Indian Economy in the process of

Global Competitiveness Kanti Prakash Brahma

M Tech (IIT Delhi), PGDM (XIM Bhubaneswar)

M A R C H , 2 0 1 0

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CONTENTS

Topic Page No

1. Introduction …………………………………………………………………………………………..3

2. Concept of Global Competitiveness…………………………………………………………………………4

3. State of Indian Economy…………………………………………………………………………………8

4. India’s Competitiveness……………………………………..………………………………….10

5. Future of India’s Competitiveness……………………………………….………………………………..15

6. Concluding Remarks……………………………………………………………………………….. .18

7. References…………………...………………………………………………………..19

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1. INTRODUCTION

The liberal economic policies of India unleashed in 1990s have resulted in two decades of

remarkable economic growth. In addition to the impressive economic growth presence of

abundant natural resources, cost-effective manpower, large number of English speaking

youth indicates the increasing important role to be played by India in global economy. The

integration with the global economy has provided wider space for India across the globe. At

the same time being interwoven with the global economy, interdependencies of Indian

economy with the global economy has increased. The effects of these interdependencies

precipitated well in the recent economic crisis of 2008-09. The slump demand and liquidity

crunch of the US and the EU economics curbed the economic growth of India. This

underscores the importance of sustainable economic growth of India through implementing

policies and factors that makes India competitive in the global economy.

From the increasing complex and uncertain economic cycles it is evident that the

performance of a nation will depend on not losing long-term competiveness amidst short-

term economic cycles. A nation that gives importance to factors conducive to productivity

and successfully maintains supporting economic environment will be able to achieve

competitiveness and agility required for the changing economic paradigm. In India,

competitiveness will hasten the growth process enabling India to explore the business

opportunities available in India and abroad. A competitiveness supporting business

environment in India will help to tackle the global downturn effectively and will act as a solid

edifice to achieve inclusive and sustainable growth.

This report analyses the concepts of competitiveness, building blocks of global

competitiveness, India’s strengths and weaknesses in providing the driving forces of

competitiveness. India’s performance and future is analyzed by comparing it with some other

countries of global economy.

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2. CONCEPTS OF NATIONAL COMPETITIVENESS

Michael E. Porter believes that national level productivity is the only meaningful concept of

national competiveness1. He finds it to be inappropriate to define competitiveness solely on

the basis of exchange rates, interest rates, cheap and abundant labour, bountiful natural

resources, government policies or management practices. Classical theory focused factors of

production such as land, labour and natural resources as the drivers of competitiveness of a

nation. With the passage of time the paradigm shift brought by technological breakthrough

and globalization has overshadowed the classical theory. The concept of competitiveness has

become more dynamic and evolving. The evaluation parameter for competiveness of a nation

must include parameters like global strategy, foreign investments, segmented market,

differentiated products, economies of scope and scale, innovation etc.

Productivity (and thus competitiveness) is viewed as a function of political, legal and

macroeconomic context. The interplay of these basic functions leads to productivity which

provides competitiveness advantage to nations. The quality of microeconomic business

environment and the sophistication of company operation and strategy determine the quality

of microeconomic business environment. Stability of political and legal system creates an

environment where competitiveness is possible. But it is the macroeconomic environment

that creates competitiveness. The question why some nations enjoy competitive advantages

over the rest could be answered based on Porter’s Diamond of Determinants of Competitive

Advantages. A diagram of the diamond is provided in figure 2.1. Each point in the diamond

and the diamond as a system act as basic ingredients for achieving mastery in global market.

1 Michael E. Porter, The Competitive Advantages of Nations, HBR, March-April 1990

Firm Strategy, Structure and Rivalry

Related and Supporting Industries

Domestic Demand Conditions

Factor Conditions

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Figure 2.1: Determinants of National Competitive Advantage

The four determinants of competitive advantages are:

1. Factor Conditions

Factor conditions include the nation’s position in matters like skilled labour,

infrastructure etc. that are necessary base of competing.

2. Demand Conditions

The demand of domestic market helps firms to create requisite avenues and resources

to compete at the global level.

3. Related and Supporting Industries

Presence of supplier and related industries provide and growth impetus to compete.

4. Firm Strategy, Structure and Rivalry

The conditions in which companies are created, governed and companies learn the

basic lessons of competing is crucial to decide the functioning of the firms and nation.

Based on the concepts postulated by Porter, World Economic Forum comes out with a report

named “The Global Competiveness Report” every year. The report contributes to enhancing

the understanding of determinants of economic growth. It also provides underpinning factors

that makes a country more competitive than other. Policy makers, economic reformers and

business leaders accept the global competitiveness report as a reliable tool to formulate the

strategy for competing at the international level.

Definition of Competitiveness

World Economic Forum defines competitiveness as “the set of institutions, policies, and

factors that determine the level of productivity of a country.” Productivity determines the

ability to sustain the level of income of a nation as well as it decides the return on investment.

Return on investment in turn decides the economic growth potential of a nation.

Pillars of Competitiveness

World Economic Forum has identified 12 pillars of global competitiveness. These are:

1. Institutions

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The legal and administrative framework within which the government, firms and

individuals interact with each other determines the institutional environment of a

nation. The quality of institutions have a strong impact on the way corporate and

government decisions are made, the growth drivers are decided and policies are

formulated. Thus, investment on factors of productions and productive processes are

governed by the institutional mechanism. Government’s commitment to growth and

competitiveness, inclusive growth, corruption, innovation, intellectual property rights,

foreign players, infrastructure building etc. affects the overall macroeconomic outlook

of a nation.

Private institutions and their commitment to development, transparency,

responsiveness and excellence are as important as the government and the legal

framework. Responsible corporate behavior and quality and service orientation of

private players makes business environment suitable for growth and expansion.

The increasing role of public private partnership is also crucial for increasing

productivity.

2. Infrastructure

Efficient functioning of market economy, distribution of corporate outputs require

effective and extensive infrastructure. Infrastructure also decides the kind of

industries and sectors that will drive the economy. Transportation and communication

are two basic infrastructures for economic growth. Road, rail, air and port

connectivity ensures trading of goods and services within and across nations.

3. Macroeconomic Stability

Instable macroeconomic conditions like too high interest rates; high inflations,

uncertain price fluctuations, fiscal deficit etc. are detrimental to the economic health

of a nation. Thus macroeconomic stability is another pre-requisite for

competitiveness.

4. Health and Primary Education

Health of the productive human resource is an important asset to the organization.

Workers with illness and health problems could drag the growth rate down. This will

also have a negative impact on the business environment due to absenteeism and poor

performance due to sickness.

Primary education level makes workers more productive and improves their ability to

perform on critical situations.

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5. Higher Education and Training

The rapidly changing business environment requires qualified workforce who can

adapt to the ever changing business environment and can act as change catalysts

within the organization. Again nations that strive to move up the value chain from the

simple production sectors to complicated processes and products.

6. Goods/Services market efficiency

Market efficiency encourages productive players to participate in economic activities

that could generate value for the nation. Market efficiency ensures that taste, choice

and preferences of the consumers are reflected in the market. Efficient trading of

goods and services encourages both domestic and foreign players to play roles in the

market system. This increases competition which ultimately makes the market system

more competitive.

7. Labour Market Efficiency

Labour market efficiency creates a level playing field for the workers in order to

attract best of the talents. It also ensures effective allocation of human resource and

motivates labors to give their best performance.

8. Financial Market Sophistication

Sophisticated financial market generates faith in the investors through information

symmetry. Financial market channelizes the savings of budget surplus players of the

economy towards the budget deficit players with the ability to generate maximum

returns for the economy. Sound banking sector, well regulated exchange boards,

effective central bank etc. makes the financial market efficient.

9. Technological readiness

Agility with which a nation and its industries adapt to the changing technology is

crucial. Upgradation of the system to fit into the new technology helps to achieve an

edge over others. It is more crucial when it comes to Internet and Telecommunication

Technology as these technologies have their impacts on almost all industrial sectors.

10. Market Size

Bigger market size is instrumental to achieve economies of scale. With globalization

it is possible to explore foreign markets to reap the benefits of scale.

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11. Business Sophistication

Quality of countries’ overall business networks and quality of firms’ individual

operational excellence and strategy decides overall business sophistication. It helps to

foster responsiveness and innovation.

12. Innovation

Innovation is inevitable for long-run benefits. Investment on Research and

Development (R & D) activities brings innovation. Innovation is more important as

countries approach frontiers of knowledge.

All the 12 pillars of competitiveness are interdependent. However, it is believed that a nation

starts with factor driven competitiveness and moves towards efficiency driven to innovation

driven competitiveness. The pillars of each stage is shown in figure 2.2

Figure 2.2: 12 Pillars of Competitiveness

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3. State of Indian Economy

For the first three decades after independence India followed inward-looking policies. The

notorious license raj regime was characterized by heavy state interventionism and central

planning. Result was erratic and sluggish growth rate. Between 1960 and 1991 the annualized

growth rate was abysmal 4% per year. Economic reforms of 1991 steered Indian economy in

the path of growth. Policies of economic liberalization, privatization and globalization helped

Indian economy to grow at an impressive rate. Average GDP growth rate was 6.2% between

1991 and 2008. India is one of the fastest growing economies today. India’s GDP and per

capita GDP growth is shown in figure below.

Figure 3.1: India’s growth and per capita growth rate, Source: World Bank

According to 2005 World Bank report around 42% of Indians still lived below poverty line2.

The figure was 54% in 1988. India ranks 134th in latest Human Development Index (HDI)3.

Life expectancy in India is 64 years. For China the figure is 72 years. In 2007 foreign direct

investment in India accounted to US$ 23 billion4. Export of goods and services was US$ 239

in the same period. From 2001-02 to 2008-09 export has tripled more than 3 times due to

government efforts and policy frameworks. The share of trade to GDP has increased from

37.6% in 2003-04 to 60.5% in 2008-095.

Recent period of comparative macroeconomic stability, improvements in domestic savings,

investment has provided strength to Indian economy. Inexpensive skilled labour, availability

of raw materials and growing domestic demand are expected to enhance India’s 2 World Bank 2009a 3 UNDP 2009 4 UNCTAD 2008 5 CMIE

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competitiveness in future. Policy reforms needs to focus on poverty eradication and quality of

life improvement. Creation of quality jobs for the growing working population is essential.

The economic growth needs to create more jobs and needs to distribute the benefits of job

creation across the nation. India also needs to focus on power and transportation for

enhancing productiveness. This is possible by investments by both government and private

players.

Corporate sector performance has contributed to India’s growth. Productivity increase and

capital efficiency has enabled Indian corporate sector to compete in global markets.

Corporate top line in India is growing at a robust rate of more than 20% over past five years6.

India’s income growth at 1999-2000 prices during different 5 years plan is demonstrated in

Figure 3.2. The increase in both gross national product and per capita net national product has

grown over the years.

Figure 3.2: India’s Income Growth, Source: Ministry of Finance

6 The India Competitiveness Review, Page 47

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4. INDIA’S COMPETITIVENESS

Rank of India is 49 out of the 133 nations in the Global Competitiveness Index. At present

factor driven competitiveness drives India.

India performs abysmally poor in Health and Primary Education with a rank of 101.

Alarming sanitary situation, insufficient quality and quantity of education drags India down

in competitiveness. Energy and transport infrastructure ranked at 76th needs improvement.

Corruption and Securities issues remain to be addressed.

India has better position when it comes to efficiency indicators. India’s financial system ranks

16th indicating development in this system. India has a strong banking system ranked at 25th.

Due to huge population and growing purchasing power of consumers, India ranks 4th in

market size. Presence of a number of competitors makes India’s market efficiency reasonably

good (rank: 48th). India still needs to work on lowering the entry barriers in certain markets.

Rigid hiring and firing policy earns a low rank in labour market efficiency (rank: 83). Low

penetration rate of internet and communication technology has resulted in poor rank (83) in

technological readiness. Despite a strong and reliable higher education system, the rank of

India in Higher education is 66 due to the lack of sufficient accessibility to all.

It is remarkable to notice India’s rank in innovation drivers. India ranks 27th in business

sophistication and 30th in innovation.

When compared to other nations India lacks behind in several parameters. China is ahead of

India in 10 out of the 12 pillars of competitiveness. India enjoys competitive advantage in

financial market sophistication, market size, business sophistication and innovation.

India’s performance could be analyzed on the basis of each of the 12 pillars of

competitiveness.

4.1 Institutions

India stands out much ahead of the countries of same income group and region when it

comes to institutions. Business communities perceive India positively when it comes to

institutions.

Government: Government efficiency and ability to nurture a business-conducive

environment is evaluated encouraging by entrepreneurs.

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Judiciary System: The independent and well functioning judiciary system provides India

a sound scope to implement rule of the law.

Intellectual Property Rights: India is also ranked low in Intellectual Property Rights

(IPR) related issues. Considering the importance role played by IT and communication

technology it is imperative to strengthen the IPR related laws in India.

Corruption: Business communities rank India poor on trust on politicians and

administrative/bureaucratic corruption. Transparency International has ranked India 85

out of 180 nations in Corruption Perception Index. India is still considered as a nation

where business is affected by bureaucratic red tape. May be a second round of reforms to

eliminate the red tape is demand of the time now.

Terrorism: Threat of terrorism has been always associated with India. The serial bomb

blasts in various cities of the nation followed by the Mumbai terrorist attack stains

negative colours on the business environment of India.

Crimes: On a positive note India ranks much better when it comes to other forms of

crimes scoring well above its comparative nations of same income group and region.

Private Institution: India’s rank in private institutions is at a reasonable number of 51.

Unfortunately the rank has shown a negative movement which might be assigned to

Satyam episode. India needs to improve its accounting and corporate governance

practices in order to unmask such scams.

4.2 Infrastructure

Indian competitiveness is adversely affected by the poor state of infrastructure and lack of

it. Shortage of power, water and transportation facility etc. hold back India. The country

ranks 76 in infrastructure. Some economists opine that lack of infrastructure prevents

India’s transition from an agrarian economy to a manufacturing economy.

Electricity: Electrification is the biggest infrastructural challenge faced by India.

Electricity production per unit of GDP has started falling after 2000. The electricity loss

during distribution and transportation remain s a major problem to be tackled. High

government regulation and dominance of public players have added to the wounds of

power sector.

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Road Transport: India ranks below Pakistan and China when it comes to road

communication. 65% of freight and 85% of passenger traffic are carried by the road.

Hence, Improvement of road connectivity is imperative. Road accidents are also high in

India. This underscores the need of road safety.

Port Infrastructure: India’s port infrastructure suffers from low turnaround time,

insufficient handling capacity, and frequent human intervention. Low productivity and

bottlenecks make the situation worse. It is reported that India’s ports operate at more than

90% of their capacity. This emphasizes the need of upgrading the existing ports and

building new ports to meet the business and trade requirements. Indian government’s

attempt to encourage public-private partnership (PPP) is expected to bring reforms in port

functioning. Government is also planning to provide more autonomy to major ports to

increase their performance.

Air transport: India is out-forming many of its comparative countries in terms of air

transportation. Government’s decision to end state monopoly in aviation sector has paid

up. Competition among private and public players, emergence of low cost airlines has

demonstrated the dynamism of India’s aviation sector. Governments initiative to

modernize 35 airports are and privatization of Mumbai, Delhi, Hyderabad, Cochin and

Bangalore airports are expected to increase the efficiency and performance of aviation

sector.

Railroad: With 14 million passengers daily, India’s rail is the largest rail of the world.

Indian ranks an impressive 20th position in rail infrastructure. However, the high density

road corridors face capacity constraints.

It is widely accepted that India’s infrastructure development would be possible through

investment. Lack of sufficient public funds emphasized public private partnership (PPP)

in this sector. Allocation of more than 40% of budgetary outlay to infrastructure

development in the 2010-2011 budgets is positive signal at long-term orientation for

competitiveness building.

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4.3 Macroeconomic Stability

Indian ranks 96 in macroeconomic pillar. Fiscal deficit is the primary reason for this low

rank. However, the 2010-2011 budget aiming at reducing the deficit from more than 6%

to 5.5% over might increase India’s rank in this parameter in future. The Fiscal

Responsibility and Budget Management Act (FRBMA) 2003 have helped India to

achieve some fiscal discipline. Balance budget is still a distant dream.

Government borrowing: The high government debt of around 75% of the GDP is

detrimental to the state of economy. It is estimated that Indian government borrows 34%

of the money it spends. Regulations forcing the commercial banks to invest in

government bonds divert the money from the more productive sector of the economy.

Inflation: India is facing severe challenges to curtail the increasing inflation rate.

Particularly the food inflation rate is a matter of concern. With the increase in oil and

petroleum prices as an outcome of 2010-2011 budget it is expected that the price of

commodity products will continue to increase as more inflationary pressures.

India has been exploring the options of coming out populist budgets to cut back subsidy

and to for reforms in tax structure. Withdrawal of subsidy in some sectors like IT

corroborates the fact that government is giving priority to reduce fiscal deficit.

4.4 Health And Primary Education

India ranks 101 in health and primary education. The situation is linked to lack of

government funds to invest in such sectors, lack of skill manpower and infrastructure.

Sanitation and diseases: Only 28% of India’s population has access to sanitation facilities.

A sizeable portion of Indian population suffers from diseases like tuberculosis; malaria

etc. 21% of Indian suffers from malnutrition.

Primary Education: India has achieved more than 90% of enrollment in primary

education. Since many countries have achieved universal literacy at primary education

level India still lags behind. Quality of primary education remains a problematic area.

Poor spending is the primary reason for such abysmal performance. Indian has increased

its planned allocation to schools from Rs 26,800 Crores to Rs 31,036 Crores in 2010-2011

budget.

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4.5 Higher Education and Training

With a rank of 66 Indian has higher enrollment rate then its comparative countries, but

has lower quality of education. Enrolment rate in secondary education is at 55% which is

low. Quality is far better in higher education. On a positive note India performs better in

quality of higher education and provision of on the job training. In the last few budgets

India had the provisions to create more IIMs, IITs and NIFTs to give boost to the higher

education sector.

4.6 Goods/services Market Efficiency

According to a World Bank report starting a business in India takes 30 days. Though the

number has reduced, it needs further reduction. Costs associated with starting a new

business are high in India.

Tax structure: World Bank estimates that on an average Indian firms pay 76% of their

profits as tax. Widening tax base is an option that could be exercised by the government

to lower tax rates.

Market Competition: Lowering barriers for foreign players will helps to improve market

efficiency through more fierce competition.

Formal Sector: India needs to encourage its players to switch from unorganized informal

sector to organized formal sectors. This will improve productivity and will help to handle

the critical issues of tax base increase as many informal sectors are outside the tax

structure.

4.7 Labour Market Efficiency

Labour market has been a problem for India’s competitiveness. India ranks 83 in these

parameters.

Firing cost: In India it is difficult to dismiss employees. The cost of firing is also very

high.

Employer and Employee Relation: Employee and employer relation is not considered as

confrontational in India

Labour efficiency: Labour efficiency level of India is encouraging. Educational

attainment gap has also prevented adequate participation of female workforce.

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Brain drain: India faces lesser brain drain than the countries of similar growth rate. This is

expected to increase India’s competitiveness as India is being able to retain and attract

talent.

4.8 Financial Market Sophistication

Indian ranks 16th in financial market sophistication. Despite financial crisis of recessions

of 2008-09 India’s rank has improved on this parameter.

Equity market: India has an extremely dynamic equity market. A jump from $387

billion to $1811 billion in total market capitalization of the companies listed in equity

market from 2005 to 2008 corroborates this fact. Obtaining funds from domestic markets

of India has become easier.

Decreasing government regulation on matters of allocation of funds, simple policies for

foreign capital investment etc. are some of the improvement areas in this sector.

4.9 Technological Readiness

India Ranks 83 in technological readiness. India’s compound annual growth rate in

technology is around 65% from 1998 to 2008. Broadband access, use of computers etc.

lags in India. However, when it comes to firms in adopting technology, Indian firms

outperform many of its competitors in technology adoption. Greater diffusion and spread

of ICT is a priority area for India.

4.10 Market size

Indian ranks fourth in market size. The US is the first followed by China and Japan.

Consumption in Indian market still faces the problems of low income. Increasing annual

disposable income has increasing the consumption capacity of Indian consumers over the

year.

Sales Tax: Movement of goods and services within states of India is governed and sales

tax imposed by state governments. As a result price of the same product varies in

different states. In addition regulations like Essential Commodities Act restrict free

movements of goods within the nation. Deregulation in these areas will give a boost to

India’s competitiveness.

Export Market: India is world’s 26th biggest exporter with just 1% share of total exports

of the world. This underscores the room of growth in export market for India.

Improvement in trade openness will increase exports.

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4.11 Business Sophistication

India ranks 27th in global sophistication parameter. Nation’s competence in Business

Process Outsourcing, Information technology, telecommunication, consumer retailing,

automobile sector, pharmaceutical and air transport could be the reasons for higher

business sophistication.

There are seven Indian companies in fortune magazine’s global 500 lists of biggest

companies by revenue. Financial Times list includes 5 Indian financial companies on the

basis of their revenue. Presence of Indian companies in global market is demonstrated in

Table 4.1

Figure 4.1: Global Companies: India’s Presence, Source: Fortune 2009, Financial Times

2009

4.12 Innovation

Spending in research and development is crucial to foster innovation. The provisions of

budget 2010-2011 encouraged higher investments on R&D.

Academia: National Institutes of Technology, Indian Institutes of Technology and Indian

Institute of Science etc. focuses on research and development activities.

Research organizations: research organizations like ISRO, ICAR, BARC, ICSR etc.

have been instrumental in fostering innovation in India.

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Private Spending: Private spending on research and development in India is low. This is

a negative trend and needs attention.

IPR: Intellectual property rights in India are believed to be not par with other nations. In

order to nurture innovation India needs increase the purview and enforceability of

Intellectual Property Rights.

5. The Future of India’s Competitiveness

India in order to become one of the super powers of the nation has to harness the resources

available in the optimal way. Sustainable growth and exploration of global avenues will drive

India in the direction of growth and prosperity. India has to focus on the following aspects:

5.1 Cost Effective and Skilled Manpower

India has the advantage of low labour cost. A large chunk of English speaking population

provides advantage to India in global markets. India produces large number of engineers,

doctors, Ph Ds each year. However, looking at the international standards, though the number

of skilled manpower is high India has a lot of scope of improving the enrolment rate in higher

education. Skilled manpower will enable India to lead innovation. The redesign and business

process reengineering cost will come down due to skilled manpower.

5.2 Optimum utilization of Raw Materials

India has a significant raw material availability advantage in sectors like iron, textiles.

Unfortunately India has been exporting many of these raw materials without processing them

for value addition. The nation could build infrastructure and requisite expertise for processing

and value-addition of these raw materials to meet the demand of both domestic and

international markets.

5.3 Domestic Market Size

As of 2005, India has a market size of US$ 370 billion7. It is expected that the Indian market

will quadrupled by 2025. Domestic demand will surge in future. India’s infrastructure

growth, importance to manufacturing and industrial product growth will help to tap these

demands. India could generate revenues and employment by exploring the market size.

7 Study by Mckinsey Global Institute, 2007

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5.4 Demographic Dividend

India accounts for 16% of world’s economy. In the next 20 years around 265 million people

will enter into working age cohort. India’ average age will be 29 by 2020. India’s

demographic dividends will impact India’s competitiveness by:

• Greater demand for goods and services

• Shifting of labour intensive value addition to India

• Greater contribution in R&D activities

5.5 Employment Generation

To be a globally competitive nation India needs to achieve inclusive growth. Indian

government has adopted acts like NREGA for addressing unemployment. Indian needs to

chuck out plans to absorb the surplus labour from agricultural sector to non-agricultural

sectors with higher productivity. The details of employment in rural and urban area is

provided in figure 5.1

Figure 5.1: Employment in Rural and Urban Area (Financial Year 2004-05)

Source: Planning Commission 2008

5.6 Social Development

Human development index (see table 5.2) underscores the requirement of social

development. An improvement of health and literacy state is the need of the time. Health and

literacy rate would drive productivity and competiveness. Government spending the social

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sector has been increasing consistently. However, the private players also come out to

contribute in social development through corporate social responsibility.

Table 5.2: India’s performance in UNDP’s Human Development Index, Source: UNDP 2009

(Figures in parenthesis indicate ranking among 182 countries)

5.7 Infrastructure Development

Inadequate infrastructure has caused inequitable growth. The economically backward

segment bears the brunt of lack of infrastructure as the segment with higher economic power

has been able to ration the infrastructural spending in favour of it due to its ability to pay.

India’s spending on infrastructure has been lower than other countries. The 2010-2011 union

budget is a positive step for infrastructure development. Table 5.3 provides the estimates of

infrastructure spending under 5 year plan.

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Table 5.3: Investment estimates for infrastructure Sector (US$ billion)

Source: Planning Commission 2008

Problematic Factor of Doing Business

The policy framework of India that aims to enhance competitiveness has to focus on the

barriers of doing business in India. The most problematic factors of doing business in India is

depicted in Figure 5.4

Figure 5.4: Most problematic factors of doing business in India

Source: World Economic Survey’s Executive Opinion Survey, 2009

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6. CONCLUDING REMARKS

India has to surpass each of these barriers in order to compete globally. In addition to

addressing the needs of infrastructure, inefficient government bureaucracy and corruption

should be the primary focus of government. India has successfully implement reforms in

1991. But the World economic Forum’s executive survey demonstrates the need of further

reforms in terms of restriction and liberalization. Access to financing, tax regulation and

policy stability are viewed as hurdles in India.

India needs to encourage entrepreneurs to invest in its economy so that the problem of

unemployment could be tackles and some of the huge job seeker population could be turned

into job-provider population. Rural industrialization and credit availability in rural sector

could bring the neglected rural market to the forefront. Agricultural development has to be

the focus to avoid acute food crises and inflation in food items. Value addition activities in

minerals, food, and textile have mammoth potential of improvement. Value addition can help

India improve its exports and narrow down the balance of payment issues.

The map of competitiveness for India has to be based in a long-term broad vision. However,

the policy makers have to focus on factors like sustainability, environment, inclusive growth

and social sector both during drafting the policy and implementing it. Neglecting

development and too much focus on growth will hit the global competiveness of India in long

run. India has rightly identified this and has been focusing on inclusive growth currently.

However, implementation and monitoring has to be aligned with the objectives of

formulation of policies. Steps like E-governance, Right to Information etc. are expected to

increase global competitiveness of India.

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7. REFERENCES

1. Michael E. Porter, the Competitive Advantages of Nations, HBR, March-April 1990

2. World Bank Report 2009a

3. UNDP Report 2009

4. UNCTAD Report 2008

5. CMIE

6. The India Competitiveness Review, Page 47

7. Fortune 2009, Financial Times 2009

8. World Economic Survey’s Executive Opinion Survey, 2009

9. Planning Commission of India Report 2008

10. Global Copetitveness of Indian Banks, P Singh, IIM Lucknow

11. Global Competitiveness Review, 2009, World Economic Forum

12. Global competitiveness and total factor productivity in Indian manufacturing; R Kiran, M

Kaur; International Journal of Indian culture and business management, Volume 1

number 4/2008, P 434-449

13. Manufacturing Excellence and Global Competitiveness- Challenges and opportunities for

Indian industries; P Chandra, P R Shukla, Economic and political weekly, Feb 1994