Traditional software services have peaked; manufacturing needs greater focus: MN Vidyashankar

Former Karnataka IT & BT secretary M. N. Vidyashankar, President of the India Electronics and Semiconductor Association (IESA), has been championing the cause of startups as the next big avenues for job creation

MN Vidyashankar, President IESA

M N Vidyashankar, a former bureaucrat, has served in various key positions in the Government of Karnataka for several years. He was in charge of key portfolios such as the Information Technology and Bio-Technology departments before retiring in 2013. Now as the President of the Indian Electronics and Semiconductor Association (IESA), he has been championing the cause of startups as the next big avenue for job creation. He has also actively campaigned for reforming labour laws, which have stunted growth and investment.
Here are the excerpts from a recent interview, in which he speaks to Vishal Krishna:   What is the potential of the semiconductor industry in India? The industry generates a great deal of interest because it has the potential to provide more jobs and increase India’s power as a global research hub. Traditional software services have peaked. The rate of growth is not going to be the same because of competition from Eastern Europe, South America and the Philippines, as they are developing very important BPO services and software testing businesses. Sri Lanka is becoming a very important BPO destination as well. In that context, chip-level design is going to bring great opportunities for India.   We now need to think of manufacturing to support the semiconductor industry. There is no way out for us because we need to create jobs. Manufacturing requires three things. One is land, the second is power and the third is labour. Coming to the debate about land; we need a policy that will help us. The new Land Acquisition law is in the works and it will address issues of development by taking farmers into consideration and pave the way for manufacturing growth. It is right that 70 percent consent of the farmers is a precedent and that they should be compensated four times the market rate. Manufacturing, such as automobile manufacturing or medical device manufacturing, needs land.  
The second subject is labour laws; they are archaic and need to be changed immediately. Just to give you an example; there are 120-plus labour laws in this country; 50 of them are at the Centre while the remaining are state laws. Most laws for manufacturing were passed in the early part of the 19th century.
  What is the mandate for IESA? The mandate is two-fold: advise the government and other bodies on growth; and job-oriented growth. This growth should not be limited to electronics alone - I am talking of manufacturing sectors across all the verticals. For me, the real issue is that we must keep the factories running. We have an average power cut of five hours every day. The irony, though, is that the world is interested in India and there are a lot of positive vibes in the market about the country. People are talking about growth, development and jobs. Every day you hear about 'Make in India' but do you hear about how one should make 'Make in India' happen? The stock market has been on the rise and we must latch on to this trend. Investments will grow only when we have some transparency in laws.   Do you think startups will add to 'Make in India'? They will certainly bring in clever services, such as software and engineering services, to stay ahead in the game. Many have already raised global capital and they can serve the large Indian market. In fact, one of the reasons why you hear more about startups these days is because of the availability of funds. But the IT sector is still a great benchmark for job creation. From its 20-year journey we see so many startups being born. For startups, the ecosystem is missing. You need bold policies that support all industries equally. For the manufacturing industry you need tax holidays. The IT industry grew because of tax holidays. Just take the demand this country has for set top boxes; 80 percent of them are imported. We don’t even manufacture a box, so the opportunity is to support this across the industry spectrum.   Everyone is talking about smart cities. Can the Internet of Things play a major role in creating manufacturing scale in India? A couple of things. In 2000, the total number of landlines [fixed lines] in the country was 28 million. In 2014 we have over 900 million mobile phones sold in the country. The telecom industry grew because mobile phone costs and tariffs fell rapidly. The smartphone story is what is going to set off the Internet of Things (IoT). But smart cities are a larger concept where internal systems and processes should change in every government department and link to citizen services.   Technology will play a major role in delivering education and health. IoT is at the centre of all this. I can have a student sitting in the village and do a programme from Harvard, with interactive learning. IoT makes sense at multiple levels. Now, technology can ensure that every school has a teacher or a multiple number of teachers. The infrastructure has to be set up first and then the education system must be open to a new form of learning. Just providing a device does not make something smart. It is the entire chain, starting from registration to teaching to payments to finishing coursework; everything should go online. Even landing a job interview is part of a smart city.   The data then connects to hospitals, insurance companies and retailers. You choose to be a digital citizen. It has multiple layers overlaid with the physical delivery of commodities. We can set standards globally only if we start sorting the myriad services that can benefit people. Today we have close to 3000 start ups doing different kinds of work and IoT is providing a big push. It can benefit manufacturing too, with machines interacting with each other and learning to conserve power and allowing an organisation to adjust their supply chains with a continuous flow of information.   If Indian policies change then we are in for a great time. Sometimes policies do not make sense; you can import a laptop with no duties. But its components are so expensive because there are duties being slapped on them. These components are not manufactured locally.  
The interview was first published in BW|Businessworld and has been republished here with minor editorial corrections.