We are regularly getting updates on how the energy transition is progressing in India. It is encouraging to read the article by Rajabahadur V. Arcot in the Economic Times about the boost coming to small businesses.
MSMEs to benefit from smart city, renewable energy, and Digital India initiatives
Micro, Small, and Medium Enterprises (MSMEs) and the country’s economy get a boost when sustained major investments take place in sectors that are reliant on high tech and aligned with global trends.
While increasing dependence on renewable sources of energy and building new cities that are smart, more resource efficient and meet the administrative needs of the future are some of the global investment trends, information and communication technologies are becoming all pervasive.
India has embarked on a new economic growth model that is well aligned with global technological and developmental trends. Generating 175 GW of electric power from renewable sources of energy of which 100 GW will come from solar power, building 100 smart cities, rejuvenation transformation of around 500 existing mid-sized cities that have a population of around 100,000, digitizing India, and making India a global manufacturing hub are some of the pillars on which the new growth model rests.
An interesting aspect of these growth initiatives is the synergy among them and their strong linkages with manufacturing and service sectors. These are large growing sectors and MSMEs are dominant stakeholders in the related ecosystems.
Thrust on renewable energy
India, despite emerging as the world’s third largest producer of electric power, is still not able to provide electricity to all and the International Energy Agency’s World Energy Statistics 2013, places the country at a dismal 110th position in terms of per capita consumption of energy.
The country remains a laggard both in terms of per capita consumption of electricity and access to all. As the county’s economy expands, its appetite for electric power is bound to keep further escalating in the years to come. It has to keep adding additional generating capacity for many more decades and significant share of that has to come from renewable sources of energy. There are compelling reasons for the country to place greater thrust on solar, wind and such others to ensure the country’s energy security, make electricity available to all, and overcome energy shortages.
In addition, it has to meet its international obligations to reduce global warming. At the recently concluded United Nations Climatic Change Conference, India committed to generate 175 GW of power from renewable sources of energy. This initiative has immense economic implications and for the growth of MSMEs. The World Bank study “Power for all: electricity access challenge in India” points out that the cumulative benefit would be greater than the cost of providing electricity service.
Implementing the renewable energy projects will spur a broad range of activities along the entire value chain relating not only to manufacturing but also to service activities such as design, erection, commissioning, metering, maintenance, and others. The value chain partners will comprise of a large number MSMEs making and supplying parts, components, panels, enclosures, and subsystems, providing technology and on-site services, developing application programing interfaces, and such others.
Smart cities’ fortune
The McKinsey Report Urban world: Cities and the rise of the consuming class, while highlighting that cities have long been the world’s economic dynamos, says that “through a combination of consumption and investment in physical capital, growing cities could inject up to $30 trillion a year into the world economy by 2025” and that around 600 cities alone will generate nearly 65 percent of world economic growth by 2025.
As regards India, The Urban India 2011: Evidence, prepared by the Human Institute for Human Settlements , says that India’s top 10 cities while accounting for eight percent of the country’s population, contributes to 15 percent of the GDP. The cities of the future, be they be 100 new smart cities under planning or transformed avatars of existing cities, will have networked sensors, devices and actuators that will sense, collect data and information, and receive/transmit details from/to other networked devices. Embedded in homes, hospitals, power grids, civic facilities, cars, transportation vehicles, ambulances, heart monitoring implants, biochip transponders on farm animals, and similar others, they will facilitate autonomous operation of cities.
Digitizing India to emerge an equal partner
While these programs such as electric power from renewable sources extensively and building of smart cities involve the use of digital technology, it is imperative for the country to go digital and embrace information and communication technology so as to ensure that it emerges as an equal partner in the new millennia. Wearables and mobile devices such as smartphones, tablets, and such others find extensive use and new applications are emerging almost continually. The digital ecosystem consists of numerous service providers, hardware and component manufacturers, network providers, software and application developers, and others. The associated investments are massive and hence a fertile ground for MSMEs.
While the State has approved total investments to the tune of $16 billion for smart cities and improvement of existing mid-sized cities, the total investments will most likely exceed $1 trillion. The expected investments in the case of 100 GW of solar power are around over US$100 billion.
Add to these proposed investments in building smart cities and solar power plants and solar rooftops, the investments in creating the technology infrastructure to make available all government related services through mobile applications and online under the Digital India program to fully grasp the business opportunities that the new initiatives offer to MSMEs. The opportunities for MSMEs and startups are limitless as the market is expanding robustly and rapidly. In fact, India is emerging as a global startup hub with many of the startup companies attracting venture capital funding.