India's Competitive Niche
“The great champions of globalization have started shirking it, but we in India trumpet globalization because we are getting globally competitive.”
Kamal Nath, Minister of Commerce and Industry, India
“Every consumer in the world wants a product at the lowest possible price and at the highest quality. We have a low-cost economy and a high-quality resource base so we will be able to produce quality goods at a low price. But we need to build that resource base further.”
Kapil Sibal, Minister of Science and Technology and Earth Sciences, India
“We need to revamp the higher education system.”
Hari S. Bhartia, Co-Chairman and Managing Director, Jubilant Organosys, India
“The important thing is that there is a huge volume of intelligence in the rural area – 70% of the intelligence is out there – so we are not really increasing our knowledge base.”
Jaggi Vasudev, Sadhguru and Founder, Isha Foundation, India
At the World Economic Forum's India Economic Summit 2006 in New Delhi, many participants called for India to repeat in other sectors the successes it has achieved in IT, pharmaceuticals and telecommunications. The message of this refrain: that India should find new drivers of growth, reform and open up its markets further, and find niches in which it can shine internationally. India’s global competitiveness – it is 43rd on the World Economic Forum’s latest ranking – compares well with those of the three other large, emerging economies with which it is often grouped: China (54th), Russia (62nd) and Brazil (66th). India’s rise has turned it into a globalization booster, said Indian Minister of Commerce and Industry Kamal Nath. “The great champions of globalization have started shirking it, but we in India trumpet globalization because we are getting globally competitive.”
Yet as it strives over the next five years to achieve and sustain 10% growth, the level where China is today, India will need to address serious competitive shortcomings, particularly in education and human resources, governance, and the rural economy. It will also need to exploit its competitive advantages, especially its youthful demographics – over half the population is under the age of 25 – and the value-for-money proposition that won it 85% of the global business process outsourcing (BPO) market or more than US$ 6 billion in revenues. “Every consumer in the world wants a product at the lowest possible price and at the highest quality,” said the Indian Minister of Science and Technology and Earth Sciences, Kapil Sibal. “We have a low-cost economy and a high-quality resource base so we will be able to produce quality goods at a low price. But we need to build that resource base further.”
It is a unique business plan, one that builds on India’s recent successes, particularly in IT services and pharmaceuticals. Indeed, India’s pharmaceutical firms are moving beyond generic production to innovative R&D in partnership with global companies to develop new drugs. The same is true in software development. In the BPO market, India is expanding its repertoire to include so-called knowledge process outsourcing (KPO), or the offshoring of high-end knowledge work in various fields including engineering, design, medicine, finance and law. And India is aiming to develop an effective innovation ecosystem. “Innovation is not buying up technology,” reckoned Sibal. “It may be quality, but it’s not affordable. We need to partner with industry to adapt technology and innovate to meet the needs of the common folk.”
It is all about competitiveness through increased efficiency. “What makes Indian firms more competitive is that they can absorb technology,” said Rajiv Kumar, Chief Executive and Director, Indian Council for Research on International Economic Relations (ICRIER). “We are increasingly a productivity-driven economy.”
Yet India’s competitiveness drive has long been stymied by its poor infrastructure and the lack of viable supply chains. Rural development and agriculture have suffered without adequate transport, storage and handling facilities. India’s supply chain, said Pankaj Chandra, Professor, Operations and Technology Management, Indian Institute of Management, is “fragmented, complex and lacks discipline.” Added Hans-Joachim Körber, Chairman and Chief Executive Officer, Metro, Germany: “If we get a proper supply chain, then the vision of India as the food factory of the world may be possible.”
That future for India’s agribusiness sector depends not just on the building of the physical infrastructure needed in rural areas, but also on other issues including the modernization of the retailing sector and distribution networks, and how effectively India can resolve the anomalies that characterize cross-state commerce, the software of supply chain management. These problems are also hampering growth in the manufacturing sector. A key problem: the variety of tariffs and fees levied on goods and transport entering states. It can take eight days for a truck to deliver goods from Kolkata to Mumbai, a distance of 2,500 kilometres. “The goal is to create a single Indian common market,” said India Economic Summit 2006 Co-Chair Nandan M. Nilekani, President, Chief Executive Officer and Managing Director, Infosys Technologies, India. “To create that single market requires government intervention if you are going to reform all of this. There are a lot of stakeholders with a claim on these taxes.”
There are doubts that this major stumbling block can be effectively addressed soon, given India’s federal structure and democratic political system. Montek S. Ahluwalia, Deputy Chairman of India’s Planning Commission, has described the country’s states as the principal shareholders in Indian development. “I wish we were China; we are a democracy,” said Kamal Nath. “Some things possible in China aren’t possible in India. States are looking for revenues, but we are inducing and counseling states to make them see the larger growth picture.” Some states have started rationalizing their tax systems, spurring others to act, Nath noted. “The new thing that is happening is the competitive atmosphere among the states.” States differ widely in income level, quality of infrastructure, and governance standards. Foreign investors are increasingly more discriminating in their choice of state to target.
Relying on the market to produce better governance may be the best approach democratic India can take. Indian companies are working around the problems. The automotive parts sector, for example, has managed to build up a 7% share of the global market, supplying components to BMW, DaimlerChrysler and other global carmakers. The key to such successes is largely a matter of skills and talent. All of India’s competitive ambitions depend on its ability to improve higher education standards and technical training. “We need to revamp the higher education system,” Hari S. Bhartia, Co-Chairman and Managing Director, Jubilant Organosys, India, said, noting the low number of Indian PhD students. ”We have no talent going through the postgraduate programme.” India’s low R&D spending relative to GDP is also hampering the development of its innovation ecosystem.
Other participants hailed India’s educational achievements so far, while acknowledging that there is enormous room for improvement. “We should really give some credit that the Indian education system has done something,” argued Mohamed A. Alabbar, Chairman, Emaar Properties, United Arab Emirates; Co-Chair of the India Economic Summit 2006. Said Jaggi Vasudev, Sadhguru and Founder, Isha Foundation, India: “The important thing is that there is a huge volume of intelligence in the rural area – 70% of the intelligence is out there – so we are not really increasing our knowledge base.”
That plea to focus on the poor and remote seemed to neatly summarize the two factors that will determine India’s future competitiveness: how well it can develop its human resources to meet its growth and equity goals as well as the demands of globalization, and how well it can tap the great potential of its rural economy. Concluded R. Seshasayee, Managing Director, Ashok Leyland, India, and President, Confederation of Indian Industry (CII): “You can’t attack the top end unless you nurture the bottom end.”
Kamal Nath, Minister of Commerce and Industry, India
“Every consumer in the world wants a product at the lowest possible price and at the highest quality. We have a low-cost economy and a high-quality resource base so we will be able to produce quality goods at a low price. But we need to build that resource base further.”
Kapil Sibal, Minister of Science and Technology and Earth Sciences, India
“We need to revamp the higher education system.”
Hari S. Bhartia, Co-Chairman and Managing Director, Jubilant Organosys, India
“The important thing is that there is a huge volume of intelligence in the rural area – 70% of the intelligence is out there – so we are not really increasing our knowledge base.”
Jaggi Vasudev, Sadhguru and Founder, Isha Foundation, India
At the World Economic Forum's India Economic Summit 2006 in New Delhi, many participants called for India to repeat in other sectors the successes it has achieved in IT, pharmaceuticals and telecommunications. The message of this refrain: that India should find new drivers of growth, reform and open up its markets further, and find niches in which it can shine internationally. India’s global competitiveness – it is 43rd on the World Economic Forum’s latest ranking – compares well with those of the three other large, emerging economies with which it is often grouped: China (54th), Russia (62nd) and Brazil (66th). India’s rise has turned it into a globalization booster, said Indian Minister of Commerce and Industry Kamal Nath. “The great champions of globalization have started shirking it, but we in India trumpet globalization because we are getting globally competitive.”
Yet as it strives over the next five years to achieve and sustain 10% growth, the level where China is today, India will need to address serious competitive shortcomings, particularly in education and human resources, governance, and the rural economy. It will also need to exploit its competitive advantages, especially its youthful demographics – over half the population is under the age of 25 – and the value-for-money proposition that won it 85% of the global business process outsourcing (BPO) market or more than US$ 6 billion in revenues. “Every consumer in the world wants a product at the lowest possible price and at the highest quality,” said the Indian Minister of Science and Technology and Earth Sciences, Kapil Sibal. “We have a low-cost economy and a high-quality resource base so we will be able to produce quality goods at a low price. But we need to build that resource base further.”
It is a unique business plan, one that builds on India’s recent successes, particularly in IT services and pharmaceuticals. Indeed, India’s pharmaceutical firms are moving beyond generic production to innovative R&D in partnership with global companies to develop new drugs. The same is true in software development. In the BPO market, India is expanding its repertoire to include so-called knowledge process outsourcing (KPO), or the offshoring of high-end knowledge work in various fields including engineering, design, medicine, finance and law. And India is aiming to develop an effective innovation ecosystem. “Innovation is not buying up technology,” reckoned Sibal. “It may be quality, but it’s not affordable. We need to partner with industry to adapt technology and innovate to meet the needs of the common folk.”
It is all about competitiveness through increased efficiency. “What makes Indian firms more competitive is that they can absorb technology,” said Rajiv Kumar, Chief Executive and Director, Indian Council for Research on International Economic Relations (ICRIER). “We are increasingly a productivity-driven economy.”
Yet India’s competitiveness drive has long been stymied by its poor infrastructure and the lack of viable supply chains. Rural development and agriculture have suffered without adequate transport, storage and handling facilities. India’s supply chain, said Pankaj Chandra, Professor, Operations and Technology Management, Indian Institute of Management, is “fragmented, complex and lacks discipline.” Added Hans-Joachim Körber, Chairman and Chief Executive Officer, Metro, Germany: “If we get a proper supply chain, then the vision of India as the food factory of the world may be possible.”
That future for India’s agribusiness sector depends not just on the building of the physical infrastructure needed in rural areas, but also on other issues including the modernization of the retailing sector and distribution networks, and how effectively India can resolve the anomalies that characterize cross-state commerce, the software of supply chain management. These problems are also hampering growth in the manufacturing sector. A key problem: the variety of tariffs and fees levied on goods and transport entering states. It can take eight days for a truck to deliver goods from Kolkata to Mumbai, a distance of 2,500 kilometres. “The goal is to create a single Indian common market,” said India Economic Summit 2006 Co-Chair Nandan M. Nilekani, President, Chief Executive Officer and Managing Director, Infosys Technologies, India. “To create that single market requires government intervention if you are going to reform all of this. There are a lot of stakeholders with a claim on these taxes.”
There are doubts that this major stumbling block can be effectively addressed soon, given India’s federal structure and democratic political system. Montek S. Ahluwalia, Deputy Chairman of India’s Planning Commission, has described the country’s states as the principal shareholders in Indian development. “I wish we were China; we are a democracy,” said Kamal Nath. “Some things possible in China aren’t possible in India. States are looking for revenues, but we are inducing and counseling states to make them see the larger growth picture.” Some states have started rationalizing their tax systems, spurring others to act, Nath noted. “The new thing that is happening is the competitive atmosphere among the states.” States differ widely in income level, quality of infrastructure, and governance standards. Foreign investors are increasingly more discriminating in their choice of state to target.
Relying on the market to produce better governance may be the best approach democratic India can take. Indian companies are working around the problems. The automotive parts sector, for example, has managed to build up a 7% share of the global market, supplying components to BMW, DaimlerChrysler and other global carmakers. The key to such successes is largely a matter of skills and talent. All of India’s competitive ambitions depend on its ability to improve higher education standards and technical training. “We need to revamp the higher education system,” Hari S. Bhartia, Co-Chairman and Managing Director, Jubilant Organosys, India, said, noting the low number of Indian PhD students. ”We have no talent going through the postgraduate programme.” India’s low R&D spending relative to GDP is also hampering the development of its innovation ecosystem.
Other participants hailed India’s educational achievements so far, while acknowledging that there is enormous room for improvement. “We should really give some credit that the Indian education system has done something,” argued Mohamed A. Alabbar, Chairman, Emaar Properties, United Arab Emirates; Co-Chair of the India Economic Summit 2006. Said Jaggi Vasudev, Sadhguru and Founder, Isha Foundation, India: “The important thing is that there is a huge volume of intelligence in the rural area – 70% of the intelligence is out there – so we are not really increasing our knowledge base.”
That plea to focus on the poor and remote seemed to neatly summarize the two factors that will determine India’s future competitiveness: how well it can develop its human resources to meet its growth and equity goals as well as the demands of globalization, and how well it can tap the great potential of its rural economy. Concluded R. Seshasayee, Managing Director, Ashok Leyland, India, and President, Confederation of Indian Industry (CII): “You can’t attack the top end unless you nurture the bottom end.”
posted by globophobe at 12.12.06
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