Making India Globally Competitive
By Jagdish N. Sheth, Ph.D.
If the dominant theme of the second half of the 20th century was ideological wars, both literally (the Vietnam War, the Korean War, etc.) and politically (Communism vs. Capitalism), the first half of the 21st century will undoubtedly be characterized by the prevalence of market-driven philosophy as the basis for national political, economic and military interactions. This movement, which began with the collapse of the Soviet Union, is rapidly gaining favor across the globe, from the established economies of Europe, Japan and North America to Communist countries such as China, Vietnam and Eastern Europe.
This emphasis on markets carries with it growing expectations of national economic well-being and has become the main factor in determining the outcomes of elections and the fates of politicians. 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. As a result, politicians have learned that unless they provide economic growth that results in more jobs and more wealth for people they are not likely to survive the next election cycle. 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. Across the globe there is a growing expectation that a rising standard of living is the norm; slow growth or stagnation in developed countries and poverty in emerging markets is no longer acceptable.
Another reality of the market-based world is that market size and economic potential will be the basis for global power and influence. In this respect, India, China and the U.S. are set to shape world history for decades to come. As of 2004, in terms of GDP based on purchasing power parity (PPP), the US 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. The economic importance of these three countries is the reason I established a research institute (www.icainstitute.org) three years ago to study how market interdependence will affect their economic, political and military inter-relationships, and how this in turn will affect the rest of the world. In this interconnected reality it is my view that India will become a strategic partner to both China and the US.
As a result of these historical shifts, India has a unique opportunity to become a major global economic power. Judging by the last century, you could easily predict this will not happen. After World War II, India made two strategic mistakes that resulted in lost opportunities. The first was to not partner with the Allied US and European countries, and instead join the non-aligned movement, which offered much less in terms of economic growth and prosperity. If India had taken the other route, it would have begun the process of economic transformation at least 25 years earlier and by now probably surpassed the level of development in Japan, Korea and China. Instead of China being the world’s manufacturing center and the US the dominant provider of technology, both of those roles would have very likely belonged to India. The second mistake India made was when it aligned with the Communist bloc in the 1970s. While this provided needed military support, it caused the nation to once again regress in terms of economic growth and economic power.
India now has a third golden opportunity to reposition itself. To do this, it must move from being a domestic-oriented, all-sector economy to being a globally-oriented economy focused on development of the global industries where it has a significant resource advantage.
To globally position for a successful future, there are specific changes that, in my opinion, 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 have a place on the tables of American, European and Japanese households? I do believe this change in attitude is beginning to take place, as evidenced by the global 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 also 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 state enterprises such as Haier, Lenovo and Huawei have quickly become market leaders after moving beyond their home market. Making this sea change will not be easy, and 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, etc. and in turn raise the level of economic sophistication and diversity.
5. India must make a major commitment to its human and intellectual capital in terms of education. The sheer size of India’s population will be its main resource advantage if it is an educated population. This includes expanding Indian institutes of higher education, inviting 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 and airports. 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 learned that by partnering to reform economic practices and policies they can achieve corporate growth and a higher national standard of living. 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. JAG SHETH is a renowned scholar and world authority in the field of marketing. His insights on global competition, strategic thinking and customer relationship management are considered revolutionary.
Dr. Sheth is the Charles H. Kellstadt Chair of Marketing in the Goizueta Business School at Emory University. Prior to this, he was a distinguished faculty member at the University of Southern California, the University of Illinois, Columbia University and the Massachusetts Institute of Technology.
Professor Sheth has published more than 200 books and research papers in different areas of marketing and business strategy. Many of these are considered classic references.
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