India needs a strategic agenda

Managers develop strategies to successfully steer companies and create value for shareholders, while the political leadership runs the country, taking it through the path of economic growth; a number of parallels could be drawn between these two processes.

SEIZING CHANCES

Identifying ‘profitability drivers' and allocating resources to build such competitive advantage is the DNA of successful managers; be it global companies like Google or Apple, or local companies like ITC and Bharti Airtel. The leadership at Apple, for example, acquired quality human assets, nurtured an environment for innovation, and mastered the art of marketing their value proposition to customers, creating shareholder value. Companies like ITC and GE have during the years, created a solid brand equity and nurtured leadership in order to share best practices between their diversified businesses, thereby creating shareholder value.

Extraordinary levels of focus and perseverance for continued periods of time, lie at the foundation of any successful strategy; this is achieved through managers staying ‘on course' building such key competencies, and simultaneously proactively navigating their companies through external uncertainties.

Although opportunities are available for all companies, only those that have been proactive have taken advantage of the opportunity; the rest have merely wasted them. There is a matter of urgency in the process of corporate strategy development. Although Bharti Airtel's MTN acquisition failed, its timely move to somehow get into the attractive African market through the subsequent Zain acquisition is a classic case of addressing strategic urgency. Such a proactive and timely strategic initiative by the managers of Bharti Airtel, sets it apart from the rest of the telecom companies.

HARNESSING SAVINGS

Goals of nations in deploying successful strategies should be no different from that of corporate.

Political leaders, being managers of the country, should diligently allocate the country's limited resources in building the necessary competencies in a proactive manner such that the country's revenues are maximised, fiscal deficit minimised, and consequently, public debt comes under control.

Two ‘economic growth drivers' are critical in this context; garnering domestic savings into investments is the first ‘growth driver'. Although India's domestic savings rate at around 32 per cent of GDP is reasonable, its investments at 35 per cent of GDP is significantly low, for an economy that needs to grow at double digits for the next 20 years.

Higher investments create more corporate activity, which, in turn, brings more taxes; more than 80 per cent of India's revenue is from corporate tax, personal tax, and indirect taxes like customs, excise and services tax. That said, there is no reason why the leadership shouldn't stay focused and do everything that it can, in order to enhance corporate well-being through higher investments.

Why is India unable to leverage its domestic savings into investments? Culturally, Indians channel more than half of their savings into unproductive assets like gold and tangible assets, which don't generate revenue to the economy.

This is due to underdeveloped financial markets and the want of investor confidence in channelling their savings into the system; personal gold holdings are estimated at more than 25,000 tonnes, valued at around a $1 trillion, being much more than the total deposits held by the Indian banks.

The government needs to unlock such assets and channel it into productive assets through a series of reforms — increasing bank penetration, making banks more productive, developing equity and corporate-debt markets, widening the government securities market, the deepening the mutual fund market in order to garner domestic savings. These are extremely urgent initiatives for driving economic growth.

TRAINING WORKFORCE

By garnering investment alone, the government's role doesn't end. In order to productively deploy such investments for maximising corporate well-being, the supply of ‘skilled' labour force is the second ‘economic growth driver' where enormous focus is required.

India needs to leverage its demographic dividend; 66 per cent of its population will be in the productive age bracket of 15 to 65 years by the year 2020, after which the proportion of older and dependent population starts steeply increasing. This window of demographic dividend opportunity will be only for a limited period.

Unfortunately, the huge workforce isn't skilled and industry-ready. We have also failed to invest meaningfully into large-scale skill development programmes that can translate the demographic dividend into economic growth. This also means that unemployed youth could focus their energies towards destructive purposes.

India needs to skill 37-42 per cent of its population during the next eight years, which would require close to 50,000 skills development centres, across the country. Allocating Rs 1,000 crore for skills development in the current budget is a mere drop in the ocean; for example, allocation for subsidies and defence are roughly Rs two lakh crore, each.

Skills development also requires a number of initiatives, including reforming our formal education system, as well as coordinated efforts with the industry.

REFORMS IMPETUS

With China ahead of India by almost 15 years in economic reforms, many emerging market specialists indicate that India has done better than China during the first ten years of the liberalisation process, and eventually, India will catch up. But, sadly, we are in a different scenario at present, post the 2008 sub-prime crisis.

The global economic scenario is much more co-integrated, and India cannot rely only on the glory of its domestic market to clock a double-digit growth rate.

When China had the window of opportunity, it built a critical mass in terms of mobilising capital and labour. By focusing them towards economic growth, China clocked double-digit growth for many more years to come. Indian leadership, unfortunately, seems to be letting the opportunity go.

Inability to take up policy changes in a timely manner will make the economy uncompetitive, result in high fiscal deficit, and make it dependent on borrowed funds; a typical problem found in many European Union nations like Greece.

Indian leadership has been unable to stay focused on a strategic agenda, in the midst of polls and change in political guard. Corruption and scandals have become excuses for stopping Parliamentary activity for prolonged periods, compromising on proactive initiatives to reform, enhance investments, make the corporate sector more vibrant.

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