India Has a Mindset Problem

Jugaad once symbolized immense potential, but the endless shortcuts are now holding the country back.

(Illustration by Shaivalini Kumar and Meroo Seth for Foreign Policy)

BY RAVI AGRAWAL

| APRIL 6, 2019, 5:52 AM
When I was a child growing up in Kolkata, I could count on one hand the different types of cars chugging around the city’s streets. Each of the brands was made in India. In those years, which preceded the country’s 1991 economic reforms, global companies were still cut off from India’s then-nascent, protectionist economy. It was with some wonder, then, that I noticed what looked like a Mercedes-Benz sedan pull up by my school one day. But this was no luxury German car. On closer inspection, the strange vehicle was in fact the most common Indian sedan of the time but with an unusually sleek and elongated hood welded on and painted over to match the rest of the car’s body. As a finishing touch, atop the hood sat the famous three-point Mercedes star.

I didn’t know it then, but there was a word to describe what I had just seen: jugaad. It’s a Hindi word—pronounced jew-GAAR—that means to procure, but its usage had evolved by then to connote a “hack” or quick fix. One source for the evolving usage of this term was northern India, where farmers had taken to building makeshift trucks that were powered by agricultural water pump engines. These bits-and-pieces contraptions came to be known as jugaads. Other examples proliferated across the country. There was the television antenna created out of metal clothes hangers; the electric iron that flipped over to become a stove; the discarded plastic bottle, cross-sectioned and transformed into a pair of sandals; the bucket with tiny holes that, when hung up high, turned into a shower. The concept of jugaad represented a way for low-income Indians to access modern conveniences on the cheap. And while there’s no better term to explain the inventiveness of the Indian psyche, it also represents a mentality that now threatens to hold back the world’s fastest-growing large economy.

As the decades passed and India’s markets gradually opened up, the idea of jugaad began to evolve still further: It became a point of pride for Indians of all income levels. As cellular phones became common in the 2000s but usage rates remained expensive, Indians adopted a phenomenon known as the “missed call”: You would call a friend, and then before that person picked up and incurred a cost, you would hang up. That person would see that you had called and would call you back on a landline—all for free. This was classic jugaad, an inexpensive way to communicate, a clever little tech hack. (The missed call went on to become a staple of business communications as well: Calling and hanging up on your bank, for example, would prompt it to text you your latest billing statement for free.)

Observers in the West watched these developments closely. McKinsey consultants began to cite India’s frugal innovation as a new model for multinational conglomerates. The U.S. chain Best Buy began holding internal jugaad workshops in a bid to generate more sales per store. Books on the subject flooded Western markets: One popular example, published in 2012, was titled Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth. Management gurus, media pundits, and foreign correspondents began to proclaim that the power of jugaad thinking would enable India to become a world-class economy.

If only. As India has gotten richer—per capita income has grown nearly 400 percent since 1990, according to the World Bank—the appeal of cheap hacks is diminishing.And while there will always be examples of good and bad jugaad, one can argue that putting frugal innovation and workarounds on a pedestal will hold modern India back more than it advances the national interest.

In February 2016, for example, the Indian government held its much-publicized Make in India summit in Mumbai, the country’s financial capital. As often happens in India, construction for the venues was delayed. But workers and officials were adamant that they would get the work done: They had jugaad, after all. Sure enough, just in the nick of time, the construction was indeed completed. But one venue, the site of a cultural event at the city’s Chowpatty Beach, caught fire in the middle of a dance performance, and 25,000 attendees had to run for their lives. Fire hazard protocols had been abandoned in the rush to deliver a Make in India venue. “Shame in India,” declared the next morning’s cover of the Mumbai Mirror.

Later that year, in November, there was another public example of the jugaad psyche gone awry. Prime Minister Narendra Modi, in an emergency prime-time television address, announced what came to be known as demonetization: a sudden nationwide recall of all 500 and 1,000 rupee bills, representing 86 percent of the total cash in the financial system. The aim, Modi said at the time, was to crack down on corrupt businesspeople who had evaded taxes and stashed away vast amounts of paper money. The move—widely denounced by economists—was presented as a clever monetary hack: Tax evaders would either be forced to abandon their cash or get caught trying to turn it in for new currency notes. But this jugaad was too good to be true. Not only did a sudden shortage of cash bring immense pain and uncertainty to daily wage laborers across the country, but it also slowed down India’s GDP growth by as much as 2 percentage points, according to a recent paper by the U.S. National Bureau of Economic Research. And tax evaders mostly thrived: The government got a taste of its own jugaad medicine as India’s rich found creative ways to launder their money, including by paying employees’ salaries in advance cash payments.

Frequent policy changes are another cause for wavering confidence in India. In 2016, after decades of protectionism in the retail industry, New Delhi began to allow foreign e-commerce platforms to operate online marketplaces—and sell products through local affiliates—so long as these platforms didn’t sell directly to consumers. (It would have been unpopular to completely open up the online retail sector, so the move was seen as a jugaad-style hack for big U.S. companies to operate in India.)

As a result, Amazon made investments in wholesale distributors and structured its supply chains around connecting them to customers. And in 2018, eager to compete in a new frontier, Walmart invested $16 billion in Flipkart—a local rival to Amazon—to gain a foothold in one of the world’s fastest-growing online retail markets. But the party came to a halt last December, when New Delhi suddenly announced new e-commerce rules closing the 2016 loophole: Foreign companies such as Amazon and Walmart could no longer sell products through their local affiliates and would instead have to become pure online marketplaces like eBay. Supply chain analysts estimate the changes could wipe out nearly a third of Amazon’s projected $6 billion in Indian sales this year. The Western hackers had gotten hacked.

Jugaad seemed charming in the 1990s and 2000s. But it’s now time to move on, and one reason why is that half of India’s population was born after 1991; most Indians have grown up under more favorable circumstances than their parents and don’t want to make do with quick fixes. For India to become a developed economy, it now needs to avoid homegrown hacks and focus on doing what has worked for other rich nations: making proper long-term investments in research, development, infrastructure, regulations, and training.