The Leader and the Sign of the Times
The Sign of the Time’s Leader from October 2017, ‘Digital Shock: How the World is Being Transformed’, explored how digital technology – and the torrent of data that it is unleashing – is changing the world and transforming societies, economies and political systems. This global shift from the industrial age to the information age is accelerating exponentially and has already proven to be highly disruptive, particularly in developed economies where the levelling effect of technology is threatening standards of living and old economy jobs, exacerbating socio-economic inequality. While this is true to an extent for developing economies as well, overall, digitization and data is more of an opportunity than the threat for these nations, particularly for those emerging markets that lack a scaled industrial power base (a key incentive to resist digitization) but have masses of people who are waiting to participate in the economy. Over the past two decades, India has emerged as a market leader in providing information technology services to the world, and will likely maintain this position in the coming years. More importantly, the coming decades will also see India apply digital technology to solve various issues it is facing, potentially leapfrogging older western models with new low-cost ones that are fit for a mass population, thereby providing its 1.3 billion people with access to an increased quality of life and opportunity without needing to over-build physical infrastructure. While at this stage the domestic market may not be as large or profitable for India’s IT companies as western markets, eventually the scale and scope of opportunities in India will attract not only these companies to return home, but new entrepreneurs and global technology and data players as well to help digitize India. While the developed world struggles to transition from an industrial economy supported by digital, India has the opportunity to jump development curves directly to a digital economy supported by a modernised industrial base. This month’s Sign, the second in our Digital Shock series, examines both the opportunity and imperative for India to leverage emerging digital technologies and data science to address its challenges and transform the country.
The opening Sign of the Times for 2018, presents a list of key themes during the next 12 months that have the potential to be catalysts or triggers for changes to shape our world, our markets and our lives. With the benefit of a tumultuous year’s events to consider, this month’s Leader will again attempt to identify the key political, military economic, social and technological themes playing out in 2018 (and beyond) along with counter-pointed scenarios and a briefing on their impact on the world in the year to come. While recognizing the considerable uncertainty in the world today, 2018 looks like a year that may be forced to reconcile booming markets with the prospect of dangerous political games triggering further discord and conflict.
Silicon Valley today is home to less than 0.25% of America’s 18m businesses, yet the valley hosts one third of the net new business formation in the United States. Further, 39 of the world’s 100 largest tech companies have their headquarters there, including four of the five most valuable companies in the world by market cap. Unsurprisingly, Silicon Valley is also home to the highest concentration of millionaires and billionaires in the country. More importantly, it is the birthplace of the semiconductor, the personal computer, e-commerce, the biotech industry and countless other innovations that have changed our lives over the past two generations. The success of the area has been driven by an unprecedented concentration of resources; Silicon Valley’s dense web of education, talent, ideas, capital, and infrastructure churns out a continuous stream of innovation and new companies that create and dominate new industries. While Silicon Valley is inextricably linked to the modern technology industry it gave birth to, the idea of concentrating resources (with an alignment of purpose) has created similar hubs across a wide range of industries, the world over. What is true for tech is true for any other industry: the concentration of resources in a cluster or hub ensures efficient utilisation of these resources and creates a network-multiplier effect in terms of the quality and amount of output.
It is undeniable that Narendra Modi has reshaped both India and international perceptions of it during his three years in office as Prime Minister. Having been overwhelmingly voted into power in 2014 on the promise of economic growth, Mr Modi set out to execute a wide-ranging reform agenda focused on domestic development, securing foreign investment and playing a more proactive role in regional and international affairs. Based on macro-economic data alone, it would appear that Mr Modi’s BJP party has been on track to deliver on his promises. GDP growth has averaged 7.5% over the past three years, with growth fuelled, to a large extent by an inflow of US$175bn capital from foreign investors, making India both the world’s fastest growing economy and the largest destination for foreign direct investment. Further, the government has also taken steps across a wide swathe of areas such as infrastructure development, financial inclusion, digitisation, foreign investment and graft, in its bid to secure the country’s long-term growth potential. A previous Sign of the Times had assessed the BJP’s performance in terms of reforms at the 24 month mark following the general election. With less than two years to go until the next general election, this month’s Sign of the Times takes a closer look at India’s progress both economically and in terms of its reforms in order to assess the Modi government’s performance. More importantly, it identifies the core priorities yet to be addressed to make advances towards its medium to long term potential, thereby providing the agenda for the next stage in the journey.