The NANO Effect - India Becoming Hub For Low-cost Innovations

Much has been written about how the Nano from Tata Motors has changed forever the way India is perceived globally. Now after all the euphoria begins to subside, it’s time to ask some key questions. Is this the visible face of a wave of innovation that’s sweeping across India? And is India poised to become a hub for low-cost innovations for the world?

Ujwal Parghi would agree. As director of Shri Kamadhenu Electronics, the Anandbased company founded by seven young entrepreneurs with less than half a million rupees as seed capital, he’s been part of this wave. His firm has developed Akashganga, an automatic milk collection and accounting system that has made lives of dairy farmers in cooperatives, much easier. What previously took over five minutes, now gets done in just 30 seconds, saving dairy farmers from serpentine queues where they had to worry about their milk getting spoilt by the time it was measured. The machine incorporates a milk analyser that provides data on six parameters of milk simultaneously and helps monitor adulteration.

“This electronic system has brought total transparency in the system as farmers immediately come to know about quality and value of their milk with a printed slip in their hands,” says Parghi. Little wonder that Akashganga has, in addition to big dairy and food clients such as Amul and Nestle India, transformed milk collection systems across Maharashtra, Bihar, Jharkhand and Rajasthan and has even found a ready market in countries like Kenya, Uganda, Vietnam and Nepal.

The Akashganga example is just one of the numerous and successful low cost innovations that have been designed to meet the needs of consumers in emerging markets such as India, and go beyond the innovations driven by big businesses that get more attention. Says Prof Anil Gupta of IIM Ahmedabad, “We can’t rely on large corporates alone to produce innovation. The world over it’s small companies that produce the most innovative products and services. But for that we need to build a strong innovation support system.”

In Bangalore, ReaMetrix has devised an immune monitoring test for HIV-positive patients, which has cut the cost of testing by one-fifth, thereby reaching out to the lower sections of the society that tend to have the highest infection rates. Now priced at Rs 125, the test earlier cost Rs 600-750 to administer. Moreover the reagents were in liquid form and had to be maintained and transported at a specified temperature, failing which they were spoilt. ReaMetrix managed to develop the reagents in a dry state, so they can now be transported over long distances without refrigeration even in harsh climatic conditions. “This is innovation, not some reverse-engineering or copying. And it creates sustained economic activity,” says Dr Bala Manian, the company’s founder-CEO, who’s also a serial entrepreneur and a scientist with 35 patents to his name.

ReaMetrix is supplying the product to countries in Africa, which has the highest incidence of AIDS, and to Brazil apart from some of the best-known labs in India.

“There’s a lot of innovative entrepreneurial activity in India today, far more than it was in say 2001, and we have invested in several such companies that show promise to attain leadership position within the next 4-5 years,” says KP Balaraj, founder and MD of Sequoia Capital, a Bangalore-based VC fund.

Similarly, Ahmedabad-based Troikaa Pharmaceuticals has successfully introduced an injectible (Dynapar AQ) of lower dosage volume for relief in post-operative pain, trauma pain, fracture, renal and biliary colic and other acute painful conditions. The Rs 105-crore company managed to bring down the dose from 3 ml earlier to 1 ml now at Rs 14 per unit. “Our aim is to innovate on such products and reach more markets where they are most needed,” says Ketan Patel, CMD, Troikaa Pharmaceuticals, who plans to take the product to Latin America, the EU, CIS and African countries. Says Prof Srinath Srinivasa of IIIT-Bangalore, “India is poised to be at the forefront of low-cost innovations that can have a global market. It is easier to innovate in this sphere because of the low costs involved in setting up an IT-based industry than a brick and mortar factory or say a retail outlet.”

Indeed, technology has played a key role, and most innovations coming out of India are leveraging this combination of low cost and high tech to produce killer products for bottom-of-the-pyramid consumers. Take for instance the Gramateller, an ATM that incorporates a fingerprint reader to authenticate the account holder, obviating the need for an ATM card and PIN. The machine, developed by Chennai-based Vortex Engineering and the Tenet group of IIT Madras, is enabling a low-cost delivery model for banking services in rural areas and locations not covered by banks so far. “India can be an innovation hub if it continues what it has been doing. However, it’s important that companies focus on marketing their products to their target audience as well,” says Vortex’s managing director L Kannan.

Many low-cost innovations actually create new markets where none existed, and kickstart a category for others to follow. Ask Mukesh Bhandari, CMD of Electrotherm India. His is the first company to launch e-bikes in India at an affordable price point of Rs 13,000 in early 2006. The bike runs on an electric battery. “As we are nearing China’s population levels we need to look at providing environmental-friendly means of transportation to our people,” he says.

Bad roads and rising fuel costs prompted this entrepreneur to produce bikes that are 20% cheaper than the even the ones coming in from China. With sales of more than 50,000 bikes, and a share of 60% in the category, Bhandari estimates that his company has helped save $1 million in fuel costs per month for the nation. Now he intends to export these bikes to emerging markets in South East Asia, Africa and Latin America.

There are hurdles though to innovations and that’s the challenge for entrepreneurs. Says Vineet Rai, CEO, Avishkaar Venture Management Service, which finances rural innovations and supports them towards becoming profitable enterprises, “India has always had talent, which is required for any country to become an innovation hub but then what we may lag behind in is infrastructure.”

But that isn’t deterring entrepreneurs who are aiming for that one big revolutionary idea that truly democratises a product or service. Tide Technocrats Pvt Ltd (TTPL), which specialises in rural energy solutions is one such company. It’s pico and micro hydel devices provide cheap power to rural areas that lack consistent access to grid power by utilising locally available natural water flow systems. It’s biomass processing system taps an alternate source of energy for rural consumption. Says K Dinesh, partner TTPL, “We address the alternative fuel need for power plants and make energy affordable for the masses.” While providing electrification in far-flung remote areas the bio mass processing would create employment and entrepreneurship avenues for villagers. The company has developed a direct sales agent based strategy for reaching out to areas interested in micro hydel Installations.

For India this could be just the beginning of a string of innovations that will find applicability across the world. IIMA’s Gupta cautions against getting carried way by the celebrations in the wake of the Nano, and suggests that small businesses look at moving up the value chain, which will spur them to innovate. “We are not there yet,” he says.