Norway, India, Competitiveness, Doing Business in India, Strategizing

1. Doing Business with India: Issues, Perspectives, and Strategies
Dr. Amit Kapoor
Institute for Competitiveness (IFC), India is an independent, international initiative centred in India, dedicated to enlarging and disseminating the body of
research and knowledge on competition and strategy, pioneered over the last 25 years by Professor M.E. Porter of the Institute for Strategy and
Competitiveness, Harvard Business School (ISC, HBS), USA. IFC, India works in affiliation with ISC, HBS, USA to offer academic & executive courses, conduct
indigenous research and provide advisory services to corporate and Government within the country. The institute studies competition and its implications for
company strategy; the competitiveness of nations, regions & cities; suggests and provides solutions for social problems. IFC, India brings out India City
Competitiveness Report, India State Competitiveness Report, India Economic Quarterly, Journal of Competitiveness and funds academic research in the area
of strategy & competitiveness. To know more about the institute write to us at info@competitiveness.in.
1

2. Agenda
Macroeconomic
Trends in India
Additional
Issues
Strategizing
for India

3. 5.4
33.1
61.5
World GDP in 1990
Agriculture Value Added as a Percentage of GDP Industry Value Added as a Percentage of GDP Services Value Added as a Percentage of GDP
8.8
38.2
53.0
World GDP in 1970
2.8
25.4
71.8
World GDP in 2009

4. GDP over the years
Source: WDI and Institute for Competitiveness Analysis
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
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
39% in
2010
23% in
2010
9% in
2010
3% in
2010
26% in
2010

5. GDP and Population in the World Economy
Source: World Bank dataset , Institute of Competitiveness Analysis
19.6% of the world
population and 9. 38%
of world GDP
China
India17.1 % of the world
population and
2.73% of world GDP
0.90% of the world
population and 3.56%
of world GDP
United Kingdom
United States of
America
4.5% of the world
population and 23.11
% of world GDP
Japan
1.86 % of the world
population and 8.65%
of world GDP

6. Geopolitical Hotspots
China
India
Cross-strait
relations
Offshore Oil reserves
Kashmir Conflict Tibet Conflict
Source: Deutche, Institute for Competitiveness Analysis

7. Agriculture and Allied
Industry
Manufacturing
Services
ConstructionTransport, Storage & Communication
Finance, Business & Real Estate Services
Community and Personal Services
-10
-8
-6
-4
-2
0
2
4
6
8
10
-10 0 10 20 30 40 50 60
%ChangeintheContributiontoGDP(1994-2000)
Percentage Contribution in GDP (2000)
Structural shift in Indian Economy (1994-2000)
Institute for competitiveness Analysis

8. Agriculture and Allied
Industry
Manufacturing
Electricity, Gas and Water Supply
Services
Construction
Transport, Storage & Communication
Finance, Business & Real Estate Services
Community and Personal Services
-15
-10
-5
0
5
10
15
-10 0 10 20 30 40 50 60 70
(%changeincontribution2000-2010)
Percenatge Contribution in GDP (2010)
Structural shift in Indian Economy (2000-2010)
Institute for competitiveness Analysis

9. Macro Economic Trends in India – The Big Idea
Opportunities in India India versus Bharat
Base of
the
Pyramid
The
Indian
Middle
Class
Factor
Conditions
Demand
Conditions
The rural
and the
urban
India
The Big Idea

10. Diamond for India
Context for Firm
Strategy and
Rivalry
Related and
Supporting
Industries
Demand
Conditions
- Local rules and incentives that encourage
investment and productivity e.g.
- Tax laws could be made easy
- Cost competitive salaries
- Robust banking support
- IP protection is weak as of now but is slated
to be better in the coming future.
- SEZ’s and Cities along the proposed
corridors could look at long term growth.
- Vigorous local competition in some sectors
but certain sectors do not have competition.
- Companies increasingly becoming
sophisticated
- Local availability of suppliers and
supporting industries
- MSME Sector has been particularly
good in India
- Focus should be on quality
- Presence of clusters instead of isolated
firms
- Presently some 380 clusters are present
in India
- A huge Consumption Driven Middle
Class (estimated by NCAER at 160
Million slated to rise to 267 Million by
2017.
- Often quality, environmental and
safety norms are flouted at the cluster
level.
- CCI has recently been formed by the
CCI act.
- Online trade is bound to pick up as
internet users rise from 130 million to
180 million in the near future
- Entry of global majors like IKEA etc.
into Indian Market will change the
dynamics of competition
- Access to high quality business
inputs
- Biggest producer of
Tea, Coffee, Jute, Cotton and
sponge iron. Second largest
producer of wheat and largest
producer of pulses.
- 1.2 Billion People, but low female
participation in workforce remains a
challenge.
- Stable monetary and fiscal scenario
- Education is also seen as a key
enabler
- Improvement in Physical
infrastructure-
Roads, Ports, Airports, Railways.
- Has good higher institutions but is
not able to produce quality research
and scientific output.
Factor
Conditions

11. Income Levels

12. Income Distribution
Rich
Consumers
ClimbersAspirants
Destitute

14. McKinsey Global
Institute: The “ Bird of
Gold”: The Rise of
India’s Consumer
Market, May 2007.p.12
Share of population in each income
bracket %millions of people
Household income brackets
thousand, Indian rupees, 2000
100%
755 928 1,107 1,278 1,429
Global{>100}
Strivers (500-1,000)
Seekers (200-500)
Aspirers (90-200)
Deprived (<90)
Middle
class
93
80
54
35
22
6
18
41
43
36
1 2 4
19
32
0 0 1 1
9
0 0 0
1
2
1985 1995 2005E 2015F 2025F
India will see further reduction in poverty and growth of its middle
class

15. The Ageing Population

16. Demographic Dividend Demographic Burden

17. Understanding the Demographic Opportunity
Stage 1
Stage 2
Demographic
Window of
Opportunity
Stage 3
Population
Ageing
The Second
Opportunity

18. Demographics
55328
58396
59500
59529
59176
60113
61859
60313
51965
43702
37704
32968
28268
22185
15820
9937
8412
49256
51790
52734
52739
52410
55998
56739
54219
46466
41361
38267
34124
28651
21982
15819
10644
11465
80000 60000 40000 20000 0 20000 40000 60000 80000
0-4
5-9
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80+
Projected Population of males / females in Thousands
Age Pyramid for India in 2026
Male
Female
Source : Expert group on Population 2006

19. Education: Undereducated, Employability etc

20. Source: USPTO
PATENTS OVER THE YEARS

21. RESEARCHERS IN R AND D PER MILLION PEOPLE
NOTE: The data used is last year data or thelatest year available data
Source: World Bank, Institute of Competitiveness Analysis
696
4335
1199
3780
136
3091
396
3794
4673
1270
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
Brazil Canada China Germany India Russian
Federation
South Africa United
Kingdom
United States World

22. Traffic Jams and Healthcare

24. Urbanization in India

25. Aspiring India
Advent of Urbanizations - Some Fast Facts
590 million people
living in cities, nearly
twice the population
of the US today
68 cities will have
population of 1 million
plus, up from 42
today; Europe has 35
today

26. Institute for Competitiveness, India
SNAPSHOT OF URBAN INDIA IN 2011
10 - 30 million
5 - 10 million
1 - 5 million
0.1 – 1 million
Cities Size Class By Population
Source:- India Urban Conference 2011: Evidence & Experience - IIHS

27. Jugaad Urbanism

28. Urbanization

29. A Closer Look at India
Town Class Population Number of Towns
Class I 1,00,000 and above 423
Class II 50,000 – 99,999 498
Class III 20,000 – 49,999 1,386
Class IV 10,000 – 19,999 1,560
Class V 5,000 – 9,999 1,057
Class IV Less than 5,000 110
Total no. of towns 5,034
1mn + : 27 0.5mn – 1.0mn :42 0.1mn -0.5mn: 354
Source: MART

30. A Closer Look at Rural India
Population No. of Villages % of Total Villages
Less than 200 92,541 15.6
200- 500 1,27,054 21.4
501- 1,000 1,44,817 24.4
1,001 -2,000 1,29,662 21.9
2,001 – 5,000 80,313 13.5
More than 5,000 18,758 03.2
Total no of Villages* 5,93,145 100.0
*The Total number of villages includes uninhabited ones adds up to 6,38,365
Source : MART

31. The States in India

32. Stages of the Economy – Indian Context
Factor-driven economies: Factor-driven economies focus on low-cost
basic factor conditions, such as low-skilled labour, natural resources
and geographic location. Factor-driven economies need to focus on
input costs, macro, political and legal stability, efficient basic
infrastructure and lowering the regulatory cost of doing business.
Investment-driven economies: Investment-driven economies would
have the ability to produce standard products and services of high
quality using efficient methods but at lower wages than advanced
economies. Investment-driven economies need to focus on building
efficiencies, enhancing local competition, market
openness, incentives and rules for encouraging productivity.
Innovation-driven economies: Innovation driven economies would
focus on innovative products and services at the global technology
frontier. Innovation driven economies would need to focus on
advanced skills, advanced infrastructure, incentives and rules
encouraging innovation.
Stage 1
Stage 2
Stage 3

34. Prosperity in India
Highly Productive and Prosperity
Rising versus India
Andhra Pradesh
Arunachal Pradesh
Assam
Bihar
Chhattisgarh
Delhi
Goa
Gujarat
Haryana
Himachal Pradesh
Jammu & Kashmir Jharkhand
Karnataka
Kerala
Madhya Pradesh
Maharashtra
Manipur
Meghalaya
Mizoram
Nagaland
Orissa
Punjab
Rajasthan
Sikkim
Tamil Nadu
Tripura
Uttar Pradesh
Uttarakhand
West Bengal
0
20000
40000
60000
80000
100000
120000
140000
0 2 4 6 8 10 12 14 16
Gross Domestic Product per Capita CAGR rate, 2008-2010
High but declining versus India
Low and declining versus India Low but rising versus India
High and rising versus India
All
India
Avera
ge
57.28
Index
Points
All India GSDP /Capita
rate (CAGR) of 8.36 %
All India Average
of 46,836
Rupees/capita
GrossDomesticProductperCapita,2010

35. Country Equivalents
Source: Economist Intelligence Unit, National Statistics

38. State Competitiveness Report 2011
© Institute for Competitiveness, India

39. The State Competitiveness Report
• The report incorporates hard data rather
than soft data such as executive opinion
surveys, etc., which might introduce
sampling errors and bias.
• The hard data allows a more correct
assessment of competitiveness ranking
with mapping of incremental or quantum
changes in values of input indicators.
• From an execution and policy formulation
perspective, this approach provides clarity
to the choice of relatively important
indicators; a virtual Pole Star for those keen
to enhance competitiveness.

40. erchunkofworking-agepeople,whocan
contributetotheGDPandgeneratehigh-
eroutput percapita.
Infact,theInternational Labour Orga-
nization (ILO) hasstated that Indiawill
account for thehighest workingagepop-
among several others, that is dragging
downtheeconomicgrowthof relatively
affluent states like Maharashtra, Kar-
natakaandTamil Nadu.Yet,afew states
such asBihar, AndhraPradesh andGu-
jarat with largepopulationsareexhibit-
force,which
moreproduc
Group 2: Sta
population gr
garh, Delhi, H
cusonsector
POLICIESTHATMAKEPRODUCTIVEUSEOFAVAILABLERESOURCESAR
Chandigarh
Delhi
Uttarakhand
Haryana
Gujarat
Bihar
Chhattisgarh
Sikkim
Nagaland
Himachal Pradesh
5.05
3.11
1.59
1.98
1.64
1.86
1.76
1.58
4.89
1.59
Population
growth rates
areHIGHER
than national
average
Population
growth rates
areLOWER
than national
average
GDP
(India avg 7.99)State
Population
growth rate
(India avg 1.55)
13.12
11.86
11.8
11.69
10.8
10.83
9.78
9.6
9.54
8.88
AndhraPradesh
Orissa
Meghalaya
Tripura
Arunachal Pradesh
Kerala
0.99
1.07
1.39
0.99
1.27
0.77
9.52
9.37
8.05
8.4
8.79
9.55
PEOPLEPOWER
States contributing to India’s GDPgrowth
(GDPgrowth higher than national average)
Population size vs GDPgrowth rate
14
12
10
8
CH
GO
TR
MGHP
DL
HRUK
SK CG KR
ORAR
NL
TN
AP
BR
KA RJ
WB
MH
GJ
populationtogrow
POLICYTHEECONOMICTIMESON SATURDAYMUMBAI 27 NOVEMBER2010 * 9
erchunkofworking-agepeople,whocan
contributetotheGDPandgeneratehigh-
eroutput percapita.
Infact,theInternational Labour Orga-
nization (ILO) hasstated that Indiawill
account for thehighest workingagepop-
ulationinthenext10years,inareport re-
leasedrecently.Inthedocumentprepared
for the G-20 Summit held earlier this
month inSeoul,theILOsaysthat theG-
20nationswill seetheirworkingagepop-
ulationbetween15and64yearsincrease
by 212million in theperiod2010-2020.
Over64%ofthisincreasewilloccurinIn-
diaalone!
Thismonth’sIFCIndiaStateDevelopment
Barometer takesasharplookat what pop-
ulation really means to the economic
growthofIndia’sstatesandanalyseshow
statescanusetheirdemographicsituation
to improve their competitiveness, and
hence,enhancetheir prosperity.
Rising stars among states
ItiswidelyacceptedthatgrowthamongIn-
dianstatesisskewed,withsomeprosper-
ousstatesbearingtheburden of growth,
among several others, that is dragging
downtheeconomicgrowthof relatively
affluent states like Maharashtra, Kar-
natakaandTamil Nadu.Yet,afew states
such asBihar, AndhraPradesh andGu-
jarat with largepopulationsareexhibit-
inghighGDPgrowth.
Noburdenoneconomic growth
SixteenstatesinIndiahaveaGDPgrowth
higher than the national average. Of
these, ten states show a population
growth ratehigher thanthenational av-
erage,whilesixother stateshaveapopu-
lationgrowthratelower thanthenation-
al average.
Population growth, considered abur-
den toeconomicgrowth, seemstohave
littlecorrelation withGDPgrowth(corre-
lation=0.24). LargestatessuchasBihar,
for instance,haveshowedsustainedGDP
growth over the decade along with a
steadilyrisingpopulation,whereasstates
suchasPunjabandManipur withslower
population increase are showing GDP
growth ratesthat arelower than thena-
tional average.
force,whicharealsocorrespondingly far
moreproductive.
Group 2: States with healthy GDP and
population growthrates,suchasChandi-
garh, Delhi, HaryanaandBihar must fo-
cusonsectorswheretheyareinherently
competitive because of the presence of
natural resourcesor traditional skillsand
knowledge.Thesestatesshouldfindways
to turn the availability of alarge work-
forcein their favour by offeringsuitable
educationpoliciesandopportunities. Set-
ting the right priorities iscritical to en-
hancecompetitivenessforthisbandofIn-
dianstates.
Group3:Anumber of statessuch asKar-
nataka, West Bengal, Rajasthan, Tamil
Nadu andMizoramareperformingonly
slightly below India’s average GDP
growthrate.Thesestatescanquicklycat-
apult themselvesintoGroup2withafo-
cusedeffort onproductivity.
Group4:Aroadmapfor enhancingcom-
petitivenessiscritical for poorlyperform-
ingstates.Amongthese,statessuchasUt-
tar Pradesh and Madhya Pradesh with
largeandgrowingpopulationsmust con-
P
l
w
G
d
f
m
n
gatenetgovernment de
trillion —44%ofworld
—in2015.Advancede
Prasadestimatesther
vancedeconomieswill
ther to85%in2015.In
better.Thecorrespondi
26%respectively.In20
grossdomesticproduct
debt.By2015,theyare
account for just 14%o
shareinworldGDP,thei
Toput that moregraph
nal rather thanborrowe
Thishastwo major
theywill beabletousem
purposesrather thanfo
or repayment. Two, the
wheresucceedinggene
lier generationswill be
advancedeconomies. A
pendencyratio—read
group—andclearly,th
Thisisgraphicallybr
withtheriseinGDP.EM
levelsfrom2007to201
2010 to2015. In contr
over thesetwoperiods
Averagedebt percapita
rose to $29,100 in 201
$41,000in2015.By20
$48,000 per person. T
$75,900,thehighest in
bejust $1,200in2015.
S
ind
THEEXPLOS
SERIOUSLO
POLICIESTHATMAKEPRODUCTIVEUSEOFAVAILABLERESOURCESARECRITICAL
ARINDAM
INDIA
Source: IMFFiscal Monitor,
ILOEconomically-ActivePo
DEBTBURDE
Grossdebt to GDP(
Grossdebt
(USdollarsinbillions
Grossdebt per
capita(USdollars)
Grossdebt per
working-age
person (USdollars)
Chandigarh
Delhi
Uttarakhand
Haryana
Gujarat
Bihar
Chhattisgarh
Sikkim
Nagaland
Himachal Pradesh
5.05
3.11
1.59
1.98
1.64
1.86
1.76
1.58
4.89
1.59
Population
growth rates
areHIGHER
than national
average
Population
growth rates
areLOWER
than national
average
GDP
(India avg 7.99)State
Population
growth rate
(India avg 1.55)
13.12
11.86
11.8
11.69
10.8
10.83
9.78
9.6
9.54
8.88
AndhraPradesh
Orissa
Meghalaya
Tripura
Arunachal Pradesh
Kerala
0.99
1.07
1.39
0.99
1.27
0.77
9.52
9.37
8.05
8.4
8.79
9.55
PEOPLEPOWER
States contributing to India’s GDPgrowth
(GDPgrowth higher than national average)
Population size vs GDPgrowth rate
Comparison of state population growth and GDPgrowth
0 500 1000
Populationsizeinlakhs
1500 2000 2500
14
12
10
8
6
4
2
0
CH
GO
TR
MG
MZ
HP
JH
PJ
MPAS
AN
MN
JK
PD
DL
HRUK
SK CG KR
ORAR
NL
TN
AP
BR
KA RJ
WB
MH
UP
DL: Delhi
CH: Chandigarh
AS: Assam
NL: Nagaland
TN: Tamil Nadu
BR: Bihar
UP: Uttar Pradesh
AP: AndhraPradesh
0 1 2
Populationgrowth(%)
3 4 5
14
12
10
8
6
4
2
0
AP
TR KR
WB
AS
TN
KR OR
AR
MG
MH
RJ
GO
AN
PD
JH
PJ
JK
UP
MN
MP
SK CG
HP
GJ BR
UK HR DL CH
NL
GJ
MZ
Statescanharnesstheir
populationtogrow
NDIAisatthecentreofthepopulation-versus-
growthdebate.Withtheworld’ssecond-largest
e
n
a
u
l
f
m
2
u
b
O
d
B
u
g
s
t
h
R
I
d
o
w
g
s
a
g
g
f
r
Comparison of state population growth and GDPgrowth
0 500 1000
Populationsizeinlakhs
1500 2000 2500
12
10
8
6
4
2
0
GO
TR
MG
MZ
HP
JH
PJ
MPAS
AN
MN
JK
PD
DL
HRUK
SK CG KR
ORAR
NL
TN
AP
BR
KA RJ
WB
MH
UP
DL: Delhi
CH: Chandigarh
KR: Kerala
TR: Tripura
MG: Meghalaya
PD: Puducherry
KA: Karnataka
WB: West Bengal
AS: Assam
NL: Nagaland
UK: Uttarakhand
HR: Haryana
GJ: Gujarat
CG: Chattisgarh
SK: Sikkim
JH: Jharkhand
TN: Tamil Nadu
BR: Bihar
RJ: Rajasthan
GO: Goa
MZ: Mizoram
PJ: Punjab
MN: Manipur
OR: Orissa
UP: Uttar Pradesh
AP: AndhraPradesh
AR: Arunachal Pradesh
HP: Himachal Pradesh
JK: Jammu&Kashmir
MP: MadhyaPradesh
AN: Andaman &Nicobar Islands
MH: Maharashtra
0 1 2
Populationgrowth(%)
3 4 5
14
12
10
8
6
4
2
0
AP
TR KR
WB
AS
TN
KR OR
AR
MG
MH
RJ
GO
AN
PD
JH
PJ
JK
UP
MN
MP
SK CG
HP
GJ BR
UK HR DL CH
NL
GJ
MZ
JAYEETA

44. Indian Market is Highly Regional
Uneven Pattern of
Wealth Distribution
Seasonality
Cultures &
Languages

45. Strategizing for Success in India
Is it an easy
market to
crack
Where
should we
focus
Who are
the
successful
players

46. Why is India so Complex?
• India is good at resource
maximization
• Indian businesses have a
way of making things
differently and with
minimal resources maybe
because India is a poor
country

47. Innovation or Ind’ovation
Ind’ovation commonly know
in Hindi as Jugaad is a striking
feature of the Indian business
landscape. It indicates the
ingenuity to achieve results by
out of box thinking, at times
even temporary fixes.

48. Doing it for India

51. Creating Unique Business Models

52. Disaggregation of Sales

53. Local Mom and Pop Store

54. How many bidis are sold in a day in India by 502 Pataka
Manufacturing Company?
100,000,000

60. Indian Culture
How we look at things Collectivism
Karma
The
Concept
of Time
Varies
within
States
India Is
hierarchy
driven
Noticeable lack
of privacy &
importance of
interpersonal
contact
The Basic Idea

61. Risks for India
EconomicSocietal Geopolitical Environmental Technological
• Overpopulation
• Diseases
• Migration
• Food Shortage
• Religious and
caste problem
• Education
• Rising Fiscal Deficit
• Meeting the
Infrastructure Spending
target
• Inflation
• Inability to Attract FDI
• Policy Lock jam
• Overspending on
Government welfare
Schemes
• Energy Imports
• Labour Market Demand
Supply Mismatch
• Ease of Doing Business
• Rising Inequality
• Liquidity Problem
• Risks of Overexposure
• Poverty
• Overregulation
• Conflicts with
neighboring
countries
• Governance
Failure
• Maoist Insurgency
• Resource
Nationalization
• High Crime Rates
• Failure of
Diplomatic
Conflict
Resolution
• Rising Pollution
Levels
• Mismanaged
Urbanization
• Geophysical
Extraction Resulting
in Destruction
• Extinction of Species
• Extreme Weather
• Nuclear waste
• Cyber Security
• Failure of IP
Regime
• Lack of
Awareness of
Technology
RISKS FACED BT INDIA AT PRESENT IN 2013
RISK MEASUREMENT = LIKELIHOOD OF OCCURENCE * IMPACT

62. Disparity
• Rich & Poor
• Urban & rural
• Educated &
Uneducated
Development
• Right amount of
regulation
• Allowing business
to create new
methods & new
models
Demography
• 550 million below 25
years
• Health, Nutrition
• Education, Jobs
Indian
Challenges
Source: GOI
INDIA’S MAJOR CHALLENGES

63. INCLUSIVE BUSINESS MODELS: SOME EXAMPLES IN MANUFACTURING
DOMAIN
CONSERVING
NATURAL
RESOURCES
NURTURING
SKILLS AND
CAPABILITIES
CHANGING PRICE/
PERFORMANCE ENVELOPE
ENHANCING INCOME AND
LIFESYTLE
MARICO
(SAFFLOWER
INITIATIVE)
HUL (SHAKTI)
ITC
E CHOUPAL
FIRST ENERGY
(OORJA STOVE)
JAIN
IRRIGATION
SYSTEMS
TATA
(NANO)
KEGGFARMS
(KUROILER)
Source: Accenture, Quest for Inclusive growth

64. Corruption and Competitiveness
(Effect on the National Diamond)
Factor Conditions Demand Conditions
Related, Supporting
Industries &
Institutions
Context for Firms
Strategy and Rivalry
• Resource allocation is
skewed; providing goods and
services at below market
price
• Rent seeking behavior by
bureaucracy
• Arbitrary tax for fast track
treatment
• Disincentives for labor to
perform
• High level of Government
intervention
• Degree of regulation a
predictor of corruption
• Collusion and cartelization
• Too much market power to a
few companies (industry
capture)
• Innovation is curtailed
• Manipulation of policy and provide
poor quality services
• Failure of institutional support
• Lower acceptance of established
institutions
• Bureaucratic rigidity
• Weakening institutional foundations
• Poor quality services
• Heightened income disparity
• Consumer interests are
compromised
• Social versus self interest

65. Thank You