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Making India Globally Competitive
Dr. Jagdish N. Sheth
Wednesday, March 1, 2006
If the second half of the 20th century was driven by ideology (Communism vs. Capitalism), the first half of the 21st century will undoubtedly be characterized by its market-driven philosophy. This emphasis on markets carries with it growing expectations of national economic well-being and is the gauge for judging politicians and political parties.

In a book I recently co-authored with Dr. Rajendra Sisodia, "Tectonic Shift: The Geo-Economic Realignment of Globalizing Markets" (Sage, 2006), we preface our discussion with a look at how economics drives politics, and economic malaise inexorably leads to political change. Recent examples of this include the major gains made by Hamas in Palestine, the collapse of the liberal government in Canada, and the election of a fundamentalist government in Iran.

Another reality of the market-based world is that size and potential will be the basis for global power and influence. As of 2004, in terms of GDP based on purchasing power parity (PPP), the U.S. was first, China second, and India fourth. In the next few years, India will pass Japan to occupy the third spot. Even in terms of absolute GDP, it is projected that India, China and the U.S. will be the top three within 30-40 years.

As a result of these historical shifts, India has an opportunity to become a major global economic power; however, this should not be taken for granted given India's recent history of missed opportunities.

India made two strategic blunders with its economy after World War II. The first was to not partner with the Allied U.S. and European countries and instead join the non-aligned movement. If India had taken the other route, it would have begun the process of economic transformation at least 25 years earlier. Instead of China being the world's manufacturing center and the U.S. the dominant provider of technology, both of those roles would have very likely belonged to India. The second mistake was when the country aligned with the Communist bloc in the 1970s. While this provided needed military support, it caused the nation to once again regress economically.

India now has a third golden opportunity to reposition itself. To do this, it must move from a domestic-oriented, all-sector economy to a globally oriented economy that emphasizes the worldwide success of industries where it has a significant resource advantage.

To make India globally competitive, there are specific changes that must occur:
1. Indian industries must develop a global mindset. This means more than serving the global Indian ethnic market; Indian products and services should be part of the mainstream consumption patterns of the world. For example, why shouldn't Amul butter and Tata tea be a part of the American, European and Japanese households? I do believe this change in attitude is beginning to take place, as evidenced by the aspirations of companies like Mittal Steel, Tata Motors and Infosys.

2. While the global mindset is a good mental positioning, India must also raise its reputation with respect to quality. It should not be considered a nation of cheap goods where lowest price is the only measure of success. Instead, it must aspire to be a source of both high-quality, lower-priced products and services, and premium and high-performance products and services.

3. The Indian enterprises best positioned to be the next wave of global enterprises are its public sector units (PSUs), mainly because they have the domestic scale necessary to compete in a worldwide market. This is similar to what has happened in China, where large enterprises such as Haier, Lenovo and Huawei have quickly become major international players. Making this sea change will require that PSUs be given significant autonomy and a more accountable governance structure, including non-political Boards of Directors.

4. India must position itself as the design and R&D center of the world. Because of its sheer number of people, even if a small portion of the economy is devoted to design and R&D, India will be a leader in the development of new technologies, drugs, energy sources, fashion and in turn raise the level of economic sophistication and diversity.

5. The sheer size of India's population will be its main resource advantage, if it is an educated population. Therefore, India must make a major commitment to its human and intellectual capital in this area. This includes expanding Indian institutes of higher education, investing in world-class research universities and rebuilding the primary and secondary education system.

6. Finally, as it is well known, India must modernize its infrastructure. The same spirit of revolution that has taken place in the information and communication technology industries must be replicated in terms of building out physical infrastructure, such as roads, ports, airports and communication networks. This will facilitate efficiency and productivity by increasing the flows of products, people, money and information.

I'm very optimistic that India will emerge as a major global economic power in the next 15-20 years. It has well-established and stable democratic institutions, favorable age demographics and considerable human and intellectual resource advantages. In addition, India's business leaders and politicians have learnt that by partnering to reform economic practices and policies they can achieve corporate growth and a higher national standard of living. And, because continued prosperity of the developed economies is now tied to the developing economies, there will even be a concerted effort from the outside to ensure the country's success. With all the pieces falling into place, the stage is now set for a revitalization that will position India as a leading force in the world economy.

Dr. Jagdish N Sheth is the Kellstadt Professor of Marketing at Emory University, Atlanta, U.S. and founder of the India, China and America Institute (www.icainstitute.org)
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