Two companies that are making
news in the digital world recently are AirBnB and Uber. Both the companies have platform based business models
and have been extremely successful and expanding globally at a fast pace. For the uninitiated
platform is a model where value is created by facilitating the exchange between producers of value with
consumers of value. While AirBnb is a platform for people to rent out lodging, Uber is a
ridesharing service connecting drivers with commuters.
Last year, our Prime Minister
Shri Narendra Modi launched an ambitious project called ‘Make in India’ to make India a manufacturing hub. Drawing
analogy from the digital world, India would act as a platform where value will be created by
foreign companies setting their manufacturing base and selling to a global market. We
need to learn from the best practices of successful platform businesses as to
how they have been able to attract
producers of value and kept the growth momentum high.
The learnings on different aspects are:‐
a)
Simplification
What is special about Uber as compared to other taxi
service companies is that it provides an
intuitive, simple and user‐friendly experience. India needs to provide
the same for the manufacturers through
simplification of rules and procedures, decreasing the steps taken to start an enterprise and ease of trading
across borders. E‐commerce exports need to be
promoted on both the B2B and B2C fronts by simplifying movement of
products through courier as well as
otherwise.
b) Lower costs
Costs of participation in these digital networks are
clear to the user beforehand and what has
made them popular is the lower costs as compared to other networks.
India needs to take a cue from this by
benchmarking its cost of doing business with other competitors. Cost
should also be clear and predictable for anyone buying and selling from India.
The time taken to ship a product needs
to be lowered as today’s consumer cannot wait for long. The large hidden costs of operations involving
corrupt practices and delayed clearances leading to loss of business need to be wiped out.
Decreasing the transaction costs as envisioned by the “Task force on reduction in transaction
costs” is the first step to make India competitive as a platform as compared to other countries.
c) Culture
On the cultural aspect, there is a lot to learn from
AirBnB. The shared values and norms that
are to be provided by Indian government and regulators would decide the
course of business in the future.
Predictability,stability and clarity of policy is the first and foremost
requirement. The development of a strong
manufacturing base requires linkages with domestic industries and hence a feeling of partnership and
community needs to be fostered. The liberal policy regime and quick services through a single
window needn’t be limited to the foreign FDI based manufacturers but equally to domestic
companies. The vision of Make in India needs to
percolate to each and every service provider in the government hierarchy
who acts as a ‘Niryat Bandhu’ rather
than a ‘Niryat Shatru’. Also, the trust posed by users of the platform needs to be strengthened and not broken. The
confidence and trust is more important in platforms like ‘Make in India’ as the costs of entry and
exit are far higher than digital platforms like Uber.
d) Regulation
With new business models come the regulatory burden of
overseeing their operations. In the case
of AirBnb and Uber, it consisted of evasion of tax by service providers, no
licenses to run as a business etc. In
the case of ‘Make in India’, while we need to provide a simpler regulatory environment it needs to be ensured that the
industries entering India are sunrise industries and not polluting sunset industries of
countries like China. China recently has been pushing to shift these to other countries like Vietnam
and Bangladesh. Also, sectors with domestic over‐ capacity need to be protected as investment
in those will just drive some of them out of
business and get replaced by these foreign companies. Investment in such
industries may be allowed in ‘Special
Economic Zones’ on the condition that most of the produce will be exported rather than sold domestically.
e) Competitive retaliation
There has been a huge backlash by taxi drivers against
Uber and hotel industry against AirBnb because
of the disrupting nature of their businesses. These new platforms are facing
legal challenges in operating and
expanding their businesses. If India as a platform thrives, it will also disrupt the thriving value chains of
various countries and hence a ‘manufacturing war’ is imminent. We need to be ready to face this at
the international level by focusing on strengthening
our economic diplomacy. By developing economic interdependence with integral countries we would have the leverage
to take our vision further. A number of steps
in this direction have already been taken through strengthening our
economic engagement and the process
should be strengthened by setting up ‘Make in India desks’ in all our major ‘Trade consulates’.
f) Connectivity with other Platforms
While Uber doesn’t connect with other similar
ridesharing platforms, it does connect itself
with credit card providers which is also a platform of a different kind.
In global trade, different countries act
as platforms for different goods especially in an era of Global Value chains.
To be a part of this complex
interconnected web, we need to ease the flow of goods into and from our country. A firm based in Gujarat to participate in a
value chain in South East Asia, needs
faster transportation of goods to the east coast. Similarly firms situated in
Andhra Pradesh need connectivity to the
west coast. This high speed connectivity would convert our unique location in the Indian Ocean with a
huge geographical expanse and peninsular shape
into a strength rather than a weakness.
India as a platform is one which
has a huge potential as it is provides strong positive externalities of a large labour force and a huge domestic
market. The Guinness record for the word printed on highest number of product labels might soon belong to
the words – “Made in India” if a serious effort is made to achieve the same.
