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From socialist rags to competitive riches

Innovations In transforming themselves, the enterprises have pioneered several innovations. • Innovations in involving communities: Ara...


In transforming themselves, the enterprises have pioneered several innovations.

Innovations in involving communities: Aravind Eye Hospital, Lijjat Papad, SEWA, Dastakar.

Innovations in modes of production: decentralised production, centralised collection and processing, modern marketing: Amul collects 60 lakh litres of milk every day from 22 lakh households spread across 10,750 villages; 40,000 women — each working out of her home — make the Lijjat papads.

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Innovations in delivery: the way the dabbawallahs of Mumbai reach two lakh tiffin carriers from homes to offices and back using just public transport and pavements; the convenience that the roadside thelawallah brings to the customer — these are the stuff they teach at business schools.

Innovations to meet our needs: Aravind Eye Hospital, Shankar Netralaya, Sulabh Shauchalya, SEWA, the Apollo chain of hospitals. Each of them is a story in itself. I had not learnt about the Akshaya Patra Foundation of Bangalore till recently. What it has created would have been hailed a miracle in any other country. The Foundation began a midday meal programme for children in government schools in July 2000. At that time it fed 1,500 children. By August 2002, the Foundation was feeding 40,000 children. It is zooming ahead to meet its target for 2005: feeding 250,000 children and making the Bangalore district ‘‘hunger-free’’. To cook for such large numbers, the Foundation has developed special stainless steel cauldrons, steam boilers, a novel exhaust system, a conveyer system, stainless steel containers to carry the food, custom-built vehicles to transport the food to 210 schools.

Innovations in affordability, to pluck the expression of Mckinsey’s Jayant Sinha. The Akshaya Patra Foundation that we just encountered feeds 40,000 children for 200 days a year at a cost of a mere $1 million, that is just Rs 4.5 crores — just 13 cents, Rs 6 per child per day. The results are what fantasies are made of. An independent study conducted by the Department of Education, Karnataka reports that 92 per cent of the teachers felt that the attention of the students in class had improved; that 94 per cent of them felt that there had been an overall improvement in the academic work of the students; 92 per cent felt that attendance had improved; in the year after the programme was launched, enrolment increased by 15 per cent.

Another study — conducted by the M S Ramaiah Medical College Hospital — in one of the rural schools that was covered by the programme reported that, whereas 40 per cent of the children had anaemia before the meals began, the proportion fell to 5 per cent after the programme; that the proportion of children with sub-optimal nutrition fell from 60 per cent to zero; before the programme began about 80 per cent of the children had skin infections, that proportion too has fallen to zero; children show significant gains in weight and height, they have developed heightened resistance to diseases…


The cost of a cataract operation in the USA, as Professor C K Prahlad points out, is $ 1,500. At the Aravind Eye Hospital — and they conduct 200,000 major eye surgeries a year — it is all of $ 12, including the cost of the lens. The poor are treated free. The paying patients pay just Rs 50 — just about a dollar — for a comprehensive consultation, and that includes two subsequent visits, at no cost at all.

The Aurolab that Dr Venkatswamy and his team have set up does frontier work in inter-ocular lenses, sutures, pharmaceuticals. Its products are exported to 100 countries. It has already captured 7 per cent of the global market in IOLs. The combination of excellence, dedication and cost — so characteristic of Indian companies — has compelled others to match them: IOLs use to be imported at $ 60 ten years ago; today, because of Aurolab, they are available for $ 3, and are of far superior quality to boot. What has accounted for such changes? What can we do to spur them further?

What kind of enterprise do we want to spur?

The first among the factors that has unleashed the changes we see around us, of course, is the death of socialist ‘‘controls and licenses’’ regime. That was the lid on creativity. When it was lifted, creativity could at last explode. But in one respect, even that lid helped. It made our industrialists experts in getting round laws and rules — an expertise that, I am sure, will help them dodge US’s new laws that seek to prohibit outsourcing!


Privation itself has helped. As have difficulties we face everyday in securing public services. Getting through the day requires innovativeness of a high order! Hence, the expertise, the jugaad technology we see in villages, in slums.

Nor is the spur of privation confined to villages and slums. We think of Dr G Venkatswamy, Chairman of the Aravind Eye Hospital, Dr Pratap Reddy, Chairman of the Apollo Hospital chain, Bindeshwari Pathak, head of Sulabh Shauchalaya, Ela Bhatt of SEWA and others of their class, we think of them as successful entrepreneurs. That of course, they are, just as much as they are benefactors of society. But part of the reason we see them as such is that we see them at the peaks they have reached. But each of them had to face the business-equivalent of deprivation.

Dr G Venkatswamy retires from government service at the age of 58 in 1976. He has a dream: he yearns to provide eye care to the masses. But he has no resources. He calls on one mill owner in the Coimbatore area after another for donations. A week’s trudging around yields Rs 2,000. He persuades his sister and brother-in-law, and two other ophthalmologists in the family to give up their practice and join him. They rent a house. As the numbers they serve multiply, they secure an acre of undeveloped land. They need to expand beyond the 30-bed facility they have set up. Bank after bank rejects their applications because they are not ‘‘credit-worthy’’. They mortgage family property to raise Rs 23 lakhs. A British doctor affiliated to the Royal Commonwealth Society for the Blind gives them another lakh. Today Dr Venkatswamy’s hospitals handle 14 lakh visits by out-patients; they perform over two lakh major eye surgeries every year. They conduct over 1,500 eye camps, examine over four lakh patients in them, and then conduct over 90,000 eye surgeries on those among the patients who need operations.

Notice the role that his sister, brother-in-law and other members of Dr Venkatswamy’s family played. This is a recurring pattern. And it speaks to one of the great strengths of our society: the close bonds in our families. These bonds support innovative, venturesome individuals. They also constitute the great safety net for all of us. Yet, many today advocate proposals that seek to transfer to the State functions that our society performs so well — proposals which, if implemented, will weaken familial bonds and load on to the State another set of functions that it will not be able to discharge.

There is a romance in the lives of such self-made men and women. A Dhirubhai Ambani filling tanks at a petrol station in Aden, going from loan officer to loan officer, himself carrying bolts of textile, for loans of a few lakhs, eventually constructs a giant, the Reliance we see today. A Mammen Mappillai who, together with his wife, begins by selling balloons, and creates MRF. Seven housewives begin Lijjat Papad with 80 borrowed Rupees — today 40,000 women out of their homes have taken its turnover to Rs 300 crores. Here is a book to be written — the struggles of such self-made women and men, what they learnt along the way, and what they eventually built. That would be ‘‘The Indian School of Business’’.


S. Gurumurthy draws attention to yet another source of strength and support — a sprawling, invisible incubator: the bonds of community. How is it that one community, the Nadars, account for so much of the retail trade in the South, he asks. How is it that the Gounders have been able to establish themselves so well in transport, in the Tirupur textiles, in Karur handloom exports and finance?

Notice the vast contribution of Naidus in building Coimbatore into an engineering centre, in particular into a centre of the textile industry. Notice how they and the Gounders have established as many as 60 engineering and other colleges within a radius of 25 kilometres in the area. The explanation lies in part in the lore and expertise that a community builds up in a profession, and the way these are transmitted in well-knit social groups. It also lies in part in the way members of the community help each other through vicissitudes. That is an important point — and there is a positive lesson embedded in it, as well as a negative one.


On the positive side, such examples teach us to locate social groups that have close bonds and make their intra-relationships a vehicle for growth. Take the Nagas as an instance. In the Northeast one frequently hears the complaint that the people of the region deposit more in the banks than the latter lend in the region. This is held up as further proof of ‘‘exploitation’’ of the region. The banks, on the other hand, say that they are not able to lend more because prospective borrowers are unable to provide the necessary collateral — as land is not privately owned. But as land is collectively owned by the tribe, why not make the tribal body of the village, say, the unit for loans? Every member of the community feels honour-bound to obey that body, he is duty-bound never to create a situation in which the word of that tribal body or head is dishonoured. Once the body or head of the tribe in the locality gives his word that the sum shall be put to such and such use, once he gives his word that it will be repaid, banks need look no further.

There is also a negative lesson. Communities that have sought to assist the creativity of their members as the Nadars and Gounders have done, that is communities that have made economic development their focus, they have prospered. Communities — the Vaniyars and Thevars, for instance — whose leaders enflamed them on grievances, whose leaders steered them solely into ‘‘politics’’ — narrow, casteist politics — those communities have fallen behind. And it is the curse of the North that it is the latter model which has been adopted by the caste-based leadership here.

To be concluded


The author is Union minister for Communication, Disinvestment and Information Technology. This article is based on his address at the 10th Anniversary of Business Line

PART I- Charge of the Indian brigade

PART III- Required: a new form of governance for a new economy

First published on: 03-04-2004 at 00:00 IST
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