Today's Swaminomics highlights the loss of India's competitiveness as a nation:
GDP growth has halved to 4.5%. India has become uncompetitive in several ways. Worse, the Indian political class has stopped even trying to compete globally. It focuses on subsidies, reservations and special measures for sundry vote banks, regardless of the implications for competitiveness.
Why is this so important? Because, there are multiple options for resources (capital and labour) to be invested. Whether it is foreign investment or Indian money, if it becomes too difficult or unattractive to operate in India, poof, many other countries are waiting for that money. Similarly, the best talent will move in and out of markets. Just five years ago, I was hoping (confidently) that 30 Indian companies would be able to fulfill late Dr. Prahlad's vision of becoming part of the Fortune 100 by 2022. I wrote:
India will be the third largest economy by 2022 and will contribute nearly a billion people to the world's workforce. The market should provide adequate scale to create globally leading business models.
An additional challenge for India is to consolidate what are typically highly fragmented and unorganised markets. Leadership in the home market is essential to achieve the scale that the Indian market can provide.
Several markets, including the US and the UK, are facing an economic slowdown. Consequently, several multinational companies are seeking to get into India and other emerging markets, making these markets more competitive. We have to defend the home turf not by creating entry barriers, but by directly competing with global players.
We have already lost a third of the fifteen years, and only one company (IOC, Govt. PSU) has managed to enter the Fortune 100 (2013) and Reliance Industries is close-by at #107. Looking ahead, it appears difficult that another 28 Indian companies will be able to make that shift. As Mr. Aiyar concludes,
Neither the courts, NGOs nor the politicians seem to care. A profusion of new rules and regulations are constantly churned out without any cost-benefit exercise to judge the impact on competitiveness. The latest Doing Business 2013 report of the World Bank says India has slipped from 131st to 134th position in ease of doing business. It stands 177th in ease of starting a business, 183rd in getting a construction permit; and 186th in enforcing contracts. Yet this damning expose of our uncompetitiveness produces no political will to change. We have a deep structural problem that is not even recognized, let alone redressed. Will India have to go bust again to concentrate the minds of politicians?