India’s image in the eyes of the world undergoes a major shift in every 30 years or so. From Independence to the import of PL-480 wheat, it was one of abject poverty and utter helplessness — of a nation unable to feed itself.

Post the economic liberalisation, there was this image of the IT or tech support person answering queries from half a world away, which led to the creation of “Bangaloring” of jobs that has been seared onto the consciousness of many around the world.

Now, another image is taking root. That of a country that has moved from solving others’ problems to one that is trying to solve its own problems, and often in innovative ways that cost much less than what it takes in the west.

Cost-lowering innovation seems to have become the mantra of the past half-decade or so. From the world’s cheapest car, the Nano, to the low-cost vaccines pioneered by Shantha Biotechnics, Indian companies have been busy introducing a slew of products that cater to people who otherwise would not have even registered on the radar as customers — real or potential.

India is one of the youngest countries in the world today. With a working population of almost 526 million, slated to increase to a staggering 653 million over the next 20 years, for marketers, it translates to people willing to spend more on improving their lifestyle.

Though incomes have risen, it still does not translate into a rush for the nearest Armani store. In practical terms, it means that the average Indian consumer who earlier used a cycle, can now actively consider buying a bike, a bike-owner can now consider getting a car.

The Indian consumers’ quest for bettering his lot through upward social mobility on a limited budget has been noted by companies across product classes. Eager to make a profit through sheer volumes, companies are innovating on products and business plans to reach out to a customer traditionally thought to be “beyond the pale”.

This is in stark contrast to the established ways of doing business in the west. Companies spend huge sums of money on R&D for bringing a costly product into the market. They then market their products as “aspirational” (meaning only a few can afford), wait for incomes to rise for consumers to come to them. By focusing on innovation that lowers the cost of their products, companies in India have started reaching out to these customers.

There is no dearth of success stories on low-cost innovation.

Tata, one of the world’s largest conglomerates, has surely taken the lead. The availability of potable water is one of the central problems plaguing Indian cities. Often mixed with sewage water, it poses severe health problems to residents who have to use it for cooking and cleaning. Alternatives, such as bottled water or boiling, are expensive and impose other costs, either on the wallet or on the environment.

Tata came up with Swach, a water purifier that does not need running water or electricity and can cleanse water of most disease-causing microorganisms and impurities. Using a replaceable bulb-like device for purification, it has a capacity of purifying almost 3,000 litres before the material in the bulb is exhausted, upon which the entire purifier is rendered ineffective, an excellent safety mechanism for preventing impure water from being consumed. Available at less than Rs 1,000, it has brought down the cost of purified water to about 10p/litres. Swach also represents a classic study of a conglomerate such as Tatas, with diverse business interests, leveraging its capabilities in fields as diverse as chemicals and telephony to deliver a low-cost product for use by the masses. (Also see report on Swach)

While Tata Chemicals developed the bulb-like purifier, Titan supplied precision engineering know-how and Tata Teleservices provided customer support solutions. The Nano, also a product of the Tata group, is another example of the ability of low-cost innovation to create markets. Development began in 2003 as a promise by Ratan Tata, who delivered on it in March 2009, by announcing the sale of the Tata Nano at a price of Rs 1,00,000.

The emphasis on cutting costs while meeting pollution and safety standards led to a number of innovations on the different sub-systems, most of it carried out within India. There are now plans to begin exporting the Nano to other countries such as Europe, where it will be marketed as the Pixel.

Primary healthcare in India is seeing an increasing interest from industry giants. GE, a worldwide leader in healthcare, has set up labs in India to focus on low-cost medical technology. Innovation to lower costs can also save many lives.

A stranglehold of the big pharmaceutical companies over production of vaccines for Hepatitis B ensured that WHO’s recommendation for getting all children vaccinated against Hepatitis B remained a pipe dream in the poor nations of the world. Prices of the vaccine, at $23/dose meant that it remained out of reach of most people in third-world countries, where Hepatitis B had a fatality rate of 1-2 per cent and caused liver complications later in life.

Enter Shantha Biotechnics, a pioneering biotechnology firm founded in 1993. The company’s founder, Dr KI Varaprasad Reddy, saw the urgent need for innovating on processes relating to the manufacture of the vaccine to bring down its price. Innovations and novel processes were developed that brought its cost down to $1/dose. Mass vaccination programmes taken up by Unicef further ensured its reach to millions of poor people in Africa and other corners of the globe.

In 2009 alone, Shantha Biotechnics shipped more than 120 million doses of the life-saving vaccine. Long accustomed to living off the riches from patent royalties, large pharmaceutical companies were introduced to the highly profitable and socially important role of innovations to lower the cost of critical drugs.

According to some studies, almost a third of the food that is consumed in India goes waste because of spoilage and other such avoidable reasons. This is a body blow for the poor, for whom spending on food forms a very large percentage of their meagre incomes. Given the spotty record of the government in connecting a large portion of the population to the grid and also at making sure that electricity is available, refrigeration of food was a luxury easily taken off the list of possible solutions for prevention of food wastage. Until now, that is. Godrej, a leading manufacturer of, among other things, electrical appliances, has come up with the ChotuKool, a small (40 litre capacity) refrigerator with minimal electricity requirements. Based on the Peltier effect, it works on the principle of transfer of heat from one junction of a couple of well-chosen metals to the other — a thermodynamic process that keeps one end cool while the other hot. Priced at Rs 3,500, it is expected to rattle markets and established players.

Not be outdone, an enterprising potter from Gujarat, Mansukhbhai Prajapati, has come up with a refrigerator made from clay, appropriately named “MittiKool”. Pots of clay have been used since time immemorial for keeping water cool using evaporation, removing heat from the substance being cooled and transferring it to the surroundings. The fridge, with a capacity of 50 litres, uses two water tanks for cooling and is equipped with a cabinet to hold vegetables and other food items.

Running without electricity, Prajapati claims that “food items like vegetables can be stored up to six days, while liquid milk can be stored up to three days”.

Feminine hygiene is an area that receives very little attention, mainly because of people’s attitudes that seek to hush things up. It is even worse in rural India. Women often use cloth rags, old newspaper or even dried leaves during their menstrual cycles. These unhealthy practices lead to infections, complications in childbirth and have even been shown to cause cervical cancer. The solution, of course, was to provide all rural women with subsidised sanitary napkins. Made with cellulose derived from wood fibre, machines used to make the fibre cost more than $500,000 a piece, ensuring that multinationals like P&G and Johnson&Joh­nson dominate this space.

Arunachalam Muruganatham, with no formal education beyond the 10th standard, worked for almost four years to create a simpler version of the machine and finally came up with an acceptable solution that works with electricity and foot-pedals. The machine breaks down the cellulose, turns it into the shape of a sanitary napkin and sews it with a fabric. This innovation has brought down the cost of sanitary napkins to about Rs 12 for a packet of eight. Muruganatham has refused to hand over the patent of this machine. Many states, such as Uttaranchal and Punjab have sought to replicate his machine. This surge in low-cost innovation is not unique to India alone. China has a number of companies whose cost-lowering technical innovations have garnered for them a large share of the global market. A prime example is the company BYD. A battery maker, it has taken the worldwide lead in producing low-cost lithium batteries. These batteries are now being used to manufacture cars with hybrid power systems. Cost of lithium cells, often the major hurdle in adoption of this green technology, is being lowered on the back of innovations pioneered at BYD. The resulting hybrid cars, reportedly now being exported to the US, will cost less than half the $40,000 price tag of the Chevrolet Volt. Other examples include the setting up of biogas-based latrines in the markets of Nairobi (Kenya), which help maintain hygiene and also provide biogas and fertiliser to farmers.

This method of innovation, often called “frugal engineering”is used to solve what are often serious problems affecting the quality of life of the average citizen. It has resulted in innovative and homegrown solutions engineered with Indian needs in mind.

Often derided by some as compromising on quality, safety and other parameters that have “traditionally” gone into the creation of a great product, cost reducing innovations are definitely “disruptive” if nothing else.

Coined by Clayton Christensen, a Harvard Business School professor, “disruptive innovation” refers to the introduction of a new technology, product, or a new version of an existing product that discovers new markets, sometimes changing its very contours and often transforming manufacturing or marketing processes completely.

To take an example, in the run-up to the launch of Nano, prices in the second hand car market in India were depressed by 20-30 per cent and prices in the new car market were also depressed by 20 per cent. Such price reductions ultimately help consumers get better value for money.

The intense competition in the mobile telephony market in India has seen call rates drop consistently over the past decade. With outgoing calls at 1p/second, the Indian mobile telephony market is one of the deepest in terms of penetration and sophistication and cheapest in terms of cost to the consumer. Not every technology designed to benefit the masses reaches them, not every innovation succeeds.

Government laboratories have pioneered research in innovations leading to lowering costs, but little of it has managed to enter the market or find mass acceptance. Private players and industry too, have had their fair share of failures. The Simputer was for long touted as the answer to most of India’s shortcomings in the education space. Expected to breathe life into moribund classes and bridge the divide between the digital haves and have-nots, it has not lived up to its promise. Expected to have sold about 50,000 units until 2005, it is said to have sold only 5,000.

High-cost of the devices (priced at Rs 12,500 then) and availability of cheaper and more capable smartphones are some of the reasons given for its commercial failure. Aakash, the new tablet launched as part of the government’s digital education policy, has also faced trouble on compliance.

As we move away from the labs at conglomerates and established research institutions to the villages, we see a whole world of such low-cost innovations open up. Known colloquially, and now internationally, as jugaad, it is the name given to the uncanny ability to make-do with what one has, often improvising a solution until it just-works.

The best example is perhaps the vehicles we see on many rural roads transporting grain and even people. With a body made of scrap metal, an engine that once belonged to a tractor and a drive train fashioned from a water pump, this modern day chimera is illegal according to the Indian Motor Vehicles Act. Representing ingenuity and an anything-goes culture in equal measure, it raises serious questions about safety and implementation of regulations.

While Harvard Business School may have devoted case studies to the phenomenon of jugaad, fashioning it as the next in-thing in business thinking, more fundamentally, it takes root in an environment where one is desperate to survive. In the “complexity” of modern India, jugaad is a necessary, even welcome trait. When jugaad is taken to mean anything-goes culture towards people and their lives, it acquires dangerous dimensions. The sooner we do away with this sort of jugaad the better. In a socially dynamic country like India, with hundreds of millions of people at the bottom of the pyramid but striving to move up, there are fortunes to be made by serving their needs and wants.

Low-cost innovation and cost-reducing innovation can both be made to work to better people’s lives. The massive pool of engineering talent in the country, coupled with a can-do (‘jugadoo’) ethic has successfully engineered solutions to many problems once thought of as impossible. Marketing those same solutions, however, leaves a lot to be desired.

Often treated as give-aways by the government, these patents and products do not unleash the entrepreneurial energies of people associated with them. IITs and other research institutions seem to have taken note of this need for better marketing and commercialisation of innovation. Start-up incubators, rapid prototyping centres and extensive partnerships with the industry are coming up at a rapid pace and can today be found at most, if not all, government and private institutions of higher learning and research.

By giving space at economical rates to budding entrepreneurs, entrepreneurship is supported and encouraged. Through rapid prototyping, products can be introduced and tested in the market quickly. Extensive partnerships with the industry allow access to better funding and larger R&D networks. There are signs that the government may be entering this space by setting up a $1 billion VC fund, in cooperation with other venture capitalists to increase financing for rural innovation. All the ingredients for making India into an innovation and economic powerhouse are present. What is needed is better commercialisation.

Management guru CK Prahlad, in a book of the same name, had said, “A fortune lies at the bottom of the pyramid”. Bottom of the pyramid, for a country like India, means hundreds of millions of people, often many times over the entire market size of many countries put together.

Given the sheer numbers then, it makes economic sense for companies to focus on them. With rising economic prosperity, disposable incomes and favourable demographics (a larger spending population), more and more companies, big and small, are making products that represent high value to the customer, while keeping costs low.

From refrigerators to cars to water purifiers to vaccines — low-cost innovation is no longer limited to sachets of shampoo and soap, and to government laboratories.

(The author is an engineer involved in developing technologies such as speech recognition and text to speech systems for Indian languages)