Competitiveness: What works in India & What does not

1. Competitiveness :
What works in India
&
what does not
29 November 2010

2. You don't simply visit India, you
experience India: Obama

3. Some facts about India
• Internet users : 81 million
• Mobile phones : 670 million
• Middle class population : 368 Million
• Working population : 61%
• ICT exports : US$ 60 billion
• Media : 180 TV channels; 65 news channels

4. Top 10 Mobile phone users
• China 747 million
• India 670 million
• United States 270 million
• Russia 187 million
• Brazil 173 million
• Indonesia 140 million
• Japan 110 million
• Germany 105 million
• Pakistan 91 million
• Italy 88 million

5. Top 10 Internet users
• China 298 million
• United States 231 million
• India 107 million
• Japan 90 million
• Brazil 64 million
• Germany 61 million
• United Kingdom 48 million
• Russia 45 million
• France 42 million
• South Korea 37 million

6. • Between 2010-2030 India will add 241 Million people
in working-age population
• Brazil will add around 18 million
• While China will add 10 million people during the
same time.
India’s young population

7. Even though the world has
just discovered it, the India
growth story is not new
It has been going on for 25 years
25 years in the making

8. India is now the 4th largest
economy
It will overtake Japan
between 2012 and 2014
to become the 3rd largest

9. “By 2010 India will have world’s largest
number of English speakers”
“When 300 million Indians speak a word in a
certain way, that will be the way to speak it.”
Professor David Crystal
Cambridge Encyclopedia of the English Language
Cambridge Encyclopedia of the English Language

10. India’s growth is led by…..
• ICT
• Telecom
• Pharma
• Automobiles

11. India’s Growth line
Bihar – 11% growth
M P – self
sufficient in
energy by 2013
Rajasthan – in 10
years, literacy rate
has gone up by
23%
U P – Agri
production grew by
4% last year

12. Reasons for success
India’s success is market-led
not state induced
The entrepreneur is at
the
centre of the Indian model

13. Implications of Indian model
GDP : Composition by sector
Agriculture : 17.0%
Industry : 28.1%
Services : 64.9%
Has India skipped the
industrial revolution ?

14. India has a vibrant private space
– 100 Indian Companies have market cap of US$
1bn
– 1,000 Indian Companies have received foreign
institutional investment
– 125 Fortune 500 companies have R&D bases in
India
– 290 Fortune 500 companies have outsourced
software
development to India
– 2% bad loans in Indian banks (v~20% in China)
– 80% credit goes to private sector (v~10% in China)

15. What could stop the show for India
?
• Infrastructure : Improving via public-private
partnerships
• Fiscal Deficit ?
• Governance ?
• None of these stopped the show in the past
25 years
Nuclear War ???

16. Cluster Pulse is not for profit NGO that provides cutting-edge
solutions to help firms and industries in emerging markets confront
the challenge of developing successful business strategies through
cluster approach.
LeadershipLeadership
Moral
Purpose
Insight
ReceptivityReceptivity
TensionTension
AnalysisAnalysisAnalysisAnalysis
Change ProcessChange Process
FacilitationFacilitation
Change ProcessChange Process
FacilitationFacilitation
MultilateralMultilateral
EngagementEngagement
MultilateralMultilateral
EngagementEngagement
New EconomyNew Economy
SolutionsSolutions
New EconomyNew Economy
SolutionsSolutions
 Describing the
causes of
underdevelopment
 Discovering that
simply providing
the right insight is
insufficient to
create change
 Fitting the
preconditions
for change
together,
through
collaborative
processes, to
build working
industry
clusters
 Attempting to
help donor
institutions
reshape their aid
programs to
build
competitiveness
at the
microeconomic
level
 Creating solutions
to help firms
discover new
export markets
and become
globally
competitive
 The OTF Group
develops industry
strategies based on
concepts of
“clusters”
World Bank Group
Introduction to Cluster Pulse

17. Worked in 82 clusters in 14 countries
Intl
Dev
Agency
c
Govt.’s
Private
Sector
Public
Sector
MSME’s are our pride……

18. Worked in
India
USA
Canada ( Govt of Manitoba )
United Kingdom
Brazil
Italy
South Africa

19. Worked in
Oman
Brunei
RAS Al Khaimah
China
Afghanistan
Pakistan

20. What is Competitiveness?
– Competitiveness has emerged as the preeminent issue in every nation – for
companies and governments
– Upgrading a nation’s competitiveness requires a shared understanding of
competitiveness within the nation
– Competitiveness is not simply:
• A favorable exchange rate
• Positive balance of trade
• Industrial subsidies
• Low inflation rate
– Rather, competitiveness is the productivity with which resources are deployed
• Human resources
• Capital
• Physical assets
– Since competitiveness relies on productive deployment of resources, industry
sectors and their firms compete, not nations
• Government has a partial but significant role in creating the platform from
which firms compete
• Clusters of related and supporting firms are the building blocks of a
competitive economy

21. Challenges to competitiveness
5 Lessons learned
1. Lack of public – private sector dialogue resulting in low trust
2. Cluster selection process driven by traditional industries vs.
small high growth sectors or cluster member enthusiasm
3. No quantitative targets for the cluster
4. Government and donor over-responsibility for results vs.
a cluster driven approach
5. Misperceptions of the cluster development process and goals; especially the
tension between short-term wins and building the foundations for long-term
competitiveness.

22. Challenges and solutions to
competitiveness
The approach uses a double loop process called the “Prosperity Generation Cycle”
to ensure parallel growth in competitiveness and public – private dialog.
Early wins by the private sector is supported by productive
communication among all parties.
Economic
Growth
Social
EquitySustainability
Productivity
Innovation and
Competition
Capacity to Export
Complex Products to
Demanding
Customers
Investment in Higher
Capital
Compounding
Activities
Improved
Environment
Shared Economic
Leadership
Private
Sector Resp
Private Sector
Representation
Public / Private
Dialog
Rational Policies to
Balance Social and
Economic Growth
Increased Taxes To
Support Government
Policies
Economic Leadership
and ControlImproving the Capital
Conversion Cycle
Increased
Wealth
Economic
Growth

23. results in
attracts
leads to
reinforces
Competition in
Service Delivery
High Quality
Product Offering
Good Income
Opportunities
Growth and
Innovation
Profits
Excellent Business
Services
Alappuzha Coir SMEs
BDS Providers
BDS Market
leads to results in
reinforces increases
The fostering of a skilled and entrepreneurial BDS sector will lead to a self-
supporting loop of improved innovation and competitiveness in Alappuzha’s coir
industry.
BDS Project Background

24. Coir fibre
producers
(60% total
inputs)
Other input
producers
(40% total
inputs)
Spinning,
roping, etc.
(Hhold. units,
45,000 indiv.)
Finishing
Large
15 units
Finishing
MSMEs
250 units
Dye
suppliers
Machinery &
equipment
suppliers
R&D
Transport
-ers
Fibre / yarn
suppliers
Packing
materials
Transporters
& export
logistics
Buying
agents
Wholesalers
Retailers
(specialty
and mixed)
Large retailers
(domestic &
international)
Agents /
‘Bulkers’
Machinery &
equipment
suppliers
Mktg/
branding
Manufacturing
Medium: 15
units
Weav
-ing
Tuft-
ing
Manufacturing
MSME: >9700 units
Weav
-ing
Tuft-
ing
Competitive Needs improvement Under-developed
Banks
•Sheds & Elec.
Connection
•Fibre Consortia
•World’s Longest Mat
•SPARSH – Dom. Brand
• Domestic Market Entry
Ratt
•FOREX
• Loans
SIDBI
Looms
up-gradation
Marathon
• International Warehouse
• Management Gyanam
Marathon
Lean
Mfg.
Anti-slip
Flame Retardant
B2C Portal
Mkt. Entry

25. World’s Longest Doormat

26. Like a sapling, BDS providers will require
continued support from Govt., Academia &
industry to guarantee its development into
a mature tree

29. CulturalCulturalCulturalCultural
HumanHumanHumanHuman
KnowledgeKnowledgeKnowledgeKnowledge
InstitutionalInstitutionalInstitutionalInstitutional
FinancialFinancialFinancialFinancial
Man-MadeMan-MadeMan-MadeMan-Made
NaturalNatural
EndowmentsEndowments
NaturalNatural
EndowmentsEndowments
Social
 Tangible Articulations
 Norms
 Mental Models
Physical
 Ecosystem Services
 Raw Materials
 Climate and Location
 Transportation, Communication
 Power
 Water and Sewerage
 Financial Systems
 Private Wealth
 Public Wealth
 “Good, Clean Governance”
 Justice System
 Connective Organizations
 Qualitative, Quantitative Data
 Frameworks and Concepts
 Knowledge Generation
 Health and Population
 Education and Training
 Attitudes and Motivation
 Respect for Nature, Architecture, Music, Language,
 Range of Acceptable Behaviors
 Trust, Wealth Creation Attitudes, Long-term Thinking
 Clean Air, Water, Protected Ecosystems
 Agricultural, Mineral, Petroleum
 Proximity to Markets
 Roads, Ports, Telephone Systems
 Electric Grids, Generation Capacity
 Pipelines, Pumping Stations
 Banks, Stock Markets
 Bank Deposits
 Bank Reserves, Taxes, Duties, Macroeconomic Stability
 Transparency, No Hidden Costs, Accountability
 Property Protection, Predictable Regulations
 Chambers of Commerce, Unions
 Statistics, Opinions, Records
 Theories, Processes, Procedures
 Universities, R&D, Market Learning
 Nutrition, Medical & Mental Health
 Primary & Secondary, Technical
 Self-responsibility, action-orientation
Representative
Elements
Representative Examples
Source: Based on Wolfensohn framework and Cluster Pulse experience.
SEVEN FORMS OF CAPITAL

30. Implementation approach
• Deep diagnostic study
• Pain point identification
• SHG or consortia formation
• BDS intervention
• Use of ICT
• Domestic & Export market linkages
• Sustainable model

31. Implementation principles
• Minimizing market distortion
• Partner with local Govt.
• Scale and replicability
• Variety and learning
• Gender mainstreaming
• Public-private partnership
• Institutional handover

32. Competitiveness :
What is good & works
• Strong Government support (policies /
UID)
• Reasonable understanding by all
stakeholders : 1994 ( 16 years )
• Marketing approach to competitiveness
• Infrastructure investment in clusters –
CFC
• Strong BDS network across the country

33. Competitiveness :
What needs improvement
• Too many agencies working in the same
cluster
• Not many good implementation agencies
• Low budgetary allocation for soft
interventions
* Inclusiveness ( Artisanal & industrial
clusters )
• Passionate people

34. Action @ speed of thought
In our experience of 82 clusters, there is a close link
between entrepreneurship quality, risk taking
ability, speed of decision making, intention &
passion of implementing agency &
implementing staff in meeting goals.

35. Indian as a Market for your
clusters
• Technology hungry
• Consumer taste changing
• Exports : $ 164.3 billion ( 22 )
• Imports : $ 268.4 billion ( 14 )
• Forex reserves : $274.7 billion ( 6 )
• Rural India
• Consumption economy
• Cluster to cluster market linkages

36. Gujarat
• Land of Mahatma Gandhi
• Gujarati entrepreneurship
• 55 Million population
• 22% of India’s exports
• Mega projects : DMIC

37. Gujarat holds many records in India for
economic development :
• 80% of India's Diamond Production
• 54% of India's Crude Oil Production
• 50% of India's Natural Gas Production
• 47% of India's petrochemical Production
• 45% of India's pharmaceutical products
• 35% of India's Sponge Iron Production
• 24% of India's textile production
• 22% of India's exports
• 20% of India's Industrial Output
• 9% of India's Mineral Production

38. More facts on Gujarat
■ Over 35% of the stock market wealth of India is in Gujarat.
■ Over 20% of the S&P CNX 500 conglomerates have corporate
offices in Gujarat.
■ Over 60% of Indian Population in North America is from Gujarat.
■ Gujarat is the first state to interconnect 20 rivers
■ It has the largest e-governance network in Asia Pacific
■ Operation WHITE FLOOD (MILK) was initiated in Gujarat
which took India in 1998 to become highest milk producer in
the world - AMUL

39. Elephant and not Tiger
■ India got democracy before capitalism and this has made
all the difference
■ It is slower than China, but its path is surer
■ India is more likely to preserve its way of life

40. India : The Wise Elephant
Welcome to India……
ClusterPulse.org
An elephant growing
at 8% is a formidable
beast