Thursday, July 9, 2009
Opportunity at the Bottom of the Pyramid – CK Prahalad proposed the idea and many of us cashed upon it. The “Business Pandits” of the world like Mr. Prahalad, say that the opportunity exists in emerging markets like India and there too, in the rural markets of India. My point of dissatisfaction with this approach is with treating the rural population as target market and not as a means to ensure a fair distribution of wealth.
The major indicator of India’s financial intents is the Annual Budget of India. The Finance Minister of India, Mr. Pranav Mukherjee presented the budget on 6th July 10, 2009 and spelled out a budget that clearly revolved around the single point agenda of the upliftment of the Bottom of The Pyramid. Increased allocations for JNNURM (Jawaharlal Nehru National Urban Renewal Mission) and NREGS (National Rural Employment Guarantee Scheme) are just a few indicators of this approach. Another important step taken by government is to subsidize the communication infrastructure set-up in rural India to ensure a faster reach.
Any considerate citizen of India would’ve appreciated this approach of India, Inc. to pave a path for the rural population of India to reap the same benefits as the urban population. Infosys Chief Mentor, Mr. Narayan Murthy appreciated the Finance Minister by saying, “heart of the UPA is in Inclusive Growth.”1 Through budget focus on agricultural growth by fertilizer policy and credit availability to the farmers at low interest rate, it has been tried to create an equated society of India.
But then why at the end of the day, Sensex (Bombay Stock Exchange Index) fell by 6% in a single day? And why has every other person from the industry criticized the approach adopted by Indian government? Why has the approach of India to make a rich brother help his poor brother been criticized by the “Industry Experts”? Why did The Wall Street Journal regard this budget as “A Budget for Second-Tier Developing Nation”2 ? Why would The Financial Times pass judgments about the Finance Minister by saying, “one would expect him to at least balance the politics”3 ?
I see only one reason for this – Expectation of immediate gains. In May alone, the FII to the Bombay Stock Exchange went up by $ 4.14 bn4 on the hopes of immediate gains when their economies back home were not stable and needed the cash badly for revival. But excess “money attracts more money” is the rule. So, the business logic makes sense only when it adds to itself – doesn’t matter what the country needs. And they expected Indian government to pave a path for them to realize their short term objectives, which obviously did not happen and the stock markets plummeted.
There is a major problem with the idea that all these organizations agree with – the fact that the “Opportunity lies at the Bottom of the Pyramid” where everybody looks at them just as potential customers. Several NGOs work at the grassroot level to take the benefits of government policies to the real beneficiaries. Not to miss out that the corporate also contribute to this, but only from a single perspective of “Tapping the untapped markets” or being “Prime-movers in markets of no-competition”. Never has any business organization thought about the welfare of the society in general and not as customers.
Why I am so against the “mutual benefit” theory of the Corporate Social Responsibility? The reason is that there is always an Information Asymmetry in Urban-Rural interaction and hence, there cannot be an equal “mutual benefit” for the corporates and rural population. And in such a case, it is the prerogative of the government to provide essential infrastructure to the rural population (and urban poor) to bring them at par.
So, the opportunity indeed lies at the bottom of the pyramid but let’s not consider them just a Market but a part of the family that we left behind in the run for money.
1 “FM did a good job: Narayana Murthy”, The Economic Times, http://economictimes.indiatimes.com/FM-did-a-good-job-Narayana-Murthy/videoshow/4744647.cms
2. “A Budget for a Second-Tier Developing Nation”, By PAUL BECKETT, JULY 6, 2009, The Wall Street Journal, http://online.wsj.com/article/SB124687522344399695.html
3. “India’s Budget lacks a reform agenda”, By John Elliott, July 6 2009, The Financial Times, http://www.ft.com/cms/s/0be648c2-6a2c-11de-ad04-00144feabdc0
4. “India is now flooded with $1billion per week”, by Swaminathan S Anklesaria Aiyar, June 7, 2009, The Times of India
Copyright © 2009, Arun Sharma. All Rights Reserved.
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