Prime Minister Narendra Modi’s target of 12% annual GDP growth goal is seen by many as pre-election rhetoric. But I think it is a feasible target. Here are some ideas that could help the government to achieve that dream.
Sustainable Competitive Advantage (SCA): Developed countries have companies with SCA which develop products suited to their culture and knowledge. For example, Germans and cars, French with perfume and wine, Italians and leather shoes. India must encourage development in industries that have global markets where we can upgrade and excel in, for example in information technology, gems and jewellery, and some medicines.
Born Globals (BGs): These are small and medium sized companies (SMEs) that grow globally at over 20% per year. They are founded by intellectual entrepreneurs who have a global vision. Some have become sizeable enterprises relatively rapidly, for example Austria’s “Red Bull” and Finland’s “Angry Birds”. India needs such companies.
Brand Equity: Many Indian SMEs have a low-price strategy. This is fundamentally unsound on a long-term basis, as it tends to commoditise their offerings. Advanced countries build brand equity for their country and firms. They treat their brands as valuable assets. The consequent benefits of customer loyalty and rising profits strengthen their firms.
Design: In today’s world of overproduction and competition an outstanding differentiating factor is design. Customers are searching for better-designed products and are willing to pay more for such designs and any learning programme in India should combine design, technology, commercialisation, and internship. The government should encourage programmes for SMEs to learn about BGs, how brand equity can be built, and how the international design of India’s products can be improved.
Increased R&D in manufacturing, science and technology: In such fields, the big danger is of intellectual property rights and patents accruing to those nations who are in the lead. We spend less than 1% of GDP on R&D while advanced developed countries spend 2% or more.
Hundred cities and fertilising underdeveloped areas: The PM’s idea of 100 major cities with good transportation links to each other, plus developing the North-East, will give a major boost to the economy.
Excessive regulation invites extortion in order to obtain quicker clearance for permits. Furthermore, logistics that impede speedy passage cause waste. Removing such hurdles has to be a priority. Much of international trade is done between nations adjacent to each other. India’s border ties have to be made friendlier.
VH Manek Kirpalani is distinguished professor of marketing and international business, IMI Delhi and John Molson School of Business, Canada.
The views expressed by the author are personal.