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Unable to get India to sign up for BRI, China penetrates through tech

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New Delhi, April 17 : Unable to persuade India to sign on to its Belt and Road Initiative (BRI), China has entered the Indian market through venture investments in start-ups and penetrated the online ecosystem with its popular smartphones and their applications (apps).

India may have sidestepped the physical corridor, but has unwittingly signed up for the virtual corridor. China quietly has created a significant place for itself in India in the last five years – in the technology domain, according to a research by Gateway House.

“The Belt and Road Initiative carries with it Chinese products and standards, both virtual and physical. India may have sidestepped the physical corridor, but has unwittingly signed up for the virtual corridor,” the study notes.

Over the course of one year, Gateway House has conducted a deep study of Chinese investments in India as part of a larger research project on Chinese investments in India’s neighbourhood. The findings are remarkable: 18 of the 30 Indian unicorns have a Chinese investor. This means that China is embedded in Indian society, the economy, and the technology ecosystem that influences it.

As per the study, Chinese tech investors have put an estimated $4 billion into Indian start-ups. Such is their success that over the five years ending March 2020, 18 of India’s 30 unicorns are now Chinese-funded.

TikTok, the video app, has 200 million subscribers and has overtaken YouTube in India. Alibaba, Tencent and ByteDance rival the U.S. penetration of Facebook, Amazon and Google in India. Chinese smartphones like Oppo and Xiaomi lead the Indian market with an estimated 72 per cent share, leaving Samsung and Apple behind.

Giving the reasons for China’s tech depth in India, the study notes that this is because there are no major Indian venture investors for Indian start-ups. China has taken early advantage of this gap.

Alibaba’s 2015 investment in 40% of Paytm, a digital payments platform, paid off barely a year later when in November 2016, the government of India demonetised its large currency notes and simultaneously promoted a move to a cashless economy.

Paytm benefitted from Alibaba’s superior fintech experience, which it applied to India seamlessly, making it a dominant player.

Also, China provides the patient capital needed to support the Indian start-ups, which like any other, are loss-making. The trade-off for market share is worthwhile.

For China, the huge Indian market has both retail and strategic value. Therefore, companies like Alibaba and Tencent have different considerations and horizons for their investments. In contrast, Western venture money is mostly through funds like Sequoia and SoftBank.

In India, China’s tech giant companies and venture capital funds have become the primary vehicle for investments in the country – largely in tech start-ups. This is different from other emerging markets where Chinese investments are mostly in physical infrastructure. Chinese FDI into India is small at $6.2 billion, but its impact is already outsized, given the increasing penetration of tech in India China’s Whereas investments in other emerging markets countries is mostly in physical infrastructure, Chinese funding to Indian tech start-ups is making an impact disproportionate to its value, given the deepening penetration of technology across sectors in India.

TikTok, owned by ByteDance, is already one of the most popular apps in India, overtaking YouTube; Xiaomi handsets are bigger than Samsung smartphones; Huawei routers are widely used. These are investments made by nearly two dozen Chinese tech companies and funds, led by giants like Alibaba, ByteDance and Tencent which have funded 92 Indian start-ups, including unicorns such as Paytm, Byju’s, Oyo and Ola.

Unlike a port or a railway line, these are invisible assets in small sizes – rarely over $100 million – and made by the private sector, which doesn’t cause immediate alarm. All this adds up to just 1.5 per cent of the total official Chinese (including Hong Kong) FDI into India. This doesn’t cover investments made by funds based out of Singapore and elsewhere, where the ultimate owner is Chinese, so the actual investment in India will be higher.

China is most active in India in the start-up space. Gateway House has identified over 75 companies, with Chinese investors concentrated in e-commerce, fintech, media/social media, aggregation services and logistics. A majority – more than half – of India’s 30 Indian unicorns (start-ups with valuation of over $1 billion) have a Chinese investor.

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Antecedents of anti Muslim bias in media including Sudarshan TV

The Sudarshan TV’s “UPSC Jihad” is, in the words of Justice Chandrachud, a “rabid” vilification of Muslims. The channel felt encouraged to cross the red line because this particular line is considered Kosher in the current political atmosphere by mainstream channels as well as fly-by-night media operators.

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There have been many but let me cite just two reactions from the family to Justices D.Y. Chandrachud, Indu Malhotra and K.M. Joseph’s utterances restraining Sudarshan TV from telecasting its ‘UPSC Jihad’ show. A relative mailed a couplet comprehensive in its simplicity:

‘Door insaan ke sar se yeh musibat kar do

Aag dozakh ki bujha do, use jannat kar do’

(Remove this menace hovering over our heads,

Douse the leaping flames of hell; make it a paradise)

“Leaping flames of hell”: that is how a majority of Indian TV shows register with petrified Muslims. TV news is daily mortification; lynchings happen outdoors. The Supreme Court’s quest for “some mechanism” for self regulation of the media brings her hope. “Cricket will be played within a well measured boundary?” Not too much to expect.

The other reaction, from a younger relative is more cynical: if the Supreme Court had sharp instincts, it would have taken suo motu note of the outrage, before Sudarshan TV was able to telecast even one episode.

Incipient communalism was part of the Republic from the very beginning. Contentious issues on that score, however, did not come up when the electronic media consisted only of Doordarshan. DD, launched in the mid-70s, faced roadblocks too — as in the screening of Tamas, based on a novel by Bhishm Sahni, directed by Govind Nihalani. Centered on Partition, the director pulls no punches on exposing communalism on all sides. Since Hindu communalism had never been placed under the scanner with such candour in independent India, there was a furore. Screening was stopped. Only when Justices Bakhtawar Lentin and Sujata Manohar of Bombay High Court cleared the serial was it screened.

The Sudarshan TV’s “UPSC Jihad” is, in the words of Justice Chandrachud, a “rabid” vilification of Muslims. The channel felt encouraged to cross the red line because this particular line is considered Kosher in the current political atmosphere by mainstream channels as well as fly-by-night media operators.

An anti Muslim edge is a perceived requirement of Modi’s march towards Hindu Rashtra. But an anti Muslim edge in the media has antecedents which predate Modi. Four apparently disparate events stirred the cauldron of communalism. In 1990, the Soviet Union collapsed. The disappearance of a column in the international system on which India had depended, plus an unprecedented economic crisis, caused Prime Minister P.V. Narasimha Rao and Finance Minister Manmohan Singh to lurch towards Washington and swiftly embark on liberal economic policies.

With the new market economy came consumerism and the need for multiple TV channels to accommodate the burgeoning advertising. Remember, when the Babri Masjid fell in December 1992, there was only Doordarshan to televise the news. About this time, Mandal versus Kamandal, caste versus communalism spiraled out of control. It is pointless speculating whether a mushroom growth of channels went some distance in amplifying the new, energetic, communal politics. Market and identity politics is a separate study. Internal politics, however communal, would have been amenable to management. The real problem arose when globalization, spurred on by unbridled capitalism caused even Barack Obama to ask in retrospect: “Did we mishandle globalization?” I have often wondered if Ghalib’s imagery is applicable:

‘Rau mein hai rakhsh e umr kahaan dekhiye thamey,

Nay haath bag par hain, na pa hai rakab mein.”

(The steed is in full flight; I know not where it will halt;

I have lost control of the reins and, feet are not in the stirrups.)

That was globalization.

All prime ministers of India, from 1947 to the mid-90s, depended on traditional forms of mass mobilization, prior to the TV era. A more media savvy Prime Minister than Narendra Modi there has not been. He played all the strings to arrange for himself a saturation coverage of the 2014 and 2019 elections with expert ease. Crony capitalism was essential and it was easily managed.

Having brought down the Soviet Union, the US put its imprimatur on a Unipolar World Order by embarking on operation Desert Storm in February 1992. In some ways, Desert Storm bared the plans the US had for the future. The most important of these, pertinent to our narrative, was the inauguration of the Global Electronic Media which the Pentagon planned with such stealth that even an arch ally like the UK found itself flat footed. BBC’s senior correspondent, John Simpson walked around Baghdad with a lowly satellite telephone while Peter Arnett of the CNN launched the New World Information order from the terrace of Baghdad’s Al Rasheed hotel. For the first time in history, a war was brought live into our drawing rooms.

The unprecedented fire power which I saw from the 14th floor of Al Mansour hotel, remained a nightmare for months. This frightful exhibition, let it always be remembered, divided the world in perpetuity into two hostile sets of audience — the triumphant West and the defeated Muslim world, humiliated yet again. Had multiple channels been operational in India (they were not in 1991-92), would they have been cheering Western victory or Muslim defeat? It would have been bad form to pose this query then? Please note how times have changed and why the Supreme Court’s intervention is timely.

The Post 9/11 war on terror transformed itself into a crusade against Islam. Journalistic restraint became a casualty. Geraldo Rivera of Fox News flourished a revolver in front of a TV camera in October 2001 in Afghanistan. “Should I see Osama bin Laden anywhere, I shall finish him off with this,” said he, his finger on the trigger. The copycat Indian media, now in a phase of rapid expansion, picked up every inflection.

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Muslim education in India: Need for private and public sector investment

These are troubling findings that frame the continuing needs of Muslims and others in the weaker sections. What should be done to address those needs?

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Muslim education in India: Eminent columnist Swaminathan A. Aiyar called upon Wakf boards and wealthy Muslims to finance the development of “a string of world-class education institutions” that would attract foreign students and Indian Hindus as well. His article was written in response to Member of Parliament Asaduddin Owaisi’s recommendation for “government scholarships for all” to deal with the “literacy and attendance gaps” of Muslims and other communities.

The proposal was driven by his opinion that “the quality of government schools is so poor that giving more government scholarships will do little for Muslims or any other community”. And, that “Christians have long created their own educational institutions of excellence”.

There is no argument that Christians have created good educational institutions — as have Muslims and others I might add — and that government-supported schools need to be improved. But, a programme of the scope and nature that the article suggests would do nothing to address the very real problem that Owaisi has identified.

That problem is that Muslims and others in the weaker sections still lag far behind those in other religious groups in terms of their development. The development deficit occurs at points all along the educational continuum from pre-school through higher education.

The Sachar Committee Report of 2006 disclosed this “development deficit” for minorities in many areas. The report resulted in the creation of an across the board programme for the development of minorities in India.

Some progress has been made since then but much remains to be done:

  • In the 2011 census, the overall literacy rate for Muslims went up substantially to 68.5 per cent from 59.1 per cent in 2001. The rate for Muslim females was much lower at not quite 52 per cent.
  • A study released by the US India Policy Institute at the end of 2013 states that since 2006, “… the literacy level and the quantum of improvements for Muslims were modest compared to other populations.”
  • That same study showed that only 11 per cent of Muslims in India pursue higher education compared to a national average of approximately 19 per cent and that participation in the “general category of Muslims in higher education” had actually declined by 1.5 per cent for the period studied.
  • The National Sample Survey Office (NSSO)’s 75th round report cited by MP Owaisi showed that 22 per cent of Muslim girls aged 3 to 35 have never enrolled in a formal educational course.

These are troubling findings that frame the continuing needs of Muslims and others in the weaker sections. What should be done to address those needs?

In my opinion, the answer must be a comprehensive and collaborative effort financed and supported through public and private sector investment.

That effort should improve educational opportunity and quality at all levels. Educational literacy should be the starting line and higher education of some form should be the finish line.

For students at the primary and secondary levels, the Indian government needs to continue to upgrade its educational improvement initiatives to ensure basic knowledge, skills and abilities in language, science, mathematics and technology. Although madarasas educate only between 2-4 per cent of Muslim children and youth, they need to modernize their curriculum and move away from Islam centric or Islamic-only education to a holistic approach that enables these students to integrate fully into Indian society.

Higher education should not be solely the province of four-year colleges or universities. It should include technical, vocational and professional education at the secondary and post-secondary levels.

Education in those areas provides avenues for participation in 21st-century careers, the competencies to compete in a global economy, and the capacity to contribute to lifting Muslims and those in the weaker sections out of poverty and deprivation.

I know from my personal involvement that Muslims are already making commitments to assist in providing educational opportunities for Muslims at all these levels. For example, the American Federation of Muslims of Indian origin supports hundreds of schools and scholarships for underprivileged Muslims and others throughout India.

The Duty Society of Aligarh Muslim University (AMU) has numerous members who have focused on educational development for those in the weaker sections and placed an intensified organizational focus there in 2016, its 125th anniversary year.

I myself have supported AMU with initiatives that enhance higher educational opportunities for Muslims and others including the funding of a new Management Complex, an Entrepreneurship Center, and an auditorium for the Mass Communications Department. At the dedication of the Frank and Debbie Islam Management Complex, I said, “From this Management Complex will come the future leaders who will make India and the world a better place. It will be an educational empowerment zone.”

I have had a lifelong passion and commitment to improving girls’ access to and participation in meaningful education. If we empower girls through education, they are most likely to control their own destiny. Education prepares the girl to become a change agent. Too many families are trapped in poverty because of lack of education. With her own education, the girl who becomes a woman and a mother can educate and equip her children to escape that trap. This is why my wife Debbie and I have also committed to support the development of a technical school for women in Azamgarh UP. Those women graduates will make invaluable contributions to making India and the world a better place as well.

Addressing the development needs of Muslims and others in the weaker sections is a strategic investment. It is a hand-up and not a hand-out. Those who get that hand-up will extend their hands to help others up. As a result, the return on these public and private investments will be exponential for the Indian economy and society.

(The writer is an entrepreneur, civic and thought leader based in Washington DC. The views expressed here are personal)

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Column: Helping Indian SMEs to achieve scale – Behind Infra Lines

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As the Indian economy deals with the economic impact of the Corona induced slowdown, an opportunity to make constructive changes to the economic policies has arisen.

India needs a long hard look at ways to deregulate the economy and businesses. Deregulation pertains to not just the legal frameworks at play but the overarching tax, law and business frameworks that drive business decisions and policies. Changes that can help reduce the regulatory burdens and hindrances to business will help businesses in India achieve the elixir of “creating scale” to help them take advantage of economies of scale.

In a recent article, Paula Mariwala refers to the fact that if Adam Smith or Napoleon who referred to England as “a nation of shopkeepers” were to stereotype India, they would arguably refer to us as “a nation of entrepreneurs”. The article further goes on to state that 80 per cent of Indians find livelihoods in the informal sector. The two biggest takeaways from the article are both the importance of small businesses to the Indian economy and the need to help support small businesses.

While a lot is written and said about helping SMEs and MSMEs, the critical point that needs attention is how to assist businesses in India to scale to a larger size. Taking advantage of the concept of ‘economies of scale’ is probably the most significant need for companies across the spectrum in India. While lack of access to credit has been a large contributing factor to the hindrances faced by small businesses in India, a more effective and less complicated regulatory regime is equally important, if not more.

A closer look at the issue will show that a lack of access to credit and complex regulatory ecosystem that hampers the growth of small businesses are closely interlinked. As has been oft-repeated, Indian businesses suffer from the vicious cycle of not being able to formalise due to the complexity of the regulatory regime and, therefore, lacking access to credit and thereby remaining small are unable to achieve economies of scale.

Essentially, the inability to achieve scale today inhibits the ability to achieve scale in the future. Therefore, the critical question is how does the government turn this vicious cycle to a virtuous one in which small businesses are incentivised to formalise, access credit more easily, achieve scale and generate returns and get the ever-important tax revenue that is needed? Essentially, when making policy changes, one question that policymakers must keep in mind is whether the policy change will assist small businesses to achieve scale. While achieving ‘economies of scale’ cannot be the only determinant of policy decisions, it must surely be a major one.

For instance, for smaller businesses the concept of ‘job work’ whereby a larger business outsources some of its work to a smaller unit or a small unit outsources parts of the product creation to another small unit sounds routine but is of prime importance. Job work allows for economies of scale through specialisation. As India moves ahead, especially intending to boost manufacturing, the ability of small businesses to achieve scale will be driven through their ability to specialise that will allow them to scale and add technology. In this case, compliances around concepts such as ‘job work’ must get more attention in terms of ease and compliance burdens on businesses.

While the concept of jobwork and related regulation at the surface seems standard, a searching look on how Indian small businesses will grow will reveal the importance of rules around concepts such as jobwork. As mentioned earlier, scale is needed for businesses to thrive as the classic economic theory dictates. It is only after a threshold of scale is achieved that businesses can start enjoying the fruits of lower costs, greater profits, formalisation and access to credit, thereby further boosting growth. Indian SMEs have historically struggled for scale and the concomitant advantages that scale brings.

Therefore, as India emerges from the economic slowdown, significant attention must be paid towards the need of businesses to achieve scale. Capital flows, job creation and demand creation are all factors that revolve around the success and scalability of millions of businesses in India. Policy creation and changes that keep a close eye on assisting Indian businesses to scale amongst other factors will have a significant contribution to putting the wheels back on India’s growth story.

(The author heads Development Tracks, an advisory firm. You can contact him at [email protected] The views expressed in this article are personal and that of the author)

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