Global Competitiveness Report 2005-06:
Human capital will deliver India
ECONOMIC
INDICATORS
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In May 2005, the Indian Institute of Planning & Management (IIPM) emerged as the highest advertising brand in the print medium with an ad spend of Rs 5.1 crore (US$1.18 million). In comparison, its April spend amounted to Rs 2.8 crore (US$647,329). IIPM’s campaign, which sells its MBA courses offered in eight cities, is well timed and is directed at students who are in the process of deciding on the educational options available to them.
GLOBAL COMPETITIVENESS REPORT 2005-06:
HUMAN CAPITAL WILL DELIVER INDIA
India has moved up five notches to 50 in the Global Competitiveness ranking in the World Economic Forum's Global Competitiveness Report 2005.
India's improvement in ranking has been largely on the back of a higher mark in the area of technology. Since technology has become a major driving force in today’s knowledge-based economy, it touches everything from the range, quality and price of goods produced in a country. The degree to which rates of growth and productivity can be sustained depends on the technological readiness and its impact on life.
Global Competitiveness Global CompetitivenessGlobal Competitiveness Global Competitiveness Global Competitiveness
The World Economic Forum defines competitiveness as that collection of factors, policies and institutions which determine the level of
productivity of a country and that, therefore, determine the level of prosperity that can be attained by an economy. However, productivity is also the key driver of the rates of return on investment, which, in turn, determine the aggregate growth rates of the economy. Thus, a more competitive economy is one that is likely to grow faster over the medium to long term.
The study, which covers 117 countries and spans 100 indicators, ranks countries based on publicly available data and the results of the
Executive Opinion Survey, a comprehensive assessment conducted by the World Economic Forum (WEF), together with its network of
partner institutes (leading research institutes and business organisations) in the countries.
The rankings are drawn from a combination of hard data, publicly available for each of the economies studied, and the results of the Executive Opinion Survey, a comprehensive assessment conducted by the World Economic Forum (WEF), together with its network of
partner institutes (leading research institutes and business organisations) in the countries covered by the report.
This year nearly 11,000 business leaders were polled in a record 117 economies worldwide. The survey questionnaire is designed to capture a broad range of factors affecting an economy’s business environment that are key determinants of sustained economic growth. Particular attention is placed on elements of the macroeconomic environment, the quality of public institutions which underpin the development process, and the level of technological readiness and innovation.
India's improvement in ranking has been largely on the back of a higher mark in the area of technology. In prevalence of foreign technology licensing, India stands at 7, having moved up from 8 in the 2004 report.
In comparison, Malay-
sia is ranked 9, Philip-
pines 19, Brazil 37 and
China 71 in 2005
India has fared well in most technology-related indicators in the executive survey of the WEF report with technological readiness at 28 and firm-level technology absorption at 19, leaving China (68 and 37) and Brazil (56 and 46) way behind. In prevalence of foreign technology licensing, India stands at 7, having moved up from 8 in the 2004 report. In comparison, Malaysia is ranked 9, Philippines 19, Brazil 37 and China 71 in 2005.
Technological readiness refers to a combination of factors that facilitate and enable the technological capacity of a country. This includes the general availability of technologies, and the penetration rate of information and communication technologies (ICT). ICT plays a significant role in the
establishment of effective and rapid communication systems and in providing efficient infrastructure for commercial transactions.
Penetration of ICT in India is steadily moving up as the country’s triumphant technology story begins spreading to small towns and villages and the
government takes definite measures to enrich rural life with IT applications.
According to a Gartner report, the total ICT spending by Indian enterprises including hardware, software, telecommunications and IT services will touch US$ 23 billion in 2006.
India’s rank in ICT parameters in the WEF report are fairly encouraging, with government prioritisation of ICT at 9 and government success in ICT
promotion at 11. In comparison, Brazil has scored 75 and 58 and China 56 and 40. Clearly, India’s ICT readiness is getting better and will soon show its impact on larger issues such as productivity and economic growth.
India’s technology story would never have happened if it were not for its people. The country’s human capital, trained at its world-famous engineering and business schools, is the driving force behind its economic growth. And will continue to drive it for decades as the young populace continues to grow, says the WEF report. In an incisive section on ageing, the report reveals that India has a definite advantage in reaping the benefits of what is termed as the demographic dividend.
GLOBAL COMPETITIVENESS REPORT 2005-06:
HUMAN CAPITAL WILL DELIVER INDIA
Demographic Dividend Demographic DividendDemographic Dividend Demographic DividendDemographic Dividend
The demographic dividend, a concept explained in “The Demographic Dividend: A New Perspective on the Economic Consequences of
Population Change” by David Bloom, David Canning, Jaypee Sevilla, can be described as a phenomenon that occurs when a falling birth rate changes the age distribution, so that there are fewer dependents and fewer
investments are needed to meet the needs of the youngest age groups and resources can be used for economic development and family welfare.
India’s technology story would never have hap- pened if it were not for its people. The
country’s human capi-
tal, which is the driving
force behind its eco-
nomic growth, will
continue to drive it for
decades as the young
populace continues to
grow
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Human resources form the foundation for economic growth in the future. And India, with a median age of barely 30 now, stands to be at an economic advantage.
Making projections from 2005 to 2025, the WEF report says India will have a rela- tively lower number of elderly people by 2025 than a number of affluent countries
Making projections from 2005 to 2025, the chapter on ageing in the WEF report says India will have a relatively lower number of elderly people by 2025 than a number of affluent countries. The 65 plus cohort will
account for only 8 per cent of the population by 2025 in India. In comparison, China’s elderly population will be exploding in the years ahead, increasing at an annual pace of about 3.5 per cent per year.
Between 2005 and 2025, approximately two-thirds of China's aggregate population growth will be in the 65-plus grouping. That cohort is likely to double in size, to roughly 200 million people. By 2025, according to current United Nation Population Division (UNDP) and United States Census projections, China would account for less than one fifth of the world population, but almost a fourth of the world's senior citizens.
Since human resources form the foundation for economic growth in the future, India, with a median age of barely 30 now, stands to be at an economic advantage.
However, mere growth in young populations cannot ensure productivity and economic growth. The youth needs to be educated and trained to be a part of the working populace. This is an area India has already taken great strides in. India ranks 1 in the availability of scientists and engineers,
GLOBAL COMPETITIVENESS REPORT 2005-06:
HUMAN CAPITAL WILL DELIVER INDIA
A falling birth rate ensures that there is a smaller population at young, dependent ages and relatively more people in the adult age groups — who comprise the productive labour force. This improves the ratio of
productive workers to child dependents in the population and makes for faster economic growth and fewer burdens on families. Per capita output will be higher in societies where people of working age account for the greater share of total population. In India, lower dependency can be expected to have a positive effect on the rate of savings and pace of economic growth.
The demographic dividend, however, does not last forever. It is a limited window of opportunity. In time, the age distribution changes again, as the large adult population moves into the older, less-productive age brackets and is followed by the smaller cohorts born during the fertility decline.
When this occurs, the dependency ratio rises again, this time involving the need to care for the elderly, rather than the young.
a position it held last year too, in the WEF report. The quality of business management schools is rated at 6, compared to China’s 73 and Brazil’s 41.
In addition, India ranks 5 in the quality of math and science education, far ahead of China's 51, Brazil’s 100 and Russia’s 21.
These ranks should not come as a surprise. With more than 5 million graduates joining the workforce every year, India boasts of 350,000 engineers 25,000 medical doctors and 12,000 PhDs. It has over 250 universities, 1,500 research institutions and 10,000 higher education institutes that churn out 10 million graduates every year. In comparison, the US produces 75,000 engineers, 25,000 doctors and about 40,000 PhDs in all disciplines, while China has 1-2 million graduates a year and Singapore 35,000. By 2015, India is estimated to have about 20 million students enrolled in higher learning, with 1.4 million engineering students, 60,000 doctors and 50,000 PhDs.
The global feats of the formidable talent pool shaped by best of breed Indian institutions are quite well known. So is the emergence of global IT brands and the manufacturing and R&D centre shifts of Fortune 500 companies into India. From GE, Toyota, to Nokia and BMW, the list of firms with bases in India is endless.
With the number of international firms in the country growing, the amount of foreign direct investment pouring into the country has crossed the US$
5 billion mark. “The increasing inflows of FDI to skill and technology- intensive sectors observed over the past few years have certainly
succeeded in boosting the mood of the business community,” says Augusto Lopez-Claros, Chief Economist of the World Economic Forum and
Director of the Global Competitiveness Programme.
Another factor that has been working in India’s favour is its government’s single-minded zeal in creating an improved business climate. The
government has been working at reforming its policies to achieve this end.
As Lopez-Claros, says, “the move to more open and better policies (in India) has contributed to major improvements in productivity.”
Productivity is enhanced by business sophistication which in turn leads to improved competitiveness. Business sophistication, explains the WEF report, concerns the quality of overall business networks, as well as the quality of individual firms’ operations and strategies.
GLOBAL COMPETITIVENESS REPORT 2005-06:
HUMAN CAPITAL WILL DELIVER INDIA
India ranks 1 in the
availability of scientists
and engineers, a posi-
tion it held last year too,
in the WEF report. This
rank should not come as
a surprise. With more
than 5 million graduates
joining the workforce
every year, India boasts
of 350,000 engineers
25,000 medical doctors
and 12,000 PhDs
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The report captures the quality of business networks and supporting industries under parameters such as the quantity and quality of local suppliers. When companies and suppliers are organised in geographically close groups (‘clusters’) efficiency is heightened, leading to greater
opportunities for innovation, and to the reduction of barriers to entry for new firms. Individual firms’ operations and strategies (branding, marking, the presence of a value chain, and the production of unique and
sophisticated products) all lead to sophisticated and modern business processes.
India’s special economic zones (SEZs) are consolidated efforts in this regard. SEZs are specially delineated duty free enclaves created for the manufacture of goods for the purpose of trade. These Zones are self- contained and integrated with their own infrastructure and support
services. The infrastructure would include roads, airports, ports, transport system, generation and distribution of power, telecom, hospitals, hotels, educational institutions, leisure and entertainment units, residential/
industrial/commercial complexes, water supply sanitation and sewerage system and any other facility required for development of the Zones. The government recently gave its permission to Finnish telecom major Nokia to set up an SEZ at Sriperumbudur in Tamil Nadu for manufacturing telecom equipment and mobile handsets.
The WEF report rates India favourably in its business indices — domestic competition and cluster development. India scores 5, up from 6 in 2004, in local supplier quantity, compared with China’s 37 and Brazil’s 27. In
intensity of local competition, India is ranked 11 compared to China’s 31 and Brazil’s 56. And in extent of market dominance, India’s position is at 17, higher than even Singapore (19), China (44) and Brazil (41). On the finance front, India ranks 1 in access to credit, having moved up from 2 in 2004.
“There has been a significant improvement in recent years in the quality of India’s business environment, and in the degree of sophistication of its private sector. No doubt, the better growth performance seen during this period reflects these improvements in the policy framework and the institutional environment,” rationalises Lopez-Claros.
The Indian economy has been growing at a sustained rate of 7 per cent for
GLOBAL COMPETITIVENESS REPORT 2005-06:
HUMAN CAPITAL WILL DELIVER INDIA
“There has been a significant improve- ment in recent years in the quality of India’s business envi- ronment, and in the degree of sophistica- tion of its private sector,” says Augusto Lopez-Claros, Chief Economist of the World Economic Forum and Director of the Global Com- petitiveness
Programme
the past few years and with recession expectations at a low, it is expected to maintain its current growth rate. The WEF report ranks India 3 in recession expectations, leaving behind even the United States at 34. India’s GDP, at US$ 661 billion, is ranked 12 in the report and is ahead of Brazil (14) and Russia (15). With the third position, India has been generating a lot of international attention with record foreign fund inflows, a booming outsourcing sector, strong services, manufacturing expansion and
consumer spending by a growing middle class.
The writing is clear on the wall. To a potential investor, India offers a combination of a business-congenial market, complete with healthy competition, availability of raw materials, business-friendly policies and a rich multitude of trained young manpower. It is good to do business in India.
GLOBAL COMPETITIVENESS REPORT 2005-06:
HUMAN CAPITAL WILL DELIVER INDIA
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The
the Ministry of Commerce, Government of India and the Confederation of Indian Industry.
India Brand Equity Foundation is a public - private partnership between
The Foundation's primary objective is to build positive economic perceptions of India globally.
India BrandEquityFoundation c/o Confederation of Indian Industry 249-F Sector 18
Udyog Vihar Phase IV Gurgaon 122015 Haryana INDIA
Tel +91 124 501 4087 Fax +91 124 501 3873 E-mail [email protected]
Web www.ibef.org The
the Ministry of Commerce, Government of India and the Confederation of Indian Industry.
India Brand Equity Foundation is a public - private partnership between
The Foundation's primary objective is to build positive economic perceptions of India globally.
India BrandEquityFoundation c/o Confederation of Indian Industry 249-F Sector 18
Udyog Vihar Phase IV Gurgaon 122015 Haryana INDIA
Tel +91 124 501 4087 Fax +91 124 501 3873 E-mail [email protected]
Web www.ibef.org
