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March 4, 2003
Service industry alone will not grow the economy

NEW DELHI -- On the occasion of the golden jubilee of the IITs, Convergence Plus asked Arjun Malhotra, a distinguished alumni of the oldest among all the IITs, about the changing role of the products of these elite institutions and their future programs in the liberalized economic environment. Malhotra founded TechSpan in the early 1980s with Shiv Nadar of the HCL group, the top-most diversified IT company in the country. He was also president of HCL America for many years. Later, he left HCL to found TechSpan, a top-level software firm having offices in India and the Silicon Valley. Recently, he has brought together the alumni of IIT Kharagpur in a Vision 2020 initiative to raise $200mn for the development of their alma mater as a world class institution like Harvard and Stanford. Excerpts from the discussion that Convergence Plus bureau chief Rajendra Prabhu had with TechSpan chairman Arjun Malhotra.

Convergence Plus: The perception that IITs are an elitist set of institutions and supplying well trained skilled man power to USA is now changing. Would you say that IITians have significantly impacted the competitiveness of US economy and thereby changed USA's perception of India?

Arjun Malhotra: When you say, the IITians have significantly impacted the US economy, that might be a difficult statement. The US economy is really huge. The IITians have made a significant impact in the US. Specifically in certain sectors, not just connected with technology only and there are a number of other sectors too, definitely. The IITians are probably the leading brand in the US. Gandhi and IIT would be the two Indian brands in the US.

CP: Has this changed the US perception of India?

AM: Definitely, a significant part of this whole acceptability of outsourcing to India or India Inc. that NASSCOM represents, a large part of the credibility would have come directly or indirectly from the contribution of IITians. They definitely have had an impact in a fairly wide sense.

CP: What about Indian perception that IITians are enriching USA and not India? Is it a misnomer when people say most of the IITians are going out?

AM: Only 30 percent to 40 percent of the IITians are going out. Over 50 percent are staying back in India. Last December, I attended a function where I happened to meet many IITians who are all heading organisations in India. They are all having a significant impact. Some of them have started ventures of their own. If we take a sample of IITians like Narayanamurthy and Nandan Nilekani, and if you look at the whole IT industry, there are a number of other IITians who are playing a significant role. In Reliance, there are a couple of IITians who are quite senior there. In Tata Group, K. Gopalakrishnan, the Vice-Chairman, is an IITian from Kharagpur. Phiroz Vendrewala, now the head of Tata Power, is an IITian from Kharagpur, and the head of TELCO, TISCO -- one of the two is from IIT, Madras.

I was at IIT, Kanpur, the other day and was told that over the last 10-15 years, lots of IITians have been going to IAS, and some of the significant initiatives and changes in IAS have been undertaken by these IITians.

CP: Our idea of IAS, as an unchanging bureaucracy may have to be revised?

AM: Yes, but not too many are going in. There is only a handful that is getting into the IAS. I believe, they are setting the standards, if I may use the term, the initiatives they are taking and the way they are doing things that are different. The Dean and top level people at IIT, Kanpur, are very proud of some of the achievements of their alumni in the IAS. When people get into a bureaucratic environment, they are actually trying to break some of the shackles they would be living under. Knowing the people of IITs, it is no wonder that they become change agents. The chief minister of Goa, Manohar Parikar, is an IITian from Bombay. The head of SpicMackay, Dr. Kiran Seth, is an IITian as well. So, IITians are not just getting into technology, companies and other areas. They seem to be in all sorts of endeavours.

CP: Some of them have become like Narayanamurthy, the icons of the young now. Would the IITians be the heroes of the knowledge age?

AM: You are probably right. Most of the new age icons are those who come out of institutions like IIT.

CP: You are heading Vision 2020 for IIT Kharagpur. What is this vision about? How much investment are you envisaging?

AM: In fact, this program is a part of the IIT alumni's foundation. IIT has been very successful in getting some large value donors who step forward and give big donations. We have not really done very attractive grass root campaigns to get larger number out of the 40,000 IIT, Kharagpur graduates to come forward and give some small donations that would total upto a substantial amount. What we have done is a small amount to start an 'Advanced VLSI Laboratory.' We had started this experiment three years ago. It has already been accepted as a leading place in India for advanced VLSI design and is considered as one of the top ten in the world. This has happened in a short period of three years, largely because of the quality of the manpower doing the work. Given the facilities, they will accept any challenge.

We are looking at a number of other initiatives at IIT, Kharagpur that have already started specialisation in medical technology, nanotechnology and other emerging areas. The HRD ministry will give them grants two to four years later, but the cutting edge is happening right now. If the alumni can give them 75,000 to 100,000 dollars a year, over three years, we can motivate them to get into some new area where they become leaders in those front-ranking technologies.

We are trying to start a grass root campaign to collect $200 million. This is a 20-year programme. There is no scientific basis for this number of $200 million. However, for the first year, we are planning to collect $1.5 million. Now, we are in the process of collecting the database, analysing how people can donate so that we can make sure that they get some tax benefits, organising some programs, etc. We will come back to India and talk to the alumni here, six to nine months later. We have a lot of work to do, especially with the government.

Getting people to donate money to non-profit educational institutions is not easy in India. The government does not give you the tax breaks that they give abroad. We need to discuss with the government in this regard. People have the tendency to spend money rather than donating it. Basically, this programme is going to do grass root campaigns. Hopefully, a large percentage of the alumni of IIT, Kharagpur, become involved with the campus. We are not just asking for money. If they have time for us, they can come to the IITs and teach, if they have any specialisation.

If you feel like doing social work in the area around the IIT, whether it is a school, or any other institution, come and tell us how we can improve them. If we can improve the economic condition of area around the IIT, automatically, it becomes a better place to live in. Those are some of the big challenges. We are working with schools on the campus. We have central schools in the IITs where the kids of gardeners and professors are entitled to study. Some poor children do not get tuition at home. Automatically, they began to leave schools and could not even complete their high school studies. Hence, we have started a program at IIT Kharagpur, where we are getting some students to pick up the poor children and mentor them in their studies. The schools love it. They make them feel good.

When we look at education, IIT is not only giving technical education, but it gives a well-rounded education in liberal arts, social sciences, etc. This program actually adds one more dimension to this well-rounded education. We really think that people graduating four to five years from now will actually be much better human beings than us.

CP: Why is it that despite top class engineering institutions, India is far behind China in hardware and manufacture in general? Bill Gates cautioned India in his message at IITians meet in Silicon Valley.

AM: There are two reasons. One, the government has always understood hardware, hence, it has been regulated a lot. When I was in HCL, we faced so many problems with the government regarding hardware. I feel that the government has to rationalise this. Today, broadband has been laid to many houses. We need to provide low-cost access devices to the people. We have to get them to start using it. This is one way of doing it. Somehow, this does not seem to be very important to our policy makers. There may be many other ways of doing it. The government must actively undertake this. There is a major problem in manufacturing in this country. The entire infrastructure is not suitable for manufacturing. The customs take two to three weeks to clear goods and it takes some more time to transport by road. I have run manufacturing here for a couple of years. When we were trying to export manufactured goods from HCL, we faced lot of problems.

Then, there you have the electronic hardware parks (EHTPs). If the components are sent out for soldering, it takes several weeks to get refunds after the components have returned. If we have to lock up our funds in such payments, where do we get the return? So, the real problem is infrastructure. People will manufacture because they know how to manufacture. We have been manufacturing for so many years. However, the whole process encourages the assemblers who do not have to pay taxes. They have over 50 percent of the market share. These are all published statistics and the government knows it. So, 50 percent of the industry is not paying taxes. I would say that we should give subsidy to people who are paying taxes. However, government does not seem to think that way.

CP: Do we need to change the rules?

AM: More than that, we need an attitudinal change. We have two units in Noida. If we want to take goods from one unit to another, it takes us two weeks time. The customs have to complete their formalities. Whether I am earning foreign exchange for the company or for the country, customs do not care. That is the attitude. Intel or others do not want to set up chip plants in India, but they set up lots of chip plants in China. We have better engineers and can probably do more designs for them than China does. Five years from now, this may not be true. If we do not get into it now, we are going to lose it. The service industry alone will not grow the economy.

CP: What new courses or changes in IITs approach to engineering and technology would you like to bring about to make India technology the hub of the world? Is there a call for reservations in IITs for all and sundry?

AM: The IITs are doing a better job. The problem is that they do not get faculty of the quality they want. It is very important to give the inputs they need. The government is putting pressure on them to increase the number of graduates. So, when the IITs does not get enough faculty, the need to increase the number of students is going to cause a huge problem. Therefore, all the students do not get the kind of personalised attention needed in an institution like IIT.

We should really have a merit system in choosing the people for academics, administration, etc., in the IITs like a merit system in the entrance examination. If we can do that and people are not allowed to interfere in appointments, the institution can automatically get a name and a reputation. You will find an institution that this country can probably be proud of today and can be proud of for a long time. Some reputed universities, like, Allahabad and Kolkata were known to be world class 50 years ago, but are today really unknown. This really worries me. Therefore, I don't want the IITs to be like those unknown institutions. We must make sure we don't make the same mistakes in the IITs as we did in the leading universities, actually killed them.

CP: How can IITians pay back the country for the benefit in high-tech education from IITs at comparatively low cost? Should education tax be applied on IITians?

AM: I would do it a little differently. I would price the education the way it should be priced and give them a loan to get it. The parents have to pay the money now. Why should we tax the parents of the middle class students? The IIT is a merit-based institution. The IITians' degree is a good collateral. Whether he goes abroad or sits in India, I have no problem with that at all. Making parents pay will perpetuate the digital divide as poor, but meritorious students, will not be able to afford IIT education.

Lot of us IITians are so much emotionally involved with the IITs, partly because of friends they make, the physical building and infrastructure, and partly we all know that we have got a world class education at throw away price. You do feel subconsciously that you must give something back. Right now, we are seeing lots of them are coming back to IIT.

What I don't want is that the 20-30 million dollars a year that is coming back to IIT is reduced to zero by putting a tax or giving a loan. We can encourage people to give back when they can afford to give back and encouraging them to do that may be a better way. Taxing the IITians will look like an old economic solution to tax the industry that is doing well. I would rather tax such an industry less as the more wealth it creates, the more money it will pay.

CP: You mean that the IITians are creating wealth for the country?

AM: The creation and distribution of wealth is very important. Many IITians have come back and given back to their colleges and to their community. They are doing it entirely differently from their earlier generation that put their money into temples. Now, the people are putting money into other institutions. The IIT system is working well. Do not tamper with it. Let it run the way it does. We should let them be a little more independent.