India’s frugal innovation powering superpower roadmap: Cambridge professor Jaideep Prabhu | Exclusive

At a time when the global startup ecosystem is recalibrating after years of capital excess, Cambridge academic Jaideep Prabhu is challenging one of innovation’s most deeply entrenched myths: that scale demands massive capital. In his recently released book LeanSpark: Frugal by Design, Global in Impact, Prabhu argues that India’s long-evolving culture of jugaad is no longer about improvisation, it is about disciplined, scalable, high-tech innovation built for global relevance.

In this wide-ranging interview with Firstpost’s Rajat Mishra, the Nehru Professor of Indian Business explains why burning cash is not ambition, why venture capital orthodoxy does not suit India, how India Stack reshaped financial inclusion, and why frugal innovation could become India’s strategic advantage in a fragmented world order.

Edited Excerpts:

What prompted you to write this book, and why this theme? Why talk about Frugal by Design right now?

I have been an academic all my adult life, and I have studied innovation. That has been my focus. In the first part of my career, for about 10 or 15 years, I studied innovation as it was done in large Western corporations. The received view — in textbooks and research — is that innovation happens there: in large Western corporations, in high-tech sectors like pharmaceuticals or computing.

These are the organizations with big budgets, big teams, and talent. They are the ones who produce breakthroughs. That was the view I also had.

Around 2008, I started looking at how innovation was done in emerging markets like India, where I had grown up. When I examined how innovation happened there, I saw that the approach was very different. It was much more frugal, less formal, more flexible, and more improvised.

At that time, in 2008 and 2009, many innovations were designed to bring people who were outside the formal economy, or on its fringe and on lower incomes, into it. There were many frugal innovations in telecom and mobile phones — not just the handset, but services such as five-rupee scratch cards to make calls. There were similar frugal innovations in healthcare, education, financial services, and other sectors.

This led me to rethink my understanding of innovation and focus on what I call frugal innovation, which in India we call jugaad. How do you do more with less?
From that came a book titled Jugaad Innovation, published in 2012. It was essentially about how countries like India were using existing technologies — not necessarily high-tech, sometimes even low-tech — to create products and services for lower-income people.

Later on, we realized that in India, the idea of jugaad was evolving. More people were finding ways to retain the frugal mindset while scaling it, often using technology. That is what this book covers. It presents many examples from the last 10 years where the frugal mindset has been applied at scale across sectors — from financial services and digital governance to space tech, as well as in areas like culture and education.

You say that innovation does not need scale or access to capital. What is the single biggest myth about innovation you are trying to challenge in this book?

No — innovation does need scale. That is key. If you do not scale, your innovation remains low impact. From a frugality perspective, scaling is also very important because it helps you stay frugal. So I do not say that you do not need to scale. On the contrary, you must scale.

The biggest myth is that you need lots of resources, especially financial resources, to scale. That is the Silicon Valley approach — the venture capital model. You throw money at, say, ten new innovations, knowing that nine will fail. You lose money on those nine, but if you throw enough money at one, it will scale, become extremely successful, and perhaps even a virtual monopoly — like Uber, Airbnb, or Facebook.
That is the Western approach, and that is the myth we are trying to challenge.

Particularly in countries like India, where resources are scarce — not just financial resources, but all kinds of resources — it is important not to be misled by the idea that the only way to scale is through massive capital.

When you talk about high-tech jugaad, and when you look at India Inc or the startup ecosystem, what are some examples of high-tech innovations from the last few years that have left an indelible imprint on your mind?

Let’s start with what is called India Stack, beginning with Aadhaar. Aadhaar itself was a technological biometric solution that scaled, and it was done extremely frugally and quickly. On the back of Aadhaar, they developed solutions like eKYC and UPI. Again, these were frugal innovations that scaled.

On top of this digital public infrastructure, we now have a thriving financial services sector. On the demand side, we have seen hundreds of millions of people who were outside the banking system come into it. Small businesses have entered the formal banking and tax systems. On the supply side, we see many fintech startups using these digital rails to create new solutions very quickly and very frugally. Many of them have become unicorns. That sector has been transformed by this kind of frugal mindset that has scaled.

In the book, we also look at space. India has built a reputation over decades for doing high-tech work — launching satellites, sending missions to Mars and the moon, even landing a rover on the moon — at a fraction of the cost of global competitors like NASA, the European Space Agency, the Russians, or the Chinese. ISRO has played a central role, and the sector has now been opened up to space-tech startups. There are many startups operating in this ecosystem, and some have reached unicorn status. This too represents frugal innovation in high tech.

More recently, we are seeing similar frugal innovation in AI. In the West, particularly in the US, the Silicon Valley approach to AI is resource-intensive — spending hundreds of billions of dollars on chips, datasets, data centres, energy, and talent. India does not have that level of capital or resources. However, it has enormous opportunities to apply AI in education, healthcare, financial services, agriculture, and other sectors.

For these applications to scale and create impact, they must be affordable. To be affordable, they must be developed frugally. We have a chapter on frugal AI and the developments happening in India — startups that are scaling rapidly while operating at a fraction of the cost of companies like OpenAI or Microsoft in the US.

Is frugal innovation peculiar to India? Or do we see frugal or high-tech frugal innovation in other countries as well? Do you find it interesting but unique to India?

I think other countries are also doing it. The most obvious example is China. Even though China is richer than India, it is still a relatively poor country with many people on lower incomes. It has undergone a manufacturing revolution and achieved several technological breakthroughs.

Like India, it has a large talent pool.

For at least the past 10 to 15 years, China has demonstrated frugal innovation in areas such as medical devices, home appliances, and consumer electronics — including refrigerators and washing machines. More recently, it has done so in electric vehicles, with companies like BYD, as well as in battery technology, solar energy, and semiconductors. China is the clearest example of frugal innovation at scale.

I would say India comes next because of its scale, its talent, its ecosystem, and relatively good governance. India is also more diverse and enjoys greater relative freedom because of democracy. It is a younger country, with a much larger working-age population, while China is ageing rapidly.

In that sense, India is uniquely positioned over the next 10 to 20 years to lead globally in frugal innovation. Innovations emerging from India will not only be applicable in other emerging markets — including China, Africa, and other Asian countries — but also in Western economies.

Western countries are facing rising inequality, more people on lower incomes, and increasing resource constraints. Yet they tend not to adopt a frugal approach to innovation; their models are often far more capital-intensive and expensive. For these reasons, India is uniquely poised going forward in this space.

As the world fragments through trade wars and industrial policies, do you think frugal innovation becomes a strategic advantage for countries like India?

My personal belief is that India’s frugal approach is a kind of superpower. First, for our own market and growth. A large section of our population remains in the semi-formal economy and in lower-income segments. For them to access new technologies and tools — such as affordable AI — it is essential that we pursue frugal innovation domestically.

If startups continue developing frugal, tech-enabled solutions, it will benefit the Indian economy by bringing more people into the formal system. Productivity will rise, incomes will increase, and India can grow in a sustainable and inclusive way.

There is also an external advantage. If we develop solutions for India that scale successfully, we can export them to economies with similar conditions — including parts of Asia, Africa, Latin America, Eastern Europe, and even China, where we have a large trade deficit. A significant portion of the world would find Indian frugal solutions immediately relevant. We already see success in emerging markets, but there is room to do much more.

Regarding geopolitics, much of the recent protectionism has been driven by the US. However, other blocs are responding by strengthening trade ties elsewhere, particularly with India. Many countries are accelerating free trade agreements with India. The UK-India FTA has moved forward after years of negotiations. The EU is also engaging more actively. India is expanding trade with Russia, Canada, and others.

In some ways, the tariffs imposed by the US have pushed India to diversify its trade partnerships. India offers valuable products and services to global markets. It also provides an alternative to China. Many countries are heavily dependent on Chinese goods and are uncomfortable with that dependency.

India is therefore well-positioned globally, and a significant reason is its strong ecosystem of frugal innovation and scalable solutions.

Do you think burning cash is still being mistaken for ambition in the startup world? How do you view these failures and the broader startup story we have witnessed?

I am not surprised by it because that is the venture capital model we discussed. Investors throw money at startups they believe have potential. It is a gamble. They know that nine out of ten will fail, and they are comfortable with that if one succeeds and becomes dominant.

Even in the US, this model has consequences, including the creation of monopolies so large that they are difficult to regulate. But it is an even bigger issue in India, where we do not have that kind of capital to deploy inefficiently. Even if we did, such capital could be used far more productively elsewhere in the economy.

India does not have the deep financial resources of Silicon Valley, nor does it have the scale of state-backed funding that China deploys. In China, sectors like electric vehicles and batteries were heavily supported by government subsidies. India cannot replicate that approach at the same magnitude.

It is not surprising that startups in India that followed the Silicon Valley model have struggled. Investors may provide funding, but they also demand rapid returns and aggressive scaling. If there are flaws in the business model, or if the business requires patient development, it becomes vulnerable to failure.

I believe that approach is risky in the Indian context. Startups should first focus on building a product, service, and business model that genuinely works for the customer. They must prove it, scale through customer satisfaction, and then attract the right kind of capital as they expand.

A customer-centric, rather than investor-centric, approach is more likely to create robust and sustainable startups in India’s ecosystem.