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A Winning Formula for Hard Economic Times
http://www.nytimes.com/2010/07/24/world/asia/24iht-currents.html?_r=1&pagewanted
July 23, 2010 | By ANAND GIRIDHARADAS

MUMBAI — This is a tale of two Indian vehicles — the Jaguar and the jugaad.

The former is one of the world’s finest cars, once a strictly British product, now owned by Tata Motors of India. The XJL Supersport, which can cost upward of $100,000, comes with a 510-horsepower engine, massaging seats, mood lighting, a hard drive and electric rear blinds.

Then there is the jugaad (pronounced jew-gaar), which is nothing like a Jaguar.

It is, for one thing, illegal: a truck tossed together, saladlike, in the sheds of northern India, beyond regulators’ view. Parts from old jeeps are cut and welded and combined with wooden planks to form a chassis. An engine commonly used for irrigation pumps is attached.

Actual bells and whistles may be added as adornments, and the wheels are painted by hand.

The truck gives India’s village dwellers a cheap ride: 10 cents for a half-hour journey with a few dozen others. So compelling is their business logic that jugaads have become popular in dowries. The truck may be obscure, but the culture behind it is now a management fad. Jugaad, not as noun but as verb, is suddenly the talk of consulting firms like McKinsey and companies like Best Buy in the United States.

The slang Hindi verb “jugaad,” as translated for managers, means to make something much like a jugaad. It is to be innovative despite scarcity - a winning formula for hard economic times. Management gurus cite India’s ultra-low-cost creations as inspiration: the $800 electrocardiogram, the $24 water filter, the $2,500 car, the $100 electricity inverter, the $12 solar lamp.

But these represent only a sliver of what jugaad is. It is more than frugal innovation; jugaad is a way of life, here as elsewhere, that has anticipated important movements of the 21st century, from open-source technology to cultural fusion. From years of observation in India, some core tenets emerge, many of use beyond the business world.

FATALISTIC CREATIVITY India is not an easy place, and to be fatalistically creative is to transcend its hardships. It is to chafe daily against the way things run; to resist the idealistic temptation to change all that; and to strive instead for success and solutions within the constraints.

India is chronically short of small change, for example. Small businesses rarely have the coins and 10- and 50-rupee notes that most transactions require. They often solve the problem by sweetening the deal, jugaad style. A pharmacist may give you Orbit chewing gum instead of 5 rupees; a friend recently received three Cadbury éclairs and a Tehelka magazine when a toll-booth operator couldn’t locate 25 rupees.

You can perhaps hear echoes of the jugaad spirit in the careerist idealism of the West’s Generation Y. Those whose parents flocked to the barricades, dreaming of a new order, seem more likely to work on a Citibank microcredit project today - fatalistic about the system writ large, but creative within its folds.

MARKET HUMANISM Jugaad, as a truck and a way of life, involves a capitalism different from the market philosophy that informs the West - and one that prefigured the interesting new directions that capitalism is taking today.

Long before the local-everything movement took off, jugaad counseled a face-to-face capitalism in which you knew the people who made your products, married your children into the families who lent you money and prayed with your customers and suppliers. Long before Wall Street highlighted the perils of virtual-reality capitalism, jugaad was skeptical of what it could not see. It encouraged the tangible capitalism of the little guy who must stay afloat in a churning market, not of government-sized businesses too big to fail. And long before social entrepreneurs discovered “impact investment” and “triple bottom lines,” jugaad nourished a humanistic capitalism that blurred the line between community service and profit making, in which builders of institutions felt no ideological compulsion to choose between them.

ANYONE SOURCING The black-and-yellow Mumbai taxi, an exemplar of jugaad, was crowd-sourced before Wikipedia and open source before Firefox.

The taxis, Premier Padmini sedans built from a Fiat design in the middle of the last century, haven’t been upgraded in decades. Their maker has faded from the scene. But in jugaad’s India, this means that anyone can be a Padmini mechanic, supplier or decorator.

Mumbai taxis brim with experiments: blue lights, metal poles, electrical outlets, tune-giving idols, massive speakers, tiny fans, radios controlled by light switches.

Today, even as these taxis give way to new Hyundais and the like, the spirit lives on in cell phones: Unlike in the West, where you must contact Vodafone and only Vodafone for connection issues or Nokia and only Nokia for handset woes, on India’s streets, as across the developing world, every third store is a one-stop cell phone shop. They poke into your device with screwdrivers and pens, recharging your credit, answering queries on behalf of a company they do not work for.

BOTH-AND TRUTHS A.K. Ramanujan, the late Indian folklorist, once asked whether there was a specially Indian way of thinking. His conclusion was that Westerners were more comfortable with truths applied universally to every case, while Indians resisted the universal, preferring situation-specific solutions.

This is philosophical jugaad: an approach to human dilemmas that rejects the either-or.

In the realm of social change today, Indians seem to feel less need than most to label and define themselves. They are content with the hodgepodge identities that you might find in a shed-made north Indian truck. Young city dwellers pursue romantic love today, in defiance of arranged marriage. But they often don’t mind parents trying to arrange marriages on a parallel track. They may snort cocaine and massage their father’s feet in the same evening, seeing no contradiction.

Gay Indians likewise employ jugaad in navigating a society that is hyper-globalized on the surface and conservative underneath. As Parmesh Shahani, the author of “Gay Bombay: Globalization, Love and (Be)longing in Contemporary India,” told me, gay Indians are different from gays elsewhere in preserving contact with parents, grandparents, uncles and aunts even as they circulate in a gay universe. They oscillate easily from family business meetings to gay clubs to cousins’ weddings.

“It’s not a case of ‘Let’s have our own ghetto in the Castro and all will be O.K.,”’ he said. “They rather choose the difficult path of negotiating, on a daily basis, and with a tremendous amount of jugaad, the tangled web of relationships that bind them.”

Gravity Shift: How Asia's New Economic Powerhouses Will Shape the Twenty-First Century by Wendy Dobson

Abstract
http://www.asiapacific.ca/canada-asia-agenda/gravity-shift-thinking-about-china-and-india-2030

Author Wendy Dobson argues that, while it is certain that the world’s centre of economic gravity in the coming decades will be pulled toward the Asian powerhouses, their roles in the world will be constrained by the need to rebalance significant distortions in their domestic economies.

Review from:
http://www.eastwestcenter.org

(Washington D.C.) April 8 – Though the economies of China and India have developed significantly, structural changes will be required in both countries in order to sustain current growth rates. In an East-West Center in Washington Asia Pacific Political Economy seminar, Dr. Wendy Dobson, professor and co-director of the Institute for International Business at the Rotman School of Management in the University of Toronto, and discussant Dr. Ellen Frost, visiting fellow at the Peterson Institute for International Economics and adjunct research fellow at the National Defense University’s Institute of National Strategic Studies, examined the economic development of China and India, detailing the opportunities and challenges inherent in their respective rise as economic powerhouses in Asia.

Many economists have predicted that the center of global economic gravity is shifting to Asia, led by the quickly developing economies of China and India. Growth in both countries has been driven by large labor forces, investment, and innovation. Many economists predict that by the year 2030, the economies of India and China will exceed that of the United States, and that this shift spells profound changes for the future of world economic institutions and the balance of power. However, Dr. Dobson argued that while the development of both economies has been remarkable, growth in the future will be hampered by factors that will require concerted systemic changes on the part of both governments.

China’s growing economic power has not only improved the lives of countless of its citizens but also impacted the international economic system. Dr. Dobson explained, however, that China’s growth will soon be hampered by difficult challenges. She pointed out that due to China’s one-child policy, the country’s labor force will contract by at least 30% by the year 2030 and that much recent growth has been supported by unsustainable investment activity. To overcome these obstacles, the government will have to find ways to encourage increased productivity among a diminished workforce, encourage greater consumption by its population, and prompt entrepreneurial innovation. To achieve these goals, Dr. Dobson explained that the government will have to make changes to a plethora of systems, such as improving social security nets so that the population will feel less need to save and more desire to consume, or by encouraging state-owned banks to invest in non-state owned enterprises and accept the risks inherent in entrepreneurial activities. These systemic changes, she argued, will take time to implement and, in the meantime, Chinese growth rates will consequentially drop.

India, too, could see enormous economic gains by 2030 through the use of its large labor force and technological innovation. However, Dr. Dobson pointed out that the government has not made the investments in its labor force required to transform the country into a manufacturing society, such as providing comprehensive education and opportunities for training. Further, she explained that government regulations, many supported by a strong socialist movement, limit the ability of entrepreneurs to develop large, labor-oriented industries that can capitalize on economies of scale. As a result, most entrepreneurs focus on knowledge intensive, rather than labor intensive, industries, leaving India’s labor force underutilized. Additionally, vast public sector debts in India make it difficult for entrepreneurs to get the loans they need to develop their businesses. Without significant changes to address these problems, Dr. Dobson argued that India’s growth will necessarily slow over time.

Because of the unbalanced growth in both China and India and the changes that will be required for the economies to rebalance, Dr. Dobson explained that she currently sees smaller growth potentials for the two countries by 2030 than many other economists. However, she noted many positive factors that have resulted from China and India’s economic rise. Both countries, she explained, are now active in international financial systems, and they are beginning to create important trade ties bilaterally. She believes that while some economic competition between the two powers will occur, efforts by regional neighbors to encourage regional economic integration should prompt China and India to be cooperative rather than competitive. Dr. Frost agreed, explaining that China in particular is interested in maintaining regional stability, as this is best for its own economic development goals. Further, Dr. Frost pointed out that policymakers in both countries are aware of the structural problems that their economies face, and that internal debate about the best course for economic development is strong. She also noted that as members of the G20, the two countries are becoming more active and responsible in international economic matters, an activity that will provide valuable experience for the two governments as they develop their respective economic futures.