Argument

An App Won’t Solve India’s Bloated Bureaucracy Problem

Narendra Modi’s whirlwind tour of Silicon Valley won't make up for India’s inability to implement economic reforms at home.

Indian Prime Minister Narendra Modi speaks during the official opening of the Hannover Messe industrial trade fair in Hanover, central Germany on April 12, 2015. India is the partner country of this year's trade fair running from April 13 to 17, 2015. AFP PHOTO / TOBIAS SCHWARZ
Indian Prime Minister Narendra Modi speaks during the official opening of the Hannover Messe industrial trade fair in Hanover, central Germany on April 12, 2015. India is the partner country of this year's trade fair running from April 13 to 17, 2015. AFP PHOTO / TOBIAS SCHWARZ

Indian Prime Minister Narendra Modi is an unabashed technophile. He has proved himself an effective user of social media and has no hesitation embracing snazzy tech toys, like the Tupac-at-Coachella-style holographic projections that he used during his 2014 election campaign. He has 30 million likes on his Facebook page, and he has more than 15 million Twitter followers, behind only U.S. President Barack Obama and Pope Francis among world leaders. He launched Digital India, a number of interrelated programs to make India more wired and his citizens more tech-savvy. And he has a deserved reputation as an early adopter — or at least as someone hip to the technology the kids are using these days. An official Chinese video explaining the importance of the Shanghai Cooperation Organization, a Chinese-led multilateral grouping of which India is a member, depicted an animated Modi using a selfie stick.

His Sept. 26 to Sept. 27 visit to Silicon Valley, then, seems like a natural way for Modi to shine. He will meet privately with the CEOs of Apple, Facebook, Google, Tesla, and Adobe, and he will participate in a Facebook town-hall question-and-answer event that’s sure to be hugely popular. He will also deliver a speech at San Jose’s SAP Center — home of the NHL’s San Jose Sharks — to a standing-room-only audience, many of them Indian-American information technology professionals.

And yet, Modi faces the risk of relying too heavily on Silicon Valley’s gadgets and not enough on the hard reforms necessary to facilitate India’s adaptation of technology. While his swing through Menlo Park, San Jose, and Palo Alto could certainly help India’s development, it’s no replacement for the difficult economic reforms that Modi must implement.

When Modi swept into power as India’s prime minister in May 2014, he promised to transform the country’s economy after several years of tepid growth. Indeed, his 16-month tenure has seen some improvements. Foreign direct investment (FDI) to India jumped 22 percent between 2014 and 2015, even as FDI fell globally during the same period. By some estimates, India surpassed China as the world’s fastest-growing major economy in late 2014, growing at 7.5 percent year on year.

But the gloss is starting to wear off Modi’s domestic agenda. Long overdue tax and land reforms recently failed to pass India’s Parliament, where Modi’s Bharatiya Janata Party only controls one of two chambers. And slow bureaucratic processes, political brokering, and insufficient administrative capacity are hampering steps that should be no-brainers, like privatizing loss-making state-owned enterprises.

Technology offers considerable hope in overcoming many of India’s challenges, given the rapid rate of change. At about 19 percent, India has one of the lowest Internet penetration rates among major economies. That said, some 30 million users, or roughly 2.5 percent of India’s population, are coming online annually, and that figure is set to accelerate. Facebook wants to tap into that market, in part with its Free Basics app, which allows users access to pared-down Internet services at no cost. But for India’s poor, the difficulties in getting online — including language barriers, illiteracy, and poor infrastructure — are more complicated than just affording the price of a phone or computer.

The implications of expanded Internet access for media dissemination, education, and entertainment are self-evident. It’s not just about enabling Indians to watch more cat videos. Digital access is critical to integrating India’s citizens — particularly the poor — into the economy. For example, efforts underway toward financial inclusion, biometric identification, and digital access have the potential to overhaul India’s massive and wasteful subsidy regime. Better identification, more bank accounts, and expanded online access can cut out middlemen and corruption and can ensure that the poor receive what they are owed by the state. There has been significant progress: So far, some 900 million people, or roughly 72 percent of India’s 1.25 billion people, have signed up for a national biometric identification scheme begun under Modi’s predecessor, Manmohan Singh. And Jan-Dhan Yojana, Modi’s signature effort to enable access to banking, credit lines, and insurance, has resulted in the creation of more than 180 million bank accounts (though critics have noted that many are left unused). While basic mobile services are widespread and cheap in India, enabling access to cost-effective broadband will be necessary to tap the full potential of these efforts.

Modi’s Digital India initiative also promotes e-governance: using tech tools to improve interactions between the government and citizens, and not just on subsidies. New Delhi is experimenting with e-governance as a method to increase transparency and accountability. Biometrics, for example, could help ensure that bureaucrats report to work (a big problem in India). And Digital India also involves efforts to put rules and forms online, such as documents required to register a business or comply with India’s complex tax codes. But putting forms online doesn’t automatically make India an easier place to do business — tax and regulatory reforms are necessary as well.

Besides expanding India’s proven capabilities in IT services, the country’s industrialization will require investments in manufacturing, which India skipped almost entirely as it developed. The tech sector offers a number of possibilities for job creation, particularly as it relates to electronics manufacturing. This formula, which helped fuel the economic booms in Japan, South Korea, and China, can also help link India to global supply chains. A window is opening for India as labor costs continue to rise in China. Asian manufacturers like Foxconn and Huawei have already pledged to move some of their operations to India, while South Korean electronics giants LG and Samsung have long had manufacturing presences in the country. Getting Silicon Valley firms to invest in manufacturing jobs in India — and at the higher end in research and development efforts — will be another important objective.

The Modi government’s efforts in the digital realm have not been without difficulties. Google is facing scrutiny about its search results from India’s antitrust commission as part of an investigation that preceded Modi’s election, similar to charges it has faced in the European Union. A proposal recently floated to give the Indian government access to Internet users’ encrypted online communications — including social media messages — was quickly withdrawn in response to public criticism.

That said, tech is the sector that offers Modi the best opportunity to demonstrate transformational change in his first few years in office. Along with defense, it is also an area where the United States holds a massive advantage over international competitors. And the benefits are mutual. With over 125 million Facebook accounts and 9 percent of Google visitors, India is already home to the second-largest user base for both companies, behind only the United States. Unlike China, whose restrictive policies have protected its online market — enabling local variants of U.S. tech giants such as Baidu, Sina, and Alibaba to thrive — India has offered a more level online playing field. And the success of Indian-born professionals in the U.S. tech sector, including Microsoft CEO Satya Nadella and newly minted Google CEO Sundar Pichai, is also a matter of pride in India. That helps create the perception of U.S. technology companies as partners in India’s development — rather than as exploitative foreign firms.

Modi has visited 27 countries since becoming prime minister in 2014 and has faced criticism for spending too much time abroad. But given its potential implications for India’s economy and governance, his trip to Northern California may prove among his most important yet — as long as he successfully resists the false complacency that so often accompanies the allure of tech.

Photo credit: TOBIAS SCHWARZ/AFP/Getty Images

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