In this week’s Businessworld, Sangeeth Vargheese writes on the importance of India moving to a knowledge economy from merely being a low cost production destination.
Vargheese has an important point, growth lead merely by low cost is replicable and not sustainable in the long run. With the appreciating Rupee, exporters are already lining up at the government’s doorstep asking them to offset the rupee appreciation.
India, henceforth needs to focus on innovation and leadership. Low cost can only grow the economy to a certain extent, for it to leapfrog into the next level, innovation is required. Indian companies have to consistently invest in research and development to innovate for them to survive.
"For now, everything seems to be hunky-dory. Yet, one point being missed is that most of India’s present growth is a result of our lower cost services when compared to other countries. But cost competency is never a sustainable proposition. In the long term, it holds no competitive advantage, since it can be easily replicated. Today it is India; tomorrow it could be any other country. If Pakistan or Ethiopia offer the same services at lesser cost, all these multinational companies that are currently swearing by India will pack their bags and move there. The solution is to differentiate India in ways other than just cost competency, before we can hope to consolidate India’s leadership.
However, our present systems — be it education or culture — focus on creating a bunch who are more doers (managers, engineers and analysts) than dreamers (change architects, innovators and entrepreneurs). This further reinforces our excessive reliance on cost competency. We are adept at replicating ideas and reverse engineering but are yet to be taken seriously as innovators.” (Link)
Vargheese has an important point, growth lead merely by low cost is replicable and not sustainable in the long run. With the appreciating Rupee, exporters are already lining up at the government’s doorstep asking them to offset the rupee appreciation.
India, henceforth needs to focus on innovation and leadership. Low cost can only grow the economy to a certain extent, for it to leapfrog into the next level, innovation is required. Indian companies have to consistently invest in research and development to innovate for them to survive.
