Presentation on India at Canadian High Commission Event


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Presentation on India at Canadian High Commission Event

  1. 1.   Assessing  India’s  Compe00veness     Professor  Amit  Kapoor   Honorary  Chairman  of  Ins0tute  for  Compe00veness,  India  &     Professor  of  Strategy  &  Industrial  Economics  at  MDI,  Gurgaon,  India  Ins$tute   for   Compe$$veness   (IFC),   India   is   an   independent,   interna0onal   ini0a0ve   centred   in   India,   dedicated   to   enlarging   and   dissemina0ng   the   body   of  research   and   knowledge   on   compe00on   and   strategy,   pioneered   over   the   last   25   years   by   Professor   M.E.   Porter   of   the   Ins0tute   for   Strategy   and  Compe00veness,  Harvard  Business  School  (ISC,  HBS),  USA.    IFC,  India  works  in  affilia0on  with  ISC,  HBS,  USA  to  offer  academic  &  execu0ve  courses,  conduct  indigenous  research  and  provide  advisory  services  to  corporate  and  Government  within  the  country.  The  ins0tute  studies  compe00on  and  its  implica0ons  for  company   strategy;   the   compe00veness   of   na0ons,   regions   &   ci0es;   suggests   and   provides   solu0ons   for   social   problems.     IFC,   India   brings   out   India   City  Compe00veness  Report,  India  State  Compe00veness  Report,  India  Economic  Quarterly,  Journal  of  Compe00veness  and  funds  academic  research  in  the  area  of  strategy  &  compe00veness.  To  know  more  about  the  ins0tute  write  to  us  at     1  
  2. 2. Natural Endowments Population and GDP’s of the world 3%  of  the  Land  area,   7%  of  the  Popula0on,    26%   7%  of  the  Land  area,   of  the  GDP  5%  of  the  Popula0on,    23%   7%  of  the  Land  area,   of  the  GDP   20%  of  the  Popula0on,    9%   European Union of  the  GDP   USA China 2%  of  the  Land  area,   India 17%  of  the  Popula0on,    3%   of  the  GDP  
  3. 3. GDP over the years100%90% 39%  in   2010  80%70%60% 23%  in   2010  50%40% 9%  in   2010  30% 3%  in  20% 2010  10% 26%  in   2010   0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 European Union India China United States Rest of the World Source: WDI and Institute for Competitiveness Analysis
  4. 4. Structural shift in Indian Economy (1994-2000) Services 10 8 6% Change in the Contribution to GDP (1994-2000) Community and Personal Services 4 Finance, Business & Real Estate Services Transport, Storage & Communication Construction 2 Industry 0 Manufacturing -10 0 10 20 30 40 50 60 -2 Agriculture and Allied -4 -6 -8 -10 Percentage Contribution in GDP (2000) Ins0tute  for  compe00veness  Analysis  
  5. 5. Structural shift in Indian Economy (2000-2010) 15 Services% change in contribution 2000-2010) 10 Industry Transport, Storage & Communication Finance, Business & Real Estate Services Construction 5 Manufacturing Electricity, Gas and Water Supply Community and Personal Services 0 -10 0 10 20 30 40 50 60 70 Agriculture and Allied -5 -10 -15 Percenatge Contribution in GDP (2010) Ins0tute  for  compe00veness  Analysis  
  6. 6. Geographic  Influence  on  Compe00veness   World  Economy   Broad  Economic  Areas   The  business  environment  at  a  given   Group  of  Neighboring  Na0ons   loca0on  is  the  cumula0ve  outcome     of  policy  at  all  levels  of  geography   Microeconomic  Compe00veness   Na0on   raises  the  importance  of  lower   levels  of  geography   The  alloca$on  of  responsibili$es   State,  Provinces   across  levels  of  geography  is  a   crucial  policy  challenge   Metropolitan  Areas   Rural  Areas  Ins0tute  for  Compe00veness,  India   6  
  7. 7. Microeconomic  Compe00veness:  The  Diamond     (Understanding  Business  Environment)   Context  for   Firm  Strategy   and  Rivalry   Local  rules  and  incen$ves  that   encourage  investment  and  produc0vity   e.g.  salaries,  incen0ves  for  capital   Factor   investments,  intellectual  property   Demand   Condi0ons   protec0on   Condi0ons   Vigorous  local  compe$$on  i.e.,     openness  to  foreign  and  local    Access  to  high  quality  business  inputs   compe00on;  sophis0ca0on  of  company   Sophis0ca0on  of  local  customers  and  i.e.,  natural  endowments,  human   opera0ons   needs  i.e.,  strict  quality,  safety,  and  resources,  capital  availability,  physical   environment  standards  infrastructure,  administra0ve   Related  and  infrastructure,  informa0on   Suppor0ng  infrastructure,  scien0fic  and  technological  infrastructure   Industries   Availability  of  suppliers  and  suppor$ng   industries   Presence  of  clusters  instead  of  isolated   firms   Successful  economic  development  is  a  process  of  successive  upgrading,  in  which  the  business   environment  improves  to  enable  increasingly  sophis0cated  ways  of  compe0ng   Ins0tute  for  Compe00veness,  India   7  
  8. 8. Decoding manufacturing competitiveness The  State  of  Manufacturing  in  India   India needs state-specific approaches to consolidate and attract investment op a strategic policy framework to idenMIT KAPOOR & and develop innovative clusters that hav SHUL PACHOURI great potential in exports and can gener more employment. There is a need develop investment mechanisms to fosI ndia and China are the future drivers public-private partnerships that can inv of the world economy though the two , in sick clusters and focus on improving economies look very different in latter’s productivity . terms of their development patterns There is a need for state-specific economic structure. China has proaches. After all, each state is at a dif rged as the manufacturing power- ent stage of development in the manu seinthelast20yearswhileIndiahasbe- turing industry and, therefore, ne e the major player in services. differentstrategiestoimproveitsmanu hina’s share in world manufacturing turing competitiveness. witnessed tremendous elevation from I Strong manufacturing states (Guja%in1991to13.7%in2011.Theincrement Maharashtra, Tamil Nadu, Karnatahe Chinese economy’s contribution to Andhra Pradesh, Goa, Haryana and Jha ld manufacturing has come at the cost hand) need an innovation-driven strate he European Union, whose share had These states need to move towards m inedto20.9%in2010from33%in1991.It technological advancement to impromes much more pronounced when we their production efficiency These sta .k at the fact that per capita manufactur- should invest in developing advanced sk GDP of China has increased by 8 times sets for manufacturing and become m pared to 1991, reaching $806 in 2010 export competitive. le India’s is just $122 (see figure). The I Weaker manufacturing states (Tripu re of India in world manufacturing is a Sikkim, Nagaland, Kerala, Jammu a e 1.8% and has increased by just 1% Kashmir, Delhi, Bihar, Assam, and Wr the past 20 years. Bengal) need an investments-driven strAt the same time, the US contribution gy They need to give more incentives to . remainednearlystagnant,whichisdue dustry in terms of taxes, power costs a eirspecialisationincapitalgoodsman- logistics, and try to facilitate more privcturing, while Chinese manufacturing investments in the sector. ominated by consumer goods. China I Medium manufacturing states (Chhaty have succeeded in capturing a bigger garh,HimachalPradesh,MadhyaPrade nk of world manufacturing, but its per Orissa, Punjab, Rajasthan, Uttar Prad tamanufacturingGDPisstillfarbelow and Uttarakhand) need a factors-driv of the US, which was $6,147 as of 2010. strategy These states need to focus in l .ndia’s growth is presumed to be driven ering the costs of inputs of production, he services sector, which contributes a veloping the right set of skills and taleximum 65.2% to its GDP However, the . and removing the barriers to doing bu of manufacturing in India’s develop- ness. These states should initiate pubnt can’t be discounted considering the private partnership mechanisms to attr that it contributed 16% to the country’s investments and improve productivity . lGDPin2010.Totalworkforceemployed Before devising policies for cluster dehe manufacturing sector is estimated to opment, it should be understood that mamore than 40 million, which amounts to facturingclustersneedtobemoreintegraof thetotalworkingpopulationof India. and deeper than service clusters. How c interesting to note that the share of ters that are not export-oriented fit intonufacturing to GDP in India hasn’t Ins0tute  for  Compe00veness,  India   9   global value chain of manufacturing ne nged much over the past 20 years, due to and Jharkhand, manufacturing con- map the manufacturing sector’s perfor- times their fixed investments. tobeanalysed.Indiahasabigpotentialofhtheincreaseintheshareof theservices tributes nearly 27% of the total GDP which , mance at both the state and firm levels to Today manufacturing in India requires , coming a good manufacturing-outsourc
  9. 9. Near  Term  State  Prosperity  Performance   140000   High  but  declining  versus  India     High  and  rising  versus  India     Goa   Highly  Produc0ve  and  Prosperity   Rising  versus  India   120000  Gross  Domes$c  Product  per  Capita,  2010   Points   57.28   Index   Avera India   All  India  GSDP  /Capita   100000   Delhi   rate  (CAGR)  of  8.36  %   All   ge   Haryana   80000   Maharashtra   All  India  Average   Punjab   of  46,836  Rupees/ Gujarat   Himachal  Pradesh   60000   capita   Karnataka   Kerala   Tamil  Nadu   Andhra  Pradesh   Sikkim   Chhagsgarh   Ukarakhand   West  Bengal   Orissa   Meghalaya   Arunachal  Pradesh   Mizoram   Tripura   40000   Rajasthan   Assam   Nagaland   Manipur  Madhya  Pradesh   Jammu  &  Kashmir   Jharkhand   Ukar  Pradesh   Bihar   20000   Low  and  declining  versus  India     Low  but  rising  versus  India     0   0   2   4   6   8   10   12   14   16   Gross  Domes$c  Product  per  Capita  CAGR  rate,  2008-­‐2010  
  10. 10. Composi0on  of  Haryana’s  Economy  in  Greater  Depth   8   Average  of  Change  in   Strong  and  Growing  Posi0on     contribu0on  of  (Haryana  / 7   Na0onal  sectoral),  CAGR  is  Haryana  /Na$onal  GSDP  share  (Percent)  ,2010   15.26%      Transport  by  other  means     6   Railways     Real  states,  ownership  of  dwellings   and  business  services   5   Agricuture      Construc0on     Electricity,  gas  and  water  supply    Manufacturing      Trade,  hotel  and  restaurant     4   Other  services      Forestry  and  logging   3   Storage   Average  of  (Haryana/   Public  sdministra0on  and  defence     Banking  and  insurance     Na0onal  sectoral  )GSDP   2   share  is  3.5%   Communica0on     1   Fishing     Mining  and  quarrying   0   0   5   10   15   20   25   30   -­‐1   Change  in  contribu$on  of  GSDP  of  Haryana  to  total  Indian  GSDP,  CAGR  (2000-­‐2010)  
  11. 11. State  Private  Sector  Wage  Performance   160000   Jharkhand   Wage  Growth   Highly  and  rising  wages  rela0ve  to     140000   India   rate  4.53%  Average  Wages  in  Rupees  ,2008   High  but  declining  versus  India     120000   Ukaranchal   Orissa   100000   Maharashtra   Goa   Average  Wage  :   Rupees  64,741   80000   Chagsgarh   West  Bengal   Haryana  Karnataka   Madhya  Pradesh   Gujarat   Meghalaya   Delhi   Himachal  Pradesh   Ukar  Pradesh   60000   Andhra  Pradesh   Punjub   Tamil  Nadu   Kerala   Rajasthan   Jammu  &  Kashmir   Bihar   Assam   40000   Manipur   Tripura   Nagaland   20000   Low  and  declining  versus  India     Low  but  rising  versus  India     0   0   2   4   6   8   10   12   14   Wage  Growth  (CAGR),  2001  to  2008  
  12. 12. Long  Term  State  Labour  Produc0vity   400000  GSDP  at  Current  Prices  per  labour  force  par$cipant,2010     High  but  declining  versus  India   Highly  produc0ve  and  Produc0vity   rising  versus  India   350000   Goa   All  India  Average  of     300000   11.37  %   250000   Delhi   Haryana   200000   All  India  Average  of  of   Maharashtra   1,18,112  Rupees/Labour   Punjab   force  par0cipant   Himachal  Pradesh   150000   Kerala   Gujarat   Karnataka   Tamil  Nadu   Andhra  Pradesh   Sikkim   Nagaland   Chhagsgarh   Ukarakhand   100000   Mizoram   West  Bengal   Orissa   Tripura   Meghalaya   Jammu  &  Kashmir   Rajasthan   Arunachal  Pradesh   Assam   Manipur   Ukar  Pradesh   Low  and  rising  versus  India   50000   Low  and  declining  versus  India   Madhya  Pradesh   Jharkhand   Bihar   0   0   2   4   6   8   10   12   14   16   18   20   GSDP  /Labor  force  par$cipant  growth  rate(CAGR)  
  13. 13. Short  Term  State  Labour  Produc0vity   400000  GSDP  at  Current  Prices  per  labour  force  par$cipant,2010     High  but  declining  versus  India   Highly  produc0ve  and  Produc0vity   rising  versus  India   350000   Goa   Points   Index   57.28   e   Averag India   All   300000   All  India  Average  of     15.11%   Delhi   250000   200000   All  India  Average  of  of   Haryana   1,18,112  Rupees/Labour   Maharashtra   force  par0cipant   Kerala   Himachal  Pradesh   Punjab   150000   Gujarat   Tamil  Nadu   Andhra  Pradesh   Karnataka   Sikkim   Chhagsgarh   Ukarakhand   Nagaland   Mizoram   West  Bengal   Orissa   100000   Tripura   Meghalaya   Rajasthan   Arunachal  Pradesh   Assam   Jammu  &  Kashmir   Ukar  Pradesh   Jharkhand   Madhya  Pradesh   Manipur   50000   Low  and  declining  versus  India     Bihar   Low  but  rising  versus  India     0   0   5   10   15   20   25   30   GSDP  /Labor  force  par$cipant  growth  rate(CAGR)  
  14. 14. Long  Term  State  Job  Growth   90000000   Ukar  Pradesh   80000000   s   Point Index   57.28   ge   Avera India   All   70000000   All  India  Average  of     2.05%    Number  of  Jobs,  2010   60000000   50000000   Maharashtra   Bihar   40000000   West  Bengal   Andhra  Pradesh   All  India  average  of   Madhya  Pradesh   30000000   1,62,99,464  Jobs  / Tamil  Nadu   Rajasthan   Karnataka   State   Gujarat   20000000   Orissa   Kerala   Assam   Jharkhand   Punjab   Haryana   Chhagsgarh   10000000   Delhi   Ukarakhand   Jammu  &  Kashmir   Nagaland   Himachal  Pradesh   Tripura   Mizoram   Manipur   Arunachal  Pradesh   Meghalaya   Goa   0   Sikkim   0   0.5   1   1.5   2   2.5   3   3.5   Losing  Jobs   Job  growth  rate  CAGR,  2001-­‐2010   Gaining  Jobs  
  15. 15. Near  Term  Unemployment  Rate     30   Goa   jharkhand   Points   57.28   Index   Avera 25   India   Below  average  Unemployment   All  India  Average  of     -­‐6.55%   All   ge  Unemployment  rate  2010   20   Rajasthan   Unemployment  Rising   Bihar   15   All  India  Average  of   9.39%   Meghalaya   Punjab   West  Bengal   Gujarat   kerala   Orissa   Haryana   10   Ukar  Pradesh   Manipur   Madhya  Pradesh     Above  Average  Unemployment   Mizoram   Nagaland   Tripura   Andhra  Pradesh   Arunachal  Pradesh   Sikkim   Assam   Himachal  Pradesh   Maharashtra     Tamil  Nadu   Jammu   Ukarakhand   5   Chagsgarh   Karnataka   Delhi   0   -­‐30   -­‐25   -­‐20   -­‐15   -­‐10   -­‐5   0   5   10   Change  in  Employment  rate  2008  to  2010    
  16. 16. Healthcare     9  Percentage  of  Total  government  Expenditure  on  Medical,  Health     8   Delhi   7   Mizoram   6   All  India  Average   3.95%     Goa   and  Sanita$on   5   Jammu  &  Kashmir   Meghalaya   Jharkhand   Ukar  Pradesh   Himachal  Pradesh   Kerala   Arunachal  Pradesh   Assam   Tamil  Nadu   4   Tripura   Rajasthan   Chhagsgarh   West  Bengal   Ukarakhand   Orissa   Manipur   Karnataka   Andhra  Pradesh   Punjab   Bihar   Maharashtra   3   Nagaland   Gujarat   Haryana   Madhya  Pradesh   Sikkim   India   All   2   All  India  Average   1407.59  Crores   1   0   0   1000   2000   3000   4000   5000   6000   Total  Government  Expenditure  on  Medical,  Health  and  Sanita$on  in  Crores    
  17. 17. Debt  to  GDP  ra0o     Debt  to  GDP  Ra$o  of  States   West  Bengal   42.8   41.1   Prescribed  limit  according  to  the   Ukar  Pradesh   43.5   growth  and  stability  Pact  of  EU   42.2   Tamil  Nadu   25.5   80.6   Rajasthan   41.1   35.2   Orissa   30.6   59.4   Mizoram   109.1   37.3   Manipur   77.4   25.1   Madhya  Pradesh   34.4   34.3   Karnataka   24.3   33.6  Jammu  &  Kashmir   70.1   55.7   Haryana   19   32.1   Goa   35.5   13.8   Prescribed  limit  according   Chagsgarh   15.2   to  WTO  for  developing   39.7   economies   Assam   28   115.9   Andhra   30.1   0   20   40   60   80   100   120