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The Secret of India’s Economic Success? Reincarnation

The recent slowdown in India’s economy has everybody from stock investors to grand strategists and foreign policy poohbahs concerned. In a Project Syndicate piece we found while scanning Lebanon’s English language newspaper The Daily Star, Indian parliamentarian and intellectual Shashi Tharoor showcases reasons for optimism about India’s future.

India, Tharoor tells us, thrives on “frugal innovation,” or the art of transforming luxury goods by designing cheaper and more accessible versions, building markets for such items where none previously existed. To “reincarnate” these high end products, Indian entrepreneurs must get creative:

Indian ingenuity has produced a startling number of world-beating innovations, none more impressive than the Tata Nano, which, at $2,000, costs roughly the same as a high-end DVD player in a Western luxury car. Of course, there’s no DVD player in the Nano (and no radio, either, in the basic model); but its innovations (which have garnered 34 patents) are not merely the result of doing away with frills (including power brakes, air conditioning, and side-view mirrors).

Reducing the use of steel by inventing an aluminum engine; increasing space by moving the wheels to the edge of the chassis; and relying on a modular design that enables the car to be assembled from kits proved conclusively that you could do more with less.

The transformative ingenuity isn’t limited to mere consumer products like cars. By thinking both frugally and outside the box, Indians were able to pull the rural poor into the rest of the country’s modern banking system:

Even the financial sector has seen innovation. Just three years ago, there were only 15 million bank accounts in a country of 1.2 billion people. Indians concluded that if people won’t come to the banks, the banks should go to the people. The result has been the creation of brigades of traveling tellers with hand-held devices, who have converted the living rooms of village homes into makeshift branches, taking deposits as low as a dollar.

For those Americans wondering what’s behind India’s astounding dynamism, and what could sustain it through the economic winter, Tharoor’s treatment of “frugal innovation” is a good first peek into the shifting gears of the powerhouse on the subcontinent.

And here’s a thought for the future: the products and delivery systems Indians develop in South Asia have a lot of potential to solve problems in Africa. Historically, India and East and South Africa had close and beneficial trade relations; a new wave of Indian commerce and know how could do more to change Africa than all the big budget western and Chinese aid projects have yet managed to accomplish.

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  • Atanu Maulik

    Indians have no choice but to innovate to survive. After all they have to learn to live with corrupt, dysfunctional governments. So you have private transport, private power generators, private water supply and purification system… must go on. I am not sure how much India should be proud of such a state of affairs though.

  • Akshay Kanoria

    But this is no excuse for assuming that growth will keep going on without 2nd generation reforms. For all the ‘jugaad’ or frugal innovation, the Indian economy will eventually stall without massive reforms in governance and education.

  • David Bennett

    Unfortunately Mr. Tharoor is not much familiar with auto design. All of the “innovations” that he mentions have been and are being used by any number of auto makers around the world. The only innovative thing about the Nano is the $2000 price, which would end up being at least $4000 in any western country after the regulators get done beating the poor thing about its head and shoulders. It is great that Indians can produce an economical car for themselves but calling it innovative is absurd.

  • JCP Brown

    Another good example to cite is the dabbawala supply chain network in Mumbai. A few thousand food & lunchbox deliverymen, many illiterate, are as efficient & reliable as any six sigma blackbelt. No paperwork, no bureaucracy, no frills. Just your home-made meal, served on time. And this has been going on for the past 125 years or so!

  • Casey

    Imagine how many more opportunities of this sort there would be for the poor not just in the third world but everywhere if it weren’t for the government intervention of copyright.

  • Mick The Reactionary


    “Imagine how many more opportunities of this sort there would be for the poor not just in the third world but everywhere if it weren’t for the government intervention of copyright.”

    And even more opportunities for the poor to lift themselves up if only government would decriminalize the holding up the banks.

    Imagine how many more inventions and the poor could create with all that money they would have liberated from the banks.

  • Casey

    @Mick The Reactionary

    Actually Mick, there probably would be a lot more opportunities for the poor if the state also ended the banking monopoly and allowed regular people to create their own forms of financial structure.

    That’s a topic for another day however. To deal more directly with your analogy, money represents actual scarce commodities. Copyright on the other hand creates an artificial scarcity and limits the way that people use the resources of their own mind.

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