From Jugaad to Start-ups

A few months back, RBI governor Raghuram Rajan, made very accurate points about “jugaad” (make-do solutions) that many Indians are so very proud of:
“Jugaad or “working around” difficulties by hook or by crook is a thoroughly Indian way of coping but it is predicated on a difficult or impossible business environment. And it encourages an attitude of short-cuts and evasions, none of which help final product quality or sustainable economic growth.”
Therefore, he said:
“We have to have the discipline to stick to our strategy of building the necessary institutions and creating a new path of sustainable growth where jugaad is no longer needed.”
I couldn’t agree more with Rajan.

The other end of the spectrum consists of start-ups. And boy, has start-up culture picked up in the country. Today, India is 4th largest on the start-ups list, after the US, UK and China. Remember the term “Unicorn” from an earliest post? It refers to software companies founded after 2003 that are valued today at more than $1 billion (yes, that’s billion with a “b”). Today, that list includes Indian companies like Flipkart, Snapdeal, InMobi, Ola, Zomato and PayTm among others!

In 2015 alone, over $8.7 billion was invested in start-ups in the country: Ola raised $755 million, Flipkart got $750 million and PayTm raised $680 million. Now you see why global giants like Uber and Amazon are pouring so much money into India: if they don’t, the local startups will win by default. Most of the start-ups for which you see ads (Snapdeal, Quikr, Food Panda, Pepper Fry and Saavn) all raised more than $100 million last year. And who are the investors? It’s a diverse mix consisting of Indian, US and even Chinese entities.

Did you notice the common theme in all these start-ups? They are almost all Internet/software based. Why’s that? Several reasons: software companies need very little money to get started as opposed to, say, steel or auto companies. It also helps that the Internet is one sector that doesn’t have too many entrenched players in many areas (e-commerce, travel, food, e-payment) who can kill new companies by sheer size. And this sector doesn’t need the institutions and systems that Rajan talked about: hell, they get their funding via venture capitalists rather than the banking system.

So while we build the systems and institutions that Rajan talked about, it’s good to see us moving along in other areas to build companies on a size and scale that would never be possible with just the jugaad mentality.

Comments

  1. Ramiah KumarJanuary 2, 2016 at 8:42 PM

    Sure. The point is well taken.

    We need to change our mindset like this in ever so many other aspects too. Our laws can be archaic, our bureaucracy is a huge system of very low efficiency, our ever willing to exhibit resigned indifference when something can be done etc. all of which are entirely due to our attitude.

    We can and should do for the better.

    ReplyDelete

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