My Thoughts and Expressions
Kiran Mazumdar Shaw

Thursday, 18 September 2014

Indo-Japanese Partnership Model can Ensure Highest Quality at Lowest Cost


Introduction: Strong Historic Business Ties

Prime Minister Narendra Modi’s call to Japanese businessmen to "Come, Make in India" has laid the groundwork for a special strategic global partnership between the two great Asian nations.

India and Japan are natural synergistic partners who can mutually benefit from closer commercial ties. Japan, the world’s third largest economy by GDP, is known for its unparalleled focus on quality. India, the world’s 10th largest economy, has successfully used its low-cost advantage to emerge as a strong manufacturing destination.

Maruti Suzuki and Hero Honda have demonstrated the   immense potential of Indo-Japanese business partnerships. Started in the early 1980s, these JVs have built enormous value for both partners and shareholders besides benefitting a large pool of customers.

Indian and Japan had signed a Comprehensive Economic Partnership Agreement (CEPA) in 2011, but its potential has not been exploited fully. Though Japan is the fourth largest investor in India, the $2.8 billion of FDI it injected into our country in 2012 was only 2% percent of what it invested globally that year. Similarly, Indo-Japanese bilateral trade stood at $16.3 billion in FY14, which is quite dismal given the huge potential that exists.

Common Economic Goals

Prime Minister Modi’s recent visit to Japan has breathed new life into the economic ties between the two countries.

Both PM Modi and the Japanese Premier Shinzo Abe share a common economic ethos and vision focussed on strong GDP growth and job creation.

While PM Modi is focussed on reviving a sluggish economy and navigating India towards a path of robust and sustainable economic growth, PM Abe is also trying to boost the Japanese economy by increasing export oriented growth and reducing inflation.

Given the commonality of their economic goals, I believe India and Japan should seize this historic opportunity to forge a world-beating partnership.

India’s ‘Low Cost’ Advantage

India’s unique position between Africa and Asia makes it an ideal partner for Japanese companies to use it as the low cost regional manufacturing hub.

The Indo-Japanese JVs in the auto sector have already established India’s strategic importance as a manufacturing partner. These successful partnerships need to extend to other areas as well.

As the largest and lowest-cost producer of generic drugs, India has much to offer to the Japanese healthcare system. The Indian pharma industry has already started playing its part in making healthcare affordable in Japan, which is increasingly looking at generic alternatives to costly innovator products.

It is estimated that nearly a quarter of the Japanese people are over 65 years of age. Japan’s population is projected to shrink from 127 million to about 87 million by 2060, and nearly 40% will be aged over 65 years. A rapidly ageing population means that Japan’s healthcare costs are likely to skyrocket in the coming years. Indian pharma can certainly help Japan to address this looming healthcare challenge.

The Indian pharma industry, which accounts for 40% of US generic drug imports based on volume, has already made a big difference in the world’s largest pharma market. Data from a 2013 US Report on Generic Drug Savings (which includes generics from other countries including the US) show that generic pharmaceuticals saved the US health system and patients a staggering $1.3 trillion in the most recent decade.

‘Made in India’ Generics and Biosimilars can therefore help Japan in scaling down its healthcare spends which stood at a staggering $3,200 per person in 2013.

Japan’s ‘High Quality’ Differentiator

Japanese manufacturers have an enviable reputation when it comes to quality systems, process efficiency and productivity through techniques like Kaizen & Six Sigma, which are considered global best practice.

Indian manufacturers can significantly boost product quality levels and operational efficiencies by institutionalizing these quality principles through training and skill development, thus improving their competitiveness in global markets.

Bilateral co-operation will boost local manufacturing operations in India, creating tremendous job opportunities for the growing Indian workforce.

India also stands to gain from Japanese expertise and investments in infrastructure, especially rail & road and the renewable energy sector, which can be great economic drivers for the country.

The $90 billion Delhi-Mumbai Industrial Corridor, a mega infrastructure project for which Japan is providing financial and technical aid, points to the immense potential of similar collaborations in future.

Looking Ahead

PM Modi’s Japan trip has underscored the need for a deeper economic engagement between the two nations.

To take this promising partnership to the next level, the Prime Minister announced the creation of a special Japan cell that will include two Japanese nominees for fast-tracking investment proposals from Japan.  It will also help to allay serious investment concerns relating to regulatory and operational impediments expressed by Japanese companies at the India-Japan Business Leadership Forum.

Japan has committed to doubling its current investment in India to $35 billion over the next five years. However, this is modest in the context of Japan’s total FDI outflow that was nearly half a trillion dollars between 2008 and 2012. Clearly there are enormous opportunities that await a steady, committed and long-term Indo-Japanese economic partnership.


I sincerely believe the combination of Japanese quality & technology with Indian manufacturing experience and cost advantage will reap enormous dividends for both the nations by ensuring market leadership through the supply of world-class products at the lowest cost to global markets.

Image adapted from: http://bit.ly/1pbk5MR 

Saturday, 12 July 2014

Healthcare Needs a Higher Dose of Medicine from FM

Image Courtesy: Pixabay
An educated, healthy workforce is of crucial importance for any country that is aiming for sustained economic growth. In fact, empirical studies have shown that health improvements provide a significant boost to economic growth in developing countries.

It stands to reason then that health and education should top the agenda of the Modi government, which has promised to raise the pace of India’s economic growth to 7-8% in three to four years from less than 5% now.

In light of this fact, the lack of concrete measures for the healthcare sector in Finance Minister Arun Jaitely’s maiden budget speech was disappointing to say the least.

What disheartened me more was the fact that there was nothing in Mr. Jaitley’s speech that lived up to the BJP’s pre-election promise of introducing “radical reforms” in healthcare.


Wednesday, 4 June 2014

The Global Right to Healthcare

The Othmer Gold Medal was given to me by Carsten Reinhardt, President and CEO, CHF
 
My Speech at The Chemical Heritage Foundation (CHF) 


I am deeply grateful to the Chemical Heritage Foundation for awarding me the 2014 Othmer Gold Prize.  This is an honour akin to being invited to join an extraordinary league of scientists, engineers, entrepreneurs, thought leaders and philanthropists, an emotion that is both proud and humbling at the same time.


As a citizen of the developing world, I am only too aware of the power of science and technology in innovating and enabling the alleviation of poverty and building social inclusion in economic development.  As an entrepreneur who is driven by a sense of purpose to make a difference to global healthcare, I would like to use this platform to share with you my thoughts on the global inequity that exists in accessing basic healthcare needs.



Nearly 2 billion people — or a third of the world's population — lack access to essential medicines. We need to ask ourselves: what use is our scientific endeavour and innovation when they do not come to the aid of people who need it the most? Should a drug be described a “blockbuster” by a billion-dollar label or a billion-patients label?

Tuesday, 3 June 2014

Reaping The Winds of Change

Image Courtesy: http://bit.ly/ChangeIndia 


The decisive mandate handed to the Narendra Modi-led BJP reflects India’s overwhelming desire for strong leadership that will drive change. Expectations are high from the new government, which will have to deliver on its promise of a better life for every single Indian.

The lacunae in our governance and economic models have thwarted the aspirations of a billion Indians. Runaway inflation has eaten into the savings of the common man, lack of meaningful economic reforms have hurt business and industry and a slowing economy has led to job losses. Basic needs like health, education and a clean environment have remained unmet.

The Indian economy needs a complete overhaul and the No. 1 priority of the new government will be to navigate India towards a path of sustainable economic growth. It will have to embrace the aspirations of the common man and work on narrowing the gap between the privileged and the underprivileged.

To accomplish these goals the new government will have to come up with new and innovative solutions to tackle the current challenges and create an enabling ecosystem that supports the development agenda for the country.

Smarter Regulation for Ease of Doing Business

To begin with, the government will have to focus on regulatory reforms that will improve the ease of doing business, reduce transaction costs and expedite approval timelines. 

We thus need to move away from over-regulation to a system of self-regulation. The regulatory process should be re-engineered to replace the current inordinately lengthy tiered approval system with time-bound ‘deemed approvals’ and ‘automatic approvals.’ There is also a need to make regulations unambiguous and transparent so that their interpretation is uniform across the land.
 
FDI requires an environment of fast-track project clearance and unambiguous tax and compliance regulations.  These measures alone can attract and augment FDI that can contribute to GDP growth.

Leverage IT to Push E-Governance

It is time for a paradigm shift in administrative governance in India through increased application of smart IT platforms for e-procurement, e-tendering, e-documentation etc.

Several schemes to address India’s myriad challenges have failed in the past because of one fundamental shortcoming: the governance mechanism to deliver these schemes is mired in inefficiency and unaccountability. This needs to be rectified urgently.

A good example is Tamil Nadu’s  IT-enabled Drugs procurement model that  has ensured its citizens access to a reliable supply of affordably priced, generic essential drugs. Such a model should be replicated throughout India.

Similarly, there is a need for a wider application of the Aadhar unique ID program.  Aadhar has the potential to provide a strong platform for e-governance and e-healthcare.  The next government has the opportunity to build on the 600 million Aadhar cards and create a unique e-delivery model across a plethora of services. 

Focus on Science & Technology, Incentivize Innovation

Science & Technology is of strategic importance to India’s future leadership.  

Innovation is key to value accretive growth and India needs to step up its investment in research and translational innovation. 

We must identify key areas in which to build world class scientific and technological excellence, e.g., genomics, nanoscience, analytics, synthetic biology, information technology, space technology etc. 

Incentivizing innovation and IP creation is important for India’s future growth prospects. Enabling entrepreneurs to propel ideas into sustainable businesses will add value to our economy in the long run.

The government should give R&D a boost by providing a 10-year tax holiday on products developed indigenously, provide tax breaks for venture funding, and allow zero duty on R&D equipment.

Promote Green Technologies, Prudently Manage Natural Resources

The new government needs to leverage the power of biotechnology in promoting green technologies.

Energy independence must become a driving mantra to reduce our precarious balance of payments which is so vulnerable to the vagaries of fossil fuel resources.  If Brazil could achieve this through sugarcane based Biofuels, we can also aim to do so through newer forms of renewable energy that encompass solar, wind and biofuels that can light up the lives of energy-starved rural India.

Sanitation is another big challenge for India where only half the population have access to toilets.   We need rapid and large scale solutions based on bio-toilets that can eliminate the need for sewers, sanitation treatment plants and water. Innovative bioconversion systems can convert solid waste into renewable energy and fertilizers, eliminating landfills.

Water scarcity continues to threaten drought like conditions across the country posing grave challenges to our agrarian economy.  It is well known that India has a large perennial source of fresh water from the Himalayas, most of which remains unharnessed and wasted. The next Government must set up a  high-powered ministry that plans for the optimal management of water resources on a war footing to address the looming danger of widespread water scarcity. 

Make Healthcare a Priority

The new government will have to address the ‘Right to Health’ through a Universal healthcare program which hinges on affordability and access.

In attempting to fulfil the needs of ‘Affordability’, ‘Availability’ and ‘Access’ for its citizens, the new government has an opportunity for creating a system of universal healthcare that can set a global benchmark.

Additionally, other healthcare-related issues need to be urgently addressed as part of this agenda:

> FDI in Pharma: The FDI policy on pharma needs to revert to the previous UPA1 regime that allowed automatic infusion of foreign equity of up to 100% in both greenfield and brownfield projects, so that it is not left to the government’s discretion to introduce riders for clearing investment proposals.

> IPR: India must clearly enunciate the rules governing patentability for pharmaceutical products. Our stand on IP laws that discourage ever-greening of patents is gaining acceptance. We have also adopted a thoughtful pre-grant patent opposition which should serve to protect us from frivolous patents.  However, we must ensure that we demonstrate our commitment to legitimate patent protection. 

> Pricing policy: The unilateral demand on the Indian pharma industry to bear the full burden of making medicines affordable is untenable.  The imposition of price control on a large number of essential drugs has seen the replacement of a number of Indian bulk drugs with Chinese imports.  This policy needs urgent amendment if we are to restore our supremacy in drug manufacturing.   It is imperative that the Government increases public spending on healthcare to at least 3% of GDP in order to fund schemes that can offer basic healthcare to all.

> Clinical trials:  If India is to pursue drug research and drug innovation, the present moratorium on clinical trials must be removed post haste.  Additionally, the proposed regulations and strictures around conducting clinical trials need to be revisited.  Most of the regulatory recommendations are impractical and will severely disadvantage Indian drug research. 

> Incentives to spur R&D: To spur investment in research and development in life sciences,  the government should extend the current benefit of 200% weighted tax deduction on all in-house R&D spends including those attributable to  international patenting and overseas clinical development as well as any licensed technology that is required for drug innovation.

> Incentives to indigenous manufacturers:  The Indian Government has done little to advantage indigenous industry over foreign competition in Government tenders. It is well known that MNCs have always adopted predatory pricing in developing markets through cross subsidizing the higher prices they enjoy  in protected western markets. The Indian Government must therefore provide   preference and advantage to indigenously manufactured pharma products and in fact, mandate local manufacturing as an eligibility criterion as is the norm in many countries Eg. Mexico, Brazil, Russia etc. It is important to note that the Indian Government practises this in the case of vaccines but needs to extend this to drugs.

We Need Development-oriented Politics

The fundamentals of the Indian economy are strong.  However, our economic engines of growth have been throttled by wrong policies and regulations in the past.

The new government needs to exhibit strong political will to implement bold economic reforms, create world-class infrastructure, usher in overdue tax, labour, land and regulatory reforms, address the power deficit and roll back unfriendly business regulations.

The mandate for change must translate into a more enlightened and development-oriented political discourse in India that rises above partisan politics and instead focuses on putting the nation on the path to robust, inclusive and equitable growth.

This article first appeared as a feature in Forbes India on May 28th, 2014

Sunday, 18 May 2014

Reviving the Indian Growth Story

Image Courtesy: http://bit.ly/1oCEsYf

The decisive mandate in favour of Narendra Modi led BJP Govt reflects people’s overwhelming vote for change. Change in the way the country is administered; change in the way India does business; change in the way food is distributed; change in the way healthcare is delivered; and change in the way the government addresses the aspirations of a billion Indians. 

If the new government is serious about delivering on its promise of a better life for every single Indian, its No. 1 priority should be to navigate the country towards a path of sustainable and inclusive economic growth.

The new government will be starting off with economic “tailwinds”: inflation is showing signs of cooling; CAD has eased significantly; the rupee has stabilized; and GDP growth is expected to pick up pace in FY15 after two consecutive years of sub-5% growth.

However, there is no scope for complacency as significant challenges face the country.  Projects worth over $100 billion were shelved or abandoned in FY14, the highest in the past 18 years, due to policy uncertainty and pending regulatory clearances, according to CMIE. Capital goods production has contracted in nine of the past 12 months, according to latest government data.

The new government that comes to power will have to move quickly to de-bottleneck projects and revive investment sentiment in the country. India desperately needs to be seen taking corrective actions to regain its lost glory by creating an enabling ecosystem that paves the way for a double digit growth.

The prospect of a positive change by the new Government has already started reflecting in market sentiments. The Sensex has hit record highs as overseas investors are aggressively buying into Indian equities in the hope that a BJP-led coalition will take the steps necessary to boost consumer and investment demand that in turn will give a leg-up to economic growth. The Indian rupee is near a 10-month high. Concrete actions by the new government will help capitalize on this mood.

> Need for decisive action

In order to restore investor confidence the new government needs to introduce enabling policies as well as build the necessary infrastructure that supports the development agenda for the country across sectors.

Some critical steps the government needs to take to revive in the Indian economy are as follows:

> Smarter regulation for ease of doing business
 
The need of the hour is not more regulation but smarter regulation. The government needs to focus on a number of regulatory reforms that will address the ease of doing business, reduce transaction costs and expedite approval timelines.Currently, businesses need to secure a plethora of approvals and licenses from multiple agencies. We need to move away from over-regulation to a system of self-regulation. To make the system transparent and stakeholders accountable, we have to ensure that E-Governance becomes the backbone of regulation.  Moreover, the regulatory process should be re-engineered to replace the current system with ‘deemed approvals’ and ‘automatic approvals.’  A time-bound approvals system can help fast-track projects, businesses and start-ups, thus improving the business climate in the country. 

These measures alone can add a percent or two to GDP growth through increased FDI and project implementation.

> An efficient taxation system

The long-pending GST needs to implemented as an uniform tax on all goods and services across India is a key indirect tax reform that needs to see the light of day. There is also a need to exempt SEZs from MAT. 

> Remove bottlenecks to boost flow of foreign capital

A lack of clarity over laws regulating FDI in key sectors like multi-brand retail is preventing much-needed foreign money from coming in to bolster India’s infrastructure setup.  MNCs can help bring in technological knowhow and share best manufacturing practices with local companies, thus helping them upgrade their systems and processes.

> Build the necessary Infrastructure that supports industrial growth

All infrastructure projects which have been held up for long need to be cleared. The SEZ policy needs better implementation if it has to boost manufacturing and exports.

The government also needs to allow a longer tax free status for SEZs for the real benefits to kick in.  Broad banding in a pragmatic way should be allowed to unlock the full potential of this far reaching scheme.

Establishing industrial corridors through high-end road and rail connectivity that links metros to interior towns can spread economic growth and create job opportunities more uniformly across the country.

> Generate high-skilled jobs

There is an urgent need to create high-skilled jobs that add long-term value. Employment generation initiatives should focus on creating a large market for skilled jobs through building scale in high-end manufacturing. For this, the government needs to provide adequate incentives to the manufacturing sector. Incentives should also be given to encourage start-ups as they can contribute to the goal of employment generation. 

> Introduce a universal healthcare program

The ‘Right to Health’ should be addressed through a universal healthcare program which hinges on affordability and access. An IT enabled healthcare delivery model like that of Tamil Nadu has the potential to revolutionize various aspects of the industry. The implementation of an e-healthcare system at a national level can ensure fair and transparent delivery of affordably priced, good quality medicines to patients across the financially challenged socio-economic strata of India.

> Focus on Science & Technology, Incentivize Innovation

Science & Technology is of strategic importance to India’s future leadership. Innovation is key to value accretive growth and India needs to step up its investment in research and translational innovation.  We must identify key areas in which to build world class scientific and technological excellence, e.g., genomics, nanoscience, analytics, synthetic biology, information technology, space technology etc.  Incentivizing innovation and IP creation is important for India’s future growth prospects. Enabling entrepreneurs to propel ideas into sustainable businesses will add value to our economy in the long run.

In the final analysis, the new government needs to exhibit strong political will to implement bold economic reforms, create world-class infrastructure, usher in overdue tax, labour, land and regulatory reforms, address power woes and roll back unfriendly business regulations to return the India economy to a path of high growth in 2014.

Saturday, 17 May 2014

Congratulations to Narendra Modi: Let's Work Towards Prosperity

Image Courtesy: http://bit.ly/1mD4vMt
The landslide mandate handed to the Narendra Modi and BJP reflects India’s overwhelming desire for strong leadershIp that will drive change. Change in the way the country is administered; change in the way policies are framed; change in the way India does business; change in the way it engages with the world; and change in the way the government addresses the aspirations of a billion Indians.  These are tall expectations and the new government will need to take immediate steps to revive the economy to signal change. This will call for swift action to implement bold economic reforms that create jobs through massive infrastructure projects, roll back unfriendly business regulations and instead focus on speed and ease of doing business that attract large domestic and foreign investments. Above all, there is a compelling need to provide transparency and accountability through e-governance.

The new government has been provided a historic opportunity to bring positive and far-reaching change, it must do so with responsible objectivity that lifts the spirit of a billion Indians.