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Norway, India, Competitiveness, Doing Business in India, Strategizing

Norway, India, Competitiveness, Doing Business in India, Strategizing

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  • 1. Doing Business with India: Issues, Perspectives, and StrategiesDr. Amit KapoorInstitute for Competitiveness (IFC), India is an independent, international initiative centred in India, dedicated to enlarging and disseminating the body ofresearch and knowledge on competition and strategy, pioneered over the last 25 years by Professor M.E. Porter of the Institute for Strategy andCompetitiveness, Harvard Business School (ISC, HBS), USA. IFC, India works in affiliation with ISC, HBS, USA to offer academic & executive courses, conductindigenous research and provide advisory services to corporate and Government within the country. The institute studies competition and its implications forcompany strategy; the competitiveness of nations, regions & cities; suggests and provides solutions for social problems. IFC, India brings out India CityCompetitiveness Report, India State Competitiveness Report, India Economic Quarterly, Journal of Competitiveness and funds academic research in the areaof strategy & competitiveness. To know more about the institute write to us at info@competitiveness.in.1
  • 2. AgendaMacroeconomicTrends in IndiaAdditionalIssuesStrategizingfor India
  • 3. 5.433.161.5World GDP in 1990Agriculture Value Added as a Percentage of GDP Industry Value Added as a Percentage of GDP Services Value Added as a Percentage of GDP8.838.253.0World GDP in 19702.825.471.8World GDP in 2009
  • 4. GDP over the yearsSource: WDI and Institute for Competitiveness Analysis0%10%20%30%40%50%60%70%80%90%100%1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010European Union India China United States Rest of the World39% in201023% in20109% in20103% in201026% in2010
  • 5. GDP and Population in the World EconomySource: World Bank dataset , Institute of Competitiveness Analysis19.6% of the worldpopulation and 9. 38%of world GDPChinaIndia17.1 % of the worldpopulation and2.73% of world GDP0.90% of the worldpopulation and 3.56%of world GDPUnited KingdomUnited States ofAmerica4.5% of the worldpopulation and 23.11% of world GDPJapan1.86 % of the worldpopulation and 8.65%of world GDP
  • 6. Geopolitical HotspotsChinaIndiaCross-straitrelationsOffshore Oil reservesKashmir Conflict Tibet ConflictSource: Deutche, Institute for Competitiveness Analysis
  • 7. Agriculture and AlliedIndustryManufacturingServicesConstructionTransport, Storage & CommunicationFinance, Business & Real Estate ServicesCommunity and Personal Services-10-8-6-4-20246810-10 0 10 20 30 40 50 60%ChangeintheContributiontoGDP(1994-2000)Percentage Contribution in GDP (2000)Structural shift in Indian Economy (1994-2000)Institute for competitiveness Analysis
  • 8. Agriculture and AlliedIndustryManufacturingElectricity, Gas and Water SupplyServicesConstructionTransport, Storage & CommunicationFinance, Business & Real Estate ServicesCommunity and Personal Services-15-10-5051015-10 0 10 20 30 40 50 60 70(%changeincontribution2000-2010)Percenatge Contribution in GDP (2010)Structural shift in Indian Economy (2000-2010)Institute for competitiveness Analysis
  • 9. Macro Economic Trends in India – The Big IdeaOpportunities in India India versus BharatBase ofthePyramidTheIndianMiddleClassFactorConditionsDemandConditionsThe ruraland theurbanIndiaThe Big Idea
  • 10. Diamond for IndiaContext for FirmStrategy andRivalryRelated andSupportingIndustriesDemandConditions- Local rules and incentives that encourageinvestment and productivity e.g.- Tax laws could be made easy- Cost competitive salaries- Robust banking support- IP protection is weak as of now but is slatedto be better in the coming future.- SEZ’s and Cities along the proposedcorridors could look at long term growth.- Vigorous local competition in some sectorsbut certain sectors do not have competition.- Companies increasingly becomingsophisticated- Local availability of suppliers andsupporting industries- MSME Sector has been particularlygood in India- Focus should be on quality- Presence of clusters instead of isolatedfirms- Presently some 380 clusters are presentin India- A huge Consumption Driven MiddleClass (estimated by NCAER at 160Million slated to rise to 267 Million by2017.- Often quality, environmental andsafety norms are flouted at the clusterlevel.- CCI has recently been formed by theCCI act.- Online trade is bound to pick up asinternet users rise from 130 million to180 million in the near future- Entry of global majors like IKEA etc.into Indian Market will change thedynamics of competition- Access to high quality businessinputs- Biggest producer ofTea, Coffee, Jute, Cotton andsponge iron. Second largestproducer of wheat and largestproducer of pulses.- 1.2 Billion People, but low femaleparticipation in workforce remains achallenge.- Stable monetary and fiscal scenario- Education is also seen as a keyenabler- Improvement in Physicalinfrastructure-Roads, Ports, Airports, Railways.- Has good higher institutions but isnot able to produce quality researchand scientific output.FactorConditions
  • 11. Income Levels
  • 12. Income DistributionRichConsumersClimbersAspirantsDestitute
  • 13. McKinsey GlobalInstitute: The “ Bird ofGold”: The Rise ofIndia’s ConsumerMarket, May 2007.p.12Share of population in each incomebracket %millions of peopleHousehold income bracketsthousand, Indian rupees, 2000100%755 928 1,107 1,278 1,429Global{>100}Strivers (500-1,000)Seekers (200-500)Aspirers (90-200)Deprived (<90)Middleclass93805435226184143361 2 419320 0 1 190 0 0121985 1995 2005E 2015F 2025FIndia will see further reduction in poverty and growth of its middleclass
  • 14. The Ageing Population
  • 15. Demographic Dividend Demographic Burden
  • 16. Understanding the Demographic OpportunityStage 1Stage 2DemographicWindow ofOpportunityStage 3PopulationAgeingThe SecondOpportunity
  • 17. Demographics55328583965950059529591766011361859603135196543702377043296828268221851582099378412492565179052734527395241055998567395421946466413613826734124286512198215819106441146580000 60000 40000 20000 0 20000 40000 60000 800000-45-910-1415-1920-2425-2930-3435-3940-4445-4950-5455-5960-6465-6970-7475-7980+Projected Population of males / females in ThousandsAge Pyramid for India in 2026MaleFemaleSource : Expert group on Population 2006
  • 18. Education: Undereducated, Employability etc
  • 19. Source: USPTOPATENTS OVER THE YEARS
  • 20. RESEARCHERS IN R AND D PER MILLION PEOPLENOTE: The data used is last year data or thelatest year available dataSource: World Bank, Institute of Competitiveness Analysis69643351199378013630913963794467312700500100015002000250030003500400045005000Brazil Canada China Germany India RussianFederationSouth Africa UnitedKingdomUnited States World
  • 21. Traffic Jams and Healthcare
  • 22. Urbanization in India
  • 23. Aspiring IndiaAdvent of Urbanizations - Some Fast Facts590 million peopleliving in cities, nearlytwice the populationof the US today68 cities will havepopulation of 1 millionplus, up from 42today; Europe has 35today
  • 24. Institute for Competitiveness, IndiaSNAPSHOT OF URBAN INDIA IN 201110 - 30 million5 - 10 million1 - 5 million0.1 – 1 millionCities Size Class By PopulationSource:- India Urban Conference 2011: Evidence & Experience - IIHS
  • 25. Jugaad Urbanism
  • 26. Urbanization
  • 27. A Closer Look at IndiaTown Class Population Number of TownsClass I 1,00,000 and above 423Class II 50,000 – 99,999 498Class III 20,000 – 49,999 1,386Class IV 10,000 – 19,999 1,560Class V 5,000 – 9,999 1,057Class IV Less than 5,000 110Total no. of towns 5,0341mn + : 27 0.5mn – 1.0mn :42 0.1mn -0.5mn: 354Source: MART
  • 28. A Closer Look at Rural IndiaPopulation No. of Villages % of Total VillagesLess than 200 92,541 15.6200- 500 1,27,054 21.4501- 1,000 1,44,817 24.41,001 -2,000 1,29,662 21.92,001 – 5,000 80,313 13.5More than 5,000 18,758 03.2Total no of Villages* 5,93,145 100.0*The Total number of villages includes uninhabited ones adds up to 6,38,365Source : MART
  • 29. The States in India
  • 30. Stages of the Economy – Indian ContextFactor-driven economies: Factor-driven economies focus on low-costbasic factor conditions, such as low-skilled labour, natural resourcesand geographic location. Factor-driven economies need to focus oninput costs, macro, political and legal stability, efficient basicinfrastructure and lowering the regulatory cost of doing business.Investment-driven economies: Investment-driven economies wouldhave the ability to produce standard products and services of highquality using efficient methods but at lower wages than advancedeconomies. Investment-driven economies need to focus on buildingefficiencies, enhancing local competition, marketopenness, incentives and rules for encouraging productivity.Innovation-driven economies: Innovation driven economies wouldfocus on innovative products and services at the global technologyfrontier. Innovation driven economies would need to focus onadvanced skills, advanced infrastructure, incentives and rulesencouraging innovation.Stage 1Stage 2Stage 3
  • 31. Prosperity in IndiaHighly Productive and ProsperityRising versus IndiaAndhra PradeshArunachal PradeshAssamBiharChhattisgarhDelhiGoaGujaratHaryanaHimachal PradeshJammu & Kashmir JharkhandKarnatakaKeralaMadhya PradeshMaharashtraManipurMeghalayaMizoramNagalandOrissaPunjabRajasthanSikkimTamil NaduTripuraUttar PradeshUttarakhandWest Bengal0200004000060000800001000001200001400000 2 4 6 8 10 12 14 16Gross Domestic Product per Capita CAGR rate, 2008-2010High but declining versus IndiaLow and declining versus India Low but rising versus IndiaHigh and rising versus IndiaAllIndiaAverage57.28IndexPointsAll India GSDP /Capitarate (CAGR) of 8.36 %All India Averageof 46,836Rupees/capitaGrossDomesticProductperCapita,2010
  • 32. Country EquivalentsSource: Economist Intelligence Unit, National Statistics
  • 33. State Competitiveness Report 2011© Institute for Competitiveness, India
  • 34. The State Competitiveness Report• The report incorporates hard data ratherthan soft data such as executive opinionsurveys, etc., which might introducesampling errors and bias.• The hard data allows a more correctassessment of competitiveness rankingwith mapping of incremental or quantumchanges in values of input indicators.• From an execution and policy formulationperspective, this approach provides clarityto the choice of relatively importantindicators; a virtual Pole Star for those keento enhance competitiveness.
  • 35. erchunkofworking-agepeople,whocancontributetotheGDPandgeneratehigh-eroutput percapita.Infact,theInternational Labour Orga-nization (ILO) hasstated that Indiawillaccount for thehighest workingagepop-among several others, that is draggingdowntheeconomicgrowthof relativelyaffluent states like Maharashtra, Kar-natakaandTamil Nadu.Yet,afew statessuch asBihar, AndhraPradesh andGu-jarat with largepopulationsareexhibit-force,whichmoreproducGroup 2: Stapopulation grgarh, Delhi, HcusonsectorPOLICIESTHATMAKEPRODUCTIVEUSEOFAVAILABLERESOURCESARChandigarhDelhiUttarakhandHaryanaGujaratBiharChhattisgarhSikkimNagalandHimachal Pradesh5.053.111.591.981.641.861.761.584.891.59Populationgrowth ratesareHIGHERthan nationalaveragePopulationgrowth ratesareLOWERthan nationalaverageGDP(India avg 7.99)StatePopulationgrowth rate(India avg 1.55)13.1211.8611.811.6910.810.839.789.69.548.88AndhraPradeshOrissaMeghalayaTripuraArunachal PradeshKerala0.991.071.390.991.270.779.529.378.058.48.799.55PEOPLEPOWERStates contributing to India’s GDPgrowth(GDPgrowth higher than national average)Population size vs GDPgrowth rate1412108CHGOTRMGHPDLHRUKSK CG KRORARNLTNAPBRKA RJWBMHGJpopulationtogrowPOLICYTHEECONOMICTIMESON SATURDAYMUMBAI 27 NOVEMBER2010 * 9erchunkofworking-agepeople,whocancontributetotheGDPandgeneratehigh-eroutput percapita.Infact,theInternational Labour Orga-nization (ILO) hasstated that Indiawillaccount for thehighest workingagepop-ulationinthenext10years,inareport re-leasedrecently.Inthedocumentpreparedfor the G-20 Summit held earlier thismonth inSeoul,theILOsaysthat theG-20nationswill seetheirworkingagepop-ulationbetween15and64yearsincreaseby 212million in theperiod2010-2020.Over64%ofthisincreasewilloccurinIn-diaalone!Thismonth’sIFCIndiaStateDevelopmentBarometer takesasharplookat what pop-ulation really means to the economicgrowthofIndia’sstatesandanalyseshowstatescanusetheirdemographicsituationto improve their competitiveness, andhence,enhancetheir prosperity.Rising stars among statesItiswidelyacceptedthatgrowthamongIn-dianstatesisskewed,withsomeprosper-ousstatesbearingtheburden of growth,among several others, that is draggingdowntheeconomicgrowthof relativelyaffluent states like Maharashtra, Kar-natakaandTamil Nadu.Yet,afew statessuch asBihar, AndhraPradesh andGu-jarat with largepopulationsareexhibit-inghighGDPgrowth.Noburdenoneconomic growthSixteenstatesinIndiahaveaGDPgrowthhigher than the national average. Ofthese, ten states show a populationgrowth ratehigher thanthenational av-erage,whilesixother stateshaveapopu-lationgrowthratelower thanthenation-al average.Population growth, considered abur-den toeconomicgrowth, seemstohavelittlecorrelation withGDPgrowth(corre-lation=0.24). LargestatessuchasBihar,for instance,haveshowedsustainedGDPgrowth over the decade along with asteadilyrisingpopulation,whereasstatessuchasPunjabandManipur withslowerpopulation increase are showing GDPgrowth ratesthat arelower than thena-tional average.force,whicharealsocorrespondingly farmoreproductive.Group 2: States with healthy GDP andpopulation growthrates,suchasChandi-garh, Delhi, HaryanaandBihar must fo-cusonsectorswheretheyareinherentlycompetitive because of the presence ofnatural resourcesor traditional skillsandknowledge.Thesestatesshouldfindwaysto turn the availability of alarge work-forcein their favour by offeringsuitableeducationpoliciesandopportunities. Set-ting the right priorities iscritical to en-hancecompetitivenessforthisbandofIn-dianstates.Group3:Anumber of statessuch asKar-nataka, West Bengal, Rajasthan, TamilNadu andMizoramareperformingonlyslightly below India’s average GDPgrowthrate.Thesestatescanquicklycat-apult themselvesintoGroup2withafo-cusedeffort onproductivity.Group4:Aroadmapfor enhancingcom-petitivenessiscritical for poorlyperform-ingstates.Amongthese,statessuchasUt-tar Pradesh and Madhya Pradesh withlargeandgrowingpopulationsmust con-PlwGdfmngatenetgovernment detrillion —44%ofworld—in2015.AdvancedePrasadestimatesthervancedeconomieswillther to85%in2015.Inbetter.Thecorrespondi26%respectively.In20grossdomesticproductdebt.By2015,theyareaccount for just 14%oshareinworldGDP,theiToput that moregraphnal rather thanborroweThishastwo majortheywill beabletousempurposesrather thanfoor repayment. Two, thewheresucceedinggenelier generationswill beadvancedeconomies. Apendencyratio—readgroup—andclearly,thThisisgraphicallybrwiththeriseinGDP.EMlevelsfrom2007to2012010 to2015. In controver thesetwoperiodsAveragedebt percapitarose to $29,100 in 201$41,000in2015.By20$48,000 per person. T$75,900,thehighest inbejust $1,200in2015.SindTHEEXPLOSSERIOUSLOPOLICIESTHATMAKEPRODUCTIVEUSEOFAVAILABLERESOURCESARECRITICALARINDAMINDIASource: IMFFiscal Monitor,ILOEconomically-ActivePoDEBTBURDEGrossdebt to GDP(Grossdebt(USdollarsinbillionsGrossdebt percapita(USdollars)Grossdebt perworking-ageperson (USdollars)ChandigarhDelhiUttarakhandHaryanaGujaratBiharChhattisgarhSikkimNagalandHimachal Pradesh5.053.111.591.981.641.861.761.584.891.59Populationgrowth ratesareHIGHERthan nationalaveragePopulationgrowth ratesareLOWERthan nationalaverageGDP(India avg 7.99)StatePopulationgrowth rate(India avg 1.55)13.1211.8611.811.6910.810.839.789.69.548.88AndhraPradeshOrissaMeghalayaTripuraArunachal PradeshKerala0.991.071.390.991.270.779.529.378.058.48.799.55PEOPLEPOWERStates contributing to India’s GDPgrowth(GDPgrowth higher than national average)Population size vs GDPgrowth rateComparison of state population growth and GDPgrowth0 500 1000Populationsizeinlakhs1500 2000 250014121086420CHGOTRMGMZHPJHPJMPASANMNJKPDDLHRUKSK CG KRORARNLTNAPBRKA RJWBMHUPDL: DelhiCH: ChandigarhAS: AssamNL: NagalandTN: Tamil NaduBR: BiharUP: Uttar PradeshAP: AndhraPradesh0 1 2Populationgrowth(%)3 4 514121086420APTR KRWBASTNKR ORARMGMHRJGOANPDJHPJJKUPMNMPSK CGHPGJ BRUK HR DL CHNLGJMZStatescanharnesstheirpopulationtogrowNDIAisatthecentreofthepopulation-versus-growthdebate.Withtheworld’ssecond-largestenaulfm2ubOdBugsthRIdowgsaggfrComparison of state population growth and GDPgrowth0 500 1000Populationsizeinlakhs1500 2000 2500121086420GOTRMGMZHPJHPJMPASANMNJKPDDLHRUKSK CG KRORARNLTNAPBRKA RJWBMHUPDL: DelhiCH: ChandigarhKR: KeralaTR: TripuraMG: MeghalayaPD: PuducherryKA: KarnatakaWB: West BengalAS: AssamNL: NagalandUK: UttarakhandHR: HaryanaGJ: GujaratCG: ChattisgarhSK: SikkimJH: JharkhandTN: Tamil NaduBR: BiharRJ: RajasthanGO: GoaMZ: MizoramPJ: PunjabMN: ManipurOR: OrissaUP: Uttar PradeshAP: AndhraPradeshAR: Arunachal PradeshHP: Himachal PradeshJK: Jammu&KashmirMP: MadhyaPradeshAN: Andaman &Nicobar IslandsMH: Maharashtra0 1 2Populationgrowth(%)3 4 514121086420APTR KRWBASTNKR ORARMGMHRJGOANPDJHPJJKUPMNMPSK CGHPGJ BRUK HR DL CHNLGJMZJAYEETA
  • 36. Indian Market is Highly RegionalUneven Pattern ofWealth DistributionSeasonalityCultures &Languages
  • 37. Strategizing for Success in IndiaIs it an easymarket tocrackWhereshould wefocusWho arethesuccessfulplayers
  • 38. Why is India so Complex?• India is good at resourcemaximization• Indian businesses have away of making thingsdifferently and withminimal resources maybebecause India is a poorcountry
  • 39. Innovation or Ind’ovationInd’ovation commonly knowin Hindi as Jugaad is a strikingfeature of the Indian businesslandscape. It indicates theingenuity to achieve results byout of box thinking, at timeseven temporary fixes.
  • 40. Doing it for India
  • 41. Creating Unique Business Models
  • 42. Disaggregation of Sales
  • 43. Local Mom and Pop Store
  • 44. How many bidis are sold in a day in India by 502 PatakaManufacturing Company?100,000,000
  • 45. Indian CultureHow we look at things CollectivismKarmaTheConceptof TimeVarieswithinStatesIndia IshierarchydrivenNoticeable lackof privacy &importance ofinterpersonalcontactThe Basic Idea
  • 46. Risks for IndiaEconomicSocietal Geopolitical Environmental Technological• Overpopulation• Diseases• Migration• Food Shortage• Religious andcaste problem• Education• Rising Fiscal Deficit• Meeting theInfrastructure Spendingtarget• Inflation• Inability to Attract FDI• Policy Lock jam• Overspending onGovernment welfareSchemes• Energy Imports• Labour Market DemandSupply Mismatch• Ease of Doing Business• Rising Inequality• Liquidity Problem• Risks of Overexposure• Poverty• Overregulation• Conflicts withneighboringcountries• GovernanceFailure• Maoist Insurgency• ResourceNationalization• High Crime Rates• Failure ofDiplomaticConflictResolution• Rising PollutionLevels• MismanagedUrbanization• GeophysicalExtraction Resultingin Destruction• Extinction of Species• Extreme Weather• Nuclear waste• Cyber Security• Failure of IPRegime• Lack ofAwareness ofTechnologyRISKS FACED BT INDIA AT PRESENT IN 2013RISK MEASUREMENT = LIKELIHOOD OF OCCURENCE * IMPACT
  • 47. Disparity• Rich & Poor• Urban & rural• Educated &UneducatedDevelopment• Right amount ofregulation• Allowing businessto create newmethods & newmodelsDemography• 550 million below 25years• Health, Nutrition• Education, JobsIndianChallengesSource: GOIINDIA’S MAJOR CHALLENGES
  • 48. INCLUSIVE BUSINESS MODELS: SOME EXAMPLES IN MANUFACTURINGDOMAINCONSERVINGNATURALRESOURCESNURTURINGSKILLS ANDCAPABILITIESCHANGING PRICE/PERFORMANCE ENVELOPEENHANCING INCOME ANDLIFESYTLEMARICO(SAFFLOWERINITIATIVE)HUL (SHAKTI)ITCE CHOUPALFIRST ENERGY(OORJA STOVE)JAINIRRIGATIONSYSTEMSTATA(NANO)KEGGFARMS(KUROILER)Source: Accenture, Quest for Inclusive growth
  • 49. Corruption and Competitiveness(Effect on the National Diamond)Factor Conditions Demand ConditionsRelated, SupportingIndustries &InstitutionsContext for FirmsStrategy and Rivalry• Resource allocation isskewed; providing goods andservices at below marketprice• Rent seeking behavior bybureaucracy• Arbitrary tax for fast tracktreatment• Disincentives for labor toperform• High level of Governmentintervention• Degree of regulation apredictor of corruption• Collusion and cartelization• Too much market power to afew companies (industrycapture)• Innovation is curtailed• Manipulation of policy and providepoor quality services• Failure of institutional support• Lower acceptance of establishedinstitutions• Bureaucratic rigidity• Weakening institutional foundations• Poor quality services• Heightened income disparity• Consumer interests arecompromised• Social versus self interest
  • 50. Thank You