Thursday, July 7, 2016

Make By India

Make in India needs policy support for access to markets and much else.

Shyam Ponappa   |   July 7, 2016

It is a truism that Make in India requires the implementation of supportive policies for Indian manufacturers, especially when it comes to leading edge equipment. This raises the issue of what exactly our governments are doing for us, or to us, in the name of progress. It is “governments” in the plural, because the problems date from way back before the United Progressive Alliance-II, and carry through to the present. No doubt some of it arises from the genuine complexity of figuring out all the detailed steps in many domains, which are truly omnibus in character.

These are aspects beginning with the primary objectives and organisation in the context of public policy and practices, necessarily including market access, and extend to the formulation of primary and secondary laws that align with existing legal and customary requirements, followed by detailed regulations and procedures, economic and financial linkages, requisite institutional and process changes, and so on. Yet, all these have to be thought through and articulated, and ultimately made to happen, for robust development. Particularly in strategic sectors, policy support is essential in areas such as facilitating access to local markets for scale, to equity and debt finance, good logistics, and effective infrastructure. 

How does a domestic start-up in high-technology manufacturing break into the charmed circle of contract awards? The answer is that it doesn’t, unless it’s favoured by a government with foresight (for details of the predicament, see “Domestic High-Tech Manufacturing Needs Access to Markets”, Business Standard, August 1, 20131). Otherwise, Indian manufacturing companies with promising products have to actually succeed in markets abroad before they can compete for contracts in India.

Now consider the status of the long delayed and languishing Digital India initiative. After the radical changes introduced by the National Democratic Alliance-I and the tremendous growth of mobile telephony with limited broadband thereafter, little has changed in the policy space to bring about accelerated growth in broadband, especially not in rural India.

There is a known record of Indian manufacturing companies having to deal with the government’s non-adherence to its own policies on tenders. But that’s a separate discussion. The following case exemplifies another problem. There is a start-up manufacturing venture that has designed and built some really innovative wireless equipment from scratch. Its products are of the sort that are of critical importance in extending broadband communications access for TV, data and voice, especially in rural and semi-urban areas. Some of these products compete favourably with international products in early-stage trials that are under way. For such products to be even tested before deployment, however, new enabling policies have to be formulated, together with the associated rules and procedures — an aspect not handled well historically in India.

There are no major international vendors for these devices as yet, because there are no established external markets for such equipment. This is essentially because the developed world has extensive fibre and wired networks, and limited demand for such wireless products. The markets in developed countries may well open up once the devices are available in volume and prices drop, but it’s a chicken-and-egg situation. Yet, this Indian company has to rely on investors from abroad for most of its funding, and for such ventures, it’s a struggle to bring their products to the market. With supportive policies, these devices could be a force multiplier for broadband. Instead, this group of Indian entrepreneurs, who thought they were starting up a fabless chip design venture, has found out that there is no ecosystem to support such enterprises. 

That’s not all, because there are policy hurdles at every step. For instance, there are no designated frequencies available to such pioneers for testing their products. Each test has to be applied for in a slow process controlled by the Centre. While concern for spectrum allocations which could be easily misused in these troubled times is understandable, there appear to be no streamlined protocols in place for clearing applications from such high-tech manufacturing entities for testing their equipment, and the process takes an inordinate amount of time. Companies such as this should be feeding into and growing on the huge market that must be bridged in order to arrive at Digital India. Instead, our policies seem counterproductive, and on the market side, the government contends with the operators, who contend with each other unceasingly in factional wars of attrition. 

There are no promising developments regarding market structures or policies that could lead to orderly, rapid growth. These could include the permitting of unused frequencies for extending broadband access, common (unbundled) access to last-mile links, or shared network facilities. If unused spectrum were made available to operators in an orderly fashion, for last or intermediate-mile/backhaul to link up with fibre, rural users would get broadband access, operators would likely get better revenues from shared infrastructure — and the government’s revenue share would also increase.

The weight of legacy problems, together with inappropriate foreign models and unsupported local manufacturing appear to confuse analysts, academics, administrators and the legal community. Those in decision-making positions with good insight seem intimidated by the scope of the problem, which calls for complex financial restructuring together with other difficult organisational measures for change.

What’s to be done? Here’s where the government has to intervene and act cohesively with understanding and wisdom. Just as there is no way in which electricity supply can be successful without central initiative, coordination, and convergent action by stakeholders, so also broadband and communications networks cannot be provided without a problem-solving approach using collaborative solutions among this set of stakeholders and the government.

Only the Centre can provide a constructive lead on these issues, in a manner similar to what may be happening in cutting the Gordian Knot of electricity supply.2 The ministries and regulators should take the initiative to collaborate actively in pulling together all operators, suppliers and agencies to hammer out a solution that is practicable. Broadband coverage would improve, and India
could build a leadership position in last-mile access technologies.


Shyam Ponappa at gmail dot com