It was the 31st of December 1999. A new century was dawning with hopes and ambitions, after all the 20th century had been a huge success. But the general mood didn’t agree to this. People were a little scared because of a potential catastrophe that could manifest out of a small overlooked computer bug which made them incapable of handling the year “2000”. Due to memory constraints, the computers had represented the year by its last 2 digits, which worked only until 1999(99). By this time all the public utilities, banks, companies, factories, and governments were run by computers. And the fear was that the simultaneous breakdown of everything could push the world into dark ages. But amidst all this fear and uncertainty, little known tech companies from India offered to solve this “Y2K” bug (year 2k). This was the start of many billion-dollar IT industry in our country and in just 2 decades it’s one of the largest earning sectors in our economy.
We are almost into another one of those “times” that would define our world in days to come. The point of telling you about Y2K bug was, we Indians might be at the sweet spot once again. What we need are few entities taking the lead and an ecosystem that could provide leverage of sorts to magnify those actions. Archimedes had a phrase for this, “give me a lever long enough and a place to stand and I shall move the world”. Who should take the responsibility of bringing about a positive movement? And what would serve as the lever to magnify those actions to bring about a recognizable change in as large an economy as ours? Well, that’s what we will think over this time.
Opportunity disguised as Crisis
COVID-19 has proved that the world is way more interconnected then we thought. It hardly took a month for a small virus to spread from one city to almost every other country. Wuhan was one of the most industrially active cities with strong supply chain links to the world. And with it being incomplete lockdown, a major chunk of the world had to face a shortage of raw materials. For instance, with the entire COVID pandemic going on, the demand for drugs and medicines was at an all-time high. Manufacturing these drugs (India is a major manufacturer) requires APIs(Active Pharmaceutical ingredients) of which Wuhan was one of the largest producers. Clearly, lack of such important raw material during the time of emergency could prove to be quite literally, fatal. This disease has brought into attention this extreme reliance on China that many companies and countries have. Businesses hate a single point of failure and try to distribute their risk to avoid it. Consider tech companies, they spend enormously on backup data centers on multiple continents to ensure that their “business” keeps running even if one of the continents gets destroyed. China has clearly become a single point of failure for a lot of these businesses. The world could seriously use a country with the established manufacturing industry, availability of cheap labor, and resources to shift part of its trade to. India is well-positioned with an added advantage of a huge population that could become a consumer for the manufactured products.
The Virus has made us realize the fragility of our existence and our ignorance about science. We should finally see some seriousness on the parts of governments and industries towards science and the warnings it has been issuing about our unsustainable lifestyle. Governments and private companies will be pouring tonnes of money in the field of medical sciences. Industries and companies would realize the importance of automation and would require fewer and fewer humans to manage them. Most of the monotonous and repetitive jobs will be taken over by "intelligent agents" and only jobs requiring creativity and decision making will be left for us. All these technological advancements would require computer programmers who can automate tasks, build working robots, and basically run our world. India already has a large pool of extremely talented folks whose programming prowess is acknowledged all over. They are supported by an equally mature IT and technology industry that has carved out a name for itself on the global stage.
Leverage
Companies and Industries are no doubt well positioned but our ambition of making India an economic superpower is a herculean task for them. In terms of Archimedes analogy, we need a lever of some sort to magnify their efforts. This is where we millennials have to take a baton and provide them a means to rely on. We have 426 million millennials out here, by far the largest working population in any country with every third person being a potential worker. Our individual selfish actions to create more wealth are actually very good for economic growth. And this is not me saying, it is the father of modern economics, Adam Smith himself. His proposed theory of the invisible hand states that every individual’s selfish actions would actually lead to the collective good. Basically, you need to get wealthy for the nation to become one. And you need to create wealth in a way that creates value for businesses and industries.
What would be the best way to create wealth and simultaneously create value for the country? Analyzing the greatest economy in the world could probably give us answers. The US has established its dominion by standing on the top of some really powerful industries. But all of this dynamism and growth was possible because companies could get loans easily when they needed it. These businesses could take risks because they knew they could always raise money if they fell into difficult times. And why the hell was money so easily available for the US companies? Well, a simple statistic would answer this. Nearly 55% of Americans invest in stock markets in forms of mutual funds, 401K savings, and holding individual stocks. Compared to this, less than 3% of the Indian population have their money invested in the markets. Reinvesting the earned money back into the economy has been a major factor in driving the growth in all major current and historical economies. We still are at a very nascent stage when it comes to investing. Our companies do not have the luxury of depending on markets for money because we don’t invest enough in our markets. Our money does not create value for our country and drives growth as their’s does.
Given the times we are living in, there is another reason why its very important for businesses in India to be able to raise money easily and subsequently, why its important for us to put money in the markets. This is related to the Chinese threat that we are facing. What worries me about China is not the size of its economy but its ability to weaponize its currency by manipulating the exchange rate. Although doing this has its own set of problems but there’s nothing stopping the Chinese from deploying this. But Before that, we first need to know how exchange rates of currencies affect the exports of a country.
As a child, it used to always bother me that our currency was weak and one needed 50 rupees to make a dollar. It was only later I realized that this was something good for India and the government deliberated wanted rupee to be less valuable. You see, this is helpful for our exporters. Exporters sell their stuff to the outside world in dollars and then convert these dollars they receive into rupees. So if one could get more rupees for the same amount of dollars, then it would be helpful. Now, China has been selling its stuff to the world for countless years and as a result of this, it has accumulated a significant quantity of US dollars in its banks. Ideally, the exchange rates of currencies are governed by the free market and the health of the economy. But China uses these excess dollars that it holds to artificially control its exchange rate. So if it wants the Renminbi to become more valuable, it would flood the market with a lot of US dollars. This would devalue the dollars because of excess supply and renminbi would become more valuable. The point of all this is if anytime china recognizes that its exporters are facing the brunt of boycotts (maybe because of an extreme sense of nationalism of us Indians) it could simply devalue its currency. This would increase profits for Chinese exporters and subsequently they could flood our economy with even cheaper Chinese products. At one point, it would be just impossible for Indian companies to compete with them. This is the reason why boycotting Chinese products is just one side of the story. The only way to sustainably reduce our over-dependence on china is to help our own industries. And the best way to help our local industries in to ensure that they can borrow money easily. And the best way to do this is….well you already know that. China has been known to deploy this measure time and again with most recent one during the US-China trade war. Here is how much the yuan depreciated during this period.
I am not deliberately trying to sound optimistic in the face of crisis, we seriously have a very good opportunity here. One only needs a history book to convince you otherwise. Crisis shake things up, they break the existing social norms and they make way for the new. They clear up our vision so that only the things that truly matter remains in focus. Purely historically speaking, crises were a necessity for most of the technological advancements that we made. World WarII led to the humans harnessing the power of the atom, the cold war made landing on the moon possible and the SmallPox pandemic led to the discovery of the first vaccine. Longer spans of comfortable times tend to make us weak. Countless powerful empires (Romans, Mughals to name a few) fell because people became too comfortable during the good times. We need these occasional crises to jolt us back into reality. Change is inevitable, a rather simple statement but it took Buddha 6 years to truly understand this. By gaining wisdom on how the world works, we all have the power to direct the change and reduce the suffering. Buddha’s life is a fascinating one, from an age that made history. His need to find answers to the human condition in the here and now is something that we all share. Arguably Buddha’s greatest gift is deceptively simple, that its compassion, empathy, and knowing who we truly are that makes both us and the world better.
Nikhil Mudholkar
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