Making millionaires in Telangana by creating jobs

By: Soonya

Any modern society focuses on wealth creation and an equitable distribution of the wealth.

However, creating wealth can be done in multiple ways.

We hear of 2 digit growth with no jobs being created!

We also have seen from our Telugu colonialists (read as Andhra rulers) how a handful of people become super rich in a short time through crony-capitalism (Pasham Yadagari has a Telugu word for it – Chamcha Pettubadidari).

While welfare measures are a form of redistribution along with differential or progressive taxation, it is not sustainable over the long run without the resource base of taxes growing. Whatever progressive taxation one may adopt, unless the tax base is growing a healthy pace, the welfare measures can make a government go bankrupt in less than a decade.

We have seen how the populist measures of NTR (there are other interpretations of the popular rice scheme on this site) and ignoring the investments in the power sector led to a decline of the erstwhile AP as a power surplus state to power deficit state. It is another story (again there are articles on this site about the nefarious designs of Andhra colonialists) how Telangana got a raw deal in the last few decades.

What are the lessons for the nascent state of Telangana?

One question worth asking is how does she balance redistributive justice with distributed growth?

And what does that growth mean? How should the growth come? What should be the contours of such growth? What will be the engines of such growth?

I will limit this piece to one sector of the economy – services, and within that I will limit myself to the IT sector.

AP colonialists, especially the yellow brigade and its apologists in the media, tom-tommed one person as the architect of IT in the erstwhile state of AP!

I was closely associated with the emergence of IT in Hyderabad working for an IT major for about 2 decades and was privy to the challenges of growth and the evolution.

3 Myths.

1. IT city in Cyberabad created the IT revolution in Hyderabad.
2. Liberalisation of Engineering colleges
3. One person is responsible for the whole growth
4. Large companies must be wooed as they create employment

I remember an industrialist giant, and its very senior officers used to ‘suffer’ the snail paced services in Begumpet airport and used to drive pot-holed roads (apology of roads) to an IT firm 27 kilometers away from Begumpet in a sleepy village and still visit to make deals.

I am not arguing that we need not create physical infrastructure nor that it does not help, but my argument is that the industrialist giant and many more did not come here to be impressed by a clean and efficient and modern airport or swanking wide roads – they came here because they say low cost TALENT.

So the moot point is what needs to be done in Telangana to keep the edge of low-cost talent available in sufficient pool, of sufficient quality, continuously.

Second to believe that only large companies can create employment is another myth which is only partially true at best. One must remember many of the IT majors from Hyderabad were small at a point of time.

The issue is how do we build, nurture and encourage the ecology of small firms.

It is this ecology which is the back-stream supply chain of talent development for larger firms.

As an aside let me share one incident – in one of the IT events I met a young entrepreneur who lamented about my company’s HR practices of ‘poaching’ from his fledgling firm. I told him that is but natural, because a large IT firm can pay better and give better security apart from a ‘brand value’. It is as simple as people wanting to migrate from small towns to big towns and from big towns to metropolises and from Indian metropolises to global cities and abroad! However, I suggested that he have a proactive policy of offering his resources to the large companies as well trained resources and make the money the HR consultants were making! Not too sure if he took my ‘free’ advice!

The point I wish to make here is that the ecology of small firms is necessary for a constant supply of good quality resources for the large firms who often lack on risk taking and innovation.

The young and dynamic IT minister of Telangana seems to have kicked in an incubation center located in IIIT Hyderabad, which is a good thing for it will ‘spark innovation and create IP’.

However, still there is steam in ADMS – or bread and butter services as yesterday’s innovations have become legacy systems and need maintenance, enhancements etc.

I’d recommend that instead of a handful of large and fat-cat enterprises (I have nothing against them) which any know how to negotiate with governments and other stake holders, it is critical that we create a large pool of small enterprises of which some can and will aspire to grow into fat-cat enterprises.

Can the nascent state focus on creating let us say 100 if not 1000 millionaires in the next 5 years?

It can be done.

Imagine if the GoT IT (IT department of Government of Telangana, like to play with words!) were to systematically invest about a quarter of Billion Dollars for automating or leveraging IT for improving the services to citizens and offer it to small enterprises we can kick in a flurry activity and create many jobs in the short run.

Imagine in the next 5 years if we spend a Billion Dollars (for me BD is business development as well) and allow an ecology of small firms build up in Telangana, let us say in 4 district clusters in around Hyderabad we will spawn a 100 millionaires. I am confident among the 100+ we will see at least 1 – 2 firms aiming to become a half a billion to a billion enterprises.

Who will be eligible for the support from the GoT IT?

1. Those firms that have been in existence for at least 3 years should be eligible. Why 3 years? If an entrepreneur figured out a way to survive for 3 years he/she has shown the grit and determination and has in him/her what it takes.

2. Those that have a turnover of more than 1 crore in the last 3 years. The reason is that such firms would have some basic business practices in HR and can recruit and retain and may have rudimentary training processes.

3. Those that have an ISO or CMM level 3 certifications. This shows that the entrepreneur is interested in building systems and processes and may help the organization grow and help while in growth.

If the GoT IT spends around 1000-1500 crores on systems development about 100-150 companies may get business around 10 crores each in addition to their 1-3 crore topline, giving boost to employment. My guess is a blended cost of about 5-7 lakhs per job (including some 10-20% profit) may lead to about 10/15 jobs per crore deployed. That would mean a direct employment of about 10000 to 20000 jobs!

CLSA reports of yonder state that for every IT job 1.2 to 1.4 jobs are created! That would be an additional indirect employment to 12-24000 jobs!

With power-connection with Chattisgarh, some of these entrepreneurs can set up shop in Raipur as well seeking e-governance projects there!

In addition to the above, we can set up citizen services ITeS hubs in each district head-quarters, probably costing about 10 crores for each center in opex and about 1 crore per center in capex. Each center can employ about 100 men and women serving the citizens of Telangana. In just about 6 months – 1 year we can operationalise these centers creating 1000 jobs in district centers, thus taking the government $$ to rural areas and taking governance and jobs to interior parts of Telangana.

All government departments can use these as their back-offices. By investing on those wish potential and with some training we can help some of the employees migrate to Hyderabad or other urban BPOs, thus creating prosperity for Dalits and OBCs and Minorities in rural areas.

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