In conversation with Mr. Rana Kapoor – Innovation in the Economy
By UK India Business Council (UKIBC)
In a candid interview with Mr. Rana Kapoor, Founder & CEO, YES BANK, President, ASSOCHAM, Dr Rakhi Rashmi, Barrister England and Wales explores what Innovation in the Economy mean to him.
Mr Rana Kapoor, Founder & CEO, YES BANK, President, ASSOCHAM
As a professional entrepreneur, since 2003, Mr. Rana Kapoor is progressively establishing a high quality, state-of-the-art private Indian bank with a vision of ‘Building the Best Quality Bank of the World in India’ by 2020. Under his leadership, YES BANK has steadily evolved as the “Professionals’ Bank of India” with exemplary business and financial outcomes as evidenced in the financial results since inception.
1. What do you see as the major innovation opportunities in each stage of the value chain, work architecture and future constructs of development in the UK-India collaborative universes?
Just as England was the birth place of industrial revolution and innovation during 18th & 19th century, India currently is at the cusp of “start-ups” revolution.
Nasscom 2014 India start up report states that by 2020 there would be more than 11500 startups alone in technology and digital space from 3100 currently. The strong startup landscape is leading to emergence of focused domain solutions in the space of supply chain management, healthcare, agriculture, education among others.
Demographic dividend, budding class of educated youngsters, and an entrepreneurial policy environment provides a unique opportunity for the startups to thrive in India. This Start-Up India revolution offers tremendous scope and could emerge as a major point of interest in the UK-India collaborative universe.
Prime Minister Modi recently launched the ‘Start up India’ campaign to provide high quality eco system for nurturing and encouraging innovation & entrepreneurship in India.
2. Given both countries want to grow their economies through manufacturing, and related sectors such as infrastructure, services etc should we identify areas of common interest and come up with a plan to grow our industrial economies together?
India is ranked number one investment destination in the world as per the 2015 Baseline Profitability Index (BPI). In FY15, FDI inflow in to India increased by 27%, however investment from UK declined by 55% to USD 1.44 bb. Given India’s thrust on manufacturing and two country’s mutual interest in services sector, UK investors could explore greater collaboration in such sectors. With UK on a firmer economic footing, time is ripe for the same.
Sectors of common interest look most promising;
1) Pharma: Pharmaceutical industry in UK accounts for 9% of manufacturing output and 10% of manufacturing exports. UK is a base for high quality pharmaceutical R&D and delivery system. It is also a major engine for research and innovation in the world. Indian healthcare industry is also a rapidly expanding segment and its market size is currently estimated at USD 65 bn. India’s expertise in production of generics and vaccines, its pool of second largest English speaking population to steer research amid its foray into R&D, a new patent regime and government’s policy push to boost healthcare access generate a huge scope for UK & India to collaborate in this segment.
2) Renewable Energy: Interest in renewable energy in the UK has increased in recent years due to new UK & EU targets for reduction in carbon emissions (by 2020 UK must produce 15% of its energy from renewable sources). Presently, it is nearly half way towards this target. Likewise, renewable energy has emerged as policy focus for government in India. The Ministry of New & Renewable Energy has set a target of achieving overall renewable energy installed capacity of 41,400 Mw by 2017. Presently, India achieves only ~13% of renewable energy potential creating tremendous opportunity in the renewable segment in India.
In the first quarter of 2015, according to Bloomberg New Energy Finance, India and UK saw 59% and 12% respective increase in clean energy investment (vs. 2014) compared to a decline witnessed globally. Given the critical importance of clean energy in these countries, a collaborative scope is likely to entail huge potential.
3) Infrastructure: Three transformational initiatives by the Indian Govt. aim at providing 20 million homes for the urban poor by 2022, improve urban and rural infrastructure and develop 500 cities with the population of over Hundred Thousand
- ‘Housing for All by 2022’;
- ‘Smart Cities’ mission; and
- ‘Atal Mission for Rejuvenation and Urban Transformation (AMRUT) mission
4) Education: Specific schemes announced so far, include
a. IT based Student Financial Aid Authority to administer and monitor Scholarship as well Educational Loan Schemes
b. Creation of IITs and IIMs in every state
c. National Skills Mission through the Skill Development and Entrepreneurship Ministry
d. Setting aside INR 1500 Crore (GBP 15 million) to employ rural workforce, the key to harness the demographic dividend
India’s literacy rate at 62% much below comparable levels of >90% in other EME’s
3. What is the best way for developing this interaction/dialogue to its next stage happen?
Bilateral dialogue of government and business, sharing of best practices, and knowledge driven capital flow is the best way to take forward collaboration between two countries. Given the importance of economic partnership, the mandate of UK-India Economic Financial Dialogue between Finance Minister in India and UK’s Chancellor of Exchequer should be enhanced.
4. What infrastructure mechanisms could we share or exchange to make a real difference?
Exchange of research capabilities and development of joint forums for research in fields of mutual interest on the lines of RCUK (Research Councils UK) could make real difference. Both government and industry bodies could look at sponsoring specific skill upgradation programs on a bilateral basis.
Specifically, we see collaborations in the following field;
Education: The public expenditure on education is a meager 3.3% of GDP as compared to 5.5% of GDP in OECD nations and 4.4% in lower middle income nations The UK-India Education and Research Initiative (UKIERI) was set up in 2005. This initiative has been able to link 475 schools and higher education establishments in the UK and India
Defence: Collaboration in research and development between DSTL of UK and DRDO of India given India’s pursuit of becoming a defence manufacturing hub. India has hiked defence sector FDI cap to 49% from 26%.
Tourism: In 2014 UK accounted for ~11% of the total tourist arrivals in India ranking third in the world. In Aug this year, the government extended the e-visa scheme to UK taking the total list to 113. However, most tourists from UK into India are of Indian origin. Moreover, India does not feature among the top ten markets for inbound tourism into UK suggesting tremendous scope for enhancing bilateral tourism.
Infrastructure: Last year, India and UK agreed to set up a credit line worth GBP 1 bn to finance infrastructure projects in India with an endeavor of increasing greater co-operation in infrastructure financing. Taking the initiative forward, two countries should expedite the setting up of Infrastructure Feeder Fund where a London based fund that will raise capital from London market for investing in India’s infrastructure debt is being worked on.
5. What emerging economic opportunities in each country can we address in partnership?
Both British and Indian economy share key similarities. Both the economies have a buoyant and a large services sector (UK 78% of GDP, India 60% of GDP) and domestic consumption is the key driver of growth. Currently, both the economies are witnessing encouraging growth prospects with the policy makers focused on improving investment climate. As such, emerging economic opportunities for partnership are likely to arise in areas of common interests like services, infrastructure development, and skilling and higher education among others. The GBP 1 bn credit line for investment in Indian infrastructure projects offered by UK is a unique opportunity to bolster bilateral relations and partnership.
6. What should the role of governments be in this interaction?
Contrary to the conventional view that governments have little capacity to spur innovation, I believe the state can play a critical role in the area of innovation. From Silicon Valley in the US, VC funding through Yozma in Israel, public innovation fund Sitra in Finland, to state backed support for innovative companies like Huawei and Yingli Solar in China, the government has successfully displayed its policy vision for germinating innovation and entrepreneurship across some of the most innovative countries in the world.
For India and UK, the government’s role should be that of an enabler and facilitator. Policy thrust areas like ‘Make in India’, ‘Smart Cities’, ‘Skill India’ etc can be leveraged to create Innovation Hubs.
The Indian government has displayed its commitment for encouraging innovation in the country through establishment of Atal Innovation Mission (AIM) with an initial capital of Rs 150 cr. AIM will be an Innovation Promotion Platform involving academics, entrepreneurs, and researchers and draw upon national and international experiences to foster a culture of innovation, R&D and scientific research in India.
