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Michael_Enright_India_and_the_world_The_India_Dialog_2024.pptx
Goldman Sachs projects that India will become the world's third-largest economy by 2030 and may surpass the Euro area by 2050, but this growth is not inevitable and depends on strategic economic management. The document discusses various drivers of economic performance, including firm, industry, cluster, national, and supranational levels, emphasizing the need for India to capitalize on its demographics and improve infrastructure for sustainable growth. It highlights the importance of India navigating geopolitical shifts and fostering local clusters to enhance its competitive edge globally.
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Michael_Enright_India_and_the_world_The_India_Dialog_2024.pptx
- 1. India and theWorld: Economic Perspectives Professor Michael J. Enright Pierre Choueiri Family Professor of Global Business, D’Amore-McKim School of Business, Northeastern University Director, Enright, Scott & Associates February 2024 2024-02 © Copyright Michael Enright, 2024 1
- 2. Where will Indiabe in the world? • Goldman Sachs has projected that India will have the world’s 3rd largest economy before 2030, will have a larger economy than the Euro area by 2050, and will have the world’s 2nd largest economy by 2075. • This implies growing influence in global economic and geopolitical affairs. 2024-02 © Copyright Michael Enright, 2024 2 Source: Goldman Sachs Research, The Path to 2075, December 2022. But how “inevitable” is this rise? And what will India need to do to get there? And how might India conceive of, and use, the influence it may obtain?
- 3. Forecasts are forecasts,and can be wrong • Goldman’s 2011 forecasts proved accurate for several large economies, but fell far short for many economies (and this was pre-Covid) • Economic conditions going forward may be less “certain” than for 2010-2019 due to conflict, decoupling, pandemic recovery, climate change (and policies towards climate change) • Forecasts for longer periods of time are less certain 2024-02 © Copyright Michael Enright, 2024 3 There is nothing inevitable about any particular trajectory. It is up to individual countries to maximize their potential. Source: Goldman Sachs Research, The Path to 2075, December 2022.
- 4. What drives economicperformance? • Firm Level Drivers: Drivers internal to firms. • Industry Level Drivers: Drivers external to any single firm, internal to the industry. • Meso, Cluster Level Drivers: Drivers external to individual firms and industries, but internal to groups of interdependent industries (usually through vertical or horizontal linkages). • Macro, National Level Drivers: Drivers external to any individual cluster, but internal to a single country. • Meta, Supranational Level Drivers: Drivers external to a single country. 2024-02 © Copyright Michael Enright, 2024 4 Firm Level Drivers Performance All levels matter. Macroeconomists rightly focus on productivity growth, but unless a nations firms, industries, clusters can win in the marketplace, productivity gains are never realized.
- 5. Another way ofthinking about it 2024-02 © Copyright Michael Enright, 2024 5 Supranational National Cluster Industry Firm Potential Industries/ Activities Competitive Industries/ Activities • Each level provides the opportunity / challenge set for each lower level. • Nations or regions succeed when opportunities can be exploited by clusters, industries, and firms that can leverage national advantages. • It usually takes outstanding firms to overcome disadvantages at the industry, cluster, or national level.
- 6. Macro or NationalLevel Drivers • “National” Level Drivers could also include “subnational regions” • They include underlying conditions that affect all firms and industries within the nation – Macroeconomics and macro economic variables – National and local markets – Availability of general resources and capabilities (natural, human, created) – Infrastructure (hard, soft) • They include national policymaking and governance organizations and activities – Macroeconomic frameworks and policies – Regulatory frameworks and policies – National and local institutional structures • They include sources of resources, capabilities, support, competition, or activism – Government support agencies – Education systems – Financial markets – National and local civil society • National-level drivers provide the environment and opportunity / challenge set within which its clusters, industries, and firms operate. 2024-02 © Copyright Michael Enright, 2024 6
- 7. Urban Population andAdult Literary, India & China 2024-02 © Copyright Michael Enright, 2024 7 0 20 40 60 80 100 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 Urbanization India China 0 20 40 60 80 100 1982 1989 1996 2003 2010 2017 Literacy, 15 and older India China Urbanization gives a triple boost to economic development • People become accessible to be manufacturing and service producers • People become accessible as manufacturing and service consumers • People move out of low value-added subsistence agriculture Literacy allows people a starting point to enter the modern economy • Literacy opens up the world of knowledge • Literacy allows participation in manufacturing and services • Estimates of the cost of illiteracy on India’s economy (US$53 billion) are probably underestimates
- 8. Infrastructure and Easeof Doing Business 0 10 20 30 40 50 60 70 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 2007 2010 2012 2014 2016 2018 2023 Infrastructure Score and Rank India S China S India R China R 2024-02 © Copyright Michael Enright, 2024 8 Source: World Bank, Logistics Performance Index 0 20 40 60 80 100 120 140 160 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Ease of Doing Business Rank China India Source: World Bank, Ease of Doing Business Rankings Infrastructure provides the connections necessary for transactions in the nation “Ease of Doing Business” measured the challenges and frictions associated with doing business in various economies
- 9. Meta or SupranationalDrivers • Supranational Level Drivers can be global or (supranational) regional in nature • They include underlying conditions that affect all economies – International geo-politics – International technology conditions, trends, and resources – International economic conditions, trends, and resources – Social issues of international importance • They include international policymaking and governance organizations and activities – Supranational policymaking organizations (i.e. the EU) – Multilateral governance organizations (i.e. the WTO) – Trade blocs • They include sources of resources, capabilities, support, competition, or activism – Multilateral support organizations (i.e. the World Bank) – International financial flows – Foreign companies – Foreign governments – International civil society and NGOs • Supranational Level Drivers represent the opportunity / challenge set within which national economies operate. • How national economies (i.e. India) interact with supranational has a major impact on their competitiveness and economic performance. 2024-02 © Copyright Michael Enright, 2024 9
- 10. Supranational Drivers: China, nolonger a juggernaut? 2024-02 © Copyright Michael Enright, 2024 10
- 11. Are demographics destiny? 2024-02© Copyright Michael Enright, 2024 11
- 12. Possible reasons for“Peak China” • Obstacles to rapid growth – Housing investment in decline – Urban pop growth slowing – Investment returns declining – Economic growth no longer as much a priority – Suboptimal economic plans – Decoupling / self-sufficiency drive – Digital isolation – Policy uncertainty – Domestic / foreign investors wary – Broader isolation – Reaction to “coercive” policies • One-time changes that won’t repeat – Planned to “market” economy – Closed to partially open – No private sector to large private sector – Terrible infrastructure to good infrastructure – No commercial cities to advanced commercial cities – No asset markets to large asset markets – No modern corporations to modern corporations – No business education to widespread business education – Backward to modern business practices – Little entrepreneurship to vibrant entrepreneurship 2024-02 © Copyright Michael Enright, 2024 12
- 13. New forecasts suggest“Peak China” may be near 2024-02 © Copyright Michael Enright, 2024 13
- 14. Supranational Drivers: Interaction withthe world and (supranational) regional economies 2024-02 © Copyright Michael Enright, 2024 14
- 15. Share of worldexports, 1978 2024-02 © Copyright Michael Enright, 2024 15 Source: UNCTAD
- 16. Share of worldexports, 2020 2024-02 © Copyright Michael Enright, 2024 16 Source: UNCTAD
- 17. Goods and servicestrade, % of GDP 0 5 10 15 20 25 30 35 40 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 Percent of GDP China Exports Imports 2024-02 © Copyright Michael Enright, 2024 17 0 5 10 15 20 25 30 35 40 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 Percent of GDP India Exports Imports
- 18. China started itsexport drive as the assembly location in an East and Southeast Asian production system Technology Capital goods Components Subassemblies Finished goods ASEAN China “Advanced Economies” NICS 2024-02 © Copyright Michael Enright, 2024 18 Source: Enright, Scott & Associates ASEAN China “Advanced Economies” NICS ASEAN China “Advanced Economies” NICS 1) 2) 3)
- 19. Mainland China’s andIndia’s neighborhoods • Mainland China’s economic neighborhood spans East and Southeast Asia • India’s economic neighborhood spans South and (maybe) Central & Western Asia • Larger economic neighborhoods provide greater potential gains from trade, investment, regional supply chains 2024-02 © Copyright Michael Enright, 2024 19
- 20. China’s neighborhood isfar better than India’s 0 2,000 4,000 6,000 8,000 10,000 12,000 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 USD Billions GDP, China’s Neighborhood East Asia-China Southeast Asia 2024-02 © Copyright Michael Enright, 2024 20 0 2,000 4,000 6,000 8,000 10,000 12,000 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 USD Billions GDP, India’s Neighborhood South Asia-India Central & Western Asia
- 21. Supplier facilities, Appletop 200 suppliers, 2022 2024-02 © Copyright Michael Enright, 2024 21
- 22. Inward foreign directinvestment -1 0 1 2 3 4 5 6 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 Percent of GDP India China 2024-02 © Copyright Michael Enright, 2024 22 -5 0 5 10 15 20 25 30 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 Percent of World FDI India China
- 23. Estimated economic impactof FDI/FIE, including ripple effects, on China’s economy 0% 5% 10% 15% 20% 25% 30% 35% 40% 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 % of China’s GDP Investment FIEs Secondary FIEs Tertiary © Copyright Michael J. Enright 0% 5% 10% 15% 20% 25% 30% 35% 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 % of China’s Employment Investment FIEs Secondary FIEs Tertiary Source: Enright, Scott & Associates Source: Enright, Scott & Associates 2024-02 23
- 24. Estimated economic impactof FDI, including ripple effects, on India’s economy Source: Enright, Scott & Associates estimates, based ESA calculations and RBI FDI surveys, which are partial © Copyright Michael Enright, 2024 24 2024-02 Likely understated due to data availability 206 219 245 242 243 249 281 446 494 605 589 0% 5% 10% 15% 20% 25% 30% 35% 0 100 200 300 400 500 600 700 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 % of India’s GDP Total VA Impact, USD billion Total VA % of India GDP
- 25. Will India developits clusters? 2024-02 © Copyright Michael Enright, 2024 25
- 26. Meso or ClusterLevel Drivers • Cluster Level Drivers operate at the level of interdependent firms and industries • They include vertically related industries – Inputs and Suppliers – Demand and Customers • They include horizontally related industries – Through common technologies, distribution, and customers – Through complementarities and shared resources and capabilities • They include institutions and support structures geared at the cluster level – Cluster-level policies – Cluster-level institutions – Cluster-level infrastructure, education, support, etc. – Cooperative and facilitative organizations • Nations and regions tend to succeed / fail not in isolated industries but in groups of interrelated industries (clusters). • Nations that foster capabilities, communication, coordination, competition, at the cluster level can greatly enhance their development. 2024-02 © Copyright Michael Enright, 2024 26
- 27. Clusters differ inimportant dimensions • Geographic scope • Industry scope • Vertical Scope • Activity Scope • Transaction governance • Size of firms • External linkages • Local / foreign ownership • Innovation performance 2024-02 © Copyright Michael Enright, 2024 27
- 28. Types of Clusters 0 1 2 3 4 5 GeoScope Ind Scope Vert Scope Act Scope Trans Firm Size Ext Link Loc Own Innov Central City Value-Added Services 0 1 2 3 4 5 Geo Scope Ind Scope Vert Scope Act Scope Trans Firm Size Ext Link Loc Own Innov City+ Support Services 0 1 2 3 4 5 Geo Scope Ind Scope Vert Scope Act Scope Trans Firm Size Ext Link Loc Own Innov SME Industrial Districts 0 1 2 3 4 5 Geo Scope Ind Scope Vert Scope Act Scope Trans Firm Size Ext Link Loc Own Innov Technology / Creative 2024-02 © Copyright Michael Enright, 2024 28 0 1 2 3 4 5 Geo Scope Ind Scope Vert Scope Act Scope Trans Firm Size Ext Link Loc Own Innov City Survivors 0 1 2 3 4 5 Geo Scope Ind Scope Vert Scope Act Scope Trans Firm Size Ext Link Loc Own Innov Scale-Scope Clusters 0 1 2 3 4 5 Geo Scope Ind Scope Vert Scope Act Scope Trans Firm Size Ext Link Loc Own Innov FDI Driven
- 29. Advantages of focusingon clusters • Provides a link between “macro” or crosscutting policies and business on the ground – From education to education relevant to local business – From infrastructure to infrastructure relevant to local business – From market information to market information relevant to local business – Etc. • Allows one to focus on what is relevant to local as well as national economies enough to be effective on the ground • Avoids the pitfalls of targeting individual firms and industries • Focuses efforts on reducing frictions / market failures that hinder positive business interaction – Impacted information – Managerial myopia – Coordination failures – Underprovision of public goods – i.e. “classic” market failures • Cluster organizations – Can be the basis of public-private interaction – Provides interlocutors for government that go behind individual firm or industry interests 2024-02 © Copyright Michael Enright, 2024 29
- 30. Whither India? 2024-02 ©Copyright Michael Enright, 2024 30
- 31. An exciting futurefor India? • There are sizable opportunities for India today… – Demographics and economics – Desire for resilient supply chains – East-West tensions and decoupling – Recent events have resulted in an unfreezing of existing relationships and the potential to build new relationships • The opportunities can only be exploited if India has the right conditions… – Workforce, infrastructure, education, business systems, etc. – Policy environment; firm, industry, cluster environment – Links to the global economy; cluster development • And if India seizes the opportunities… – Overcomes the obstacles; leverages advantages – Builds the right relationships • It will have to choose how to use its influence to help create a new world for itself, and the rest of us 2024-02 © Copyright Michael Enright, 2024 31
- 32. The “unfreezing” ofeconomic structures creates potential instability, but also potential opportunities • Companies and countries are looking at world differently – Resilience and geo-political issues are coming to the fore – China +1 or China +2 strategies may no longer be viewed as viable • Part of China’s role in the global economy may be up for grabs – Capacity – Costs – Policies of China and other nations • Global “norms” and “rules of the game” may change – No US hegemony, but no China hegemony either – US + EU will be the strongest block for the next decade if they stick together – By the middle of the century, India is likely to be the “third power” • How India goes in terms of its posture towards the global economy could be decisive 2024-02 © Copyright Michael Enright, 2024 32
- 33. Whither India? • Domestically –Will India reach its potential? – Action on all FIVE levels will be necessary – Will a large economy be a prosperous economy for the bulk of India’s citizens? • Internationally – Can India leverage international opportunities? – Can it avoid international pitfalls? – Can a country used to “non- alignment” or “semi-alignment” successfully manage “multi- alignment”? • Where will India participate? – BRICS Forum? – Shanghai Coop Org? – Belt and Road Initiative? – QUAD? • How will India manage what other countries might want India to be? • How will it manage what India itself wants to be, and what it wants the world to be? • How will the answers impact the rest of us? 2024-02 © Copyright Michael Enright, 2024 33
- 34. Thank you Professor MichaelJ. Enright Pierre Choueiri Family Professor of Global Business, D’Amore-McKim School of Business, Northeastern University m.enright@northeastern.edu Director, Enright, Scott & Associates michaelenright@enrightscott.com 2024-02 © Copyright Michael Enright, 2024 34
- 35. Appendix 2024-02 © CopyrightMichael Enright, 2024 35
- 36. Micro or Industry-Leveland Firm-Level Drivers • Industry Level Drivers – Industry Characteristics – Competition – Cooperation – Strategic Groupings – Role of Lead Firms – Micro Policies – Micro Institutions • Firm Level Drivers – Scope – Positioning – Activities – Resources – Knowledge – Leadership – Execution 2024-02 © Copyright Michael Enright, 2024 36 Unless a nation’s industries and companies succeed and grow, the nation’s economy cannot succeed and grow.
- 37. ESA and Competitiveness •Professor Michael Enright helped design and then managed the Competitive Advantage of Nations Project at Harvard Business School in the 1980s • ESA undertook the first competitiveness project in a developing country based on modern competitiveness methodology • ESA has undertaken detailed competitiveness assessments all around the world, usually in conjunction with local partners • ESA has made major enhancements over the years to focus on the practical aspects of improving competitiveness, advanced use of these tools remains proprietary to ESA 2024-02 © Copyright Michael Enright, 2024 37