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The Rediff Business Special/C K Prahalad

India is experimenting. Consumers won't accept old solutions

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India is experimenting. The government of Andhra Pradesh is a good example. Can India take the lead in creating a totally transparent and accountable government? Can India create a system that leapfrogs the USA and Europe?

The spread of high-tech in India is staggering. The number of personal computers, Internet connections and phones sold may not be much by world standards. But, the impact of these tools in India cannot be measured by ownership but by access.

When Dinesh Beedi, a co-operative in Kerala for making and selling beedis (rolled dry tobacco leaves used as cigarettes), starts adding PCs and software to their product range, we need to sit back and ask: "What does this mean for India?"

The role of teenagers and kids will be critical in understanding the pressures on the market. Do they demand innovation? Can they shape the fashion business around the world? A 100 million young adults can have an impact.

Do the young of this country have a different level of confidence in themselves compared to their parents -- the post-Independence generation?

I could multiply the number of weak signals that suggest that massive change is taking place. Taken one at a time, these signals do not add up to much. But taken together, they present a picture of a country in dramatic transformation

While the weak signals represent a collage and no particular order, the basic direction represented by these changes is clear. At a minimum, it has four elements.

1. The Indian market place is in the process of separating out winners and losers among firms as seen by the reaction of investors (capital market), consumers (product market) and students (talent market).

2. India is becoming a consumer society. Consumers are in charge. They have choice. They are willing to exercise this choice. They are increasingly demanding better standards and price-performance levels from industry.

3. New consumers and new markets are emerging. Rural markets, Tier #2 and #3 will drive the economy. These consumers are the engines of transformation of Indian economy. New retail formats, products and services will emerge. There is an emerging democratisation of the Indian economy.

4. India's appetite for new products and services for the masses cannot be satiated without recourse to high technology solutions. Simultaneously, we need to be concerned about sustainability. High technology and sustainability are the new dimensions of this massive transformation. We need to develop a mentality of leapfrogging developed markets whenever the opportunity arises. Followership does not lead to leadership.

Needless to say, the path towards creating one of the world's largest consumer markets is going to be neither straight nor clear. There will be a lot of mis-steps, course corrections, and localised pain. The question is whether India has the wisdom to leave the process of this economic and social transformation to a distributed set of experiments and market forces. Can economic logic be the primary driver of this change rather than social engineering through public policy?

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