Competitiveness :

What works in India

&what does not

29 November 2010

You don't simply visit India,

you experience India: Obama

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

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

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

• 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

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

India is now the 4th

largest economy

It will overtake Japan

between 2012 and 2014

to become the 3rd largest

“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

India’s growth is led by…..

• ICT

• Telecom

• Pharma

• Automobiles

India’s Growth lineBihar – 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

Reasons for success

India’s success is market-led

not state induced

The entrepreneur is at the

centre of the Indian model

Implications of Indian model

GDP : Composition by sector

Agriculture : 17.0%

Industry : 28.1%

Services : 64.9%

Has India skipped the

industrial revolution ?

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)

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 ???

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

MoralPurpose

InsightReceptivityReceptivity

TensionTension

AnalysisAnalysis AnalysisAnalysis

Change Change

ProcessProcess FacilitationFacilitation

Change Change

ProcessProcess FacilitationFacilitation

Multilateral Multilateral EngagementEngagement

Multilateral Multilateral EngagementEngagement

New EconomyNew Economy SolutionsSolutions

New EconomyNew Economy SolutionsSolutions

Describing the

causes of

underdevelopme

nt

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 competitivene

ss at the

microeconomi

c 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

Worked in 82 clusters in 14 countries

IntlDev Agency

c

Govt.’s

Private Sector

Public Sector

MSME’s are our pride……

Worked inIndia

USA

Canada ( Govt of Manitoba )

United Kingdom

Brazil

Italy

South Africa

Worked in

Oman

Brunei

RAS Al Khaimah

China

Afghanistan

Pakistan

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

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.

Challenges and solutions to

competitivenessThe 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

IncreasedWealth

EconomicGrowth

results in

attractsleads 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

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

WholesalersRetailers (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

World’s Longest Doormat

Like a sapling, BDS providers will

require continued support from Govt.,

Academia & industry to guarantee its

development into a mature tree

CulturalCulturalCulturalCultural

HumanHumanHumanHuman

KnowledgeKnowledgeKnowledgeKnowledge

InstitutionalInstitutionalInstitutionalInstitutional

FinancialFinancialFinancialFinancial

Man-MadeMan-MadeMan-MadeMan-Made

Natural Natural EndowmentsEndowmentsNatural Natural EndowmentsEndowments

Soci

al

Tangible Articulations Norms Mental Models

Phys

ical

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

Implementation approach

• Deep diagnostic study

• Pain point identification

• SHG or consortia formation

• BDS intervention

• Use of ICT

• Domestic & Export market linkages

• Sustainable model

Implementation principles

• Minimizing market distortion

• Partner with local Govt.

• Scale and replicability

• Variety and learning

• Gender mainstreaming

• Public-private partnership

• Institutional handover

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

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

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.

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

Gujarat

• Land of Mahatma Gandhi

• Gujarati entrepreneurship

• 55 Million population

• 22% of India’s exports

• Mega projects : DMIC

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

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

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

India : The Wise

Elephant

Welcome to India……

ClusterPulse.org

An elephant

growing at 8% is a

formidable beast