As the then Finance Minister Dr Manmohan Singh tiptoed into the Parliament to deliver his iconic speech on July 24, 1991, India had less than INR 2,500 Cr in foreign exchange reserves, only enough to finance imports for a less than a fortnight.
By the time Singh finished addressing the Parliament, the “Gentle Giant” had set India on the path of economic reforms and “unshackled” the country from the Licence Raj. True to his name, he concluded the speech by quoting the famous French novelist Victor Hugo, saying “No power on earth can stop an idea whose time has come”.
It was true then and it appears to be true now. Singh’s series of liberalisation, privatisation, and globalization (LPG) reforms that year not just addressed a financial and economic crisis, but awoke the sleeping giant that was India.
His policies set the stage for what would become India’s startup revolution and pave the way for a growing crop of young founders that have disrupted India’s tech landscape in ways innumerable.
Three decades later, the nation mourns the demise of former Prime Minister Manmohan Singh, who breathed his last at Delhi’s AIIMS hospital at the age of 92. He was being treated for age-related medical conditions but could not resuscitate despite multiple efforts and passed away on December 26.
As we remember the architect of India’s economic reforms, let’s take a look at how the former Prime Minister liberated India’s entrepreneurial spirit and laid the foundational blocks for the world’s third largest startup ecosystem.
Creating The Domino Effect
On how bad it was to do business in the Licence Raj era, IT juggernaut Infosys cofounder Narayana Murthy reminisced in 2001 to American public broadcaster PBS that it would take him “about 12 to 24 months and about 50 visits to Delhi to import a computer worth $1,500”.
What liberalisation did for him, in his own words, was abolish the need for licences as well as the Office of Control of Capital Issues, which was responsible for deciding the premium at which companies could offer their shares at the time of their initial public offerings (IPOs), and brought the “finest multinationals” to India.
“We removed a large number of controls and regulations, which in the past had stifled the spirit of innovation, the spirit of entrepreneurship, and restricted the scope for competition, both internal competition and external competition. As a result, in the ’90s, productivity growth in the Indian industry has been much faster than ever before,” the late Manmohan Singh said in an interview in 2001.
And the likes of Infosys capitalised on this. Many argue that the 1991 reforms ushered the rise of India’s services economy and the likes of giants such as Infosys and Wipro were born. But, the domino effect did not stop there.
The services giants have given rise to some of the prolific backers of India’s startup ecosystem. A case in point being TV Mohandas Pai, who founded venture capital firm Aarin Capital, and has backed big names such as Zoomcar, HomeLane, Licious, and the list goes on.
Then, there is also Infosys cofounders Kris Gopalakrishnan and SD Shibulal, who have so far made more than 127 investments in the burgeoning Indian startup ecosystem through their VC firm Axilor Ventures.
In addition, IT services, through their various in-house funds and startup accelerators, have also pumped millions of dollars into the country’s new-age tech ecosystem and fostered an innovative tech landscape. And these are all the trickle down effects of reforms spearheaded by Manmohan Singh three decades ago.
During his tenure as Prime Minister between 2004 and 2014, India also reportedly received $90 Bn in venture capital and private equity financing for 4,000 companies.
But, what liberalisation also brought with it was something silent, something which was crafted over years – talent and confidence. The abolition of Licence Raj paved the way for MNCs to flock to India and the country gained the latest technology and resources, which in turn created a diverse, talented human resource.
While Infosys was created way in 1981, 80 of its employees, colloquially referred to as Infosys Mafia, in the ensuing years have created more than 70 new-age tech ventures including Cars24, Magicpin, DooGraphics, and the list goes. Had it not been for the policies set into motion by Singh-led Finance Ministry years ago, who knows whether the Indian startup ecosystem would even exist in its current form.
But, there is much more that can be attributed to the late Prime Minister and his efforts towards building the foundational blocks of India’s digital economy.
Paving The Way For India’s Digital Revolution
Today, we can make digital payments in a matter of seconds and even avail loans in minutes. While much of it had to do with regulatory push post 2014, black swan events like the pandemic and Reliance Jio’s affordable internet rates, many policies during Dr Singh’s tenure had somewhat set into motion India’s digital revolution.
To understand this, let’s take you back to 2008 when Nandan Nilekani, curiously enough another cofounder of Infosys, published his seminal paper ‘Imagining India: Ideas for the New Century’ and proposed the idea of a unique ID (UID) for every Indian that could be used to prove their identities in a digital world.
As per various accounts, the then Prime Minister Manmohan Singh was so impressed with the paper that he sought to recruit Nilekani as the minister of human resource development. Instead, Nilekani formally took charge of the UIDAI project in June 2019 and Aadhaar was born.
Even before the first Aadhaar number was issued, an API had already been rolled out by UIDAI in 2010 while eKYC functionality was operational by 2012, which allowed business to perform customer verification via biometric or mobile OTP. And all this happened under Singh’s tenure, much before anyone could even conceptualise what the internet revolution would do to the country’s economy half a decade later.
The story of Aadhaar is the story of the biggest puzzle in the Indian Stack, which then paved the way for unified payments interface (UPI), ONDC, and the list goes on. Building on the unique identification project, India’s tryst with digital public infrastructure (DPI) has spawned the rise of startups and sectors such as edtech, SaaS, telehealth, D2C commerce and others.
On fostering internet connectivity in India’s hinterlands, the late Manmohan Singh also laid the groundwork when his government initially launched the National Optical Fibre Network (NOFN) in 2011. The project, which would eventually in a rebranded avatar become a key part of Digital India, was supposed to connect all the gram panchayats with broadband (a speed of 256 kbps) by December 2016.
By the time Singh left office in 2014, as many as 1.5 Lakh out of 3.5 Lakh targeted village panchayats were connected with broadband.
On the policy front, Singh was also key to increasing the foreign direct investment (FDI) limit in the insurance sector from then 26% to 49%. Then, there was also the 2012 regulation, which opened multi-brand retail for foreign direct investment with a 51% cap.
The two policies together paved the way for the entry of bigger foreign players in the country, which invariably brought better pricing for customers, more capital and better technology for their local partners as well as stakeholders, including startups.
Another key facet of Manmohan Singh’s tenure as a PM was the National Electric Mobility Mission Plan (NEMMP), which was introduced in 2013, to promote hybrid and electric vehicles. The electric vehicle-focussed policy was introduced much before there was any whiff of such an ecosystem in the country.
NEMMP laid the groundwork for what would eventually become the current government’s FAME scheme, which then fostered multiple original equipment manufacturers (OEMs) and spurred EV adoption in the country.
That said, beyond the numbers and policies and statistics, the death of Singh has brought an end to the era that helped the Indian dream take baby steps. As the country transitions to a bigger role on the global stage, India’s digital and startup ecosystem surely does remember the late Prime Minister as an enabler of India’s early entrepreneurial spirit.
Life comes back full circle to late Manmohan Singh’s iconic 1991 speech, which he concluded by saying “India is now wide awake. We shall prevail. We shall overcome” – a motto to live by for Indian startups bracing the pangs of the extended funding winter.
