Professor Gnanaharan

January 2007

Two recent articles/stories in two different business dailies acted as a trigger for this Blogger to send this suggestion to Honorable Finance Minister, Shri.P.Chidambaram virtually for a virtuous reason.

One relates to a pertinent and powerful observation made by the Management Guru, Prof. C.K. Prahalad (The Economic Times dated 5th January 2007) on the efficacy of market mechanism in addressing the inefficiencies of the agricultural sector. The other is an article by Prof.Aneel Karnani (Business Standard dated 6/7 January 2007) where he emphasised the role and responsibility of the State in making available the essential services like basic education, public health, water, sanitation, public safety and infrastructure. Interestingly, both the Indian Professors are teaching at Michigan Business School.

While responding to reporters at Great Lakes Institute of Management,Chennai after addressing its students and alumni, Prahalad made this observation : "I think agriculture is not going to be reformed by agricultural policies. Agriculture is going to be reformed by logistics".

Obviously, Prof.Prahalad bets on the power of market mechanism rather than on Government policies. The huge investments made by large retailers in their supply chains, Prahalad believes would address the problems that remained stuck despite a plethora of policy interventions.

Prof.Aneel Karnani looks at the other side of the picture to show how important it is for Government to perform its function particularly in providing public goods. To quote him: "In recent years, the political ideology of the world - and of India - has shifted decisively towards an increased role for markets and a correspondingly decreased role for the state. But the role of the state has certainly not been eliminated, nor should it be".

Their points of view appears to be at loggerheads. But that is more apparent than real. In actual practice, they have a complementary role to perform. The trick is to understand clearly their respective roles. The observations made by them are prescriptive in nature and capable of producing solutions - if only an appropriate mechanism for making this happen is found out and put in place.

One such approach is briefly outlined here. The rationale behind this proposal is to encourage participation of different segments of the society in the development process. The vehicle to be used for this is enterprise creation on experimental basis. By seeding high impact making enterprises most of the agricultural and other sectors' problems can be solved.

Government from time to time set up Study Groups and Working Committees and ask them to go into the problems faced by different sectors and segments and come out with right solutions or suggestions to overcome them. They are necessary and will continue to have relevance in future as well.

But at the same time, there is a sound logic in creating Working Groups which would literally work on specific problems/issues. Such Groups can be encouraged to work on a spectrum of issues across the breadth and length of the country. When proved successful in the place of experimentation, they can morph into enterprises - commercial or social depending upon the cases.

The idea is to incorporate such a mechanism in the Union and State Budgets. Academic Institutions, Non Government Organisations(NGOs) and Special Purpose Groups in the Private Sector (assembled exclusively for the purpose) can be encouraged to participate by pitching with innovative ideas and plans. The criteria for selection and funding should be : simplicity, sustainability, and scalability of their ideas apart from their commitment.

If World Bank can reinvent itself by embedding such features in finding and funding innovative projects some five years ago, (through Development Marketplace) Government can also eminently embark on such practices and experiments. This could well be one way to make the development process much more democratic and engaging. In the process, it also makes use of the people who have fresh perspective and innovative solutions to development.

Already Presentation of Union Budget by Finance Minister is the most keenly awaited and most popular economic event in the country. By installing and institutionalizing such a system in the Budget, it could be made even more popular and participative in a meaningful manner.

India already boasts few success stories in innovatively addressing key development issues. Amul and Aravind are two shining examples each representing the commercial and social enterprise models which demonstrate the power of vision driven organizations in transforming the life of the people.

Amul today is the world's largest processor of milk and Aravind does the largest number of eye surgeries in the world. Can these kinds of success stories be replicated in other areas crying for innovative solutions? Can this be done by Government playing the "enabler" or facilitator role?. Can this feature be built into the Budgets?

It may be an IDEA whose time has come. Are we ready for that?