Competing Globally — Challenges and Opportunities 30th Annual Management Convention of the Kerala Management AssociationFebruary 3, 2011

Vinod Thomas Director-General and Senior Vice President

Independent Evaluation GroupWorld Bank Group

Competing Globally…

►Global trends►Competitiveness in India►India and its competitors►The future of Kerala

Emerging Economies and the Global Crisis

2008 2009 2010 2011f 2012f-10

-8-6-4-202468

1012

World

High income countries

Developing countries

Real

GDP

gro

wth

(per

cent

)

Source: World Bank

The Resulting Spotlight on Competitiveness

Global recovery but high risks

Deficits, debt, resource

constraints

Productivity gain is the goal

Competitiveness is the means

Productivity Rise in History

China, 2002-09

Rep. of Korea, 1966-77

Brazil, 1961-79

Turkey, 1857-77

Japan, 1885-1919

United States, 1839-86

United Kingdom, 1780-1838

0 10 20 30 40 50 60

Source: World Bank

Period during which output per person doubled, selected countries

Number of Years

Five Challenges for India’s Competitiveness

1. Governance

2. Inclusiveness growth

3. Infrastructure

4. Environment and climate change

5. Innovation

Governance and the Cost of Doing Business

► Well-established democratic institutions, but overstretched government

► Results orientation and decentralization to state and local authorities

► Link to the private sector—ICT

Inclusive Growth and the Two Indias► Reducing the gap between rich and poor,

urban and rural interstate, and within-state disparities

► Generating faster improvements in the poorer states and segments (as in Brazil and Mexico)

► Supporting small-scale enterprises and microfinance to create employment

Quality Infrastructure

► Quality of infrastructure key to foreign investments

► Long gestation and constant maintenance gaps

► Selectivity to ensure fiscal sustainability

post-crisis

Environment and Climate Change► Public and private investments in green

technologies► Incentives and resources for pilots, and

demonstration and technology transfer projects► Carbon market—opportunity for reducing

emission and inducing R&D for low-carbon technologies

► Forest conservation to gain from standing trees—REDD

19961997

19981999

20002001

20022003

20042005

20062007

- 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Brazil China India Russian Federation

R&D

expe

nditu

re (%

of G

DP)

Innovation: Spending on R&D

Source: World Development Indicator

Strengths and Weaknesses across BRICK

GDP Growth (2010)

Trade/GDP (2008)

Gen Gov't Gross Debt/GDP (2009)

Poverty headcount (latest available)

Arable land (hectares per person) (2007)

CO2 emissions (metric tons per capita) (2006)Energy use (kg of oil equivalent per capita) (2007)

School enrollment, secondary (% gross) (2007)

Researchers in R&D (per million people) (2005)

R&D Expenditure (% of GDP)

Gross fixed capital formation (% of GDP)

-

0.5

1.0

Brazil China India Russia Korea, Rep. of

Source: World Development Indicator

Kerala Is Different—Or Is It?

► Economic development versus human development?

► Rich potential of human capacity and skills

► Remittances an investments► Eco-tourism and the

preservation of biodiversity► Global lead in information

and technology?

Common Factors in Competitiveness

1. Nations shape their own destinies• BRIC weathered the crisis much better based on

policies preceding the crisis2. Proper blend of state and market is critical• Support rather than supplant markets

3. Unleashing spillover effects is key• Benefits of education go beyond individuals• Quality infrastructure for competition and innovation• Don’t follow the leader find the niche

Thank You!