Prof R. Vaidyanathan
IIM-B
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]R[/dropcap]ecent visit of PM Modi to Silicon valley has enthused the technology entrepreneurs and PM has taken personal interest in creating a Digital India. The important issue is the enormous possibilities for small entrepreneurs using mobile sets and also reducing corruption using the digital wave.
Nearly 70% of our economy consists of the service sector, to which the fastest-growing segments belong. They are construction, road transport (both passenger and goods), hotels and restaurants (also dhabhas), wholesale trade and retail trade, and all other types of businesses and services. Each of these activities is growing at more than 7% compounded annual average real growth rate in the last decade, and these are our engines of economic growth. These are the segments where the mobile phone is used widely, as an instrument that enhances market efficiency and raises incomes for entrepreneurs.
Efficient markets
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]M[/dropcap]arkets, whether product or labour or financial, are expected to have information efficiency. Mobile phones enable such efficiency and reduce the opportunities for arbitrage by re-establishing the basic law of one price — namely, assets and services of similar risk characteristics will command the same price, excluding transaction costs.
- It enables the truck-owner to track the goods that are transported, say, from Kollam to Kota, and provide immediate information on such unforeseen events as accidents and other obstacles, such as check-post harassments.
- It facilitates price discovery by small-time traders/distributors and helps them decide to send the products to markets where prices are slightly more attractive.
- It also helps the self-employed plan activities better. A small-time contractor contacts his masons and painters at different work-sites and instructs them instead of travelling to the site on his two-wheeler.
Revolution among small entrepreneurs
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he business model of Manju my plumber has dramatically changed with the arrival of cell phone. Earlier people used to visit him or call on his land line in the mornings and lodge complaints. He used to visit them and retire by lunch time. Now with his mobile phone his model is 24 by 7. He says his income has gone up by three times and he has one assistant.
The impact of telecommunication on the self-employed, particularly among the poorer groups, has not been fully understood or appreciated.
Mobile phones have created a sort of tsunami among the lower-level entrepreneurial groups, such as plumbers, carpenters, masons, small-time construction contractors, painters, cooks, auto repair mechanics, winders, welders, water-suppliers, tea suppliers, vegetable vendors, other retail traders, tyre-repairers, istri-wallahs (mobile ironing service), flower vendors, auto drivers, priests, astrologers, and so on. Actually, more than three hundred categories of self-employed entrepreneurs use them widely.
One of the major forces impacting the financial, labour and product markets is information technology and telecommunication. It seems that, in the long run, telecommunications will be a major competitor to financial institutions as more than 60% of the cost of operations of many global banks is on software and telecom.
The time-value of money has suddenly become the buzzword and, slowly, it enhances the time-consciousness among the self-employed.
The mobile phone is now being used for small-time financial activities, such as information on prices, billing settlements, etc. But the important development that service providers and bankers should work towards is to make it drive a retail credit revolution. One observes that in the boat markets of Bangkok, one can either pay by baht, the local currency or get charge cards from the service providers and pay through them.
Service provider as banker
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he service providers initially provide an overdraft or revolving credit facility to the retail trader, which is adjusted on a daily basis by crediting the retailer for every debit incurred by the buyer. This is one of the interesting possibilities, wherein the retail trade network is provided a credit facility and which reduces their cost of borrowing. It requires one mobile instrument with them and periodic crediting of their account based on received calls, which are mostly available free. There is an Rs 7 lakh core market available for service providers in retail trade itself. This is currently funded by Chits/NBFCs/Money lenders etc.
The most important thing about the mobile phones is that — unlike computers — even people who are not literate can use them. The only requirement is ability to speak and/or hear. We need not worry about language or massive software development. This small communication device provides phenomenal power unthinkable by economists or financial experts some ten years ago.
Instead of permanently singing the Walmart Sankirtan, we should think of innovative ways wherein technology could facilitate the vast mass of self-employed groups. The millions of entrepreneurs involved in retail trade, instead of being abused, as ‘unorganized’ can be made more effective by credit enhancement and price discovery process using mobile telephony. It is not required for Walmart to come here and squeeze our farmers and small manufacturers and sell it to consumers at ‘lower prices’. We can think of leveraging on telecommunication to make all factor markets more efficient and bring down consumer prices.
Reducing Corruption by Technology:
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]P[/dropcap]rior to computerised system of reservations Railways were bedevilled with corruption in allotment of berths/seats etc. It used to be told that central Cabinet ministers used to recommend postings of TTE at major stations. But after introduction of software based reservations the level of “subjective” decisions and hence corruption has definitely come down. Similarly in Bengaluru house property taxes can be paid through the net using either credit card or bank transfer. Earlier one has to visit the local office of the corporation and invariably have interactions with officials and bribery becomes part of the scene. But now based on the calculations, one can pay directly through the net.
There are many more illustrations to illustrate that technology can be used to reduce corruption.
In our context mobile technology is more useful given the cost and literacy considerations.
Views Personal
Cho S Ramaswamy Visiting Chair Professor of Public policy[CRVCPPP]
Sastra University
An expert in Finance and a two times Fulbright Scholar, Prof. R Vaidyanathan is a much sought after author, speaker and TV commentator on all items related to Money and Finance.
- नकली खबर लक्षण है, बीमारी नहीं! - April 16, 2018
- Fake News/ Accreditation and Sedition - April 4, 2018
- Two Poisonous Seeds - March 15, 2018
The Topic
The problem is that we fail to acknowledge that ‘Technology is religion and gadgets are the new gods’
“We live in a changing universe, and few things are changing faster than our conception of it”-Timothy Ferris
But Professor, please note that MSM is finding you to be communal and doing injustice to them. Only last week Honorable MP Sitaram Yetchury declared to the ever enthusiastic secular media that ‘Make in India’ and ‘Digital India’ will not generate jobs [I think CITU does]. They prefer him to Bharathan or Raja because the TV channels feel that these two may along with biting English words also end up biting the mike sets.
The problem with science and technology is that they have displaced vague inanities and also inane vagueness in many matters and thus have deprived many of their livelihoods and some of their entertainment.
Some morbid minds and manipulative minds manage to unite the luddites of the world with appealing slogans, as Murphy’s law says ‘ a good slogan can block reasoning and thinking forever’ by advancing arguments like Ronald Reagan used to do with his famous one liners, “ I notice that everyone in favor of abortion has already been born”.
The influence and impact of technology is too obvious and it has also cleared many areas of confusion which even great academic scholars like Colin McGinn is to express, “ The head spins in theoretical disarray; no explanatory model suggest itself; bizarre ontologies loom. There is a feeling of intense confusion, but no clear idea about where the confusion lies”.
However, the mind set of status quo addicts, who suffer from the usual conflict generating impulse [of projecting differences out of inherent polarity] suffer from pessimistic closures of cognition. This becomes more dangerous and becomes contagious when peddled through political or religious ideologies.
Even the so called advanced societies and organization are susceptible to this, Drucker Forum’s theme this year was ‘Claiming Our Humanity — Managing in the Digital Age’ for which I wrote this
http://contentwriteups.blogspot.in/2015/07/humanity-and-technology-let-us-not-see.html
[A bit lengthy with lot of links in it but those who have time can read and hopefully reap something out of it]
Various political systems, albeit with some short comings, have accelerated the establishment of living together of human species as social beings with some specific patterns benefiting growth of civilization as function organization.
Art, literature, religion, culture, philosophy etc have accelerated, expanded and in some cases enhanced human thinking, imagination, idea etc to contribute to various facets of human life organizing it to function efficiently.
Science has helped human beings to explore, to experiment and to understand rationally and also use that understanding for betterment of all life forms, including environment. Technology has accelerated this process and brought the benefits to various spheres of life.
You also will have to expand your visual arena and take note of things in the attic of museums of fossil genetic samples wherein you can find the leftover Indian Left’s ideology like Yetchury’s excellent observation and ruthlessly dismiss them because otherwise IIM may have a secular student union which may get activated if they want to divert attention of the nation through MSM.