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This presentation draws on ideas from Professor Porter’s books and articles, in particular, Competitive Strategy (The Free...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Armenia
Benin
Bhutan
Bolivia
Burkina
Faso
Buru...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
• Competitiveness depends on the long-run prod...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
The Dual Challenges of Development
• There is ...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter5
India in 2017
• India has made significant ec...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter6
The Path Ahead
•India has a promising future,...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Endowments
What Determines Competitiveness?
• ...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Endowments
Macroeconomic Competitiveness
Human...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Macroeconomic Competitiveness
Sound Monetary
a...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
• Human Development:
Basic education, health
c...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
How Do We Measure Development
11
Economic
Deve...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter12
Social Progress Index Framework
Nutrition an...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Social Progress 2005-2016
2005 2016
13
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Macroeconomic Competitiveness
Microeconomic Co...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
The internal skills,
capabilities, and
managem...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
The quality of the
business
environment that
s...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Context
for Firm
Strategy
and Rivalry
Related ...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Improving the National Business Environment
Pe...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
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10
20
30
40
50
60
70
80
90
100
110
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1...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Geographic
concentrations of
firms, suppliers,...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Sources: HBS student team research (2003) - Pe...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter22
Pharmaceutical Cluster in Andhra Pradesh
Sou...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Source: “Clusters and the Great Recession” by ...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Note: Showing only clusters with greater than ...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Metal-
working
Food
Processing
Lighting
Medica...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Labor/
HR-intensive
Capital/
HR-intensive
Serv...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
• Strengthens multiple related firms/instituti...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Geographic Influences on Competitiveness
State...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
• Economic performance varies significantly ac...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Alabama
Alaska
Arkansas
California
Colorado
Co...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
Prosperity Performance of Indian States
2005-2...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
• Economic performance varies significantly ac...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
33
Cluster Specialization
Selected Indian Stat...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
The Role of Sub-National Regions in
Economic D...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
• An overall agenda for
creating a more distin...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
National or Regional
Value Proposition
Develop...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter37
What is Unique About India?
• Vibrant and la...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
• Competitiveness improvement will require sus...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter
The Private Sector’s Role in Economic
Developm...
20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter40
Themes for India
1. Broad-based inclusive de...
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NITI Lectures

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Presentation by Michael E Porter at the NITI Transformation Lecture Series.

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NITI Lectures

  1. 1. This presentation draws on ideas from Professor Porter’s books and articles, in particular, Competitive Strategy (The Free Press, 1980); Competitive Advantage (The Free Press, 1985); “What is Strategy?” (Harvard Business Review, Nov/Dec 1996); On Competition (Harvard Business Review, 2008); and “Creating Shared Value” (Harvard Business Review, Jan 2011). No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Michael E. Porter. For further materials, see the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu, and FSG website, www.fsg.org. Competitiveness of Nations and Regions: The New Learning Professor Michael E. Porter Harvard Business School New Delhi, May 25th, 2017
  2. 2. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Armenia Benin Bhutan Bolivia Burkina Faso Burundi Cambodia CameroonCentral African Republic (-3.8%, $505) Chad Comoros Congo (Brazzaville) Congo (D.R.) Côte d'Ivoire Djibouti El Salvador Eritrea Ethiopia Gambia Georgia Ghana Guatemala Guinea Guinea-Bissau Guyana Haiti Honduras India Kenya Kyrgyz Republic Laos Lesotho Liberia Madagascar Malawi Mali Mauritania Moldova Morocco Mozambique Nepal Niger Nigeria Pakistan Papua New Guinea Philippines Rwanda Samoa São Tomé and… Senegal Sierra Leone Solomon Islands Sudan Swaziland Tajikistan Tanzania Uganda Ukraine Uzbekistan Vanuatu Vietnam Zambia $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% PPP-Adjusted Real GDP per Capita, 2016 ($USD at 2005 prices) Growth in Real GDP per Capita (PPP $US at 2005 prices), CAGR, 2006-2016 Bangladesh Average Prosperity Growth: +2.9% Prosperity Performance Low and Lower Middle Income Countries Source: EIU (2015), authors calculations. Note: Low and Lower Middle Countries according to World Bank Income Groups based on GNI per capita. Average Real GDP per Capita: $3,671 High but Declining Low and Declining High and Improving Low but Improving 2
  3. 3. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter • Competitiveness depends on the long-run productivity of a location as a place for firms to do business - Productivity of existing firms and workers - High participation of citizens in the workforce • Competitiveness is not: - Low wages - A weak currency A nation or region is competitive to the extent that firms operating there are able to compete successfully in the national and global economy while maintaining and improving wages and living standards for the average citizen What is Competitiveness? 3 • Successful economic development requires improving competitiveness
  4. 4. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter The Dual Challenges of Development • There is a powerful connection between economic and social development • Improving competitiveness requires improving economic and social conditions simultaneously Economic Development Social Development 4
  5. 5. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter5 India in 2017 • India has made significant economic progress over the last few years, despite a challenging global context − Robust growth of GDP, prosperity, and productivity − Rising FDI inflows and exports − Falling poverty • Policy choices have begun to address some of India’s deep-seated structural challenges − Sustainability of macroeconomic policies − Effectiveness of public programs − Corruption − Upgrading specific elements of the business environment such as infrastructure, skills, business regulations
  6. 6. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter6 The Path Ahead •India has a promising future, but multiple weaknesses and distortions remain that will require time and determined action to overcome – E.g. high informality, bureaucratic complexity, limited access to capital, public education and infrastructure deficits •Reaching India’s full potential, both domestically and in the global economy, requires: – a shared understanding of competitiveness – a coherent strategy – excellence in implementation
  7. 7. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Endowments What Determines Competitiveness? • Endowments, including natural resources, geographical location, population, and land area, create a foundation for prosperity, but true prosperity arises from productivity in the use of endowments 7
  8. 8. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Endowments Macroeconomic Competitiveness Human Development and Effective Public Institutions Sound Monetary and Fiscal Policies • Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but is not sufficient to ensure productivity What Determines Competitiveness? 8
  9. 9. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Macroeconomic Competitiveness Sound Monetary and Fiscal Policies Endowments Human Development and Effective Public Institutions • Fiscal Policy: Public spending aligned with revenues over time • Monetary Policy: Low levels of inflation • Economic Stabilization: Avoiding structural imbalances and cyclical overheating Sound Monetary and Fiscal Policies What Determines Competitiveness? 9
  10. 10. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter • Human Development: Basic education, health care, equal opportunity • Rule of Law: Property rights, personal security, and due process • Government Institutions: Stable and effective public and governmental organizations and processes Human Development and Effective Public Institutions Macroeconomic Competitiveness Endowments Sound Monetary and Fiscal Policies Human Development and Effective Public Institutions What Determines Competitiveness? 10
  11. 11. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter How Do We Measure Development 11 Economic Development GDP per Capita Social Progress
  12. 12. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter12 Social Progress Index Framework Nutrition and Basic Medical Care Water and Sanitation Shelter Personal Safety Personal Rights Personal Freedom and Choice Inclusion Access to Advanced Education Basic Human Needs Foundations of Wellbeing Opportunity Social Progress Index Access to Basic Knowledge Access to Information and Communications Health and Wellness Environmental Quality
  13. 13. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Social Progress 2005-2016 2005 2016 13
  14. 14. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Macroeconomic Competitiveness Microeconomic Competitiveness Sophistication of Company Operations and Strategy Quality of the Business Environment State of Cluster Development Endowments Human Development and Effective Public Institutions Sound Monetary and Fiscal Policies • Productivity ultimately depends on improving the microeconomic capability of the economy • Many things matter; there is no silver bullet 14 What Determines Competitiveness?
  15. 15. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter The internal skills, capabilities, and management practices that enable companies to achieve higher levels of productivity and innovationMacroeconomic Competitiveness Microeconomic Competitiveness Sophistication of Company Operations and Strategy Quality of the National Business Environment State of Cluster Development Endowments Human Development and Effective Public Institutions Sound Monetary and Fiscal Policies What Determines Competitiveness? 15
  16. 16. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter The quality of the business environment that supports company productivity, innovation, and growth Macroeconomic Competitiveness Microeconomic Competitiveness Sophistication of Company Operations and Strategy Quality of the National Business Environment State of Cluster Development Endowments Human Development and Effective Public Institutions Sound Monetary and Fiscal Policies What Determines Competitiveness? 16
  17. 17. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Context for Firm Strategy and Rivalry Related and Supporting Industries Factor (Input) Conditions Demand Conditions • Sophisticated and demanding local needs – e.g., Sophisticated demand in the private sector and government – Strict quality, safety, and environmental standards • Many things in the business environment matter for competitiveness • Successful economic development is a process of successive upgrading, in which the business environment improves to enable increasingly sophisticated ways of competing • Local rules and incentives that encourage investment and productivity – e.g. incentives for capital investment, IP protection – Sound corporate governance and accountability • Open and vigorous local competition − Openness to competition − Strict competition laws • Improving access to high quality business inputs – Qualified human resources – Capital availability – Physical infrastructure – Scientific and technological infrastructure – Administrative and regulatory infrastructure • Availability and quality of suppliers and supporting industries Improving the Quality of the Business Environment The Diamond Model 17
  18. 18. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Improving the National Business Environment Peru, 2012 + Abundant resources: mineral, agricultural, fishing, and cultural + Advantageous location + Improving administrative infrastructure ± Sound banking system, but high interest spreads and limited venture capital availability – Poor physical infrastructure – Low skill levels in the labor force, mismatch with demand – Weak university-industry research collaboration – Few high-quality research and scientific institutions + Improving consumer protection regulation ± Improving sophistication of local buyers − Weak environmental standards enforcement – Limited local suppliers and supporting industries – Shallow clusters + Openness to foreign investment, trade, capital flows + Improvements in investor protections ± Efforts to strengthen competition policy – Rigidity of employment – Difficulty in business formation – Low intensity of local competition – High Informality of the economy Context for Firm Strategy and Rivalry Related and Supporting Industries Factor (Input) Conditions Demand Conditions 18
  19. 19. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 Business Environment Quality Ease of Doing Business Rankings, India Ranking, 2017 (vs. 190 countries) India’s GDP per capita rank: 117 Favorable Source: World Bank Report, Doing Business (2017) 19 Unfavorable
  20. 20. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Geographic concentrations of firms, suppliers, and related institutions in particular fields (e.g. tourism, automotive) that enable productivity and innovation Macroeconomic Competitiveness Microeconomic Competitiveness Quality of the National Business Environment State of Cluster Development Endowments Human Development and Effective Public Institutions Sound Monetary and Fiscal Policies Sophistication of Company Operations and Strategy What Determines Competitiveness? 20
  21. 21. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Sources: HBS student team research (2003) - Peter Tynan, Chai McConnell, Alexandra West, Jean Hayden Restaurants Attractions and Activities e.g., theme parks, casinos, sports Airlines, Cruise Ships Travel Agents Tour Operators Hotels Property Services Maintenance Services Government Agencies e.g. Australian Tourism Commission, Great Barrier Reef Authority Educational Institutions e.g. James Cook University, Cairns College of TAFE Industry Groups e.g. Queensland Tourism Industry Council Food Suppliers Public Relations & Market Research Services Local Retail, Health Care, and Other Services Souvenirs, Duty Free Banks, Foreign Exchange Local Transportation What is a Cluster? Tourism Cluster in Cairns, Australia 21
  22. 22. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter22 Pharmaceutical Cluster in Andhra Pradesh Source: MOC Student Project 2013 Pharmaceutical Companies (MNCs, Domestic Companies, SOEs) Chemical Suppliers Printing & Packaging Material Suppliers Testing Laboratories Energy Suppliers International Institutions (US FDA, EDQUM in Europe, ISO, ICH, GLP, GCP, etc.) Marketers, BDS & Agents CFA and Stockists Hospitals Pharma Resellers Pharmacies Distributors / Customers Multi-lateral Agencies (e.g. WHO) Pharma Machinery Manufacturers Law Firms Transportation & Logistics Supporting Industry Financial Inst. IT / ITES Related Industries Medical Tourism Medical Devices Agribusiness Health Insurance Bulk Mfg. Contract R&D Formulation Mfg. Institutions for Collaboration Industry Associations (BDMA, OPPI, NDMA, PASS etc) Education & Research (Pharma Colleges; Research Inst. - NIPER, CCMB, IICT etc) Government (Central, State, Patent Office) Government, Regulatory, Quality
  23. 23. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Source: “Clusters and the Great Recession” by Mercedes Delgado, Michael E. Porter, and Scott Stern (2014), “Clusters, Convergence, and Economic Performance” by Mercedes Delgado, Michael E. Porter, and Scott Stern (2012), “Cluster and Entrepreneurship” by Mercedes Delgado, Michael E. Porter, and Scott Stern (2010); “The Economic Performance of Regions” by Michael E. Porter (2003) • Job growth • Higher wages • Higher patenting rates • Greater new business formation, growth and survival • Resilience in downturns • Build on the region’s existing and emerging clusters rather than chase hot fields • Economic diversification occurs within clusters and across related clusters Why Clusters Matter? Research Findings 23
  24. 24. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Note: Showing only clusters with greater than $5 billion in export value. Source: International Cluster Competitiveness Profiles project; Harvard - Prof. Michael E. Porter; Richard Bryden, Director. = $2 billion Business Services Oil and Gas Production and Transportation Hospitality and Tourism Upstream Metal Manufacturing Food Processing and Manufacturing Apparel Textile Manufacturing Biopharmaceuticals Transportation and Logistics Automotive Upstream Chemical Products Downstream Chemical… Plastics 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% -0.50% 0.00% 0.50% 1.00% 1.50% 2.00% World Export Market Share, 2015 Change in World Export Market Share, 2005-2015 Computer and Communication services (-2.2%, 12.7%) 7.00% Jewelry, Precious Metals and Collectibles (+1.7%, 14.9%) Overall Export Share 2015: 2.225% 24 Change in Overall Export Growth 2005-2015: +0.874% India’s Exports by Traded Cluster Production Technology and Heavy Machinery Financial Services Downstream Metal Products
  25. 25. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Metal- working Food Processing Lighting Medical Devices IT & Analytical Instruments Comm- unications Equip. & Services Down- stream ChemicalsBiopharma Leather Apparel Printing Services Financial Services Insurance Environ- mental Services Business Services Education & Knowledge Creation Marketing Services Music & Sound Recording Performing Arts Video Production Hospitality & Tourism Metal Mining Coal Mining Upstream Metals Wood Products Furniture Tobacco Aerospace Upstream Chemicals Trailers & Appliances Textiles Footwear Forestry Agriculture Plastics Plastics Distribution & eComm. Livestock Processing Fishing & Fishing Products Water Transport Transport &Logistics Vulcanized Materials Construction Nonmetal Mining Oil & Gas Electricity Down- stream Metals Production Metal- working Automotive Paper & Packaging Recreation & Electric Goods Jewelry & Precious Metals Related Clusters and Economic Diversification India 2015 4.5% - 9.0% > 9% World Export Share 2.25% - 4.5% 25
  26. 26. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Labor/ HR-intensive Capital/ HR-intensive Services Logistics Med. Devices Logistics: Docks, Bunkering Electronics Petro- chemicals Financial Services Pharma Business Services Aerospace & Defense Tourism Media & Design IT Logistics: Air Travel Logistics: Trans- shipment Water Technology Higher Education 1900-1960 1970s 1980s 1990s 2000s Regional HQs Biotech Clusters and Economic Diversification Singapore 26
  27. 27. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter • Strengthens multiple related firms/institutions simultaneously • Brings together firms of all sizes, including SME’s • Enhances the effectiveness of traditional economic policy areas, such as training, R&D, export promotion, FDI attraction, etc. • A forum for collaboration between the private sector, trade associations, government, educational, and research institutions • A powerful tool for public/private collaboration Clusters as a Tool for Economic Policy • Sound cluster policy should address all existing and emerging clusters, and not pick winners 27
  28. 28. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Geographic Influences on Competitiveness States, Regions and Cities Nation • Regions are the most important economic unit for competitiveness in larger countries, especially countries beyond subsistence development 28
  29. 29. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter • Economic performance varies significantly across sub-national regions (e.g., provinces, states, metropolitan areas) The Role of Sub-National Regions in Economic Development 29
  30. 30. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Alabama Alaska Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska New Hampshire New Jersey New Mexico New York North Carolina Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming $30,000 $35,000 $40,000 $45,000 $50,000 $55,000 $60,000 $65,000 $70,000 -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% High but declining prosperity versus U.S. High and rising prosperity versus U.S. Low and declining prosperity versus U.S. Low but rising prosperity versus U.S. Source: BEA. Notes: GDP in real 2009 dollars. Growth rate is calculated as compound annual growth rate. Real Growth in Gross Domestic Product per Capita, 2005 to 2015 Prosperity Performance of U.S. StatesReal GDP per Capita, 2015 U.S. Average GDP Per Capita, 2014: $50,054 North Dakota Nevada U.S. Average growth in GDP Per Capita, 2014: 0.4% 2005-2015 30
  31. 31. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter Prosperity Performance of Indian States 2005-2014 Gross Domestic Product per Capita Real Growth Rate, 1999 to 2009 Note: Growth rate is calculated as compound annual growth rate. Source: CEIC. Real growth in GDP per Capita, 2005-2014 GDP per Capita, 2014 (2005 Indian Rupees) India Overall: ₹45,750 India Overall: 6.6% Chandigarh Sikkim Uttarakhand Andaman & Nicobar Islands Andhra Pradesh Arunachal Pradesh Assam Bihar Chattisgarh Delhi Goa Gujarat Haryana Himachal Pradesh Jammu & Kashmir Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Manipur Meghalaya Mizoram Nagaland Odisha Puducherry Punjab Rajasthan Tamil Nadu Telangana Tripura Uttar Pradesh West Bengal ₹ 0 ₹ 20,000 ₹ 40,000 ₹ 60,000 ₹ 80,000 ₹ 1,00,000 ₹ 1,20,000 ₹ 1,40,000 ₹ 1,60,000 3% 4% 5% 6% 7% 8% 9% 31
  32. 32. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter • Economic performance varies significantly across sub- national regions (e.g., provinces, states, metropolitan areas) • Many essential levers of competitiveness reside at the regional and sub-regional level • Regions specialize in different clusters The Role of Sub-National Regions in Economic Development 32
  33. 33. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter 33 Cluster Specialization Selected Indian States Tamil Nadu • Textile Manufacturing • Automotive • Footwear • Leather and Related Products Gujarat • Jewelry and Precious Metals • Upstream Chemical Products • Water Transportation • Nonmetal Mining Maharashtra • Biopharmaceuticals • IT and Analytical Instruments • Jewelry and Precious Metals • Furniture Source: India ASI 2014; India Cluster Mapping Project, Harvard ISC – Prof. Michael E. Porter, India IFC – Amit Kapoor Uttar Pradesh • Livestock Processing • Footwear • Downstream Chemical Products • Food Processing and Manufacturing Haryana • Automotive • Apparel • Recreational and Small Electronic Goods • Medical Devices Clusters with strongest employment specialization based on annual survey of manufacturing industries 2014;
  34. 34. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter The Role of Sub-National Regions in Economic Development • Regions are a critical unit of competitiveness • Each region needs its own distinctive strategy and action agenda – Business environment improvement – Cluster upgrading – Improving institutional effectiveness • Much economic policy responsibility and accountability should be decentralized to regions 34 • The role of the national government should be to set the overall policy framework while enabling open competition and economic integration across regions - Digitization - Infrastructure for connecting states and regions - Harmonizing rules and incentives across regions
  35. 35. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter • An overall agenda for creating a more distinctive and competitive position for a country or region, based on its particular circumstances • Implementing best practices in each policy area • There are a huge number of policy areas that matter • No region or country can (or should try to) make progress in all areas simultaneously Policy Improvement Economic Strategy The Need for an Economic Strategy 35
  36. 36. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter National or Regional Value Proposition Developing an Economic Strategy • What is a distinctive competitive position for the nation given its location, legacy, existing strengths, and potential strengths? – What unique advantages as a location? – For what types of activities and clusters? – What roles in the broader global economy? Developing Unique Strengths Achieving and Maintaining Parity with Peers • What elements of the business environment can be unique strengths relative to peers/neighbors? • What existing and emerging clusters can be built upon? • What weaknesses must be addressed to remove key constraints to growth and achieve parity with peer locations? • Priorities and sequencing are fundamental to successful economic development36
  37. 37. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter37 What is Unique About India? • Vibrant and largest democracy in the world • Large domestic market • Growing labor force, including strong reservoir of skilled graduates • Well-established position in IT services • Growing number of internationally active firms • Large, heterogeneous country • Deep international linkages through history, diaspora, and growing trade and investment • A rich history, culture, and diversity • What will be India’s distinctive role in the global economy? • What will be India’s unique competitive advantages?
  38. 38. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter • Competitiveness improvement will require sustained efforts across decades and government administrations – Mechanisms needed to improve the continuity of policy over time • Competitiveness is affected by numerous government entities and levels of government – Multiple agencies and departments (e.g. finance, trade, science and technology, commerce, regional policy, energy, agriculture) have an influence on competitiveness – “Economic” agencies and “social” agencies are both involved – Multiple levels of government (nations, states, cities, etc.) affect the business environment – Intergovernmental relations with neighboring countries affect productivity • Coordinating structures are needed to bring together ministries, agencies and levels of government around an integrated economic strategy Government Structure and Economic Development 38
  39. 39. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter The Private Sector’s Role in Economic Development • Inform government on the needs of business and the constraints on company and cluster development • Work closely with local educational and research institutions to improve their quality and create specialized programs addressing the cluster’s needs • Nurture local suppliers and attract foreign suppliers • Collaborate with other companies to enhance competitiveness through trade associations and other mechanisms • Participate actively in national and regional competitiveness initiatives • Compete with shared value strategies that address social needs and challenges with a business model – Beyond corporate philanthropy 39
  40. 40. 20170525—India Competitiveness Copyright 2017 © Professor Michael E. Porter40 Themes for India 1. Broad-based inclusive development, which integrates economic and social progress 2. A cluster-based economic development model 3. Clear roles for the national and state governments in upgrading competitiveness 4. Make the private sector a true partner in competitiveness upgrading 5. Better data and benchmarking to inform evidence-based policy 6. Articulate a shared vision for India’s economic and social future that motivates and inspires citizens 7. Create a culture of participation and responsibility amongst citizens

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