Nandan Nilekani: One plants ideas of reform which may take years to fructify: Nandan Nilekani – The Economic Times

Clipped from:

‘I am now comfortable with the pace of change in the system.’

Whatever we are doing in terms of cash transfer needs to be well targeted and reach the right people, says the co-founder of InfosysNSE 1.24 %.

Anything specific that has been missing in the fight against Covid-19 so far and what needs to be done?
Testing can be scaled up. We have largely done testing in the public sector but we also have a lot of very good quality private labs in the country. As the Supreme Court has upheld the decision on the payment of the private labs from the Ayushman Bharat Scheme which covers half a billion people, the private lab ecosystem can be used to increase the rate of testing. The combined government and private lab testing will pan out to several hundred thousand people and that would make a big difference.

The second thing is it is not just testing alone, it is also about contract tracing and making sure that people go into either institutional quarantine or home quarantine. It is about the back-end stuff, hospitals, doctors, ventilators and so on. We need both but our ability to rapidly identify hotspots and bring these under control is going to be a very important part of making this successful.

A stimulus package was announced. Some economists we spoke to feel that this is at best a sedative, it is not going to solve the deep and painful recession that India is heading for as the total fiscal impact is less than 1% of GDP. Do you think more needs to be done towards giving cash in the hands of people to stimulate demand and get the consumption engine going again?
Well cash in the hands of people is always welcome and we will talk about direct benefit transfer (DBT) later but I think India does not have the benefit of an US which can run up huge deficits. If India runs up huge deficits, then it leads to challenges on the credit rating front, higher cost of global borrowing and all that. We work within the constraints that we have. So that is what the government has done and whatever we are doing now in terms of cash transfer needs to be well targeted and reach the right people.

The other issue of course is about migrant workers. Azim Premji recently said that what has happened to them is an unforgivable tragedy. Is there something we can do by leveraging the technology to ensure that we build a more inclusive, more equitable society to bridge the gaps?
Absolutely. One thing we have learnt in this unprecedented situation is the need for resilient systems. For example, if you look at the Aadhaar enabled cash transfer, that has come out to be extremely resilient and in April, 150 million people did 400 million transactions to withdraw money from an Aadhaar enabled payment system.

This was at a time when banks could not open branches or ATMs. All the thousands of business correspondents (BCs) and CAC centres and India payment banks postmen going around with devices, enabled people to withdraw money from their accounts just using biometric authentication. That is what resilience is about and there are five principles for this resilient system design.

First, you need national portability. Whatever you design, the person should be able to access that service or product anywhere in the country. Second, you need a choice. He should be able to go to any supplier or any outlet of his choice to get his service. Third is universal and universality which means that everybody should get access to it. Fourth is convenience. The farmer should get his cash while he is dealing with the thing. The old pensioner should get his money at home and so on. Fifth is high volume low cost population skill systems. Whenever these principles have been done, we have had resilient systems which will work even in this kind of a crisis.

One initiative that the government seems to be doubling on is the one nation one ration card scheme. Is that something you have been tweeting about as well? The idea initially came from a taskforce that you headed way back in 2011. I read that the idea did not find approval there and it was rejected by the NAC led by Sonia Gandhi. Can you take us through what happened then? Why did we not have this way back in 2010?
The 2011 report which I had shared met these five principles of nationwide portability universality. This means that somebody could migrate from a village to a city and could withdraw his ration there. Or, if he left his family behind. the family could withdraw part of it in their home town and he could withdraw another part in the city. All this was built in the design of this but in some sense, the idea was ahead of its time. At that time, the need for this mobility nationwide portability choice was not fully understood.

Now it has become apparent that this is something we need. Sometimes one plants ideas of reform which may take many years to fructify but that is the nature of the beast.

Do you feel vindicated that something that you have worked on in 2011 is finally coming to fruition?
Many of the things that we have worked on, have delivered results many years later. Aadhaar of course is well known. The cash transfer UPI took seven years to build. The FASTag was designed in 2010. The national portable PDS system was done 10 years back. On GST, we did the first report in 2010. Basically, one thing you realise in public service is that when you have large technology-led initiatives, it takes some time and then ultimately we reach a point due to an external event or a leader who understands it and suddenly it gets implemented. I am now comfortable with this pace of change in the system.

The other aspect is the complexity that this involves. There are over 750 million people who are eligible for PDS benefits. There are over 5 lakh ration shops in the country. It is going to involve a very complex technology. Are we prepared to scale it?
Absolutely. For Aadhaar, we had 35,000 enrolment stations. Today, we have a few 100,000 business correspondents, 700 million people who have linked their bank accounts with Aadhaar. We are used to this population scale and I do not think the scale is anymore a challenge. We have done it before in many other schemes.

PDS is a logical thing to do and it is there in our original recommendation that somebody should either be able to withdraw food or cash from the PDS so that he may choose to either take food or take money and buy food from the neighbourhood store. That again is something that I would still believe in.

Is this yet another initiative that you will be working on closely because your advice has been sought for pretty much every major technology scheme by the government?
I am sort of retired from that. I am Chairman of Infosys right now but I am available for discussions obviously.

For all practical purposes, you are now India’s default chief technology officer…
I do not agree with that at all. There are a lot of phenomenal people working in the system, who are working day and night to make these systems work. I played a certain role in a few key systems — four or five of the big ones and I am proud that I did that. I am grateful for the privilege of doing that to both the governments that have been involved and I am happy with that.

So you are not going to see a cabinet role for you?
I am fine locked down in Bangalore, I am very happy.

There is no doubt that over the long term basis, this would lead to an acceleration of digital economy, but obviously there is a lot of pain in the short term. Every day, we read about layoffs across industries be it financial services, media, unicorns, startups. There is talk about Infosys undertaking restructuring of senior roles. Is this going to be the trend for at least the next quarter?
Well, in the short term, it is going to be challenging and that is what many firms have said. There is also another example of resilience. Just like I talked about resilience in government systems, we need resilience in business and one of the key drivers of resilience in business is the ability to generate free cash.

One of the things that we have realised with the startup ecosystem is that they have always been dependent on raising capital from some VC or the other. If that works well, when you have liquidity and lots of money, there is winner takes all and scaling and all that stuff. But in times like this, when people are not willing to lay out money, then you really become fragile and you just have a runway of a few months. Therefore, you will see a lot of challenges in that area.

The ability to build a profitable business that generates free cash is also a sign of resilience and Infosys generates $2 billion of free cash every year. While companies are raising money, this quarter, Infosys was actually able to give a dividend of half a billion dollars. So it is important that we think about how we make businesses resilient by generating cash.

Could this lead to some kind of change? As you said startups have a very VC driven, cash-burn driven model. Will the present situation force them to reset and look at profitability?
Oh, absolutely. First of all, they had built organisations and cash burns meant for growth of 3 times or 5 times from where they were and they went from x to 0.2 x or something and now they just have to get back to x which was their pre Covid run rate before they can even think about growing. So this obviously means to reset a lot of costs.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s