Can IT Deliver the Indian Miracle?

By Greg Sheridan
October 21, 2013

When the distinguished Indian diplomat Mohammad Hamid Ansari arrived in Canberra in the early 1980s to take up his post as India's high commissioner, he found awaiting him a note from his predecessor.

This relationship, the note said, has neither substance nor prospects. Now go and enjoy yourself.

It was not an auspicious beginning, but true in its time.

Ansari went on to greatness, now serving his second term as India's Vice-President.

He attended the Commonwealth Heads of Government meeting in Perth in 2011. At that time Canberra still had a policy of banning uranium exports to India, so India's Prime Minister, the redoubtable Manmohan Singh, did not attend. Nor did its President.

Ansari came instead. One of his most substantial meetings was with the then opposition leader, Tony Abbott, who assured him there would be no problems about uranium should the Coalition win the next election, as it did.

Recently, Abbott had an hour with Singh at the East Asian Summit in Brunei. They discussed nuclear co-operation, among many other things.

Before she left office, Julia Gillard reversed Labor's ban on Australian uranium going to India, though the safeguards agreement is still being worked out.

The relationship is now described as strategic by both Canberra and New Delhi, but putting life into it is a big challenge for Abbott and his Foreign Minister, Julie Bishop, who will make an early visit to India in November.

The Coalition has a better story to tell on India than Labor. Abbott spent three months there as a young man. John Howard lifted the uranium ban, only to have it re-imposed by Kevin Rudd. But still you get the sense Abbott and his team have slightly missed a trick with India.

It is likely to be among our top two or three source countries for immigrants for as far out as you can imagine. Although its economic growth rate has gone off the boil - it may be lower than 5 per cent this year - it is a huge economy and destined to be a great power in the decades ahead.

This week, the University of Melbourne's Australia India Institute hosted a visitor who demonstrates India's genius and helps to show why it is going to be a source of global economic growth and unique social innovation for many decades ahead.

Nandan Nilekani is an embodiment of how the information technology industry will continue to transform India, through and beyond this period of temporarily subdued economic growth.

In the East Asian economic growth model, the same sequence was followed by all the tiger economies - Japan, South Korea, Taiwan, Singapore, and then China. First, agriculture was reformed, either through technology or, in China's case, by allowing a free market to operate. Successful agriculture yielded a surplus. Either the government, or financial institutions or private companies were able to get hold of that surplus and invest it in lo-tech, labour-intensive manufacturing. This manufacturing was aimed at export markets and competed on the price of the labour.

This manufacturing created mass employment and a vast shift of population from the country to the cities. It produced a huge surplus that was invested in further manufacturing, which became more technologically sophisticated. This produced further rural to city population drift and thus the huge East Asian coastal conurbations.

These urban giants spawned a middle class that wanted services and the development of these service industries led to further export opportunities, though services have been a smaller part of the East Asian miracle.

India's rapid economic growth over the past two decades did not look anything like this. It was born instead in the genius of Indians for IT. As a result, the Indian growth model has its critics and its doomsayers. Services don't produce as many jobs as manufacturing does. India's manufacturing is now developing, but much more slowly than its services sector did. Can it fill the gap?

Nilekani was a critically important leader of the IT revolution. He was educated entirely in India, where he learned his skills at the Indian Institute of Technology Bombay In 1981 he co-founded Infosys. Headquartered in Bangalore, Infosys is one of the biggest software and computer and business service companies in the world, with a turnover in the tens of billions of dollars. Press reports put Nilekani's personal worth at more than $1bn.

In a long interview with me, he defends the role of Indian IT in job creation: "For every one job in IT," he says, "there are another 10 jobs that depend on them."

But really he has a much more interesting story to tell about the way IT is transforming India.


In 2009, Nilekani left Infosys to chair the Unique Identification Authority of India. This is a cabinet-level post and UIDAI has the monumental, almost mind-boggling job of giving all 1.2 billion Indians a unique identity number linked to their biometric data.

The herculean scale of this enterprise makes it not only the biggest biometric exercise undertaken on the planet but also, in Nilekani's view, "the greatest project ever in social inclusion".

Don't think this is pie-in-the-sky, dreamland stuff. Nilekani has so far given 450 million Indians unique 12-digit ID numbers linked to their fingerprints and irises.

The authority provides ID numbers for newborn babies, but in due course these have to be validated with biometric data. By a certain age, the iris is uniquely identifiable, a little later, fingerprints are unalterable. The biometric data offers an ID accuracy of more than 99.9 percent.

The social, economic and development implications are enormous, though they take a little while to sink into the mind. For a start, it means every Indian will be able to access employment payments, welfare, bank accounts and all other financial matters wherever they go.

Traditionally, most Indians lived forever in the villages of their birth. "That doesn't work any more in aspirational, mobile India," Nilekani says. His ambition is, in a constructive sense, revolutionary: "India has 600,000 villages and our ambition is that eventually no one should be more than a few hundred metres from a banking service, whether through a local shop owner, or a village self-help group or whatever."

Above all, this will empower the poor. But it will also benefit the Indian budget. "I sell it to the Left as an act of social inclusion; I sell it to the Right as an act of fiscal good housekeeping."

Consider the question of subsidies. Traditionally, India has subsidised fuel. The poor need this to keep warm and to cook their food. But the wealthy use fuel far more extravagantly than the poor do. So if you subsidise the retail price of fuel, you subsidise the rich far more than you subsidise the poor: "Our model is that you should sell everything at market price and that the person who deserves a subsidy should get it directly into their bank account."

At a stroke, this eliminates all the ghost payments, double-dipping, fake welfare recipients and almost every other aspect of what you might call retail corruption in the Indian system.

Nilekani's agency is only interested in providing authentic ID, but the uses to which this ID can be put are nearly limitless. It is no problem at all to link a bank account to a person's ID. There is no reason for a villager to be charged a fee for receiving money, especially government money.

Nilekani's project also demonstrates the power of the US-India connection. Biometric technology was developed overwhelmingly by the US military and counter-terrorism agencies. Until Nilekani came along, the planet's biggest biometric project was the FBI's database of 120 million people, which we are all measured against when we go through a US airport, to see if we match the identity of any known terrorist or criminal.

I suggest to Nilekani that this gives him a third political constituency for his reforms - neoconservatives, because the unique ID project demonstrates the social return on US military spending.

He laughs good-naturedly. He is a good-natured man, something which may be put to the test early next year. Nilekani has had two giant careers - IT entrepreneur and government service entrepreneur. There is a strong rumour that he will contest the next election as a Congress party candidate for a seat in Bangalore.

Politics doesn't often treat ex-businessmen well.

But Nilekani would enter politics not hungry for power, but hungry to solve problems.

Perhaps India's future does lie in the cloud space and cyber domains of its millions of IT geniuses.

As a nation, we should make sure we are part of that future.

Greg Sheridan is foreign editor of The Australian.

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