:2018-2020

Lee Kuan Yew School ofPublic Policy

National University ofSingapore

It needs to be seen how India and the US aim to promote the culture ofsustainable infrastructure in Indo-Pacific factoring third country thatwill address the requirement of the developed, developing andunderdeveloped economies.

development (SID) has become a globallysignificant phenomenon.1

It, therefore, needs to be seen how Indiaand the US, as the two ardent advocators ofthe liberal international economic order, aimto promote the culture of sustainableinfrastructure in Indo-Pacific factoring thirdcountry that will address the requirementof the developed, developing andunderdeveloped economies.

The Indo Pacific region, similar to othergeopolitically defined regions, is anartificial construct whose boundaries varywith respect to the geopolitical playersinvolved. The region broadly refers to theidea of both, the Indian and Pacific oceansas a mental map that is carved out of space.This region does not fit into the existingpolitical dimensions of the Asia-Pacific


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region. It is the strategic, political andmilitary aspect of this region that has causedit to gain greater prominence.

The term Indo Pacific, in recent years,has gained considerable traction. Withrespect to the Indian perspective, PrimeMinister Narendra Modi, in the 2018Shangri La Dialogue in Singapore, spelt outthe boundaries in an overt, pellucid manneras one that extends from the “shores ofAfrica to that of the Americas.”2 Modi alsoemphasised on the inclusivity of India’sengagement in the Indo – Pacific region.

By recalling India’s civilisational ethos ofpluralism, coexistence, openness anddialogue, he said that one of India’s aimswould be to promote a democratic, rules-based order in which all nations thrive asequal and sovereign.

India, however, is not the sole power andits geopolitics is influenced by that of theother regional and extra-regional powersthat operate within the neighborhood. Witha heady amalgamation of maritimeconnectivity, infrastructure development,collaboration, cooperation and competitionplaying an increasingly instrumental roletowards the growth of Asia, and moreimportantly, to that of India, nations in theregion are scuffling with the multi-facetedchallenges of an increasingly globalisedworld, and are witnessing a historicalrestoration of the global balance of power.

As a country with great ambitions fordevelopment, and a forthcoming advocateof the Indo-Pacific strategy, it is instrumentalfor India to take this opportunity injustifying and rationalising its interest inSouth Asia; and expanding its interest in EastAsia and strengthening its multi-facetedcooperation with the US. Though the 2016Logistics Exchange Memorandum ofAgreement; the 2018 Communication,Compatibility, Security Agreement; and theAmerican decision to rename the PacificCommand as the Indo-Pacific has helped instrengthening India’s relationship with theUS; it cannot be misconstrued as anendorsement of a US-led regional orderprimarily because the American vision forregional security is firmly rooted in anti-Chinese tendencies rebutting the Indianvision of inclusivity, which views Beijingas an equal partner in bilateral and globalaffairs.3

The Free and Open Indo-Pacific has beenidentified as a strategic concept that has beenemerging as an alternative to the Belt andRoad Initiative in countering the rise ofChina. The American narrative has beenfocusing on infrastructure and capacity

Infrastructure andconnectivity

development havelong emerged as animportant subjectmatter in India-UScooperation. Moreimportant has beentheir recent mutualresolve to promote

sustainableinfrastructure

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development in Asia; aptly illustrated in theBetter Utilisation of Investment Leading toDevelopment Act (BUILD Act) whichidentifies India and Japan as key partners.4

The dual advantage of the BUILD Act isthat, firstly, the government has created toolsto support and smoothen the process forAmerican businesses to operate fromdeveloping nations. Secondly, it wouldcreate opportunities for employment andprovide access to electricity, infrastructureand investment in the region, and in time,reduce the dependence on American aid5.While this Act does seem promising onmultiple fronts, some of the shortcomingsand barriers include the lack of focus givento sustainable infrastructure, the first costpremium of the project, lack of stakeholderparticipation, of transparency andaccountability, and most importantly, thelack of knowledge about sustainability.6

The Asia Reassurance Initiative Act(ARIA), at the outset reaffirms the Americanstrategic partnership with India which isbased on promoting peace and security inthe Indo-Pacific region. Calling for furtherstrengthening of the diplomatic, economicand military ties between India and the US,this act identifies the Quadrilateral SecurityDialogue shared between the US, Japan,Australia, and India as a vital platform inaddressing the pressing security challengesthat arise out of the Indo-Pacific. WithDonald Trump signing ARIA into a law inDecember 2018, India is provided with thedual opportunity of leveraging the US intoenhancing the defense and security by usingmechanisms such as the Defence Technologyand Trade Initiative (DTTI) and the STATier 1 Status; and in the investment ofsustainable infrastructure development (SID)in the Indo-Pacific region as a stepping-stone


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in strengthening the endorsement of anAmerican led regional security order. Whilethis Act reiterates India’s position of acrucial partner in the region, the twoanticipated challenges include a directconfrontation with China and a consequentimpact on the Indo-Pacific nations as mostof them rely on China for being their largestand reliable trading and developmentpartner; and an acknowledgement of the factthat the US lacks confidence andcommitment toward India for neitherhaving economic nor military might incountervailing China in the region.7

Though the ARIA and BUILD Actreaffirm American strategic partnershipwith India in promoting peace and securityin the Indo-Pacific region, it is essential forIndia to acknowledge the potential lack ofAmerican commitment and skepticism dueto Donald Trump’s unpredictability.

America’s whimsical approach towards thewithdrawal of troops and mockinglydismissing the Indian contribution towardsAfghanistan; expecting India’s relentless andunflinching support in containing Chineseinfluence; and a paltry US$1.5bn per yearpledge under ARIA for development incomparison to a US$25bn investment byChina in the CPEC region alone shouldmake New Delhi question America’s intentand impact.8 More importantly, DonaldTrump’s tariffs on the steel and aluminumimported from India; the increase of tariffson 14 percent of Indian exports to the USand the withdrawal of India’s eligibilityunder the Generalised Systems of Preferences(GSP) in 2019 has further intensified NewDelhi’s skepticism towards Washington.9

While questioning the Americancommitment in the region does pose gravequestions, India also holds opportunities instrengthening the Indo – Pacific region,specifically in the field of SID through otherchannels as well. This strengthening,however, comes with the cost of being a partof the Regional Comprehensive EconomicPartnership (RCEP) mooted by the ASEAN,and the Comprehensive and ProgressiveAgreement for Trans-Pacific Partnership(CPTPP), originally the Trans-PacificPartnership (TPP). With Donald Trumppulling the US out of the TPP, the revisedCPTPP aims for stricter standards for labor,environmental and conflict resolutionmechanisms.10

The RCEP, for India, could have been aplatform to flex its strategic and economicstatus in the region, and an opportunity tobring to fruition its “Act East Policy”. Byaddressing pertinent issues such asinvestment, intellectual property rights andcooperation in different spheres, RCEPwould’ve complimented India’s free tradeagreements and help strengthen itsrelationship with the members. With theharmonisation of trade rules, RCEP wouldhave played the role of an effective platformin integrating India into the regional


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production network. Given that Indiaalready enjoys strong systems in place forcommunication, technology, healthcare andeducation. The RCEP would have createdopportunities for Indian companies infurthering their access to new markets andSID. The onus, thus, lies upon India andother powers in the region in ensuring thatthe RCEP is comprehensive and focusses onthemes that fall beyond the purview ofmarket access to goods.11

For India, CPTPP would have promiseda variety of rewards. Given that the blocconstitutes 16 percent of the world economy,India could have potentially plated the roleof a leading manufacturer and an exporthub for the Pacific region. India already hasa stable trade relationship with the CPTPPnations such as Canada, Mexico, and Chile,and with the US hinting at willing torenegotiate an entry into the trade bloc,India could have developed a structuredtrade pact. Securing a trade agreement withthe US and 11 other economies that haveimmense growth potential is an outlook thatwould certainly have strengthened theIndian economy.12

With pollution plaguing every major cityin India, making the air quality almostunbreathable, the Government has had tostall construction. This phenomenon ofpollution and poor air quality, however, isnot specific to India and is faced by otherdeveloping countries like China, Indonesia,and Myanmar. It is at this juncture thatsustainable infrastructure development canplay a role in minimising energyconsumption and carbon dioxide emissions.Employing SID enables job creations,encourages the purchase of local goods andservices, enhances the quality of life forcitizens and helps in protecting the naturalresources and the environment.

This paper thus puts forth threerecommendations in ensuring SID isemployed in the Indo-Pacific region. Firstly,launching an Indo-Pacific InfrastructureNetwork which ensures that a country-wise

“Sustainable Infrastructure DevelopmentReport” is published, which will help inidentifying the scale of work that has beenundertaken in promoting SID. It will alsohelp in analysing the gaps such as financingand requirements like labor and resourcesof each city, and governments can thus bewell equipped in approaching multilateralorganizations, private firms and financialbodies in filling the gaps. In order to providea checklist of efforts being carried out,recommendations on ways to developsustainable infrastructure and accountabilityto funders, this report should be publishedin a timely manner.

Secondly, the Infrastructure Network willprovide tools for governmentalrepresentatives from all tiers, starting fromthe Panchayati Raj to the Members of the

The responsibility thuslies in the rest of thedeveloping nations in

taking action and investin sustainable

infrastructure incollaboration with

nations such as the USbefore it is too late

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Legislative Assembly in India and its concurrent role sin other developing nationsto ensure capacity building, identifying scope for potential SID and working withstakeholders such as the private sector and financial institutions. The Networkwill develop a standardised toolkit in a nationwide manner and offer both in-person and online training to the representatives in ensuring a uniform approachto tackle potential challenges that may arise.

Thirdly, and most importantly, the Network will design a toolbox inpartnership with the governmental and private financial institutions in standardisingsolutions that address common risks that arise out of sustainability likedinfrastructure projects. It is estimated that over US$100tn of funding is requiredin investing in sustainable infrastructure, transportation and waste managementon a global scale Addressing these challenging issues thus requires the cooperationof international stakeholders and financial institutions.

Southeast Asia has already taken steps in encouraging private sector financingsuch as launching the ASEAN Green Bond Standards in November 2017; theincentivisation process by Indonesia for the production of environmentally friendlyvehicles; and the signing of the Declaration on South-South Cooperation by Bhutan,Mongolia, the Philippines and Vietnam. The responsibility thus lies in the rest ofthe developing nations in taking action and invest in sustainable infrastructure incollaboration with nations such as the US before it is too late.

Endnotes

1 Brenda Mutanu Munyasya & Nicholas Chileshe. “Towards Sustainable Infrastructure Development: Drivers, Barriers, Strategies, andCoping Mechanisms,” Sustainability, MDPI, Open Access Journal, vol. 10(12), pages 1-18, 22nd November 2018. Accessed at https://ideas.repec.org/a/gam/jsusta/v10y2018i12p4341-d184692.html

2 Press Information Bureau, Government of India, ‘Text of Prime Minister’s Keynote Address at Shangri La Dialogue’, 1st June 2018.Accessed at http://pib.nic.in/newsite/PrintRelease.aspx?relid=179711

3 Jagannath Panda “Does India endorse a US – led regional order?” East Asia Forum, 23rd September 2018. Accessed at https://www.eastasiaforum.org/2018/09/23/does-india-endorse-a-us-led-regional-order/

4 Nidhi Varma “The Strategic and Economic Dimensions of Indo – Pacific”, Brookings, 5th April 2019. Accessed at https://www.brookings.edu/events/the-strategic-and-economic-dimensions-of-the-indo-pacific/

5 Samantha Urban, “What is the BUILD Act?” One Org, 10th April 2018. Accessed at https://www.one.org/us/blog/build-act-questions-development-entrepreneur/

6 YH Ahn, AR Pearce, Y Wang and G Wang “Drivers and barriers of sustainable design and construction: the perception of greenbuilding experience.” International journal of sustainable building technology and urban development, 2013, v. 4, no. 1, p. 35-45.Accessed at http://ira.lib.polyu.edu.hk/handle/10397/24881

7 Col Rajeev Kapoor “Asia Reassurance Initiative Act (ARIA): What it means for India” Center for Land Warfare Studies, 14th January2019. Accessed at https://www.claws.in/1966/asia-reassurance-initiative-act-aria-what-it-means-for-india-col-rajeev-kapoor.html

8 Ibid.

9 Chad P. Brown, “Trump’s Mini Trade War with India”, Peterson Institute for International Economics, 8th July 2019. Accessed athttps://www.piie.com/blogs/trade-and-investment-policy-watch/trumps-mini-trade-war-india

10 Meaghan Tobin, ”The Difference Between RCEP and CPTPP” South China Morning Post, 6th July 2019. Accessed at https://www.scmp.com/week-asia/geopolitics/article/3017487/explained-difference-between-rcep-and-cptpp

11 Bipul Chatterjee and Surender Singh, ”Why RCEP is Vital for India” The Diplomat 3rd March 2015. Accessed at https://thediplomat.com/2015/03/why-rcep-is-vital-for-india/

12 Divesh Kaul, ”How is India Navigating Global Trade Agreement Trends” The Diplomat, 8th December 2018. Accessed at https://thediplomat.com/2018/12/how-india-is-navigating-global-trade-agreement-trends/


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MISCELLANEOUS


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Self-reliance strikes a powerful culturalchord in China, bringing to mind 1940s

slogans coined by Mao Zedong as heground out bloody victories in the country’scivil war. Over recent months the notionhas enjoyed a resurgence, reawakened byPresident Donald Trump’s moves to denycritical technologies to companies likeHuawei in the ongoing US-China trade war.

It is hardly surprising that China’sleadership find such threats unacceptable,and thus is talking up its ability to developindigenous technologies in areas likesemiconductors. But that does not make theidea of a push for technological self-relianceany more sensible, given the most plausibleroute to rapid Chinese development still lieswith greater integration with the worldeconomy, not less.

China’s Vice Premier Li Keqiang madeno mention of self-reliance when he spokeat the July 1-3 “Summer Davos” meetingof the World Economic Forum in the coastalcity of Dalian. Instead, against the backdrop

of a slowing Chinese economy and fallingforeign investment, Li pledged to accelerateChina’s openness to international companiesin sectors such as financial services.

President Xi Jinping has made frequentmentions of the idea over recent years,however, notably in a speech last September,in which he suggested China would be forcedto take “the road of self-reliance” as itattempted to become an advanced nation.Coming at a time of worsening tradetensions with the U.S., his remarks wereviewed as a call for Chinese technologicalindependence in an era of risingprotectionism.

The decision by Xi and Trump at the G-20 summit in Osaka in late June to resumetrade talks and avoid further tariffs, at leastfor now, will do little to stem this feeling ofChinese vulnerability. Trump has provedhimself thoroughly unpredictable, andtemporary cessations of hostility can bequickly undone.

A Long March toHigh-Tech Self-Reliance WouldHold Back China

James CrabtreeAssociate Professor inPractice Lee Kuan YewSchool of Public Policy

National University ofSingapore

A chipset designed by HiSilicon: China’s state-led attempts to developadvanced chipmaking capabilities have been expensive failures.


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Although a world leader in sectors fromhigh-speed rail and electronic payments tosupercomputers, China remains reliant onforeign know-how in many others.Semiconductors are a particular weak point,as the US threats to deny components to bothHuawei Technologies and ZTE, anothertelecom group, have shown.

“These attacks on Huawei have been amassive wake up call to business leadersand politicians about the reality of China’sposition,” I was told on the sidelines of theDalian gathering by Nina Xiang, author ofRed AI, a new book about her country’sstubborn technological limitations in areas

from artificial intelligence to robotics.Whatever its chances of success, a renewedpush to develop indigenous technologies arenow all-but inevitable, she suggests.

In all this, the US and China findthemselves in a curiously symmetricalposition, as hard-liners in both nations cometo fear the other side turning economicinterdependence into a weapon.

Trump’s advisers point to China’sfrequent use of economic coercion as a toolof diplomacy, from recent threats to limitsupplies of rare earth metals to its temporaryban of Australian coal imports in February,following Australia’s decision to blockHuawei’s involvement in developing fifth-generation wireless networks. Theyconclude, the US must — through greaterself-reliance, in a sense — take steps toavoid being put in a similar position asChina’s economic sway increases.

Trump’s recent actions have led China’sleaders to reach a similar conclusion. Theresulting fog of mutual distrust has led someto predict the two nations might decouple,creating something akin to the two entirelyseparate economic zones of the Cold War.

This outcome has never been likely, atleast in the short term, given how complexand entangled the duo’s economies havebecome. But a smaller and more gradualprocess of separation between the US andChina is quite plausible, reversing some ofthe rapid integration that developed over acouple of decades of globalisation.

This needs not to be a catastrophe foreither side, but it would hurt China inparticular, if it made it harder for Chinesecompanies to gain access to the kind oftechnologies they need to compete with theworld’s best.

Most Chinese industries remain deeplydependent on foreign know-how. Itscorporations paid $29 billion worth oflicences and royalties for intellectualproperty in 2017, more than half of which

It is hardly surprisingthat China’s

leadership find suchthreats

unacceptable, andthus is talking up its

ability to developindigenous

technologies in areaslike semiconductors

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came from the US, Germany and Japanalone, according to a new report releasedat the world economic forum by McKinsey& Co., a consulting company.

For Beijing’s trade hawks this is arationale for self-reliance. But in truth,China is now likely to need greater exposureto foreign know-how, especially in laggingindustries like aircraft manufacturing oradvanced industrial materials. In sectorswhere China is already world-class, suchas making high-speed trains, it prosperedby bringing in foreign expertise. Thesensible approach to areas, in which it ismuch less good, like making passengerplanes, is to do the same.

The notion of self-reliance has alreadypushed China into bad policy choices andnow risks doing so again, withsemiconductors the most obvious example.Over recent decades its leaders havelaunched repeated state-led attempts todevelop advanced silicon chipmaking

capabilities. Almost all have been expensivefailures.

Chinese companies like Huawei’sHiSilicon spinoff do now produce chips foruse in many of its smartphones and laptops.But the world’s most advanced componentmakers remain in countries like the US. Mostanalysts agree China remains as much as adecade behind leading rivals like Taiwan’sTSMC.

Officially, China wants more than three-quarters of its semiconductors to be madedomestically by 2030, up from around athird now. But the odds are slim that it canachieve anything close to this target bythrowing around public money or launchingfurther plans in the vein of its existing“China 2025” manufacturing strategy. Evenif it did, the remaining imports would almostcertainly still be the most important, giventhey would be the most complex, high-endchips.


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McKinsey points to four advantages thathelped countries like Japan and South Koreaclamber up the tech ladder: sizableinvestment, large markets, access toadvanced know-how and policies thatencourage both competition and innovation.China does well on the first two but struggleswith three and four.

This leaves China’s leaders in a bind.There is not much they can do aboutAmerica’s trade belligerence, beyondcontinuing to try and strike a deal that mightdefuse tensions overall. But there is plentyit can do to make its economic system moreopen to international investment, and itspolicies less focused on state interference.

Even if this does not placate Trump, itwill still help China’s economic prospects.If the US grows less willing to developcommercial ties, there are plenty of otheradvanced countries that will. Either way,encouraging Chinese companies to remainenmeshed in global networks of trade andinnovation remains the most likely route todevelopment. A return to Mao-era slogansis hardly likely to do the trick.

The article first appeared in Nikkei Asian Review

on July 04, 2019


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It is essential to identify, preserve andcherish core cultural values of a nation

and decide what should remain in the non-negotiable part of national DNA. Trademust be free of external influence, short-term political exuberance, economicallyfair, operationally efficient, financiallytransparent and mutually beneficial.

India is blessed with great talent in manyareas, such as maritime, software,engineering, manufacturing, mining,natural resources, etc. The US hascomplementary resources and pioneeringviews towards establishing free markets.Both democracies perceive freedom andprosperity of all people is possible througheducation, trade, investment and culturalexchanges.

Julia Gillard, Australia’s former PrimeMinister noted: “Economic growth driven

by large-scale infrastructure investmentswithout equitable provision of educationwill leave hundreds of millions of peoplebehind, exacerbating inequality, disillusion,and instability”.

Sri Mulyani Indrawati, an Indonesianeconomist and finance minister noted“Infrastructure alone won’t end poverty. TheWorld Bank had to learn this lesson too.While we believed too much in bricks andmortar in our early days, we now understandthat bringing together funding, technicalexpertise, and tested knowledge goes muchfurther.”

One of the critical reasons for trade tobe opposed in many societies is the fear oflosing existing sustenance. Lack ofeconomic opportunity diminishes thestructural norms of a society which, in turn,leads to cultural demise. It accelerates

Building Smartand SustainableInfrastructure

Vijaya S IswaraCreator, FastFix

In recent decades, many nations transformed themselves from agrariansocieties to industrial powerhouses. Some adopted an ideology ofmercantilism, some resisted meaningful transformation to modernitywhile most others continue to look for a middle path that is palatableto local populations.


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economic migration. This sentimentproduces onerous laws that stifle growth. Itcan be solved by installing smarter marketaccess methods.

India can learn from other’s experiencesin reviewing domestic infrastructureprojects. Boomtowns of past decades in theUS that went bust due to vagaries of marketforces, poor regulations and plain old policylevel ignorance provides a great example.

For India to experience and sustainattractive growth rates, it is an existentialnecessity to have a core motivationalattitude shift at the policy level. She mustengage in a fundamental review of thecountry’s strategic rationale for the next 50-100 years, both domestically andinternationally.

If the goal of possessing greatinfrastructure is to assure long-termprosperity then efficiency in deployment ofresources, simplified and transparentprocesses must be paramount.

On the domestic front, India should takea deeper look at what type of infrastructureis needed, to understand true opportunitycosts. In strategic terms, sourcing processesfor expertise should be equitable in growingdomestic talent versus utilising expensiveforeign components to satisfy certain globalinfluencers.

It is important to visualize both short/long term goals as well as stated benefitsfor the country.

Example of goals

• Switzerland: peaceful co-existence

• The US: self-sufficiency plus globaldominance

• India: can be the main destination forglobal trade with mutual benefit

Infrastructure types

Domestic based on:

• Land: roads, bridges, tunnels, energy,(non) renewable resources

• Water: drinking/freshwater, ports,coastal and inland waterways, fisheries,other marine resources

• Air/Space: civil aviation, military,communications, satellites, exploration,cyber

• Administration: borders (states, political,economic etc.), defense, legal,intellectual property, taxes, permits,markets (regulated/unregulated)

International

Global organisations that improveforeign relations issues including:

• Market access (trade in goods andservices)

• Defense (security, border disputes,peacekeeping, disaster collaborations)

• Treaties (various aspects)

To explore further

• Land: For any modern free civil societyto exist and prosper good land basedinfrastructure is a necessity. India is abig country with parts of it missing pavedroads. This is an excellent opportunityto connect remote parts of the countryto avoid mass urbanisation, tastelessoverbuilding and eternally chokingexisting business centers.

• Water: Securing, maintaining andrecapturing water for reuse assures peaceand prosperity. Ports, inland and coastaltransit systems are essential componentsfor cabotage and cross-border commercethat contribute to sustained economicdevelopment. Throughput efficiency isa key component of port infrastructure.The capacity building itself does notautomatically translate into economicdividends as learned elsewhere.Intelligent, market driven solutions thatenable smart connectivity of ports arenecessary. India should refrain from


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making the mistake of overlooking thepitfalls of trophy investments.

• Air/Space: The infrastructure for civilaviation is overbuilt in America, thoughmany hard to reach places still exist. ForIndia, the goal of civil aviation can bereliable connectivity at an affordableprice. Military air operations can be forgeneral peacekeeping, disaster rescuemissions and national preparedness.

• India has a proud tradition and uniqueknowledge of space, navigation,planetary systems, weather, technicalcompetence, mathematical pedigree andspiritual purity to pursue a progressiveagenda. This is a critical area to achievelong term self-sufficiency and greatcollaborations.

• Administration: Functional efficiencymay not be identified with typicalgovernment operations. But this can bea strong differentiating feature for India’sfuture growth plans.

On legal infrastructure - unclear rulesand lack of fast course correctionmechanisms are the reason for ongoingchaos and disagreements in any country.When Laws impede business opportunities,it costs productivity and steals a country’sgrowth trajectory. Most people are simplyunsure of what is expected of them. Thatleads to agency problems andmisrepresentations. Any Person toGovernment interaction should befrictionless with a singular goal to reduce


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all pain points. Transparency and efficiencybuild trust in dealing with counter-parties.

On the foreign trade front, India was theprimary destination since ancient times.India can assert historical, moral andspiritual leadership while investing intechnological frameworks to install globaltrading infrastructure. As originalsignatories to GATT both India and TheUS were instrumental in giving the world aframework which became the World TradeOrganization (WTO). Recently circa (April2019) WTO was seeking to embracetechnological solutions to fix trade issuesin goods and services, among other things.This is an opportunity for India to proposesolutions that offer efficient and transparent

smart technology-based systems. Emergingblockchain technologies may be embracedwith an eye towards expanding economicopportunities to underserved markets andto improve the quality of own sovereigncurrency. Excessive dependence on narrowband of global currencies is dangerous whencentral banks continue to prop them up.

From my own experiments with thesubject, the entire international trade ingoods can be simplified as:

• 195 UN members involved in trading

• 11,000 types of goods (based on HS code)

• 90% gets transported on

• 10,000 ships which call

• 3500 ports

Once we reduce the ‘trade in goods’universe to concrete numbers like this it getseasier to establish a global tradingframework that connects all countries viasmart networks.

Trade in services can be reliablydelivered using the internet, videoconferencing, text messaging and similarchannels. Except where physical interactionis necessary for successful outcomes,everything else can be processed efficientlyonline.

In conclusion, universally-transparentinfrastructure backed by smart technologiesthat consistently deliver unambiguousoutcomes can reposition trade decisionmaking back to individual traders and outof stifling forces of the day. Building smartnext-generation global trade infrastructureis the glaring opportunity for India and theUS.

Building smart nextgeneration global

trade infrastructureis the glaring

opportunity for Indiaand the US

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Historically, the US-India partnershiphas been strongly rooted in the shared

values of democracy and the premise thatvibrant people-to-people interactionsnurture the bilateral relationship. At thegovernmental level over the past twodecades, this facilitated cooperation in theareas of higher education, science andtechnology, trade and investment, defenseand (cyber) security, technology and energy,environment and agriculture, and publichealth. Both countries have benefited fromthis partnership in terms of economic growthand increased mobility. However, thesesuccesses are at risk of being underminedby rising isolationism across the world. Atthe same time, the complex global problemsbrought on by climate change demand

concerted action, which is why civil societyis more important now than ever. There isa need and an opportunity to strengthen theIndia-US relationship at the civil societylevel. Social impact fellowships are animportant tool in sparking innovation.

People-to-People Ties: TheRole of InternationalEducation and Cross-CountryExchanges for India’sDevelopment

Former Foreign Secretary and IndianAmbassador to China and the US NirupamaRao, who serves on the Board of Trusteesfor the American India Foundation (AIF) inIndia, mentioned that “India has not got its

Creating US-IndiaBridges through Service,

Social Impact,and InnovationLessons for the Future

Nishant PandeyChief Executive Officer,

American IndiaFoundation

There is a need and an opportunity to strengthen the

India-US relationship at the civil society level.

Katja KurzPhD, Programme Officer

of AIF’s WilliamJ. Clinton Fellowship for

Service in India


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due on the world stage,” despite its size, itsdemocracy, and its accomplishments.1 Thestrength and vibrancy of people-to-peopleties can be measured in the level of interestin and familiarity with each other’s cultureand language (including history, literature,music, film, geography, politics etc.), aswell as the number of cross-culturalexchanges and mobility between the twonations. Unfortunately, the level of people-to-people ties between the US and Indiaremains low.

Despite India being the world’s 2nd mostpopulous country2 and projected to becomethe 5th largest economy in 2019,3 US studentsenroll in Indian language and area studiesat startlingly low rates. A 2016 list by theModern Language Association (MLA)details the 15 most commonly taughtlanguages for US students; no Indianlanguages appear in this list,4 even thoughHindi alone is the world’s 5th most spokenlanguage.5 The number of US studentsstudying all Indian languages combined was3,090 in 2013 (0.3 percent of all US languageenrollments).6 In contrast, enrollment forKorean in 2013 was at 12,229 (four timeshigher), enrollment for Hebrew 19,249 (sixtimes higher), and the enrollment of Arabic32,286 (ten times higher).7 Comparing themost recent enrollment numbers from 2016,within three years, the overall enrollmentin Indian languages even has decreased.8

According to Alyssa Ayres, SeniorFellow for India, Pakistan, and South Asiaat the Council on Foreign Relations, this“is a comparative barometer of the lowpriority Americans place on developingdeeper and more place-specific knowledgeof India,” as compared to other countriesin Asia.9 Lack of interest in Indian languageand area studies is problematic, Ayresrightfully points out, since the largestgrowth in print and electronic media in India“is taking place in languages other thanEnglish,” which makes it “difficult to accessthese worlds without any language skillsother than English.”10 Similarly, a risingnumber of civil society groups are

mobilising across India in local languagesother than English, so lack of language skillsalso creates a barrier for collaboration andexchange.

International exchanges in highereducation are a key indicator of people-to-people ties because it is during this crucialtime that the next generation of ourworkforce is developing key interests andskills that will determine their future choicesand career paths. It is crucial whichlanguages they choose to study, whichcultures they choose to learn about, andwhich countries they choose to visit. WhileIndians are the second largest group ofstudents studying in the US11, the numberof Americans choosing to go to India isextremely small.12

India is vastly underrepresented as areceiving country for Americans to study,volunteer, or work abroad, which is a missedopportunity. Less than two percent ofAmerican study abroad participants chooseIndia, while double that number chooseCosta Rica and Australia, and triple chooseIreland and China.13 This data reaffirms that“the United States is far more visible in theIndian imagination than India is for theaverage American.”14

This lack of interest, combined withadministrative, funding, and otherchallenges, has led to the closing ofeducational partnerships with institutions inIndia. Many formerly run study, volunteeror intern abroad programmes in India havebeen discontinued, leaving Americans withfew opportunities to go to India, learn aboutthe region, and build ties with their Indianpeers to learn about local innovation suchas efforts to combat water scarcity andenvironmental degradation, reduce plasticwaste, and bridge the urban-ruralinfrastructure gap – all topics that will soonaffect the US as well in the context of globalclimate change.15 However, the number ofstudies abroad, work, volunteer, andinternship programmes to India has declinedover the last decade.16


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Leveraging Diversity, Equityand Inclusion for Innovation:Closing the Skills Gap

This development has been unfortunatefor the advancement of inclusion and equitywithin the US itself, a country with adiversity paralleled only by India. Studieshave shown that service-learningopportunities abroad encourage the USstudents’ academic and professional success,closing the skills gap especially for studentsfrom minority communities.17 Internationalexperiences through study abroad have evenbeen proven to increase underrepresentedstudents’ timely college completion,resulting in a higher graduation rate thanthe overall student population.18 Other datasuggests that international educationincreases employability, interculturalcompetence, and career prospects forAmerican graduates; an important asset intoday’s global economy.19 At thistransformative time in our history, it shouldbe a priority to “equip young Americans

with the global knowledge needed to worksuccessfully with India,” given that India isa key strategic partner and ever-rising globalplayer in the world.20

Responding to the US government’s callto action, the Institute for InternationalEducation (IIE) launched Generation StudyAbroad in 2014 with the goal of “doublingand diversifying the number of US studentsstudying abroad by the end of the decade.”21 Despite such initiatives, the number ofAmericans going to India has overalldeclined. Most Americans are not exposedto India and therefore do not grasp thechallenges to grassroots solutions forsustainable development. There is aleadership and opportunity gap in thedevelopment sector where many at the topare far removed from the groundwork andare not sensitised towards local challengesand local solutions.

To make matters more complicated,today’s global challenges requirecollaborative and inclusive solutions, which


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can only be achieved by working togetherefficiently. People-to-people ties are thebedrock of innovation. At moments of majorgeopolitical shifts, these ties that sustainshared values and foster collaborationbetween civil society actors irrespective ofthe political context. We’ve seen thisthroughout post World War II-history withthe inception of the Fulbright Programme.Founded in the belief that peace-buildingrelies on mutual understanding andpartnerships on a societal level, Fulbrighthas brought together over 380,000 students,scholars, teachers and researchers througheducational exchange across 160 countriesto date.22

President Truman, Senator Fulbright, aswell as lawmakers in the decades since haveunderstood that fellowships, peacebuilding,and innovation are intimately linked, thusthey have harnessed the power of mobilisingcivil society to facilitate service andleadership.

US-India Partnership inAction: The Rise of AIF’sWilliam J. Clinton Fellowshipfor Service in India as aPrivate Sector Initiative

Similar to Fulbright, AIF has harnessedthe power of international exchange tocultivate the value of service and drivesocial impact through its fellowshipprogramme. AIF, headquartered in NewYork City, has been weaving the bonds ofinnovation through citizen diplomacy sinceits inception in 2001. Former President BillClinton and Prime Minister A.B. Vajpayeeprovided the impetus for the founding of AIFby mobilising leading Indian diasporaleaders in the US to pool their talents andresources to launch AIF. Former Citibankleader Pradeep Kashyap became itsfounding Executive Director and LataKrishnan, tech entrepreneur and start-upinvestor, its founding President, establishingan organisation that is deeply committed

to US-India bridge building. From the get-go, the fellowship programme (AIF ServiceCorps) was at the core of this bridge-buildingmandate.23

In the aftermath of an unprecedented,devastating earthquake in Kutch, Gujarat,President Clinton, at the suggestion of PrimeMinister Vajpayee, proposed the idea ofsending a group of Americans to India tonot only help to rebuild the region and offerrelief for earthquake survivors, but also tofoster strong ties between civil society in bothcountries to support mutual understandingand long-term collaboration.24

Out of this idea, in 2001 the “AIF ServiceCorps” was born. When the first few batchesof Americans went to India, AIF soonnoticed that “disaster relief” is a complextask that requires multi-disciplinary, cross-sectoral solutions that address education,migration, public health, gender equality,children’s rights, environmentalconservation, and many other challengeslong-term. Thus the programme expandedto partner with a variety of grassroots,research, corporate, and public institutionsacross India to tackle these challenges moreholistically and sustainably. To do so, theprogramme also expanded from a summer-long to a 10-month long commitment.Gradually and organically, the fellowshipprogramme evolved from providing disasterrelief to sparking micro-innovations andaccelerating social impact in all areas ofIndia’s development. In 2009, AIF renamedthe programme to the “AIF William J.Clinton Fellowship for Service in India,”honoring President Clinton for the role heplayed in providing some of the foundingprinciples of AIF and the fellowshipprogramme.

In 2011, acknowledging the risinginterest among young Indian citizens to servetheir country’s social development, theprogram became bi-national, acceptingIndian citizens alongside US citizens to serveas AIF Clinton Fellows on the ground. Thisnot only accelerated its impact on the ground


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but also increased mutual learning andstrengthened the collaboration betweenemerging U.S. and Indian leaders during theprogramme.

The AIF Clinton Fellowship is a 10-month volunteer service programme thatbrings together young professionals from theUS and India to serve with the grassrootscommunity and civil society organisationsacross India to tackle the most pressingchallenges in India’s development. AIFClinton Fellows work on scalable andsustainable projects with largely under-resourced development organisations acrossIndia. It is designed to shape the nextgeneration of leaders committed to positivesocial change while strengthening civilsociety in both the US and India andidentifying the most innovative solutionsbeing developed on the ground.

Over AIF’s 18-year history, we havelearned that civil society is the backbone ofinnovation in the US and India, which iswhy we must invest in them. With Indiagaining prominence, civil society in the USand India can forge powerful alliances topositively shape our future. Thanks to thefellowship programme, AIF has fosteredmutual understanding between the peopleof these two great nations, develop futureleaders with an appreciation for thechallenges of building resilient societieswith dignity for all, and spurred civicengagement toward the greater good.Equally importantly, it has cultivated adedication to service among the nextgeneration of leaders and innovators.

The ‘How’ of Driving US-IndiaExchanges for Innovation:Stories of Impact from theGround

In President Clinton’s words, AIF’sfellowship programme ‘’is helping shape thenext generation of leaders to possess a strongpassion for India and the innovation to findsolutions for the problems we face.”25 Onesuch example is AIF Fellow Yael Gottlieb,

who in 2006-07 served with Action India, aDelhi-based NGO that would in 2019 winan Oscar for the documentary film “Period.End of Sentence,” which documents theirjourney of setting up a women-ownedsanitary pad business.26

Reflecting on her experience, Gottliebfound that: ‘’The opportunity to serve inIndia is invaluable. Living on the ground ina community setting, learning first-handabout the challenges that people face in theireveryday lives, and learning about theinnovative efforts being undertaken to solvethese challenges is an experience that isunique. […] I carry these lessons with meevery day.”27 Today, Gottlieb holds anexecutive role at the International Women’sHealth Coalition after over a decade ofleadership within Human Rights Watch.

Over the past 18 years, AIF has placedmany such young American and Indianprofessionals in service with organisationsacross India. It has fostered an exchange oftechnical skills and intellectual resources thataims to build the capacity of Indian NGOswhile developing American leaders with adeep understanding of, and continuedcommitment to, India. To date, 471 Fellows

People-to-peopleties are thebedrock ofinnovation.

”“


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have served with 208 non-governmentalorganisations in 23 states in India. Thefellowship offered them an unparalleledopportunity to learn from communitypractitioners and beneficiaries on theground, rather than applying externalsolutions irrespective of the cultural setting.Moreover, it has helped to close theleadership gap by sensitising diversepractitioners and immersing them ingrassroots development work, challengingtheir previous conceptions.28

They’ve worked to advance health,education, and economic opportunity forsome of the most marginalised communitiesacross India and in some of India’s mostunderserved states. Over the past three years,for example, our Fellows have served withcommunity organisations in Bihar, Odisha,Jharkhand, Chhattisgarh, Assam, UttarPradesh, and Haryana. Fellow TodEtheredge II in 2017-18 developed a societyre-entry manual for youth offenders at TiharPrison in Delhi, to make sure that youthoffenders have a second chance at life afterserving their sentence.29

Growing up in a country that continuesto struggle with criminal justice reform andracial inequality, Tod brought a uniqueperspective to the project that sparked micro-innovations.30 He did so in collaborationwith the founder of the NGO, Mohit Raj,who himself was an AIF Clinton Fellow in2013-14. Fellow Minahil Khan, who cameof age as the daughter of immigrantrestaurant entrepreneurs in upstate NY, in2017-18 worked with Muslim womenentrepreneurs in Delhi’s Nizamuddin Bastisettlement to launch small pop-up shops fora sustainable livelihood.31

Fellow Janan Dave in 2016-17 supporteda tech start-up by scaling up life-savingtechnology for mothers and newborns toreduce infant and maternal deaths, whichworldwide are among the highest in India.32

And former Fellow Priya Charry, a librarian,in 2017-18 designed an inclusive web portalfor artists with disabilities to showcase theirartworks to a global audience, therebychallenging the prevalent discourse ondisability in India.33 Fellow Prashant Anand,a community organiser and social workerfrom Uttarakhand, conducted a study tolaunch a sustainable livelihood project inflood-prone regions in Assam in 2017-18.34

After this experience, he launched his ownNGO to support forest-dwelling tribalcommunities.35

While other international programmeshave pulled out of India, AIF has been luckyto sustain and grow the fellowshipprogramme. This success is largely due tothe creation of a strong local partnernetwork in India, a concerted institutionalcommitment to our bridge-buildingmandate, and the support of key institutionalcontributors and donors. Each year, we haveseen steadily rising application numbers,most notably among Indian applicants,which in itself is an indicator of the risingpower of India’s young civil society. Theprogramme is highly competitive, with atwo percent acceptance rate in the 2017-18programme year. Despite rising applicationnumbers (in 2017-18: 996 applicants), AIF

With India gainingprominence, civil

society in the US andIndia can forge

powerful alliances topositively shape our

future

”

“


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has kept the cohort size to 36 Fellows orless to ensure outstanding quality andoptimal support for Fellows and partnerorganisations. In recent years, AIF hasfocused more strategically on diversifyingthe candidate pool to encourage more youngprofessionals from historicallyunderrepresented groups in the US and Indiato serve. Our strategy is simple:

1. Select a diverse cohort of youngprofessionals and local partnerorganisations in a multi-stagecompetitive process;

2. Match them with one another whileconsidering the organisational need,support structure, and alignment withFellows’ skill sets and interests;

3. Support and train fellows and hostorganisations to build cross-culturalpartnerships and to foster mutuallearning through immersive, hands-onproject work, a skills-buildingcurriculum, and mentorship;

4. Identify and record best practices anddisseminate them through publicationsand events open to the general public.

Through this method, we have leveragedthe power of citizen service for social impactand innovation.

The Long-Term Impact of US-India Civil Society Ties onDevelopment: Stories ofInnovation

The impact of the programme farsurpasses the 10-month projects that AIFClinton Fellows work on during their serviceyear. In a survey conducted in 2017, wefound out that nearly 75 percent of AIFAlumni have continued in a career ofservice.36 Specifically, nearly 40 percent ofrespondents work in development whileanother 36 percent collectively work inallied professions, e.g. having started theirown non-profits, working in public service,

and continuing to volunteer withcommunities.37 More than half (54 percent)of Alumni maintain active contacts in theUS or India from the Fellowship.38 Alumnihave made an impact across sectors anddisciplines. The largest number of Alumniwork in education, followed by healthservices, livelihoods (economicempowerment), and social and legalservices. Others work in government, artsand culture, human rights, environmentalconservation, gender studies, and disasterrelief.39

Like Gottlieb, who was mentioned at thebeginning of this article, there are manyother Alumni who have become influentialchange-makers driving innovation. AjaitaShah served as an AIF Fellow with UnitusUjjivan Financial Services on amicrofinance project in the early years ofthe programme, in 2006-07. Her experiencesfueled her to start her own social enterprisecalled Frontier Markets, which is a ruralmarketing, sales, and service distributioncompany providing access to affordable andquality consumer durables to low-incomehouseholds while also focusing on productsin clean energy, agriculture, health, andwater sanitation.40 In 2017, Shah was namedthe grand champion of the Global Innovationthrough Science and Technologycompetition at the Global EntrepreneurshipSummit.41 She won the competition amonghundreds of peers from 65 countries.42 Sinceits inception in 2011, Frontier Markets hasbuilt a network of over 5,000 rural womenentrepreneurs, revolutionising the landscapeof renewable energy.43

Dianne Coffey in 2008-09 served as anAIF Fellow with the Yusuf Meherally Centrein Kutch, Gujarat. Working with survivorsof the 2001 earthquake, Coffey’s projectfocused on health care, education,empowering women and indigenouscommunities, and promoting income-generating activities as part of the centre’srelief efforts. It provided her with theopportunity to learn about the


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intersectionality of these challenges andhow disaster relief requires a multi-sectorapproach. Her work as a Fellow informedher later Ph.D. dissertation at PrincetonUniversity. She published Little Women:Essays on Maternal Nutrition, SocialHierarchy, and Health in India.44 In 2013,she founded the Research Institute forCompassionate Economics (RICE) in Goato advance this research further. UnderCoffey’s leadership and with a 1.3 milliondollar grant from the Bill and MelindaGates Foundation,45 the institute conductedlarge-scale sanitation research in India,which culminated in an award-winning

book called Where India Goes: AbandonedToilets, Stunted Development and the Costsof Caste, published in 2017.46 Shedding lighton the paradox of open defecation in India,the book has been praised by critics asessential reading for policymakers.47

Gaurang Raval in 2012-13 served as anAIF Fellow with Utthan, a youth organisationworking with indigenous communities inrural Gujarat. His experience as an AIFFellow inspired him to restructure theSauhard youth fellowship programme thathe had founded shortly before becoming aFellow, to include best practices from theAIF Clinton Fellowship in terms ofprogramme design and impact.48 He scaledup operations to expose young people toservice and grassroots community workwhile they attend college. Sauhard has builta movement transforming young people intoactive citizens, building a nation where theycan achieve their aspirations.49 Through acreative skills-building curriculum andspaces to discuss young people’s roles andresponsibilities in India’s democracy anddevelopment, Sauhard involves youth insolving social and political issues.50 In 2017,Raval received the Ashoka Fellowship forhis work with Sauhard.51

Like Raval, Gayatri Agnew served in2012-13 as an AIF Fellow with the NationalCouncil on Skill Development inMaharashtra. This exposed her to theopportunity and challenges of skilling inIndia and its impact on local economies.After returning from India to her home inthe US, she became a leader in corporatephilanthropy and workforce development.In 2013, she joined the WadhwaniFoundation to invest in innovations invocational education in the US. A year later,she began her tenure with Walmart inBentonville, Arkansas, to provide strategyand oversee grant-making in economic andglobal workforce development, veteranreintegration, diversity, and inclusion.52 Shehas been a champion of fostering economicdevelopment through skills-building and

The AIF ClintonFellowship is a unique

template forharnessing the

poCwer of people-to-people ties through

leadershipdevelopment and

capacity building tostrengthen US-India

innovation

”

“


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workforce education.53 She also becameinvolved in public service. In 2018, she ranfor the office of State House Candidate inArkansas District 93.54 If she had beenelected, Agnew would have been the firstwoman to hold this seat as well as the firstAsian American woman to serve in theArkansas State Legislature.

The AIF Clinton Fellowship supports aninnovation route to development byinvesting in emerging leaders at a crucialpoint in their lives. What they experienceand learn during the AIF Clinton Fellowshipfundamentally shapes the path for theirfuture development, and their role in civilsociety as informal US-India ambassadorsdedicated to sustainable development. Thisis a unique template for harnessing thepower of people-to-people ties throughleadership development and the capacity todrive US-India innovation. People-to-peopleties matter, which is why we need to investmore in them. Over our 18-year history,these are the lessons we have learned fromrunning a social impact fellowship:1. Foster innovation through on-the-ground

service: Solving our global challengestoday requires concerted action. Itrequires not only pooling togetherdiverse talent from across disciplines butmore importantly, it requires innovatorswho understand cultural nuances and cannavigate localisations when designingsolutions. The latter is not something thatcan be studied but has to be acquiredthrough field experience on the ground.

2. Invest in young people under 35: It isimportant to invest in emerging leadersat a formative time in their professionalcareers, i.e. in their 20s and 30s. At thisstage, they have enough knowledge andexperience to add value to initiativeswhile also having the flexibility tocourse-change their careers to advanceUS-India relations further.

3. Be intentional in designing learning andreflection: We’ve found that a 10-month-long engagement provides a meaningfulplatform to foster mutual learning, addvalue to local organisations, and buildlasting ties. However, reflection has tobe facilitated at crucial points of theprogramme to foster true learning. Wehave designed week-long reflection andskill-building seminars at the beginning,middle, and end of the programmewhich, together with mentorship andcoaching, has amplified learning of bothFellows and our partner organisations.

4. Leverage diversity in every sense: Wehave found that a cohort representing thediverse talent from both countries hasnot only enriched the programme andfostered meaningful long-term US-Indiacollaboration, but also created moreinnovative micro-solutions for ourpartner organisations on the ground.

5. Seek out grassroots implementationorganisations: Partnering with a varietyof institutions in our history, we havefound that local implementationorganisations that are at the verge ofscalability derive the highest value fromhosting a Fellow, so placing Fellows withsuch organisations results in the mosttransformative learning opportunities forboth sides. Finding partners in thistransitional phase is not always easy, butworth it.

6. Invest in long-term cross-culturalcollaboration: Investing in individualscan feel like a risk because each personis unique and the desired outcome is notalways guaranteed. However, we haveseen investment in our Fellows go wellbeyond the 10-month projects, positivelyaffecting partner organisations. Theimpact of such investment long outlivesthe programme duration.


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Endnotes1 Ayres, Alyssa. Our Time Has Come: How India Is Making Its Place in the World. New York: Oxford University Press, 2018. Page 7.

2 United Nations Department of Economic and Social Affairs. World Population Prospects 2019: Highlights. New York: UnitedNations, 2019. Page 12.

3 McRae, Hamish. “India Is Set to Take the UK’s Place as the World’s Fifth Largest Economy: But Is It Really All down to Modi?” TheIndependent, 23 Apr. 2019. https://www.independent.co.uk/voices/india-elections-modi-economy-growth-uk-a8882581.html.

4 Looney, Dennis, and Natalia Lusin. “Enrollments in Languages Other than English in United States Institutions of Higher Education,Summer 2016 and Fall 2016: Final Report.” Modern Language Association, June 2019. Page 32. https://www.mla.org/content/download/83540/2197676/2016-Enrollments-Short-Report.pdf.

5 McCarthy, Niall. “The World’s Most Spoken Languages.” Statista, 12 Feb. 2018. https://www.statista.com/chart/12868/the-worlds-most-spoken-languages.

6 Supra Note 1. Page 237.

7 Ibid

8 Supra Note 1. Pages 24, 51-70.

9 Supra Note 1.

10 Ibid Page 236-37; And: Tharoor, Shashi. “There’s One Country in the World Where the Newspaper Industry Is Still Thriving.” WorldEconomic Forum, 24 May 2017. https://www.weforum.org/agenda/2017/05/despite-the-decline-of-printed-papers-theres-one-place-that-is-bucking-the-trend.

11 Institute for International Education. “Top Ten Origin International Students, 2018.” Open Doors Report 2018. Fact Sheets andInfographics. https://www.iie.org/Research-and-Insights/Open-Doors/Fact-Sheets-and-Infographics/Infographics/International-Student-Data.

12 Ibid

13 Ibid

14 Supra Note 6 Page 213.

15 Shah, Rajiv J. “What the U.S. Can Learn from India on Climate Change and Energy Access.” Rockefeller Foundation, 27 June 2017.https://www.rockefellerfoundation.org/blog/u-s-can-learn-india-climate-change-energy-access; and: Arya, Divya. “The Indian WomenLighting the Way for Change.” BBC News, 22 June 2018. https://www.bbc.com/news/business-43837484.

16 Chow, Patricia, and Kimberly Cho. Expanding U.S. Study Abroad to India: A Guide for Institutions. IIE Study Abroad White PaperSeries 8. Institute of International Education, July 2011. Page 4, 19-20. file:///C:/Users/Katja/Downloads/Expanding-Study-Abroad-India-final-version.pdf.

17 Sweeney, Karyn. “Inclusive Excellence and Underrepresentation of Students of Color in Study Abroad.” Frontiers: TheInterdisciplinary Journal of Study Abroad, vol. 23 (Fall 2013). https://files.eric.ed.gov/fulltext/EJ1062148.pdf.

18 O’Rear, Isaiah, Richard L. Sutton, and Donald L. Rubin. “The Effect of Study Abroad on College Completion in a State UniversitySystem.” University of Georgia, 1 Apr. 2011. https://glossari.uga.edu/wp-content/uploads/downloads/2012/01/GLOSSARI-Grad-Rate-Logistic-Regressions-040111.pdf; And: Xu, Min et al. “The Impact of Study Abroad on Academic Success: An Analysis of First-TimeStudents Entering Old Dominion University, Virginia, 2000-2004.” Frontiers: The Interdisciplinary Journal of Study Abroad, vol. 23(Fall 2013). https://files.eric.ed.gov/fulltext/EJ1061987.pdf.

19 NAFSA. “Independent Research Measuring the Impact of Study Abroad.” https://www.nafsa.org/policy-and-advocacy/policy-resources/independent-research-measuring-impact-study-abroad.

20 Supra Note 6. Pages 213, 239.

21 IIE Generation Study Abroad Initiative.Institute for International Education, 2019. https://www.iie.org/programs/generation-study-abroad.

22 United States Department of State, Bureau of Educational and Cultural Affairs. “Fulbright Alumni.” https://eca.state.gov/fulbright/fulbright-alumni.

23 American India Foundation: Long Distance Philanthropy Brings Donors Closer to Home. Synergos, 2002. https://www.synergos.org/news-and-insights/2002/american-india-foundation-long-distance-philanthropy-brings-donors-closer.

24 Kashyap, Vijayalakshmi. American India Foundation. 3 July 2002. https://indiacurrents.com/american-india-foundation.

25 Clinton: Young Generation Has Potential to Change Lives. Rediff News, 12 May 2009. http://news.rediff.com/slide-show/2009/may/12/slide-show-4-clinton-at-aif-gala.htm.

26 Joshi, Namrata. “India Shines at Oscars, ‘Period. End of Sentence’ Wins Documentary Short Subject.” The Hindu, 25 Feb. 2019. https://www.thehindu.com/entertainment/movies/india-shines-at-oscars-period-end-of-sentence-wins-documentary-short-subject/article26361692.ece.


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27 AIF New York Spring Awards Gala Showcases William J. Clinton Fellowship for Service in India. American India Foundation, 14 May2012. https://aif.org/american-india-foundation-showcases-clinton-fellowship-at-annual-new-york-gala.

28 Nair, Vandana Nadig. “Lessons in Leadership Building.” India Development Review, 13 Feb. 2018. https://idronline.org/lessons-leadership-building; And: Suarez, Cyndi. “The Nonprofit Racial Leadership Gap: Flipping the Lens.” The Nonprofit Quarterly, 8 June2017. https://nonprofitquarterly.org/nonprofit-racial-leadership-gap-flipping-lens.

29 Etheredge II, Tod. Schooling to a New Life. American India Foundation, 11 May 2018. https://aif.org/schooling-to-a-new-life.

30 Nellis, Ashley. The Color of Justice: Racial and Ethnic Disparity in State Prisons. The Sentencing Project, 14 June 2016. https://www.sentencingproject.org/publications/color-of-justice-racial-and-ethnic-disparity-in-state-prisons; And: Ghandnoosh, Nazgol. BlackLives Matter: Eliminating Racial Inequity in the Criminal Justice System. The Sentencing Project, 3 Feb. 2015. https://www.sentencingproject.org/publications/black-lives-matter-eliminating-racial-inequity-in-the-criminal-justice-system; And: Gramlich,John. The Gap between the Number of Blacks and Whites in Prison is Shrinking. Pew Research Center, 30 Apr. 2019. https://www.pewresearch.org/fact-tank/2019/04/30/shrinking-gap-between-number-of-blacks-and-whites-in-prison.

31 Khan, Minahil. What Growing Up in My Parents’ Restaurant Taught Me about Access to Childcare. Brown Girl Magazine, 1 Sept.2018. https://www.browngirlmagazine.com/2018/09/what-growing-up-in-my-parents-restaurant-taught-me-about-access-to-childcare.

32 American India Foundation. Janan Dave: AIF Clinton Fellow 2016-17. YouTube, 3 Aug. 2017. https://www.youtube.com/watch?v=NWSIO2R_E_g.

33 Charry, Priya. Visual Art Instruction for the Visually Impaired. American India Foundation, 23 May 2018. https://aif.org/visual-art-instruction-for-the-visually-impaired.

34 Anand, Prashant. “Development Debates, Disaster and Assam: Chapter VI – Grassroots.” American India Foundation, 18 May 2018.https://aif.org/development-debates-disaster-and-assam-chapter-vi-grassroots.

35 About Us. Samanta Foundation, 2019. https://www.samanta.org.in/who-we-are.

36 Alumni Impact Survey for Expansion. American India Foundation, March 2017. Page 2.

37 Ibid. Page 3.

38 Ibid.

39 Ibid. Pages 2-3.

40 The Story. Frontier Markets, 2019. https://frontiermkts.com/about.

41 P.S., Lakshmi. Ajaita Shah from India Named Champion at GIST Catalyst Pitch Competition at Global Entrepreneurship Summit.American Bazaar, 1 Dec. 2017. https://www.americanbazaaronline.com/2017/12/01/ajaita-shah-india-named-champion-gist-catalyst-pitch-competition-global-entrepreneurship-summit.

42 Supra Note 41

43 Supra Note 40

44 Coffey, Dianne. Little Women: Essays on Maternal Nutrition, Social Hierarchy, and Health in India. Princeton: Princeton University,2015. https://dataspace.princeton.edu/jspui/handle/88435/dsp01m613n089v.

45 Mission. Rice Institute, 2019. https://riceinstitute.org/about/mission.

46 Sharma, Sudhirendar. Review:Where India Goes by Diane Coffey and Dean Spears. Hindustan Times, 10 Nov. 2017. https://www.hindustantimes.com/books/review-where-india-goes-by-diane-coffey-and-dean-spears/story-hmPNNRSt43IAGB5SqOYpnL.html.

47 Nair, Govindan. “’Where India Goes’ Gives a First-Hand Analysis of India’s Poor Early-Life Health and Stunting.” The Wire, 17 Sept.2017. https://thewire.in/books/where-india-goes-diane-coffey-dean-spears.

48 Kurz, Katja. “Impact Fellowships: The Secret Lies in the Structure.” American India Foundation, 6 Feb. 2018. https://aif.org/impact-fellowships-the-secret-lies-in-the-structure.

49 Gaurang Raval. Ashoka, 2017. https://www.ashoka.org/en-AT/fellow/gaurang-raval.

50 Sauhard Youth Fellowship. Sauhard.org, 2019. https://sauhard.org/sauhard-youth-fellowship.

51 Supra Note 49.

52 Gayatri Agnew. Higher Learning Advocates, 2019. https://higherlearningadvocates.org/team/gayatri-agnew.

53 Varoquiers, Carrie. Workday Podcast: Opening Doors to Opportunity at Walmart. Workday.com, Oct 2, 2019. https://blogs.workday.com/workday-podcast-opening-doors-to-opportunity-at-walmart.

54 Sohrabji, Sunita. Gayatri Agnew Aims for Arkansas State House Seat on Platform of Expanding Economic Opportunity for WorkingClass. India-West, 1 Oct. 2018. https://www.indiawest.com/news/global_indian/gayatri-agnew-aims-for-arkansas-state-house-seat-on-

platform/article_09db1bf2-c5b2-11e8-9a35-87827a03b86d.html.


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