Presentation done at Canadian High Commission event organized in conjunction with e4m.

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
info@compe00veness.in.
1

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. GDP over the years
100%
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. 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. 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. 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. 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

9. 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 iden
MIT 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 fos
I
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, Karnata
he 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 impr
omes 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 W
r the past 20 years. Bengal) need an investments-driven str
At 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 priv
cturing, while Chinese manufacturing investments in the sector.
ominated by consumer goods. China I Medium manufacturing states (Chhat
y 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 tale
ximum 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 pub
nt 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 de
he manufacturing sector is estimated to opment, it should be understood that ma
more than 40 million, which amounts to facturingclustersneedtobemoreintegra
of thetotalworkingpopulationof India. and deeper than service clusters. How c
interesting to note that the share of ters that are not export-oriented fit into
nufacturing 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.Indiahasabigpotentialof
htheincreaseintheshareof 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

10. 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

11. 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)

12. 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

13. 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)

14. 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)

15. 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

16. 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

17. 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

20. 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