Using technology to achieve scale in Indian context

This August, India completes 70 years of its independence. While messy, Indian democracy has withstood the test of time and the union has only gotten stronger. 

The Indian economy however, has fared relatively quite poor when compared to many other countries in the world. In 2017 GDP per capita in India stands at $1700. That is 1/20th or 1/30th when compared with those of most advanced countries and 1/5th compared with China. That's a staggeringly low living standard for a country with 1/6th of the the world’s human capital.

India and its business haven’t quite figured out how to create wealth for its people. One key reason is that the economy remains fragmented with poor adoption of modern business practices and technology. The overly strict regulatory environment coupled with unenforceable contracts do not allow Indian companies to scale efficiently. They do, however, foster an environment where a few companies scale up through monopolies hurting competition and wealth creation.

Digital companies like flipkart and snapdeal established and are growing quickly by deploying technology to increase the reach. What they probably aren’t doing is creating scale. Creating scale is about creating a business structure and a business model that grows faster than costs by unleashing productivity. India has scale but simply digitizing business processes won’t help because digitized business processes are of little use to overcome shortcomings of poor legal frameworks and its effects on business networks and business models.

India lacks an environment that enforces contracts, fosters trust, and allows scale. There are ample medium business owners in India who could’ve been billionaires if they were operating in the same legal and regulatory environment as in the USA.

Is it possible for modern technology to leapfrog the limitations of a weak legal system?

Vertical integration would have been the answer 200 years back. Not today. The world has changed and vertical integration will only make Indian companies even less competitive.

I think technology is a good enabler to establish visibility, achieve operational excellence, foster knowledge transfer and collaboration. Technology can allow creation of a trustful mechanism that fosters collaboration to maximize self-interests of small and medium business partners. Collaboration is not foreign to Indian small businesses – particularly from the state of Maharashtra. What is probably needed is deploying technology enabled business models that foster trust, collaboration and innovation.

If there are others interested in this topic – I'd be happy to network and exchange ideas.