This is how India can become the next Silicon Valley

silicon

Silicon Valley, United States (Sylvia Gorajek, Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Ashok Lalwani, Global Head for India , Baker McKenzie


India has long branded itself as the world’s leading outsourcing destination for global companies, particularly for those in the technology sector – but in the Fourth Industrial Revolution, the time is ripe for the world’s most populous country to reinvent itself.

There is a burgeoning start-up and innovation culture, as shown by the Global Innovation Index, where India has improved its ranking from 81 to 52 between 2015 and 2019. In addition, the country has improved its reputation in terms of the risk posed to foreign investments and, in 2019, ranked third in the world in terms of attracting investment for technology transactions.

To maintain this momentum, India needs to further improve government regulations to encourage support for technological innovation, train tech talent and incentivize it to stay in the country and continue to improve its risk profile by attracting significant foreign and domestic investment in technology. Provided these favourable conditions can be met, India has unmatched potential to become the world’s next Silicon Valley.

Global protectionism – the fuel for innovation in India?

India has been a destination for low-cost, outsourced software and support services since the late 1980s when the labour arbitrage model became a cost-effective solution for multinational companies. Historically, this outsourcing has boosted the country’s wealth, while also providing much-treasured employment and fuelling urbanization.

The country’s outsourcing industry was recently valued at $150 billion. Nevertheless, India’s traditional big-ticket outsourcing contracts are under pressure owing to a combination of the changing technology climate; competition from other outsourcing destinations, such as the Philippines; a shift back to insourcing in nations, such as the UK; and, increasingly, the global shift towards protectionism.

Protectionist policies have been particularly prominent under the current administration in the US, which was historically one of the largest outsourcers to India. This protectionist approach and the rise in tax breaks for domestic job creation are beginning to erode the appeal of outsourcing.

 

But could this situation also prove to be an opportunity for India? A decrease in revenue from outsourcing might provide an unexpected incentive for the country to shake the stereotype that its workforce is a pool of reactive problem-solvers for the tech industry. It could help India to rebrand itself as a hub of technology innovation. As a country, India has leapfrogged many stages of tech development, even as it took Western nations several decades to experience the same progress.

Innovation needs people

The Fourth Industrial Revolution is blurring the lines between what was thought possible and impossible, connecting the physical, digital and even biological spheres. Against the backdrop of technological changes wrought by this transformation, India has become a place of both unique problems and increasingly innovative solutions.

India has already started to undergo a technological transformation. Its population has moved along an exponential technology curve from barely any connectivity in 2014 to being the second most connected nation in the world, with 560 million internet users, as of this year, surpassed only by China. This technology penetration and connectivity was enabled by the increase the country has seen in smartphone users, from 86 million five years ago to 450 million today.

The spread of technology has also created a fertile ground for start-ups. India was recently ranked as having the third-largest start-up ecosystem in the world, as the country now has 26 start-up companies valued at more than $1 billion each. This success rate has encouraged interest in digital entrepreneurship as a career path, which can help build a tech-savvy workforce. In a recent survey of young people in India, a third of the respondents indicated interest in entrepreneurship as a career.

Certainly, the country has all the right conditions for entrepreneurial growth supported by a combination of changing demographics and economic trends. Firstly, India has an unrivalled youth population (more than 65% of India’s 1.3 billion people are under the age of 35, with more than 50% under 25). Secondly, India is experiencing tremendous urbanization, with a rise in the migration of young people from rural areas to cities. From a consumer point of view, this creates a young, middle-class demographic with increased spending power and heightened interest in digital innovation. From a business perspective, this is also an appealing source of talent for the workforce.

How to become the next Silicon Valley

If India can continue to develop its urban centres and promote a Silicon Valley spirit of entrepreneurship, it could be in a prime position to achieve global tech hub status. Bengaluru (formerly Bangalore) in the south and Gurgaon in the north are two tech-savvy cities emblematic of India’s rapid urbanization. The country is set to become the largest contributor to the world’s urban population.

Bengaluru has previously been ranked by JLL’s 2017 City Momentum Index as the most dynamic city in the world, based on factors like technology and innovation. While initially an outsourcing hub, the city has successfully moved away from this past focus, embracing entrepreneurship and emerging technologies. This has allowed it to position itself as India’s tech capital. In 2018 alone, there were 153 new start-ups founded in Bengaluru, which has the necessary level of talent and venture capital to create the conditions for start-up success.

The city of Gurgaon has transformed from a former agricultural wasteland into an urban sea of skyscrapers. It attracts multinational companies and global tech giants such as Google, Facebook, Zomato, Uber, Booking.com and TripAdvisor, as well as local businesses. It has also quickly emerged as a hub for numerous services, from IT software and finance, to consulting.

Not enough talent for innovation?

Despite its promising young workforce, India still has a significant skills gap when it comes to securing a future of technological innovation. India ranks eighth in the world in terms of the number of students graduating in science and engineering, but it appears enough is not being done to educate them in the right areas.

A recent employability report on engineers in India showed that fewer than 4% have the technical, cognitive, and language skills necessary for technology start-ups and only 3% have new-age skills in areas like artificial intelligence, machine learning, data science and mobile development.

India has also suffered a persistent brain drain of talent. There are numerous successful Indian individuals who’ve been appointed to high-profile posts in tech companies, abroad from Sundar Pichai, CEO of Google, to Shantanu Narayen, CEO of Adobe, to Satya Nadella, CEO of Microsoft.

Recent government records do suggest, however, that the number of Indian scientists coming back to India to pursue research opportunities has increased, and the booming tech industry will continue to encourage the return of many expats. From 2012 to 2017, 649 Indian scientists have returned to pursue research opportunities back home. This is more than double the number of scientists that returned between 2007 and 2012 – but is this rate of return enough?

The shortage of tech-ready workers afflicting the private sector is at odds with the significant levels of youth unemployment in the country. The private sector needs to work with the government and the Department of Education to address this issue by creating more training programmes that match industry requirements.

Investments and innovation – a winning duo

With government support, foreign and domestic investments can help launch India as the next global tech hub.

In terms of foreign investment, market commentators believe that India’s influence is set to grow. Respondents in a recent Baker McKenzie survey feel positively about India’s ability to maintain economic growth and development.

How would you describe your company’s predicted international investment spend over the next two years?
How would you describe your company’s predicted international investment spend over the next two years?
Image: Baker McKenzie

As the US-China trade disputes rage on, India is arguably becoming a more attractive alternative. Additionally, increasing the skilled workforce could put India in a favourable position to compete with China for market dominance.

What impact is the ongoing trade war between the United States and China having on how you manage your production and supply chain?
What impact is the ongoing trade war between the United States and China having on how you manage your production and supply chain?
Image: Baker McKenzie

While global investors have traditionally been hesitant about investing in Indian companies because the country was ranked as high risk, Indian start-ups have recently attracted more than $33.4 billion of funding through foreign direct investment.

Where is your company likely to look for M&A and other investment opportunities?
Where is your company likely to look for M&A and other investment opportunities?
Image: Baker McKenzie

Domestic investment is also on the rise, as Indian companies understand first-hand the opportunities presented by the country’s exponential digital transformation.

Government support is lagging

Our Asia Pacific survey also suggests that 83% of senior executives from Indian companies believe that “policy-makers were behind the curve in terms of the laws they passed relating to technology and innovation”. Regulators could partner with private sector firms to understand rapid technological advances and explore better ways for passing legislation that can stimulate innovation.

This is already happening in pockets: in early 2016, the Indian government launched the Startup India initiative to support entrepreneurs and build a robust start-up environment. Another high profile programme, Make in India, was designed by the government to promote self-reliance, foster innovation, enhance skill development and build a best-in-class manufacturing infrastructure. Finally, Digital India is a government project that aims to digitally empower society and double the size of India’s digital economy.

India

What is the World Economic Forum’s India Economic Summit 2019?

Under the theme, Innovating for India: Strengthening South Asia, Impacting the World, the World Economic Forum’s India Economic Summit 2019 will convene key leaders from government, the private sector, academia and civil society on 3-4 October to accelerate the adoption of Fourth Industrial Revolution technologies and boost the region’s dynamism.

Hosted in collaboration with the Confederation of Indian Industry (CII), the aim of the Summit is to enhance global growth by promoting collaboration among South Asian countries and the ASEAN economic bloc.

The meeting will address strategic issues of regional significance under four thematic pillars:

• The New Geopolitical Reality – Geopolitical shifts and the complexity of our global system

• The New Social System – Inequality, inclusive growth, health and nutrition

• The New Ecological System – Environment, pollution and climate change

• The New Technological System – The Fourth Industrial Revolution, science, innovation and entrepreneurship

Discover a few ways the Forum is creating impact across India.

Read our guide to how to follow #ies19 across our digital channels. We encourage followers to post, share, and retweet by tagging our accounts and by using our official hashtag.

Become a Member or Partner to participate in the Forum’s year-round annual and regional events. Contact us now.

India has the conditions and tools necessary to take a leading position on the global technology stage, but it needs to overcome several roadblocks in order to realize its potential. Encouraging more foreign investment, offering tailored training programmes, making an effort to retain home-grown talent, as well as creating the right regulatory infrastructure are all vital to successful digital growth. The path to being a global player in the technology and innovation sphere is not straightforward, nor without strong competition from around the world, but India is on its way to becoming a real contender.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

EU Copyright Directive: Will US tech giants comply or ditch the EU market?

‘All atrocity crimes are preventable’ and can never be justified – UN chief

On International Day, UN stands in solidarity with some 20 detained staff

UN health experts warn ‘dramatic resurgence’ of measles continues to threaten the European region

Rare Disease Day: a new EU platform to support better diagnosis and treatment

We won’t win the online security war without people power

Do doctors need to know their patients’ sexual orientation and gender identity?

Medical deserts in the European Union: the practicalities of universal health coverage

How energy infrastructure is shaping geopolitics in East Asia

How Germany strives to mold ECB’s monetary policy to her interests

UN food agency appeals for access to key storage facility amid fight for Hudaydah

Vegetarianism is good for the economy too

A Valentine’s Special: giving back, a dialogue of love

Improvements to pension systems have made them better placed to deliver pensions

Ireland’s planning to make its Emerald Isle even greener

How to Create a Clear Vision For the Future of Healthcare

Brazil’s hopeless future of science

Juncker Investment Plan for Europe welcomed by European Youth Forum

This Japanese concept will help you see the world – and learn – in a different way

Why your next work meeting should be a ‘walk-and-talk’

Eurogroup asked to reduce public debts of its member states

Can elections in Italy and Germany derail Eurozone?

UN chief calls for Security Council to work with Myanmar to end ‘horrendous suffering’ of Rohingya refugees

Parliament: Last compromise on bank single resolution mechanism

Art has the power to change the world, says this renowned Iranian muralist

How data can empower patients to personalize and improve their cancer treatment

It’s time for the world to stand up behind South Africa

We finally have a life-saving vaccine for Ebola

Commission makes it easier for citizens to access health data securely across borders

No barriers to free flow of non-personal data in the EU

Towards a climate-neutral Europe: EU invests over €10bn in innovative clean technologies

Seven trends shaping the future of the mining and metals industry

Where does our food come from? Here’s why we need to know

Coronavirus: the truth against the myths: Lockdown by a novel coronavirus, named 2019-nCoV

5 key concepts for blockchain newbies

3 ways Africa can improve the health of women and children

A Sting Exclusive: “The Digital Economy and Industry are no longer opposing terms”, Commissioner Oettinger underlines live from European Business Summit 2015

World Bank President steps down, Chief Executive assumes temporary role

Coronavirus spread now a global emergency declares World Health Organization

In Rome you can swap plastic bottles for metro tickets

UN chief praises impact of Palestine refugee agency as ‘our common success’, at key pledging conference

The new Kiev rulers ask $35 billion from the West

Energy of African youth ‘propelling’ new development era as UN ties bear fruit

On the detention of children in the United States of America

UN chief condemns killing of ‘blue helmets’ in DR Congo, as violence erupts prior to elections

5 things to know about how coronavirus has hit global energy

10 expert predictions for the next decade in Chinese AI

How to harness data to tackle rare diseases

EU-China trade: closer ties as US-China trade battle brews

UN Chief ‘strongly rejects’ Guatemala decision to expel anti-corruption body

Aviation Strategy for Europe: Commission signs landmark aviation agreements with China

This Pacific island has banned fishing to allow the marine ecosystem to recover

Why good cybersecurity in business is everyone’s responsibility

Three steps we must take to secure the future of our forests

Eurozone slowly but surely builds its Banking Union

UN chief welcomes DR Congo President’s promise to stand down

Rule of Law: The Commission opens a debate to strengthen the rule of law in the EU

Engaging ‘head and mind’, key for effective learning, says UNESCO chief on Literacy Day

Security: better access to data for border control and migration management

Can Greece’s democratic institutions keep it in Eurozone?

More Stings?

Advertising

Trackbacks

  1. […] This is how India can become the next Silicon Valley […]

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s