an alternate view of the future

Nandan Nilekani, 2016

An Alternate View Of The Future

INDIA IN THE AGE OF TECHNOLOGICAL DISRUPTION


Conventional Wisdom - Prescription for India?

Exports

Led Growth

Manufacturing

Led Growth

Large Employers

Led Job Growth

Nandan Nilekani, 2016 2


Domestic Consumption

Led Growth

Services

Led Growth

Small Businesses

Led Jobs Growth

Our Vision of The Future

not Exports led not Manufacturing led not Large employers led

3


The Digitization Of The Economy

4

5

Mobile Phones are the first 'Universal' product

5.2 Billion people have a mobile phone

Source: ben-evans.com

The rise of smartphones

Current sales

about 25M smartphones per quarter

Source: Ericsson Mobility Report 6

Internet penetration is increasing!

7

With 331M internet users, India is now the second largest internet market, ahead of the USA!

Source: World Bank World Development Indicators, data.worldbank.org Source: www.trai.gov.in

Inte

rnet

use

rs (p

er 1

00 p

eopl

e)

Uses Google Maps to head to a crime scene. Bought a TV on OLX.

“I might not be educated, but I know how to respond to queries I receive on our website”

“I had no idea I could sell my art directly to my customers”

“3G nahi to hotspot sahi”

“The internet has helped us cut the middleman and changed our lives forever” “I don’t need a

passbook any more because of the SBI netbanking app” 8

1 Billion in 5½ Years

Source: Data from http://www.uidai.gov.in 9

950 M

600 M

300 M

100 M

50 M

1019 M

A Ubiquitous Digital Identity Infrastructure for a digital desh.

The Aadhaar system can

authenticate 100 M transactions per day, in real time!

The future is here!

Smartphones with integrated Aadhaar compliant Iris recognition available for commercial use!

Source:http://news.samsung.com 10

Pradhan Mantri Jan Dhan YojanaBANKING FOR ALL

11Source: As on 30 May 2016, http://pmjdy.gov.in

2 31 54 6

Micro ATMs, AEPS, APB

mPOS Prepaid Instruments

Wallets

Payment Banks

IMPS Unified Payment Interface

Digital Payments are coming in a big way!

7

BBPS

12

New national platforms to unlock more data streams

Goods & Services Tax Network (GSTN)

Bharat Bill Pay System (BBPS)

Electronic Toll Collection System (ETC)

13

GSTN will process

5 Billion invoices every month

across 70+ Lakhs businesses!

1 Billion utility bills amounting to

$60+ Billion per month

BBPS source: http://indiatoday.intoday.in/story/bill-payment-industry-all-set-to-rock-in-services-sector/1/180344.html

● Digitize their supply chains

● Increase consumption of digital infrastructure - payments, logistics, etc.

● Leave digital footprints for service providers, and customers alike.

● Digitize their customers

● The best aggregators use these digital footprints to enhance their services!

New Age Platforms are digitizing their ecosystems

Customers

Platforms

Service Providers

14

Product Providers

Vendors Partners

Transport

HotelseCommerce

Health & Care

Household Services

Food Delivery

Classifieds

New Age Platforms are leading to digitization in multiple sectors!

15

16

India will go from data poor to data rich nation in 5 Years ...

Digital Identity

Paperless Process

Commerce

Payment

Social

Machine Learning & Algorithms

… allowing data driven decision making for scale and inclusion!


Domestic Consumption Led, Not Exports!

17

Protectionism is growing around the

world

Trade deals are

slowing down

"Globalization is being attacked as never

before"

- Jeffrey Immelt, CEO General Electric

Nandan Nilekani, 2016 18Source: Fortune.com


Global Trade Is Slowing Down

19Source: economist.com


Outlook for Trade is Bleak

Freight Prices Are Down

Source: economist.com 20

Nandan Nilekani, 2016 21Source: www.business-standard.com


Domestic consumption is continuing to grow

Domestic consumption continues to grow

Even as exports slow!

22Source: data.gov.in (MOSPI)


Services Led, Not Manufacturing!

23

A young country in an aging world

- jobs in outsourcing

2X GDP - growth in

Housing, Health,

Education

Services are labour

intensive. Growth will drive jobs

Services like tourism -

job creators / forex earners

Services will Grow!

Growth of the formal economy will

Unlock Savings, Credit and Investments, leading to growth in associated services24


Rise in Small Businesses

Small Services businesses are growing faster than Manufacturing businesses.

25Source: livemint.com


Services Like Tourism Have Significant Potential

26

With 8M International Arrivals, India earned $ 20B in 2014.

However, there is significant potential as can be seen from other similar destinations!

Source: World Development Indicators.

Manufacturing outsourcing trend is starting to reverseFoxconn is considering manufacturing in the US

Technology is a huge driver of change in manufacturing

Manufacturing is becoming a high end, capital intensive activityWill not lead to jobs growth

Robotics, IoT, 3D printing are changing manufacturingAutomation will hit manufacturing before we catch up

The Changing Face of Manufacturing

27


Why India Cannot Copy China

They had universal literacy

They had no established competition

China has over 10x India's Capacity for Steel production!

When China, Korea, Japan started

2014

China - 822 Million Tonnes

India - 86 Million Tonnes 28Source:www.worldsteel.org


Growth in Services

Service Taxes are growing faster than Excise collections!

29Source: indiabudget.gov.in


Small Businesses Led, Not Large Employers!

30

A New Structure Is Emerging ...

Customers

Platforms

Service Providers

31

Product Providers

Vendors Partners

Large employers will transition to

Networks of small businesses,

micro entrepreneurs, built

around New Age Platforms (aggregators / marketplaces) leading to broad based jobs growth

Use data to grow and optimize

Provide Common ServicesCustomer Acquisition, Discovery, Payments, Logistics

New Age Platforms

Platforms

Service Providers Product Providers

VendorsPartners

Few in numbersGenerate economies of scale

Few Employees

Grow the market

32

Service Providers

Provide a specific serviceTaxi Drivers, Pathology Labs, Retail stores, Hospitality

Use platforms for the restAccounts, Inventory management, Supply chain, Logistics, etc.

Many in Number

Have few Employees

Platforms

Service Providers Product Providers

VendorsPartners

33

Supporting Products

Provide a service to the aggregator ecosystemAccounting / Tax software, Data based lending, Payments

Enablers - create efficiencies in the system

Work with multiple networks / aggregators.

Platforms

Service Providers

Product Providers

Vendors

Partners

34

35

Only 6500 Employees

1.5 Million Cars & Drivers

New Age PlatformsCreate a few, high value, jobs that can be leveraged to enable service providers.

Service ProvidersLarge number of service providersEach service provider creates multiple jobs

With 6500 employees, Uber supports 1.5M cars & drivers!

10,000 Hospitals200,000 Doctors

Labs, etc

1.5M Cars0.25M Cars 100,000+

Merchants

5000 Employees

6,500 Employees

8,000 Employees

4,500 Employees

100,000+ MerchantsLogistics, Support

23,000 Employees

Mark

et Estim

ates O

nly

36

Global

High Quality Jobs - At the Edge

37

These platforms bring in new efficiencies. As a result, the same jobs pay more than before.

● With better demand matching, cab drivers drive more with Ola / Uber than before - hence earn more, and have more control on their life.

● Flipkart merchants sell more, and have lower costs of sale - hence make more money than before!

Portability of skill related certification and

experience is essential

Networks and aggregators require a skilled workforce

for uniform service delivery

Requires a growth in training,

certification and related services

Skilling the workforce

38

The New Social Safety Net: Direct to Employees

Health & Insurance

J

Skills Training & Certification

Education

Pensions

Savings & Investment

Schemes

Replaces the safety net previously

provided by large employers and is

portable - Empowering the

Workforce.

39

Why New Age Platforms are important

Solve local problems

Remove inefficiencies

Create Significant

Value

Enable service providers across the

countryto grow, and to create jobs

40


Why India Is Different From The Rest of The World!

41

Goods Agriculture Services Labour

USA Single Market, No manufacturing tax, states have sales tax

Single market Fragmented, due to several regulators, approval for insurance products by state, ...

Free movement

European Union Single Market (GST) Fragmented, due to local regulators in each country for banking, telecom, insurance, ...

Free movement

China Single Market Single Market Single Market No free movement

India Fragmented (pre GST) due to excise, state / city entry taxes, etc.

Highly fragmented, local. Due to lack of infrastructure - cold chains, storage, processing, as well as regulation - APMC,

Single market for banking, telecom, insurance, capital markets, etc.

Free movement

42


India Stack

Open APIs as Public InfrastructureWill result in massive innovation!

Name DoB/Age Gender Address Mobile/Email

1234 5678 9012

UniqueLifetime

44

AadhaarAuthentication

NO MORE PHYSICAL PRESENCE

Are you who you claim to be?Only a yes/no answer

Anytime anywhere45

Aadhaare-KYC

NO MORE PHOTOCOPIES!

Access ONLY via authenticationNo more fake identities

No more paper

46

Existing DSC non-scalable due to physical verification, paper process, and use of dongles

eSign allows all Aadhaar holders to digitally sign anytime anywhere

Open API based, allowing applications to easily integrate

eSign - eliminating wet signature

47Source: http://www.cca.gov.in/cca/?q=eSign.html

Digital Locker - eliminating fake papers

Open API based

Ecosystem driven

Digitally protected

Source: https://digilocker.gov.in 48

DigiLockerIssuer Requestor

Users

Issues Documents Digitally

Accesses Documents Online

Approves Access

Validation & Assurance

Virtual Payment Address

Minimal Issuer/Acquirer Cost

Ubiquitous - Bank accounts

Easy Immediate Payments

Timely Notification

UPI Features

Push & Pull Payments

@Every one with a bank account can send money to any bank account in India!

Real-time postingFunds are not locked!

Immediate notifications of the payment made

Payments can be initiated by payer or payee.

Real-time validation of the account and balance

No need to disclose account information.Allows account portability, enhances privacy.

Smartphone replaces card and PoS machine!!

49

50

● Structured consent artifact and log system

● User controlled data sharing, data flow, and data retention

● Separation of data and consent flows

● Consistent with current legal frameworks

Electronic consent architecture

Data Consumers (Banks,Credits Providers etc)

CONSENT MANAGER

Data Providers(Banks,Telco,Hospitals,etc)

Consent Flow (facilitated by

consent manager)

Data Flow

Data flows tracked digitally, providing traceability Quickly identify fraud, take early action. Reduced data leakage, improved security and privacy

Allows more data sources to be used for lending decisions Stronger underwriting, less likelihood for loan defaults

Consent tokens are shared, not credentialsReduced potential for misuse, leading to improved security and privacy

Real Identity is verified in the process

Reduces potential fraud, and improves the effectiveness of credit bureaus.

Purely digital processInstant monitoring, and reporting, improved transparency. Regulator can monitor defaults, risks, fraud

Benefits of proposed consent architecture

51


PRESENCE-LESS LAYER Aadhaar AuthenticationUnique digital biometric identity

with open access of nearly a Billion users

CONSENT LAYER Open Personal Data StoreProvides a modern privacy data

sharing framework

PAPERLESS LAYERAadhaar e-KYC,

E-sign, Digital LockerRapidly growing base of paperless systems with billions of artifacts

CASHLESS LAYER IMPS, AEPS, APB, and UPIGame changing electronic payment systems and transition to cashless

economy

COMMERCE(GSTn)

CREDIT(RBI)

INVESTMENTS(SEBI)

OTHERS

I N D

I A

S

T A

C K

SKILLS

JAM Jan Dhan, Aadhaar, Mobile 52

The Evolution of the India Stack - Built on JAM

53

2010 2011 2012 2013 2014 2015 2016

950 M

1005 M

190 M

Aadhaar

Mobile

JDY

2009

944 M

600 M

100 M

Source: Ericsson Mobility Report, PMJDY, Aadhaar Web Sites

AEPS

APB

Aadhaar Authentication

Aadhaar eKyc

eSign

UPI

Consent Architecture

Digilocker

1.2+ B

1+ B

250+ M

Aligns market goals with social goals

No physical presence required (reduces more costs)

Increases trust - allows a new business architecture to emerge

Broad based, ubiquitous, inclusive platform

Cuts Onboarding Costs

Cuts Transaction Costs

Allows Innovation

Why Is The India Stack Disruptive?

54


Banking at scale

55

Presence-lessPaperless

Data drivenAlgorithms driven

Network modelTransaction Infra

Mobile Becomes The Bank!


Investment at scale

56

To increase market size 10x or 50x and bring in mass inclusion, cost of doing business must be brought down!

Source: NCAER-CMCR survey, www.openthemagazine.com, discussions with ScripBox

Low Cost, High Volume, Low Ticket Size


Millions of Borrowers

Data DrivenAlgorithm Driven

Consented Data SharingEnabled by Mobile

Electronic ContractsDigital Payments

Credit Marketplaces

Thousands of Lenders

Digital Footprints

Credit at scale


Skilling at scale

58

COMMERCE

TRANSPORTTOURISM CONSENT ARCHITECTURE

DIGITAL LOCKERCOMMON IDENTITY

SKILLS

EXPERIENCE

Networks and aggregators driving mass skilling in several domains

India Stack allows skill and experience to be portable

Aadhaar Digital Identity For All

Jan DhanBanking For All

MobileCommunications & Ubiquitous Compute Device for All

New National Platforms

built on India Stack and JAM

59

Digital footprints - build value for the consumer & businesses

A Trust networks

A Skills repository

Build credit history

Manage customer workflows with user consent

Other Innovative Businesses

Reimagine Market Services

Innovative Businesses

Aadhaar - officially valid document

KYC for Regulated Markets

MicroATM Distribution

Mobile Payments

Paperless, Presenceless, Cashless -lowered costs, market expansion & financial inclusion.

Regulated Market

Enrolment - Digital id for all

Subsidy reform - deduplication

DBT - Aadhaar as a financial address

Biometric Attendance

Government

India Stack Enabled Businesses

60

Friction ReductionReduces cost of doing

business, and expands markets - everyone wins

More Education

More Healthcare

More Services

Access to Education, Healthcare on mobile will lead to

Inside the SystemMake it easier to be inside

the formal systems vs outside!

Access to Formal Credit will lead to Prosperity

CompliancePeople will pay taxes if it is easier to be compliant!

Acceleration of formalization

61


It drives up productivity by an order of magnitudeIt drives a formalization of various businesses

Unlocks savings, credit, investment and skilling at scale

As a result, kick starts a new cycle of growth!

India Stack Is The Tipping Point

Our View Of The Future!COMMERCE

HEALTH

Small Businesses LedNot Large Employers

JAMUniversal banking, identity, and mobile

SKILLS

TRANSPORT

National platforms for Savings, Credit, Skill, Taxes, etc. built on India Stack

Services LedNot Manufacturing

TOURISM

Domestic Consumption LedNot Exports

63


Thank you!

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