Category: Doing Business

The 4th Industrial Revolution presents some of the most transforming opportunities in human history. Why?

Because disruptive technologies and trends such as the Internet of Things (IoT), robotics, virtual reality (VR) and artificial intelligence (AI) are changing the way we live and work.

In fact, while previous industrial revolutions were based on one major change, we face ten happening together – robotics, artificial intelligence, nanotechnology, quantum computing, biotechnology, the Internet of Things, the Industrial Internet of Things, wireless technologies (5G), additive manufacturing/3D printing and fully autonomous vehicles.

The First Industrial Revolution took place from the 18th to 19th centuries in Europe and America. It was a period when mostly agrarian, rural societies became industrial and urban. The iron and textile industries, along with the development of the steam engine played central roles in the Industrial Revolution.

The Second Industrial Revolution took place between 1870 and 1914. It was a period of growth for pre-existing industries and expansion of new ones, such as steel, oil and electricity, and used electric power to create mass production. Major technological advances during this period included the electric light, telephone phonograph and internal combustion engine.

The Third Industrial Revolution, often called the Digital Revolution, refers to the advancement of technology from analog electronic and mechanical devices to the digital technology available today. The era started during the 1980s and is ongoing. Advancements during the Third Industrial Revolution include the personal computer, internet and ICT.

The Fourth Industrial Revolution describes the exponential changes to the way we live, work and relate to one another due to the adoption of cyber-physical systems, the Internet of Things and the Internet of Systems.

How will it work? One example – as we implement smart technologies in our factories and workplaces, connected machines will interact, visualize the entire production chain and make decisions autonomously. This revolution is expected to impact all disciplines, industries, and economies.

In his book, The Fourth Industrial Revolution, Professor Klaus Schwab, founder and executive chairman of the World Economic Forum, describes the enormous potential for the technologies of the Fourth Industrial Revolution as well as the possible risks. He said, “The changes are so profound that, from the perspective of human history, there has never been a time of greater promise or potential peril.”

Schwab calls for leaders and citizens to “together shape a future that works for all by putting people first, empowering them and constantly reminding ourselves that all of these new technologies are first and foremost tools made by people for people.”

Will we put people first?

According to Dhiraj Nayyar, Chief Economist, Vedanta Ltd, “Perhaps India’s economy is not a lumbering elephant, but a tiger on leash.”

What does he mean? In a major article in the Economic Times, he notes that every time India tries to break free, it hurts – rising economic growth is plagued by side-effects, whether high inflation or rising Current Account Deficit (CAD). With growth crossing 8.2% in the last quarter, India’s recovery may be adding to its external account woes.

I have followed the writings and commentary of Dhiraj Nayyar for some time, including when he was with NITI Aayog. He has just released a book “Modi and Markets”. Always clear and persuasive, he is a passionate advocate of a successful India.

He believes politicians look for the quick fix, rather than curing the problem.

Instead, politicians should “focus on enabling the most important feature of free markets: competition. In the end, that is the principle which delivers the lowest prices, highest quantities, reasonable profits, investment and plenty of jobs.”

Since economic liberalisation, the successful industries have been aviation, telecom, pharma, IT, hospitality and automobiles — those where competition has been intense. Sectors where the government has retained greater control on outcomes through policy, and dominant public enterprises have done less well.

Dhiraj Nayyar argues the government should test every policy on the principle of competition. The goal of policies should be to ensure competition between enterprises operating in India, and to create a fair competition for India-based enterprises vis-à-vis their foreign counterparts.

He goes further: “Domestically, policy should be agnostic about whether an enterprise is foreign, private domestic or public domestic, as long as the policy/regulatory regime creates maximum competition.”

Entry for a new firm should be simple, exit for a dying firm should be orderly.

India suffers from mostly self-imposed constraints. A more liberalised and flexible economy will help correct chronic CAD, while containing the pressures of excess demand as growth approaches double digits.

Dhiraj Nayyar concludes: “Less control by government will lead to outcomes that don’t need to be controlled. It will also lead to rapid growth without side-effects.”

As always, he makes a strong case – will politicians act on it?

Healthcare has become one of India’s largest sectors both in terms of revenue and employment.

During 2008-22, the market is expected to record a CAGR of 16.28 per cent.

The total industry size is expected to touch US$ 160 billion by 2017 and US$ 372 billion by 2022.

Indian companies are entering into merger and acquisitions with domestic and foreign companies to drive growth and gain new markets.

The hospital industry in India stood at US$ 61.79 billion in 2017 and is expected to increase at a Compound Annual Growth Rate (CAGR) of 16-17 per cent to reach US$ 132.84 billion by 2023.

Engagement through regular visits and providing innovation should prove to be fruitful in this growth economy.