How Strategic Governance Can Help India Achieve $10 Trillion GDP In 10 Years
If India gets a few key strategic things right, it could achieve $10 trillion goal with ease.
Looking at 10-year stretches of growth, India’s gross domestic product (GDP) in nominal terms doubled in the 10 years from 2007 to 2017 to $2.6 trillion.
Similarly, India’s GDP doubled in the 10 years from 1996 to 2006. To get to $10 trillion by 2030 (another 10 years), we are looking at India’s GDP quadrupling.
Interestingly, China’s GDP, in nominal terms, grew almost four times from a similar 10 year period of 2007 to 2017 — from about $3.5 trillion to about $12 trillion.
This vision is significant in terms of a quantum leap and clearly challenges the country to step up and overcome historical limitations. On the face of it, not an absurd target.
If India gets a few key strategic things right, it could do better than the $10 trillion goal.
*Policy inputs that follow were presented to the BJP economic cell in early 2018, on their request*
Change Of Approach To Growth
This note does not get into economic policy (fiscal and monetary) and reforms, structural or otherwise. Irrespective of the economic underpinnings, the operative word, in my view, is ‘strategic’.
Economic policy alone will not get us this growth trajectory. Economic policy and methods will provide us with the tools to make strategic decisions. Economic tools will also provide a degree of feed-forward and a lot of feedback.
This will help ensure that our decisions can be tracked better and provide us with data for course correction. But only ‘strategic governance’ will enable India to break the shackles of our historic growth trajectories and allow us to enact a gigantic leap.
Now for a variety of reasons, Indian commerce does not come across as strategic and indeed has evolved in a bottom-up manner. Even the famed information technology (IT) industry has grown, willy-nilly, by grabbing opportunities presented to it by a transforming world applying evolving technology.
While the industry has grown huge, this explains why it is still in a low value, high volume, low influence, linear growth mode, exposed to market and regulatory risks.
Further, the industry has managed this growth with loads of government and regulatory support delivering significant comparative arbitrage advantages.
Great start for sure but not enough to take India to the next level. I mention this only as an example of our best effort being a case of high comparative advantage and low strategic, competitive advantage.
In this note, I present a strategic framework to drive super performance and put India on a trajectory for sustained, high quality growth with limited risk exposure to global dynamics.
Fundamentally, India must move from a business-friendly country to a business-oriented country. Ease of doing business is linear, ‘success of doing business’ can be exponential.
This calls for a cultural shift in engagement from a policy-and-process based approach to a global business style. Also a distinct shift from a shotgun, “try everything and see what works” approach to one that makes choices determined by strategic pillars of vision, insights, calibration, target, outcomes, relationships (VICTOR).
Vision: More than $10 trillion in GDP; global economic leader that allows India to influence the world as a thought leader in sustainable and compassionate growth.
Insights: Into sector, segment, market, value chain and ecosystem injecting conviction, agility and dynamism in choices and focus. Continuous analysis of sectors and segments to determine competitive advantage that needs to be created and nurtured. Risks are identified early when analysis is deep and continuous. Historically, India has under-priced, so insights that drive price action can provide further impetus to broad growth.
Calibration: Determine roadmap with stages of growth, continuous assessment, balance strategic and tactical opportunities, rejig industry portfolio dynamically to give impetus, sunset sectors and launch new sector/segments. Also, course correct on policy as needed.
Target: Once focus areas are determined, ensure decisions are disciplined and all process and supporting organisations are aligned to target segments. Actively avoid execution friction, leakage, defocusing by virtue of distractions.
Outcomes: Progress must be tracked based on outcomes — real benefits and real costs. Subsidies must be measured and absorbed based on financial principles not feel-good factors. Behavioural and political biases can creep in toward certain sectors but outcomes measured against targeted growth must prevail. Scale parameters are crucial so we focus on sector/segments that can drive scale. Dump or de-emphasise sector/segments that don’t support rapid scale.
Relationships: Efficiency is table stakes. For competitive advantage and enhancing business influence, strategic self interest must be accompanied by a deep and multi-layered relationship structures. Institutional approach should take off from high level (PM and ministerial) relationships.
Let us now look at the pillars of growth that will launch us into this new orbit of world leadership.
Pillars Of Growth
Exports – top five initiatives.
- Comprehensive strategic, 4-way analysis of our industries at a sector/segment level combining top-down, bottom-up, inside-out and outside-in perspectives. For each sector/segment, we need a comparative and competitive analysis of top five markets and top five competitors. We need to forecast markets and competitors over a 10-year period so we can drive our initiatives for the future.
- Comprehensive capability and sourcing analysis that will help us filter out sector/segments that cannot be fulfilled by Indian industry. This will eliminate foolhardy ideas that will suck up valuable resources and time, hurting our focus on key choices. Sharpen the saw — identify competition to India and determine differentiation (China, Brazil, Mexico, Indonesia, US, Russia and so on)
- Set up ‘India Business’ offices in the top five key markets and the next five key markets, in stages. These offices will drive a branding and marketing approach targeting the key industry sector/segments we would like to target for exports. These offices will be led by executives with international business development experience and will be parallel to the consular structures.
- Identify the infrastructure and factor inputs required by these sector/segments and ensure government support to reduce friction.
- Establish legal and quality control regulation so that performance and governance match brand positioning.
Recently, India’s top five exports have typically been textiles, IT, gems and jewellery, processed fuel and food. Barring gems and jewellery, the barriers to entry for other countries is low and India can lose out. We are already seeing a lot of new competition in textiles from other Asian countries and India does not have a strategic response.
Foreign direct investment (FDI) — top five initiatives.
- Take the ‘ease of doing business’ efforts to the next level of ‘success in doing business’ on two key fronts. Maximise capacity building in India and create smart access to Indian markets.
- Launch data initiatives to provide enormously rich and accurate data for FDIs to make strategic decisions and lower risk of outcomes. India must be mapped intelligently for actionable insights to foreign and domestic enterprises.
- Seamless governance between the Centre and states where FDI is flowing. NITI Aayog must play a hands-on facilitating role by appointing business relationship managers to work as SPOC with FDI entities. Likewise, states can appoint their SPOCs to interact with the Centre SPOC for effective teamwork.
- Targeted rapid infrastructure development and access to transportation and logistics in regions and areas where FDI will flow.
- Articulate and maintain consistency of policy and regulation — no negative surprises for FDI.
Imports — top five initiatives. India’s top five imports are a mix of domestic consumption and raw materials for exports. Not one of these imports is being leveraged or is strategic to our growth.
- Identify top 10 sector/segment imports and rationalise by looking at adjacent alternatives as well as direct substitutes.
- Imports must be aligned with geo political strategies and export objectives.
- Significantly enhance ‘offset’ structures to maximise revenues for Indian companies.
- Align imports with higher FDI from countries/companies. Quid pro quo.
- Dynamically allow for changing mix of imports proactively to support GDP and related objectives.
Domestic growth — top five initiatives
- MSME (micro, small and medium enterprises) growth must be a priority. Again, sector/segment focus must be emphasised so that MSMEs can align themselves with the impetus. Sharpen policies to ensure distinction between MSMEs. Blunt policies try to help all and end up helping none.
- GST (goods and services tax) has created a national market. To capitalise on demand, working capital options must be enhanced. Expand factoring and receivable financing to capitalise on GST transaction trails.
- Government must become a customer to startups and growth firms that invest in and deliver innovative products and services.
- Set up a sovereign wealth fund to invest in targeted sectors such as anchor investor. Facilitate global capital allocators to participate via domestic funds.
- Set up advisory board and mentoring boards at relevant ministry level for expert strategic advice and mentoring within the target segments, especially for MSME.
Key Government of India initiatives to support growth pillars
- Circles of cooperation across regions of the world — cultural affinity, alignment of geo political and economic interests.
- Reputation of India and Indians to be burnished — culture of superior work ethic, quality of product and distinctive service. Extend ‘Brand India’ to sector levels for maximum impact to desired economic outcomes.
- Manage social undercurrents and internal friction proactively so it does not flag risk for industry.
- An integrated ‘business laws’ committee must be set up to make necessary changes to all the key laws that would hinder sectoral targeted outcomes. Rather than taking a law by law approach, tackle this in a holistic, focused manner.
- Launch multi-dimensional tourism in close collaboration with states for a bouquet of complementary offerings. Tourism is the job of the entire government, not just tourism department. Dimensions of tourism have to be strategised — business, knowledge, entertainment, spiritual, natural, sustainable, history, architecture, experience, activity and so on. Airlines routes from the target ‘geos’ to be strengthened to facilitate speed and convenience.
- Ensure central government schemes like ‘Skill India’ are strategically aligned with our targeted sector/segments.
- Create a structure for lateral entrants with specific leadership mandates. Appoint commissioners to drive each strategic initiative. Appoint business relationship directors as single point of contact for major transactions will enhance ease and effectiveness of doing business. Flat, nimble organisations reporting to Prime Minister’s Office (PMO).
- Empower financial market regulators to be creative about regulation that encourages debt markets, location of fund management in India and enhancing liquidity constructs/market making for SME stock markets.
- Prioritise logistics and transportation to expand industry location as well as consumption. Domestic consumption will need to grow and balance other contributors to the GDP.
- eGovernance dashboards and processes at the centre and between Centre-state to ensure all information relating to growth strategies is available in real time. This will track any systemic failures and provide alerts for escalation and course correction.
- Establish think tanks in key countries to gather intelligence on political, economic, social, technology trends that will deliver feed-forward into market facing analysis of geo/sector/segment target for exports and FDI.
- Establish a sovereign fund that invests in think tanks that focus on Indic achievements across topics including astronomy, math, science, healthcare, governance, literature and so on. These can be translated into specific initiatives to enhance India’s soft power. Given the vision of thought leadership, this will provide valuable insights and synergies with economic growth.
- Focus state-level initiatives promoting investments and ensure tie-in to the overarching national focus on targeted sectors/segments.
- Emphasise a professional, business like culture across various committees and institutions to dramatically expand productivity of available talent. Curtail excessive administrative capacity being consumed for events and ribbon-cutting ceremonies.
- Manage the media narrative. We see a mix of passive aggression and active aggression against India in the global, even in the financial/business, media. Creating and nurturing a positive narrative of progress is crucial to Brand India.
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