Sameer Kochhar: What to your mind can Digital India do?
R Chandrashekar: Poor quality and accessibility to education, poor quality of medical care particularly in rural areas, poor skills, low productivity and high wastages in agriculture are few of our challenges. Since a vast majority of people still live in rural areas, technology can solve the problem of access. The growth of disruptive technologyes—mobile, cloud, social media—have all lowered the cost of technology and barriers in terms of skills that you need. It has made it possible for people to innovate locally with a potential to create job opportunities. The combination of disruptive technologies and the wave of innovation which is taking place, can actually make India the epicentre for solutions, which can make a difference to the other 6 billion people in the world.
SK: Way back in 2006, there was a talk of mobile companies getting into banking, delivering health services, education and so on. Aren’t we overdoing this innovation bit and losing focus on implementation?
RC: Agreed, what you need is implementation and the regulatory framework. Both technically and commercially it is possible. Actual innovation today lies in reducing the cost. Both regulator and innovator need to come together on this. I am sure, there is no barrier to this.
SK: But the government is busy setting up new genre of regulators and service providers rolled into one, e.g., NPCI?
RC: The point therefore is that regulation has to serve a certain purpose. The regulation controlling inflation or money supply in the market; unless this is made the explicit goal of regulation, this is not going to happen. There are always vested interests, that exist even outside the government. For example, if you manage to create a model to enable transaction to happen say at ₹10, inclusive of all costs, it will be hugely disruptive for the entire banking system. The challenge for a regulator in realistic sense is to calibrate the level of disruption so that the exisitng infrastructure does not collapse. With these technologies, it is possible to set up a bank which serves half a billion people yet have no branches. You can do all the transactions by having payment mechanism which is supported by infrastructure or people who are doing cash in and cash out business.
SK: This is about financial sector. The minute you say helath, they say we don’t want these guys on our turf. Same with agriculture and so on.
RC: Governance structure represents the sum total of individual opinions and interests that exist in the country. So, it is not some Delphi or Oracle, which can overcome the wisdom of all people and say I know what’s good for you. Proponents of disruptive technologies will have grand ideas but may be as unaware of ground realities in that sector as the people in those sectors are of the technological developments. Now, there are two sets of people—bankers and technologists—who never had to deal with each other in the past. The disruptive technologies are making it possible for people cutting across these different areas actually to work together to get optimal results.
SK: SKOCH had made a disruptive recommendation way back in 2006 that why not use bank accounts for DBT, within which CSCs will have a role. But this has taken nearly a decade…
RC: The drastic changes do not happen overnight. Overcoming various factors takes time. I, for one, never believed IT people when they said we can solve all healthcare problems. They can help but can not solve. Key is to get people who have knowledge, set the goals of transiting to digital mode of functioning. This is how we move towards Digital India—digital banking, digital healthcare, digital education and so on. But technology alone can not do it. It is here that knowledge of educationists, healthcare providers comes in. I would hesitate to say that somewhere, regualtion itself has become a problem. Even in regulation, there are silos. You have telecom regulator and banking regualtor. Who will regulate the combination of the two? Even the government has limited ability because the independence of regulators has to be maintained. These are barriers to the chain and a big challenge for Digital India. It is not about technology alone.
It can well be argued that open source will also need to prove itself in the market viz-a-viz other products for it to establish a business case for itself. Government shoud never make technology choices. It does not have the capability to do so.
SK: So, what is NPCI – a clearing house, service provider or a regulator?
RC: It is a service provider set up by the regulator. And that’s where the problem lies. It creates monopolies.
Digital India is an important component of Make in India. But you have a completely inverted duty structure that discourages manufacturing in India.
In the case of manufacturing, the first question is, you are in a completely globalised world. If anything has to be manufactured in India, then it has to be globally competitive. And both in terms of cost and quality, it has to conform to the global standards. You also have to figure out where are you competitive or can become one.
SK: Now there is a problem if finished goods are attracting lower duties compared to the components. Does it mean, do not manufacture PCs in India?
RC: It is not as if this classification into raw materials, inputs, intermediaries, finished goods is distinct in all the cases. Somewhere it is intermediary, at some other, the finished good and so on. When you levy duties, it is not related to the end use of a particular component, it is on the component itself. This is where difficulty lies. In cases where the government and industry has sat down together, aligning duty policy and manufacturing to a great extent, such problems have mitigated. A simple thing like imposition of 5 per cent duty on set top boxes has resulted in manufacturing of set top boxes in India. The technology winners should not be decided by the government but the market forces. Government should enable healthy competiton.
SK: There are distortions in the level playing field that create monopolies. So now how do you tackle that?
RC: In a market economy, the fundamental role of government and regulation is to ensure competition. And therefore, in a case like this, I think there is a very strong argument for the adoption of open standards. But, as far as open source is concerned, that’s a slightly different argument and it can well be argued that open source will also need to prove itself in the market viz-a-viz other products for it to establish a business case for itself. Government shoud never make technology choices. It does not have the capability to do so.
SK: In a situation when governemnt owes industry thousands of crores, no one is bidding for government projects. How to improve the procurement process?
RC: We may have some problem in procuring the technology equipment or components but we have managed it. But when it comes to technology services the systems are very sub-optimal. Because when somebody is bidding for the technology services, he is promising you something which neither of you has seen. The challenge in having a proper procurement system for technical services is just one aspect of it. Quite often, discretion creeps in even at that level which prevents competition. Further, the inability to pay for the projects that have been completed creates a problem because in a technology service project, you can always find something which has not been done in the prescribed manner as mentioned in the project. No matter, even if this deviation is less than one per cent. Ideally, holding back only the undelivered percentage should happen, but unfortunately during the last decade, the system has lost the abilty to take such calculated decisions—because nobody during this while was willing to take the call. To top it, the system of vigilance has been built up because of atmosphere of distrust and mistrust.
SK: What are your recommendations?
RC: One, procurement challenge has to be addressed. Two, Digital India is a movement and not a project. So need is to build leadership in specific areas. Three, Digital India is not digital government. The government needs to look at regulation and remove the hurdles to realise the potential of the industry. Fourth, Digital India will rest on infrastructure available across the length and breadth of the country. This needs to be created at an affordable cost. The government has to step in those areas where the infrastructure does not have a business case for itself, especially in remote areas. Infrastructure is government’s forte, but it should focus on trunk infrastructure without the objective of providing end-services. Five, the inverted duty structures have to be straigtened to make electronics manufacturing a contributor to Make in India. Last, tap the innovation ecosystem, nurture and grow it. Also ensure that in procurement of services, people, who come up with these innovations, find an opportunity.