Michael_Enright_India_and_the_world_The_India_Dialog_2024.pptx

India and the World:
Economic Perspectives
Professor Michael J. Enright
Pierre Choueiri Family Professor of Global Business, D’Amore-McKim School
of Business, Northeastern University
Director, Enright, Scott & Associates
February 2024
2024-02 © Copyright Michael Enright, 2024 1

Where will India be in the world?
• Goldman Sachs has projected that India will have the world’s 3rd largest economy
before 2030, will have a larger economy than the Euro area by 2050, and will have
the world’s 2nd largest economy by 2075.
• This implies growing influence in global economic and geopolitical affairs.
Source: Goldman Sachs Research, The Path to 2075, December 2022.
But how “inevitable” is this rise? And what will India need to do to get there?
And how might India conceive of, and use, the influence it may obtain?

Forecasts are forecasts, and can be wrong
• Goldman’s 2011 forecasts
proved accurate for several
large economies, but fell far
short for many economies
(and this was pre-Covid)
• Economic conditions going
forward may be less
“certain” than for 2010-2019
due to conflict, decoupling,
pandemic recovery, climate
change (and policies
towards climate change)
• Forecasts for longer periods
of time are less certain
There is nothing inevitable about any particular trajectory.
It is up to individual countries to maximize their potential.
Source: Goldman Sachs Research, The Path to 2075, December 2022.

What drives economic performance?
• Firm Level Drivers: Drivers internal to
firms.
• Industry Level Drivers: Drivers external
to any single firm, internal to the industry.
• Meso, Cluster Level Drivers: Drivers
external to individual firms and industries,
but internal to groups of interdependent
industries (usually through vertical or
horizontal linkages).
• Macro, National Level Drivers: Drivers
external to any individual cluster, but
internal to a single country.
• Meta, Supranational Level Drivers:
Drivers external to a single country.
Firm Level
Drivers
Performance
All levels matter. Macroeconomists rightly focus on productivity
growth, but unless a nations firms, industries, clusters can win in
the marketplace, productivity gains are never realized.

Another way of thinking about it
Supranational National Cluster Industry Firm
Potential
Industries/
Activities
Competitive
Industries/
Activities
• Each level provides the opportunity / challenge set for each lower level.
• Nations or regions succeed when opportunities can be exploited by
clusters, industries, and firms that can leverage national advantages.
• It usually takes outstanding firms to overcome disadvantages at the
industry, cluster, or national level.

Macro or National Level Drivers
• “National” Level Drivers could also include “subnational regions”
• They include underlying conditions that affect all firms and industries within the nation
– Macroeconomics and macro economic variables
– National and local markets
– Availability of general resources and capabilities (natural, human, created)
– Infrastructure (hard, soft)
• They include national policymaking and governance organizations and activities
– Macroeconomic frameworks and policies
– Regulatory frameworks and policies
– National and local institutional structures
• They include sources of resources, capabilities, support, competition, or activism
– Government support agencies
– Education systems
– Financial markets
– National and local civil society
• National-level drivers provide the environment and opportunity /
challenge set within which its clusters, industries, and firms operate.

Urban Population and Adult Literary, India & China
0
20
40
60
80
100
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
2021
Urbanization
India China
0
20
40
60
80
100
1982
1989
1996
2003
2010
2017
Literacy, 15 and older
India China
Urbanization gives a triple boost to
economic development
• People become accessible to be manufacturing
and service producers
• People become accessible as manufacturing
and service consumers
• People move out of low value-added
subsistence agriculture
Literacy allows people a starting point to enter
the modern economy
• Literacy opens up the world of knowledge
• Literacy allows participation in manufacturing and
services
• Estimates of the cost of illiteracy on India’s
economy (US$53 billion) are probably
underestimates

Infrastructure and Ease of Doing Business
0
10
20
30
40
50
60
70
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2007
2010
2012
2014
2016
2018
2023
Infrastructure Score and Rank
India S China S India R China R
Source: World Bank, Logistics Performance Index
0
20
40
60
80
100
120
140
160
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Ease of Doing Business Rank
China India
Source: World Bank, Ease of Doing Business Rankings
Infrastructure provides the
connections necessary for
transactions in the nation
“Ease of Doing Business” measured the
challenges and frictions associated with
doing business in various economies

Meta or Supranational Drivers
• Supranational Level Drivers can be global or (supranational) regional in nature
• They include underlying conditions that affect all economies
– International geo-politics
– International technology conditions, trends, and resources
– International economic conditions, trends, and resources
– Social issues of international importance
• They include international policymaking and governance organizations and activities
– Supranational policymaking organizations (i.e. the EU)
– Multilateral governance organizations (i.e. the WTO)
– Trade blocs
• They include sources of resources, capabilities, support, competition, or activism
– Multilateral support organizations (i.e. the World Bank)
– International financial flows
– Foreign companies
– Foreign governments
– International civil society and NGOs
• Supranational Level Drivers represent the opportunity / challenge set within which
national economies operate.
• How national economies (i.e. India) interact with supranational has a
major impact on their competitiveness and economic performance.

Supranational Drivers:
China, no longer a juggernaut?

Are demographics destiny?

Possible reasons for “Peak China”
• Obstacles to rapid growth
– Housing investment in decline
– Urban pop growth slowing
– Investment returns declining
– Economic growth no longer as
much a priority
– Suboptimal economic plans
– Decoupling / self-sufficiency drive
– Digital isolation
– Policy uncertainty
– Domestic / foreign investors wary
– Broader isolation
– Reaction to “coercive” policies
• One-time changes that won’t repeat
– Planned to “market” economy
– Closed to partially open
– No private sector to large private sector
– Terrible infrastructure to good
infrastructure
– No commercial cities to advanced
commercial cities
– No asset markets to large asset markets
– No modern corporations to modern
corporations
– No business education to widespread
business education
– Backward to modern business practices
– Little entrepreneurship to vibrant
entrepreneurship

New forecasts suggest “Peak China” may be near

Supranational Drivers:
Interaction with the world and
(supranational) regional economies

Share of world exports, 1978
Source: UNCTAD

Share of world exports, 2020
Source: UNCTAD

Goods and services trade, % of GDP
0
5
10
15
20
25
30
35
40
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
2016
2020
Percent
of
GDP
China
Exports Imports
0
5
10
15
20
25
30
35
40
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
2016
2020
Percent
of
GDP
India
Exports Imports

China started its export drive as the assembly
location in an East and Southeast Asian production system
Technology
Capital goods
Components
Subassemblies
Finished goods
ASEAN
China “Advanced
Economies”
NICS
Source: Enright, Scott & Associates
ASEAN
China “Advanced
Economies”
NICS
ASEAN
China “Advanced
Economies”
NICS
1) 2)
3)

Mainland China’s and India’s neighborhoods
• Mainland China’s
economic neighborhood
spans East and
Southeast Asia
• India’s economic
neighborhood spans
South and (maybe)
Central & Western Asia
• Larger economic
neighborhoods provide
greater potential gains
from trade, investment,
regional supply chains

China’s neighborhood is far better than India’s
0
2,000
4,000
6,000
8,000
10,000
12,000
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
USD
Billions
GDP, China’s Neighborhood
East Asia-China Southeast Asia
0
2,000
4,000
6,000
8,000
10,000
12,000
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
USD
Billions
GDP, India’s Neighborhood
South Asia-India Central & Western Asia

Supplier facilities, Apple top 200 suppliers, 2022

Inward foreign direct investment
-1
0
1
2
3
4
5
6
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
2021
Percent
of
GDP
India China
-5
0
5
10
15
20
25
30
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
2021
Percent
of
World
FDI
India China

Estimated economic impact of FDI/FIE,
including ripple effects, on China’s economy
0%
5%
10%
15%
20%
25%
30%
35%
40%
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
% of China’s GDP
Investment FIEs Secondary FIEs Tertiary
© Copyright Michael J. Enright
0%
5%
10%
15%
20%
25%
30%
35%
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
% of China’s Employment
Investment FIEs Secondary FIEs Tertiary
Source: Enright, Scott & Associates Source: Enright, Scott & Associates
2024-02 23

Estimated economic impact of FDI,
including ripple effects, on India’s economy
Source: Enright, Scott & Associates estimates, based ESA calculations and RBI FDI surveys, which are partial
© Copyright Michael Enright, 2024 24
2024-02
Likely understated due to data availability
206 219 245 242 243 249 281
446
494
605 589
0%
5%
10%
15%
20%
25%
30%
35%
0
100
200
300
400
500
600
700
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
%
of
India’s
GDP
Total
VA
Impact,
USD
billion
Total VA % of India GDP

Will India develop its clusters?

Meso or Cluster Level Drivers
• Cluster Level Drivers operate at the level of interdependent firms and industries
• They include vertically related industries
– Inputs and Suppliers
– Demand and Customers
• They include horizontally related industries
– Through common technologies, distribution, and customers
– Through complementarities and shared resources and capabilities
• They include institutions and support structures geared at the cluster level
– Cluster-level policies
– Cluster-level institutions
– Cluster-level infrastructure, education, support, etc.
– Cooperative and facilitative organizations
• Nations and regions tend to succeed / fail not in isolated industries but in groups of
interrelated industries (clusters).
• Nations that foster capabilities, communication, coordination,
competition, at the cluster level can greatly enhance their development.

Clusters differ in important dimensions
• Geographic scope
• Industry scope
• Vertical Scope
• Activity Scope
• Transaction governance
• Size of firms
• External linkages
• Local / foreign ownership
• Innovation performance

Types of Clusters
0
1
2
3
4
5
Geo Scope
Ind Scope
Vert Scope
Act Scope
Trans
Firm Size
Ext Link
Loc Own
Innov
Central City Value-Added Services
0
1
2
3
4
5
Geo Scope
Ind Scope
Vert Scope
Act Scope
Trans
Firm Size
Ext Link
Loc Own
Innov
City+ Support Services
0
1
2
3
4
5
Geo Scope
Ind Scope
Vert Scope
Act Scope
Trans
Firm Size
Ext Link
Loc Own
Innov
SME Industrial Districts
0
1
2
3
4
5
Geo Scope
Ind Scope
Vert Scope
Act Scope
Trans
Firm Size
Ext Link
Loc Own
Innov
Technology / Creative
0
1
2
3
4
5
Geo Scope
Ind Scope
Vert Scope
Act Scope
Trans
Firm Size
Ext Link
Loc Own
Innov
City Survivors
0
1
2
3
4
5
Geo Scope
Ind Scope
Vert Scope
Act Scope
Trans
Firm Size
Ext Link
Loc Own
Innov
Scale-Scope Clusters
0
1
2
3
4
5
Geo Scope
Ind Scope
Vert Scope
Act Scope
Trans
Firm Size
Ext Link
Loc Own
Innov
FDI Driven

Advantages of focusing on clusters
• Provides a link between “macro” or
crosscutting policies and business on
the ground
– From education to education relevant
to local business
– From infrastructure to infrastructure
relevant to local business
– From market information to market
information relevant to local business
– Etc.
• Allows one to focus on what is relevant
to local as well as national economies
enough to be effective on the ground
• Avoids the pitfalls of targeting individual
firms and industries
• Focuses efforts on reducing frictions /
market failures that hinder positive
business interaction
– Impacted information
– Managerial myopia
– Coordination failures
– Underprovision of public goods
– i.e. “classic” market failures
• Cluster organizations
– Can be the basis of public-private
interaction
– Provides interlocutors for
government that go behind
individual firm or industry interests

Whither India?

An exciting future for India?
• There are sizable opportunities for India today…
– Demographics and economics
– Desire for resilient supply chains
– East-West tensions and decoupling
– Recent events have resulted in an unfreezing of existing relationships and the
potential to build new relationships
• The opportunities can only be exploited if India has the right conditions…
– Workforce, infrastructure, education, business systems, etc.
– Policy environment; firm, industry, cluster environment
– Links to the global economy; cluster development
• And if India seizes the opportunities…
– Overcomes the obstacles; leverages advantages
– Builds the right relationships
• It will have to choose how to use its influence to help create a new world for
itself, and the rest of us

The “unfreezing” of economic structures creates
potential instability, but also potential opportunities
• Companies and countries are
looking at world differently
– Resilience and geo-political
issues are coming to the fore
– China +1 or China +2
strategies may no longer be
viewed as viable
• Part of China’s role in the global
economy may be up for grabs
– Capacity
– Costs
– Policies of China and other
nations
• Global “norms” and “rules of the
game” may change
– No US hegemony, but no China
hegemony either
– US + EU will be the strongest
block for the next decade if they
stick together
– By the middle of the century,
India is likely to be the “third
power”
• How India goes in terms of its
posture towards the global
economy could be decisive

Whither India?
• Domestically
– Will India reach its potential?
– Action on all FIVE levels will be
necessary
– Will a large economy be a
prosperous economy for the bulk
of India’s citizens?
• Internationally
– Can India leverage international
opportunities?
– Can it avoid international pitfalls?
– Can a country used to “non-
alignment” or “semi-alignment”
successfully manage “multi-
alignment”?
• Where will India participate?
– BRICS Forum?
– Shanghai Coop Org?
– Belt and Road Initiative?
– QUAD?
• How will India manage what other
countries might want India to be?
• How will it manage what India
itself wants to be, and what it
wants the world to be?
• How will the answers impact the
rest of us?

Thank you
Professor Michael J. Enright
Pierre Choueiri Family Professor of Global Business, D’Amore-McKim School
of Business, Northeastern University
m.enright@northeastern.edu
Director, Enright, Scott & Associates
michaelenright@enrightscott.com

Appendix

Micro or Industry-Level and Firm-Level Drivers
• Industry Level Drivers
– Industry Characteristics
– Competition
– Cooperation
– Strategic Groupings
– Role of Lead Firms
– Micro Policies
– Micro Institutions
• Firm Level Drivers
– Scope
– Positioning
– Activities
– Resources
– Knowledge
– Leadership
– Execution
Unless a nation’s industries and companies succeed and
grow, the nation’s economy cannot succeed and grow.

ESA and Competitiveness
• Professor Michael Enright helped design and then managed the
Competitive Advantage of Nations Project at Harvard Business
School in the 1980s
• ESA undertook the first competitiveness project in a developing
country based on modern competitiveness methodology
• ESA has undertaken detailed competitiveness assessments all
around the world, usually in conjunction with local partners
• ESA has made major enhancements over the years to focus on the
practical aspects of improving competitiveness, advanced use of
these tools remains proprietary to ESA

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