Vision 2047: How a Competitiveness Roadmap will steer India into the league of developed nations

How did India’s Competitiveness Roadmap come about? What are the roadmap’s recommendations and how can India leverage those opportunities? What are the suggested implementation structures of the roadmap? How far can the roadmap recommendations be realized? How can India transition to a developed nation with the competitiveness roadmap in a matter of around 25 years? How is it possible for a country grappling with a gaping rich-poor divide, and ever-rising unemployment and inflation to get that productivity and sustained prosperity? Will the developments reach the last man standing by 2047? And how would being competitive help there? How would sharper competitiveness help India play a major role in resolving global issues? What are India’s strengths and unique advantages that could enhance its value in front of the world? We talk to Christian Ketels, who drafted the Competitiveness Roadmap for India@100, to find answers to all these questionsEp 1: Vision 2047: How a Competitiveness Roadmap will steer India into the league of developed nationsIndia at 76 is dreaming big for India at 100. Prime Minister Narendra Modi had announced Vision 2047 from the ramparts of the Red Fort last year, during his Independence Day address. This Vision 2047 aims to see India as a developed nation, taking global markets head on. But how would India achieve that goal? By being more competitive? Would that ensure sustained prosperity for the country? And a better quality of life? As we celebrate 76 years of India’s Independence, we look at India’s Competitiveness Roadmap, a comprehensive master plan that would steer us to a roaring century as a developed country. On August 30, 2022, a Competitiveness Roadmap was rolled out by the Economic Advisory Council to the Prime Minister in collaboration with The Institute for Competitiveness. This institute is the Indian arm of Harvard Business School’s Institute for Strategy and Competitiveness headed by Michael E. Porter, one of the world’s most influential thinkers on management and competitiveness. The roadmap has been jointly developed by Porter and Christian Ketels from Harvard Business School, and Amit Kapoor, who chairs the Institute for Competitiveness. Christian is a global expert on economic competitiveness and strategy, and is currently principal associate at Porter’s institute. He has drafted the Competitiveness Roadmap for India@100. Here are excerpts from a conversation with him. SR: So Christian, first, a basic question --- how is competitiveness measured? CK: For us, competitiveness is deeply anchored in the notion of what really drives different locations to sustain a high level of prosperity for their population. It’s about what’s the standard of living that your economy can earn for you and the people around you, how productively can you use your resources, your capital stock, your human labour force to generate goods and services for consumption. So, one way to measure competitiveness is then, really, productivity. The competitiveness framework that professor Michael Porter introduced in 1990 is the foundation here. It summarises the many things that influence productivity, from the quality of infrastructure to the way that firms compete, the quality of your education system, your openness to international competition, your strength on science and technology, access to capital to grow businesses and so on. This is not what people understand by competitiveness, which is much more about doing better than others. Our notion, the productivity-based notion of competitiveness, is quite different. It’s not zero sum. Engaging in global trade with more productive foreign countries is good for you, because it gives you access to better technologies and thus allows you to focus on the things that you’re really good at. So, in that sense, competitiveness here is really not about just being better in a ranking than somebody else. SR: How did India’s Competitiveness Roadmap come about? CK: It’s a story that stretches back a few years. Professor Michael Porter had been coming to India for a number of years. He had a chance to meet Prime Minister Modi, had a number of conversations. He was then invited a few years before the pandemic to give a speech at NITI Aayog about the competitiveness framework and what it might mean for India. That led to the request of the Prime Minister that why can’t we do a study about India, trying to understand where we are and deriving an overall roadmap and some policy recommendations that can help our country up to the 100th anniversary of achieving independence from Great Britain. SR: What are the roadmap’s recommendations and how can India leverage those opportunities? CK: We have broken it up into a strategy that has four key elements. The first one defines where India wants to go. What you hear from Indian leaders is a number of different goals about the size and growth of the economy, about different goals related to climate change adjustment, social goals and so on. What we are suggesting is to try to create a more coherent overall goal that’s really anchored in prosperity. So, it’s not just GDP per capita, it goes into other principles that talk about sustainability and social progress. It talks about how to engage all of India in these efforts and also make the Indian economy more resilient. The second is how do we see economic development in India achieving these goals? What’s the mechanism that we have in mind? We argue for the need to really integrate the social and economic development agendas. At the moment, in India, these are quite separate policy areas. The strongest long-term social policy is the one that enables people to sustain themselves through employment and other productive activities that they can engage with. In our report, we talk a lot about how social policy can create gateways, bridges, conveyor belts that helps people who need help now to not need help tomorrow, because they’re able to sustain themselves. We also have a new view about structural transformation. Achieving growth is no longer simply about growing industry. You need to take a much broader approach around the sectors that have to deliver growth and create jobs. We talk about that approach and the different sets of economic sectors that need to be mobilized. The third and fourth elements are then really about implementation. In terms of policy actions, we focus on four different areas in which we see there is a need to actually build a lot on many of the good policies that have already been announced, but reform them slightly. The third element is to rethink our approach towards business environment upgrading. The key problem for India at the moment is that even though the infrastructure exists, the market structures are so distorted, so inefficient that we ultimately do not get the value out of the physical infrastructure to the companies, to the citizens of India. The final element is talking about firms. India has a very bifurcated firm structure. You have a number of very large firms that dominate the Indian market that are often also quite successful internationally, and that’s great. We should cheer them on, we need these large companies. We also have many, very small companies and they are critical for jobs, for self-sustaining large parts of Indian society. But unfortunately, they are not scaling up. We need much more firms to scale up. The government has been very active in pretty much all fields that you would argue are critical for Indian competitiveness. The challenge has been making these policies really change the reality on the ground. So, we have a dedicated section that talks about the implementation structure for India. SR: What are the suggested implementation structures of the roadmap? We talk about what you need to improve collaboration within the government. For example, there are more than 50 Union level ministries at the moment that all pursue their own agenda. How can you make sure that there’s better coordination across those? We also talk about coordination across the different levels of government. States are incredibly important. Indian states are so large that they need their own strategy. The Union government can provide the right type of instrument, but state-level governments need to take responsibility for making the right choices and set the right strategies for the economic development. Also, the third level of government is critical. The local level, the districts, the bigger metropolitan areas are where India unfortunately has a large void. We need much stronger capabilities at that level, much stronger institutions to drive development. That’s foreseen in the Indian Constitution, but hasn’t really been implemented. And so, we argue for really stepping up on that dimension. The final element is the collaboration with the private sector and societal institutions. Competitiveness is something that’s important for everyone and to be competitive as a society is not just about policies. It’s about what companies do, what universities do, what other type of institutions do. So, we need to have a better and more productive dialogue between the public and the private sector in India. SR: How far can the roadmap recommendations be realized? CK: Institutional change is always hard. We’re not naive about this, and this is also why we didn’t suggest exact measures. We have a sense of where this should go, but this is really a discussion for Indian leaders to now take on, on how to address the key challenges. The roadmap is as much about identifying what the critical issues are, as it is about proposing solutions. If you agree on these other key issues for us to solve, we already have come a long way. It’s important to understand that the Union government provides important resources to other levels of government. It provides information and allows benchmarking, sets overall goals and so on. So that’s really critical. But then, it is also about empowering and enabling state-level and regional-level entities to really become strategic, not just follow one blueprint for everyone, but figuring out what are the key barriers to growth in our economies, what are the key opportunities that we have, given the portfolio of sectors in our location. And based on that analysis and the strategic choices that those regions make, identify what tools we need from the central government to succeed. That’s quite a task and I think we need to make sure that we enable state-level leaders to make these choices in an evidence-based way. So, we suggest building up competitiveness institutes that can help with that. The other important element is the cooperation across different ministries and here again, India will have to steer its way. So, there are different models. We have talked about the idea of having a competitiveness czar, a central entity in the government. It may be the Prime Minister or somebody empowered by him to make sure we are all moving in one direction, that there’s a ‘one government, one India’ idea behind competitiveness and not making competitiveness the charge of one narrow silo within government. It really affects everyone and we need to act that way. 108411887Ep 2: Christian Ketels: India is the mediating force we need for the global economy; the stronger it is, the better it’s for the worldThis is the second part of a podcast series with Christian Ketels, who drafted India’s Competitiveness Roadmap. In this episode, we discuss more about how the roadmap will help realise India’s Vision 2047. Let’s hear it from him. SR: How can India transition to a developed nation with the competitiveness roadmap, that too, in a matter of around 25 years? CK: Well, 25 years is quite a long time. But yes, India is the fastest growing major economy in the world. There are some underlying economic trends here, largely your demographics, but also your catch-up potential. India is just not that rich yet, that it can create automatic forces to sustain a solid rate of growth for years to come. The real question is, how much can India unblock the potential to grow faster than these automatic trends would suggest by really investing in strengthening and competitiveness? This is absolutely what the road map is about. If we are going back to the productivity growth rate that we had before the pandemic, we’re actually in a quite good track. But there is one thing that worries me. If we look at labour force mobilization --- the share of working age people in India that are actually part of the labour force --- that has been going down and it needs to go up. We have between five and 10 million new Indians joining the working age over the next couple of years, every year. We haven’t been creating close to that number of new jobs over the years. In fact, for many of the past years, job creation has been stagnant. And that’s the real challenge. This is why, in our roadmap, we focus on how we can create jobs and unlock growth opportunities in sectors that are accessible to the Indian workforce. We need to bring these people into the labour force and then we can actually sustain quite a solid level of prosperity growth. SR: How can a country grappling with a gaping rich-poor divide, and ever-rising unemployment and inflation get that productivity and sustained prosperity? CK: I think it’s very important and really critical to our report to not see a trade-off here between growth and creating opportunities for the poor. You need to also mobilize the poor and unskilled in your country to contribute to GDP. They are not going to reach their same level of individual productivity than your best educated students, but they can also contribute. In fact, it’s critical for them to not become a burden on society and need to be sustained by social policies, but fight on their own and sustain themselves through the work that they do. A lot about what we’re suggesting in this report is exactly about this integration of social and economic policy and creating more opportunities for the poor. SR: How will India achieve the 4-S principles of the competitiveness roadmap, considering that it still ranks 132 among the 191 countries across the world in the Human Development Index? CK: I think it’s important to point out that there is a long way to go, but you can only get there if you’re clear where the destination is. This is why we focused on laying out these goals at the beginning. GDP per capita still is a pretty solid measure of prosperity in terms of the income that you’re generating. But what we’ve learned --- not the least also through the pandemic and the impact that it has on different parts of society in India and many other countries --- is that that’s often limited. Economists have known that for a long time, we’re not naive or kind of have a GDP fetish, but it is a good shorthand to start. But this is why we have focused on these other four assets. One is social progress and again, Michael Porter and a number of his colleagues, Scott Stern from MIT and others, have over the last couple of years provided a framework to really measure how countries are doing on factors that are not GDP related but very critical for the quality of life. So, that measurement is available across many indicators in many countries. And what we find is that India is doing not quite as good on these measures as on GDP. So, there is room to do more and a need to do more so that people really feel that life is improving. We need GDP per capita growth in line with social progress. The second element is a question of shared prosperity. Now, we want to have a sense of what’s going on for the vast majority of all Indians. Are there better opportunities that they can leverage for themselves? Are their lives improving? And we’ve seen more and more imbalances across India despite the strong focus, I would say, of the government on social policy. So, I think we need to find better mechanisms to create economic growth that creates opportunities for everyone. The third piece is sustainability. We all know that we are facing a climate crisis around the world. We have heat waves here. We had heat waves in China. We have droughts in the US and Europe, so the effects of climate change are already there. India very reasonably needs more energy. How can we square that equation? How can we make sure that you can provide affordable energy for Indians as they are getting more prosperous and want to grow, while not wrecking the global and Indian environment, which is particularly fragile if you think about water supply and so on? And finally, we are in a risky world in terms of the effects of climate change but also geopolitical tensions. The pandemic has really shown what can happen. We need societies that are not breaking once a shock hits, but that are resilient in their ability to respond. India has seen hundreds of millions and millions of people veering towards poverty because of the impact of the pandemic. We need to create an Indian society that’s more resilient and can deal with these types of shocks. SR: Do you foresee the developments reaching the last man standing by 2047? And how would being competitive help there? CK: If I turn it around, you know, if India is not competitive, if it’s not improving its business environment, if it’s not creating more job opportunities, if it’s not engaging social policies in ways that it created more economic opportunities, if it’s not creating more competitiveness firms, we know that large parts of society in India will not be doing better by 2047. So, that’s kind of the negative. Can you guarantee that by following the road map, everybody will be prosperous 25 years from now? No, of course not. But I think this agenda sets out a set of policies and a set of changes that provides much better opportunities for India and for many, many Indians to improve their lot, achieve a higher standard of living. And then it’s, of course, up to everyone else, you know. This requires hard work, competing, learning and educating yourself, taking risk as an entrepreneur, looking out for new things as a scientist and as an educator. But I think this is a good pathway that tries to get us closer to really leverage the huge opportunities that I truly believe India has over the next 25 years. SR: How would sharper competitiveness help India play a major role in resolving global issues? CK: Well, we know that economic strength is important. The prosperity that you have, it gives you resources to invest in all kinds of things, from social policies to a more robust defense. It also makes you less reliable on others, so you can take decisions much more based on your values. We pointed out in the report that India is absolutely central to the future of the global system. You are a huge country in terms of population and size that will only grow given your demographics relative to, for example, China. You are a democracy, you are a big Asian nation. You strive for good relationships with pretty much everyone around the world. So, you’re not locked in any blocks. This is the type of mediating force that we need in the global economy. And the stronger this mediating force is, the better for all of us in the global community. SR: What do you feel are India’s strengths and unique advantages that could enhance its value in front of the world? CK: The traditional view that economists have is that they look at what are the market failures or government failures, what are the weaknesses. And all of that is important. But at the same time, successful countries, successful economies also have a positive message. They are able to articulate what makes them uniquely attractive for specific types of activities in the global economy. So, they can talk about what’s their role and what are the competitive advantages that they offer as a place to do business for companies as part of their regional or global economy. India has a lot of things going for it. This is where the labour force is growing. You have a growing market because of your demographics, but also because of the opportunities for prosperity growth. I think India is not simply a future work bench or back office. It is an attractive market for many countries, for many companies from around the world to engage in and to serve and to invest in, and that will only grow. India has incredible strength in digitalization. You have some of the strongest players in IT services, which is a large share of Indian exports as the global economy is digitalising more and more. I think that plays to India’s advantages. So, I would encourage Indians to think about its strengths and how to build on them. And I would also encourage Indians to not take any of those strengths for granted. They require work to leverage, but they also require work to sustain. We lay out in the report the need to really think about a national value proposition for India that can help to be the centre of our productivity growth, and economic development can go over the next couple of decades.Audio production: Prateek Kapoor