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prosperity
WHITEPAPER ON COMPETITIVENESS
OF INDIA
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Knowledge Partner
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INTRODUCTION
The Asia Competitiveness Forum was held on April 26 & 27, 2012 in Delhi (National Capital Region),
India at Hilton, Janakpuri. The forum was organized in conjunction with The Competitiveness Insti-
tute (TCI), OECD LEED, NSDC, GIZ and MSME.
This whitepaper has emerged from the deliberations of the Competitiveness day of the forum. Broadly
5 topics were discussed during the competitiveness day of the forum and are as follows
▪▪ Asia as a driver for world economy: Dividend, Aging, Prosperity, Growth Engine, Value, Arbitrage,
and Changing Role of Capitalism
▪▪ Manufacturing Competitiveness: Multiplier effect, next paradigm of growth for India, employ-
ment generation.
▪ ▪ The Role of Business in Society: Shared Value, Economic Objectives, Social Objectives, and Phi-
lanthropy et al
▪ ▪ Clusters as a tool for wealth creation: Emergence of clusters in India, Productivity, Diffusion, In-
novation, Seeding Clusters, Trade, Cluster Portfolio, Specialization Patterns, Technology Clusters,
Cluster Composition, Internationalization
▪ ▪ Regional Competitiveness & Process of Economic Development: Provinces, Vision, Value Propo-
sition, Competition within States, Business Environment, Strategy, Sustainability, Stages of Com-
petitive Development
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erty laws. We should aim to make our intellectual these clusters which can actually bring innovation
property laws much better than what is there in in them – and these clusters need to be profession-
the US. In the US, the respect for the intellectual ally managed and branded. India needs to em-
property is very high and hence, India should brace the innovation driven manufacturing sector
also not only tread on the same path as the US, and we should use this as a basis for making the
rather try to excel therein. manufacturing policy for the next 5-10 years.
▪▪ We really have to create a culture of innovation, ▪▪ Having a very stable and predictable tax regime
celebrating innovation, linking education to in- is imperative for boosting inflowing capital in the
novation, trying out new ideas, which are go- country. Retroactive legislations and arbitrary
ing to be completely different from the colonial powers given to people are not good signals since
mindset. An education system should not be without capital the manufacturing sector would
designed just to bring out mere transactional ca- not succeed. And flight of capital brings a horren-
shiers and clerks for the colonial empire but an dous vista.
educational ecosystem should actually produce ▪▪ Hence, India should learn from the history and
and drive innovation which is going to be the key focus more and more on innovation driven strat-
for competitiveness. egies, bringing stable tax laws and polices into
▪▪ The concept of clusters becomes lot more critical the system, focus more on customization, cluster
in an innovation driven manufacturing economy. building, infrastructure etc. Therefore, in the fol-
There are a number of Clusters in India such as lowing sections, the factors which are responsible
textile clusters in Tirupur, small metal manufac- for the low competitiveness status of India and
turing clusters in Ludhiana, IT clusters In Ben- proposed solutions for improving the same have
galuru etc. What we lack is an ecosystem around been discussed.
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Manufacturing Competitiveness
What is competitiveness?
Competitiveness is defined by the productivity with which a nation utilizes its human, capital
and natural resources.
-Michael Porter
INTRODUCTION
Consumerism is growing at a very fast pace; in fact manufacturing.
we are consuming electronic goods worth $40 bil- Manufacturing will be driven by a lot of factors.
lion, whereby it is predicted that by 2020 it will Market growth cannot be avoided and if the mar-
grow to $400 billion. We will be importing more ket continues to grow at the same pace that we are
electronics in India than oil. Government has also experiencing currently, then natural forces would
realized that importing electronics worth $400 definitely lead to foreign companies to start manu-
billion would result into a financial crisis. Hence, facturing in India. Our aim is to increase the manu-
India really needs to focus on growth in internal facturing Competitiveness of India.
From the above graph it can be seen that since 1991, the last 20 years.
contribution of manufacturing sector in our GDP has During 1990s, when liberalization of policies and
remained almost stagnant. It achieved a maximum of mindset occurred, the financial ecosystem and the
16.4 percent in the year 1997 and in the last year i.e. competitive needs of the industry groups suddenly
2011 it remained only 15.8 percent. Patently, Indian grew. A large number of industries were working
manufacturing industry has remained stagnant over on enhancing their competitiveness. The most com-
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petitive manufacturing examples from the Indian in- sources. If the cost of power is high, then it is not pos-
dustry are Tata Steel and Reliance. The cost of their sible for them to set up their own power plant. And if
product was very low in spite of the fact that they they are not able to satisfy their business needs from
were situated in a country where it was very difficult their power provider, DG (Distributed generation)
to start and sustain a business. This was possible be- power costs them twice the normal amount. Such
cause of the scale on which they operated. They were kinds of issues become major barrier for small scale
able to insulate themselves from the environment manufacturing industries in building or enhancing
which led to huge reduction in cost. For example, if their competitiveness.
the power costs were high, then they would set up So what do small industries do to survive? Keeping
their own power plant; and in a similar vein, if the in- the inputs same, price cutting can only be achieved
frastructure of a port was a problem, then they would up to a very small extent. Generally, small industries
build their own port, etc. start cutting on their inputs to reduce the cost, which
The prosperity and manufacturing competitiveness leads to the deterioration of the quality of their prod-
for small scale manufacturing industry has the same ucts which eventually brings down the reputation
importance as that for bigger scale manufacturing and reliability of the manufacturer.
industries. Large scale manufacturing industries are We need to cut corners in manufacturing partly by
the hub or they provide a nucleus for the small scale demand and partly driven by famous jugaad (= the
manufacturing industries to develop. But if small ad hoc resourcefulness-cum-ingenuity that allows
scale industries are not competitive enough, then the short-term solution-mongering). Jugaad is the ex-
competitiveness of the large scale manufacturing in- cellent strength in Indian industry where we can use
dustries also have a setback. low cost techniques, common place techniques, and
Small industries cannot insulate themselves from the build the ability to survive in the industry. But some-
environment because they do not have adequate re- times jugaad leads to short sightedness.
India’s competitiveness ranking which is brought out by the World Bank and International
Finance Corporation is 132 in the list of 142 countries. We are even below Pakistan, Nepal,
Bangladesh, Sri Lanka etc.
Manufacturing is a serious concern in India, the rea- to GDP has grown up from 48.8 percent to 65.2
sons behind this serious concern can be understood percent whereas the share of manufacturing has
by looking at the facts mentioned below: remained almost constant. (see the charts be-
▪▪ Share of manufacturing in Indian GDP is only 15.6 low)
percent, which is lowest among the other Rap- ▪▪ In other RDEs, manufacturing provides a major
idly Developing Economies (RDEs). Other RDEs’ share of employment whereas in India, manu-
manufacturing sector contributes significantly to facturing sector employs only 58 million work-
their GDP. For example, Thailand (40 percent), forces, a mere 12 percent of the total workforce.
China (34 percent), Poland (30 percent) etc. Naturally, stagnant share of manufacturing in
▪▪ Since 1991, the contribution of service sector GDP should be a main cause of worry.
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From the above graph, we can estimate the amount of Manipur, Nagaland, Tripura and Meghalaya. Herein,
Gross Value Added by different states of India. Maxi- India needs to improve the Gross Value Addition of
mum Gross value is added by Maharashtra followed the states who rank low by leveraging the strength of
by Gujarat, Tamil Nadu, and Karnataka. Minimum the states which are adding maximum value to the
value addition is done by North East states which are manufacturing.
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0 4000 8000
Thousands
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From the above graph, sector wise value addition in and cork etc, crop and animal production, hunting and
manufacturing can be seen. Basic metals, coke and related service activities, manufacture of furniture etc;
refined petroleum products, chemicals and chemical and sectors need serious attention.
products, machinery and equipment and other non- The Planning Commission has been working on how
metallic mineral products are the top 5 value adders in manufacturing can add thrust to the 12th five year
the manufacturing. The sectors which do least value plan. They believe that a special manufacturing strategy
addition are waste collection, treatment and disposal should be designed to add value to the 12th five year
activities, materials recovery, wood, products of wood plan. It has set up the certain objectives for the same:
Multiplier effect This would not only affect the GDP growth but also
the growth of the country as a whole.
Talking about Agro business in India, almost 70 per-
cent of the employment is generated by agriculture. Issues in Manufacturing
The major challenge faced by India is to migrate that
70 percent of employment in agriculture to manu- ▪▪ Acquisition of land is a major problem
facturing in agriculture itself, which is supposedly a ▪▪ We are also facing energy crisis, labour issues,
large component of manufacturing, and hence would environmental sustainability, HR issues, water
generate far more employment opportunities. There- availability for the industry, competitiveness of
fore, to bring a multiplier effect in manufacturing is the exports etc
a big challenge. India needs to acquire more physical infrastructure
and technology to reduce the production time.
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RECOMMENDATIONS
Increase spending on Research and Develop- Trust Building between Government, Industry
ment and Society
In India, spending on Research and Development is An element of trust building is required between
mere 0.9 percent whereas in countries like China, it is the government, industry and the society. What is
almost 2 percent. Hence, India needs to increase the pulling us back today are the different definitions
spending on Research and development. India also of the above three sections. For example, what is
needs to take care of the issues such as bringing Foreign considered good for the society may not be good
Direct Investment and technology in manufacturing. for the industry and may not fit into the goals of the
government?
Bringing Innovation in Manufacturing
Focus on “Green” manufacturing techniques
National innovation council is already looking at
issues in bringing innovation in the manufacturing If India and China also start consuming the same
sector in the countries and for this State Sectoral In- level and same kind of energy as the developed na-
novation Councils have been set up. There is also a tions are consuming, then it would create a global
move for setting up National Technology Fund for ecological crisis. So we have to make sure that as
Innovation. Technology upgradation can happen we develop manufacturing in India, we also need
through the sectoral funds in the ministries like to come up with clean ways of energy generation
we have the technology upgradation funds for the and make sure that our ecological balance is not
textiles. A significant technology upgradation is re- disturbed.
quired in the MSME sector, where outdated technol-
ogy is a big disadvantage. The 12th five year plan also Utilizing Indian talent in a disciplined way
caters to the above issues. Recently, the Government
has adopted the National Manufacturing Policy Executives in different sectors as Agrarian sector,
which focuses on clusters as well. Clusters are very technology sector etc keep looking for talent so that
important for the development of various sectors. talent can innovate on manufacturing.
Indian talent is best in terms of brain power,
Developing Clusters thinking capacity, ability to improvise etc. and is
recognized across the world in many industry sec-
NMIZ (National Manufacturing Investment Zone) is tors such as BPO sector, IT sector, medicine, in-
a huge cluster around which a manufacturing ecosys- frastructure, entertainment etc. But Indian talent
tem can be developed. Many of the State Governments is not disciplined to the right level which is a very
have acquired land for developing national investment big weakness. Undisciplined talent leads to the
zones and have already approached the departments wastage of energy as it is not focused on exactly
of industrial policy and promotion. Delhi -Mumbai what has to be done and eventually ends up taking
industrial corridor is a very huge stretch of integrated more time in doing things which could have been
industrial township development covering the states wrapped up in lesser time.
of UP, Haryana, Maharashtra, Rajasthan and Gujarat. Philippines is not a very hot economy and it is also
This is a very huge cluster on industry zone which not very good from an investment perspective.
Government of India has kick-started. But there are various lessons which can be learned
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from Philippines and managing talent is one of the a big problem which has been causing a deep-rooted
best thing which can be learned from there. impact on society, which has not only social implica-
tion but economic implication as well.
Big Manufacturing Opportunity in India
Focus on long term planning
India is one of the biggest consuming economies in the
world. Internal consumption is so high in India that Indian small scale industries have always been too
it can enjoy a huge scale building opportunity which busy in coping up with their day to day problems and
very few countries in the world can have. Hence, a hence, they have lost their vision for quality and long
huge level of economies of scale can be achieved, costs term planning.
can be brought down and innovation can be applied Industries have stopped thinking about the long
on that. Indian intellectual power is strong enough term strategies because they get used to managing
and very well recognized all over the world. the situations as it is. They rather start doing only
short term planning for the situations which keep
arising. Hence, long term strategic competitiveness
Climb the premium charging ladder is never achieved.
India needs to work on making a consensual 20 year
An Indian software engineer gets paid one-fourth of his long vision and plan which runs across all the po-
Dutch counterpart. We should explore the reasons be- litical ideologies, political parties and irrespective of
hind and should climb the premium charging ladder. who is ruling the country.
Focus on customization rather than mass Concerns of Indian Food Processing Industry
production
Food processing industry of India is getting lot of at-
In mass production, India is a laggard and it seems tention because of the following issues:
like India is not going to cover up on that. Hence, ▪▪ Huge amount of food wastage in India
India should focus more on customization so that we ▪▪ High food inflation
can charge more as the world is also moving towards ▪▪ Less Consumption of processed food in India-
individualization. Every individual has a unique The consumption of processed food in India is
identity and hence unique needs. The modern idea mere 5-10 percent which is very small as com-
says that one cannot classify the people into seg- pared to other developed or even developing
ments today and it is advised that India works out economies where it is 40-80 percent.
individual customisation at mass level solutions. Indian Industry and government are working to
unveil the reasons behind this small consumption
Bring stability in policies and methods to curb to the food wastage and food
inflation. Food industry of India is an extremely
Indian manufacturing cannot be competitive un- competitive sector because it doesn’t attract huge
til and unless we bring stability in our tax regimes, investments. Food Safety Authority is being formed
policies, education system etc. In India, everything is in India and we also have Right to Food bill which
changed every year with the new budget, be it the tax would be rolling out soon.
system, the education system etc. This instability is We don’t yet have a relaxed Agricultural Produce
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Marketing Act (APMC) where person from the in- items as fruits, vegetables, milk, meat and other
dustry can go and procure directly from farmers dairy products. The perishable items are spoiled
without the intervention of the middlemen. A huge because of poor processing, poor packaging and
pie of the perishable food gets wasted. inefficient supply chain. For example, India pro-
In India, the production of many food items as duces one of the best apples in the world, but by
sugar, cotton, corn are produced in surplus and the time they reach Delhi from Shimla or Kashmir,
pulses and edible oils are also well supplied, but they get worse than the apples coming from China.
still we continue to suffer from one of the high- India also needs to bring improvement in packag-
est inflation rates in the world. This is mainly due ing. Poor packaging spoils food items, especially
to our inability to deal with the perishable food perishable items.
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Cluster is basically a tool in India, which was first used state as a part of a cluster mainly because of the chang-
in 1996 for the promotion of Micro, Small and Medium ing definitions. But still there are many economic con-
Enterprises. It was started by the United Nations Indus- cepts which are applicable to industrial states and to
trial Development Organization’s (UNIDO) program the cluster development methodologies as well.
and Government of India picked it up rapidly from
2003 onwards. The 11th Five Year Plan had a number of Clusters and Government
schemes and programs on clusters and the various min-
istries such as Ministry of Textile, Development Com- In 1970s, there was a lot of investment in the in-
mission of Handicrafts, Handlooms, MSME, DIPP, var- dustrial states and Government provided spaces in
ious banks such as SIDBI and many other international different locations especially to focus on balanced
organizations have been working on clusters. Basically, regional development. For the first time, as a part
the movement started in 1997, it gained momentum in of the Government policy, Government invested in
2003 and is still going very strong. industrial states like Chennai which is one of the
There are 30 million MSMEs in India, out of which oldest automotive industrial state, Agra where lot
22 million are in services and 8 million in manufac- of foundry work was started and in Kanpur where
turing. 98% of the MSMEs in the manufacturing sec- textile industry was growing. There were four major
tor are in the micro industry. There are almost 6500 clusters which were developing in India in 1960s. Af-
clusters in India. ter that, survival of natural clusters began to undergo
significant changes. Then slowly, Ludhiana, Tirupur
When was the word “cluster” first used in India and several other modern clusters came up and they
in the policy papers? survived because of their strengths.
This year, i.e. 2012, the Government is going to focus
One reference to the clusters could be found in 2nd Five on 2500 clusters with a total budget of around INR
Year Plan which was more in the form of industrial states 20,000 crore. Almost 95 percent of this budget would
but officially it was used for the first time in a book writ- be utilized on building the infrastructure required
ten by one of the earliest Development Commissioner of for clusters to flourish.
small scale industries. The book was called “Industrial
States in India” and was written in 1963. Clusters, how- Clusters and SHGs
ever, evolved significantly in India in 1990s.
In India many attempts have been made to use the clus- Cluster is a very well used term in India especially in
ter methodology in 1950s and 1960s so as to make it rural development context. In the recent past, Gov-
a major policy tool for Regional Development and to ernment started many schemes based on Self Help
curb the inequalities of income and space. As a result of Groups and also started to give special kind of names
those efforts, number of industrial spaces came up. to Self Help Groups. The Government of Madhya
But as we define clusters, we don’t qualify industrial Pradesh has evolved a concept for increasing the
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clusters and for urban poverty alleviation with the were they set up? They discovered that there is a lot
help of SHGs. The premise is if SHGs are produc- of difference between Indian clusters and European
ing different products and a hundred such SHGs are clusters. Not in terms of virtual clusters or physical
present in the vicinity, and if they are asked to pro- clusters but in the terms of definition. In Europe,
duce the same type of product, this would eventually the clusters are innovation driven which is about
result into a very big cluster. increasing competitiveness. But in India, it’s mainly
about sharing the facilities such as production facili-
Clusters and Urbanization ties, logistic facilities etc.
Urbanization in India is happening at a very fast pace In terms of cluster management, there is a huge
but it’s also dislocating the clusters. A study done on potential in India.
Delhi and NCR suggests that in near future, it would
become difficult even for Maruti to retain its subcon- Prioritize the elements of cluster development
tractors in nearby areas because of space constraint The theories of the cluster development state that
which is due to the increasing prices of real estate. there should be cooperation between various clus-
These factors will distort the current definition of ters. Apart from cooperation, other things also need
clusters and will redefine them. to be created such as infrastructure, common facili-
Because of the changing definition of the clusters, IT ties, laboratories etc. Every cluster has a different re-
is going to play a major role in the formation of the quirement and taking a decision on requirements for
clusters. Clusters would be greatly dependent on IT a cluster is tough for the policy makers.
tools which would eventually cause geographically
distant firms to be a part of the same cluster. Proper Monitoring and Evaluation of the clus-
ter programs
Traditional clusters and Innovation clusters
Most of the cluster programs are run and funded
An innovation cluster is very much different from by the Government but Government does not have
traditional cluster model. Traditional models tend to proper monitoring and evaluation programs. There is
focus on outputs and the creation of mechanism of hardly any budget for hiring the manpower required
working together to achieve quality and increased out- for the evaluation of the cluster programs. Without
puts and then ultimately creating more revenue. But proper monitoring and evaluation, programs go out
innovation clusters focus on throughputs, ideas, cre- of the way and cannot even be corrected after a cer-
ativity and then fusing innovation within the cluster. tain time.
Indian clusters and European clusters Cluster Development Programs and Competi-
tiveness
India and Europe have to bridge the gap in their
technologies in their respective sectors. Previously Global and historical research indicates that Cluster
one had to go from Euro chambers to National Development Program (CDP) makes the clusters
Chambers, regional to local, which was a long path competitive. But the cause and effect relationship is
to reach to the technology providers and the deci- yet to be explored. Hence, in India, research needs
sion makers. to be conducted on how the Cluster Development
Then the focus got shifted to the clusters and Euro- Programs can make the clusters competitive? Indian
peans started looking on how clusters work and how institutes need to take a call on this research.
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▪▪ There are lot of clusters in India which have come up due to the
strong investment made by government in support institutions.
Institution For example, clusters of Pune Belt and Bangalore or to some
extent in Delhi and nearby areas, have been playing a very good
role in bringing up IT and service clusters.
As far as the Government is concerned in using strat- goal of prosperity. The countries that are focusing on
egy for local economic development, SHG movement competitiveness are shooting too low and they get
is one of the biggest examples of the governmental bogged down by looking good in the reports and by
strategy for cluster development methodology. They trying to do the things which are barely necessary; in
use social capital for micro financing, do trust build- the end, all this amounts to C grade.
ing and improve their value system. In India, strategy Competitiveness is about just being competitive
is mainly used in informal sector, decentralized sec- and not a goal. Prosperity and a prosperous en-
tor and rural development areas. vironment should be the goal. Prosperity is more
than just dollars. It lies in personal freedom, qual-
Clusters and Prosperity ity of life etc.
Can we think of any country which is prosperous
When we talk about evolution of cluster methodolo- but not competitive? The answer is no, we can-
gy and clusters itself, prosperity pathway is the meth- not find a single country which is prosperous but
odology used. Basically, prosperity pathway focuses not competitive. But can we think of the countries
on the fact that productivity creates competitiveness. which are competitive on paper but are not pros-
Over the time, competitiveness leads to the ultimate perous? The answer is yes, we can.
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delivering qual-
addressing creating the ity healthcare to
the need market the deprived
Arogya Parivar, identifies health care needs of the people at district level, village level etc and they work
together on the agenda that how different partners can come together and fit in the spectrum and what all
needs to be taken care during next 3-5 years on a consortium based approach.
As Novartis’s responsibility, Arogya Parivar has adopted innovation in the following basic ways:
1. They sell therapy in smaller pack sizes and blister packing which keeps the dosage same but reduces the
cost.
2. They follow a community based social approach. Arogya Parivar’s health educators are delivering free
healthcare services in villages, building awareness, advocacy etc. and this is making them small entre-
preneurs. This enables Novartis to gain a tremendous advantage in its supply chain and enables com-
munity to take the health care to villagers.
They are also running various loyalty based programs. For example, when a poor villager goes to a dispensary
doctor, he spends at least 30-40 rupees for his entire therapy. They are distributing community level cards to
such patients who are earning less than 4 USD a day so that their doctor gets more footfall and poor villagers
get cheaper but quality treatment. Community level cards are for subsidizing the therapy. In the end, commu-
nity totally benefits from this program. This ultimately leads to a behavioural change in healthcare.
Novartis is also supplying medicines to Kenya, Vietnam etc. and now they are working on a completely
different sets of product portfolios for these markets and for that they are in the touch of local govern-
ments and they are also trying to come up with certain non conventional therapies as well which would
fit perfectly for these markets. These countries have quality and pricing issues. Because of heavy duties
for these countries, they pay higher prices for the therapy as compared to the rest of the world.
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Case of FabIndia
FabIndia involves NGOs, governments, community etc in their process to build value for the society. They
partner with NGOs and most of them get involved into training and capacity building in the villages. There
is a role to be played by different fixed identities through the entire chain which includes NGOs, retailers,
logistics, supply chain, government etc.
There are many government schemes on cluster development and the creation of Self Help Groups which
really help them. They are doing Public Private Partnerships and currently they are engaged in them across
the country. There are many individuals in the government organizations that show interest in doing partner-
ships with public sector. FabIndia has set up a company in Orissa which is completely a public private part-
nership and the State Government supports them and is very actively looking to promote the weavers. The
whole collaboration is working very well for them and they basically look at who delivers best and what.
FabIndia has a very open system in terms of who can work with them. Basically, anybody who has a product
which is ready to go to the market and fits the look and feel of FabIndia, has equal chances of representing
their product anywhere else. Qualifications of supplier do not matter for them. It does not matter whether
somebody is a weaver or master weaver; hence the system is very open and transparent. Hence, community
owned companies at grass root level have been able to tap this opportunity in a very well way.
FabIndia teams travel from village to village, finds clusters, talk to the people, look at their product and source
directly. In this way, their teams are able to bring lot more variety and even small producers to the table.
They follow a bottom up costing approach where costing starts from the producer. Count of yarn, quantity
of yarn, dye used, labour charge and in the end the mark up is also mentioned by the supplier or weaver very
transparently. This open costing has always been followed by them. They are still carrying their 30-40 years
old relationships and have almost equal number of young and old producers.
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COMPETITION RECOMMENDATIONS
The companies like FabIndia, Mother Dairy, Novar- Make processes transparent
tis etc work extensively on creating shared value for
the society and hence are called community compa- In today’s world, information asymmetry and opac-
nies. There are various ways to view competition in ity has come down drastically. Rates are transparent
the market which are described as follows: because they can be found at many places as mobile
▪▪ Organization is competitive with competitors phones, internet etc but what still needs to be trans-
on the other side. parent is the testing mechanisms, transparency and
▪▪ Community Company on one side and market awareness about how test can be done, what it detects
on the other side, but community companies and what it doesn’t.
view market as an ecosystem to develop.
When we look at Competition we have to identify it, Build awareness about financing
identify the competitors strategy and practices which
is enabling it to outdo the other organization. As an Awareness also needs to be built about the whole
organization starts losing its competitive position in concept of microfinance including interest costs and
the market, it becomes difficult to regain the posi- implications thereof. Lack of availability of banking
tion back because the competitor becomes master in facilities is a big problem for the farmers.
the field where the organization has lost. This mainly
happens when the losing company has multiple ob- Balance the business and stakeholders needs
jectives which is really like playing minesweeper.
Our competitors may or may not have the same To promote the inclusive growth (like involving
thought process or commitment as we have or as we farmers and artisans), there needs to be a balance
perceive them. Pretty much, it depends on our defi- in the business, which means that at the same time
nition of competition. For example, someone may business needs and the needs of producers and oth-
have a very broad perspective of the competition. A er key stakeholders should be satisfied which would
consumer has 1000 bucks to spend on a Sunday and eventually lead to sustainability.
he may go to FabIndia store and buy a Kurta or may
go to some other store and buy a pair of jeans and Work on collaborative models
sneakers or he may possibly go and catch a movie.
One may perceive all of them as the competitors who Sometimes, when ever some business or even an in-
share the wallet of the consumer, which is indeed a dividual involves themselves in a social activity then
very broad perspective to view the competition. there are many uncertainties in the beginning which
The unmet needs of the society are so huge, that if may be due to several reasons as incomplete infor-
we see from the pharmaceutical perspective and mation, accessibility to society etc. These uncertain-
healthcare needs, all the companies in India cannot ties lead to inertia. Collaboration with Government
even address the need single handedly and hence and other parties play a big role in taking away this
cooperation and collaborations are required. No- inertia. Collaborative models ultimately transfer the
vartis and Arogya Parivar as a company, always in- benefits to the producers.
vite other companies so as to make a broader spec-
trum to address the need.
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Research is an integral part of development. India If we look back 20-25 years from now, what we have
needs to produce more PhDs. The mentality of mov- achieved in IT industry is significant as it is still
ing into jobs straight away after graduation and post booming. But other areas such as education sector
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have not moved at all. In India, skilled people are ties for building the competitiveness of the city
required in every sector. Hence, as a country, India or country. For example, Finland’s primary eco-
needs to bring huge reforms in education sector to nomic activity is telecom; hence Finland is com-
produce skilled human capital. We need to bring petitive in the Telecom sector. Similarly, Japan’s
more institutes in India imparting quality education strength lies in the electronic field, Detroit in the
and equally focusing on all the other areas not just IT manufacturing, California in wireless etc. Gov-
and medicine. When we look at human capital, qual- ernment plays a proactive role in this; because
ity is more important than quantity. economic activities are always build around a
system of incentives.
Focus on sustainability
Focus on manufacturing
The question we should be asking ourselves is whether
the economic model delivered to us, is able to meet the India should focus on building manufacturing
needs and aspirations of 7 billion people on this planet, in competitiveness. As mentioned in the previous
a balanced and a sustainable way? Hence, all the process- sections, the manufacturing sector contributes
es and techniques adopted by us should be sustainable only 15-16 percent to India’s GDP which is signifi-
because resources on the planet are limited and they have cantly low as compared to other economies. More-
to satisfy the needs of future generations as well. over, India’s manufacturing sector only employs 58
million people which are 12 percent of the total la-
Competitiveness in healthcare bour force of India. Hence, India needs to increase
its competitiveness in the manufacturing sector.
US spends almost 17 percent of its GDP on health-
care and Kerala spends almost 150th of what USA Focus on water and sanitation
spends but still results are comparable. In India,
cost of availing a good quality treatment is very low. Government needs to focus on providing improved
Hence, India has sustainable models of healthcare. sources of drinking water and sanitation to the peo-
India should keep improving its healthcare System so ple who are deprived of them, especially rural popu-
as to retain its competitiveness in healthcare. There lation and the urban poor. Almost 70 percent of the
should be low dependency on the expensive health India’s healthcare capacity is engaged for the treat-
institutions like Fortis Healthcare, Max Healthcare ment of water borne diseases.
etc. and maximum focus should be paid on improv-
ing the services of Primary Health Centres because Strict Measures to curb corruption
India’s 80 percent population still depends on them.
India also needs to increase its spending on health- Corruption is the biggest inhibitor to India’s
care. Currently, India is spending only 1.8 percent of regional competitiveness and economic develop-
its GDP on healthcare. ment. Whatever the budget is allocated to various
plans, is never spent in actual because of the exist-
Identify primary activity for building competi- ing corruption in the system. Moreover, corruption
tiveness never lets the policies and plans to happen in the
correct way.
Whenever we look at a country, city or region, we
should first identify its primary economic activi-
enhancing
prosperity
22
CONCLUSION
The paper discusses the various topics on Overall Competitiveness, Manufacturing Competitiveness, Clusters,
Shared Value, Regional Competitiveness and Economic Development. Various factors that impact all of the above
have been discussed and solutions for enhancing competitiveness and development are proposed.
In a nutshell, to enhance the prosperity and competitiveness of a nation, India should learn from the history,
the time period when Asian economies including India were the major contributors to the world’s GDP.
To enhance the manufacturing competitiveness, India should focus on spending more on research and devel-
opment, bringing innovation in manufacturing, developing more and more clusters, establish a trust between
government, industry and society, focus on “green” manufacturing techniques, disciplining the Indian talent,
tap the manufacturing potential of India, climbing the premium charging ladder, focus more and more on
customization, bringing stability in policies and tax regimes, focus on long term planning, improving the
supply chain etc.
To develop more and more clusters in the country, innovation should be adopted, government and SHGs
should be involved to increase the clusters across the country, elements of cluster development should be
prioritized, proper monitoring and evaluation of cluster programs should be done, link between Cluster De-
velopment Programs and competitiveness should be explored in depth.
To enhance the role of business in society and to work more on shared value, business processes should be
made transparent, awareness about financing should be built, needs of business and stakeholders should be
balanced, more and more collaborative models should be adopted, dependence on subsidies should be re-
duced etc. Discussions indicate that work on shared value is more driven by business objectives rather than
social objectives. If one organization does not tap the opportunity of becoming a community company, then
some other organization would. The Role of Business in Society is moving towards a direction leading to
building proactive, large scale and sustainable ways which would contribute towards the objective of promot-
ing inclusive growth.
To boost the regional competitiveness of a country and to enhance the process of economic development, main
focus should be on city competitiveness, focus on research and development and entrepreneurship, certainty in
the system should be brought and human capital and quality education should be looked upon.
enhancing
prosperity
23
LIST OF EXPERTS
▪▪ Amit Kapoor, Honorary Chairman, Institute for Competitiveness & Professor, MDI
▪▪ Amitabh Thakur, Fellow, Institute for Competitiveness & MD, India Edge Advisors
enhancing
prosperity