03-05-2012, 02:58 PM
INDIA’S NEW OPPORTUNITY – 2020
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Preface
In an increasingly inter-dependent world, all countries will vigorously pursue
policies to optimise comparative factor endowments. The rapid technological
changes, while making transactions more seamless, will reinforce the process of
global integration. It has been said that the battles of this century will be fought
and won on the “power of ideas.” Societies will increasingly become knowledgebased
and promote knowledge-based industries.
India has a distinct comparative factor advantage as a vast reservoir of skilled
manpower. The demographic differentials reveal that over the next 20-30 years,
India has distinct advantages in a population profile concentrated in the younger
age group, where many new opportunities can be fully optimised.
What are the policies that would enable India to optimise these emerging
opportunities and what should we as a nation do in concert so that we turn out to
be winners and not losers?
With the objective of answering these questions, the All India Management
Association (AIMA) had set up a High Level Strategic Group comprising leaders
from industry, academia, and the government. The results of the deliberations of
the group, involving in-depth interaction with wide segments of society and
decision makers, are contained in this report. A task force comprising AIMA, the
Confederation of Indian Industry, and The Boston Consulting Group has been
constituted to implement the Action Program that has emerged. I have no doubt
that all the stakeholders, including the government, the corporate sector, and
academia, will contribute in the implementation of the recommendations contained
in the report. This will enable India to enhance its growth, secure additional
employment, and maximise the emerging opportunities.
(N. K. Singh)
Member
Planning Commission
Chairman, High Level Strategic Group
INDIA’S NEW OPPORTUNITY – 2020
Executive Summary
The steam engine (and its successor, the internal combustion engine) heralded the
industrial revolution that led to economic growth in the West. These engines
required fuel - coal and petroleum. As the industrialised countries exhausted their
own sources of supply they turned increasingly to other sources, which resulted in
the economic growth of the supplying countries, such as the oil producing
countries of the Middle East. This pattern is unfolding again. The growth
paradigm of Western economies requires another kind of fuel – knowledge workers
and skilled professionals. For example, U.S. growth rates of the 1990s are primarily
attributed to productivity increases enabled by a highly skilled workforce. In the
next two decades developed countries will face a shortfall of fuel (skilled
professionals) and once again will have to look towards developing countries to
make up the shortfall.
For India, growth is an imperative. To be counted as a major economic powerhouse
by the end of this century’s first quarter, India needs to accelerate its economic
growth beyond the existing rates of 5-6% per annum. Then only can its citizens,
more than a quarter of whom (~28%) live below the poverty line today, afford
better lifestyles. In addition, at current growth rates India is projected to have a
significant unemployed population (estimates range between 19 and 37 million
unemployed by 2012), the largest share of which will be educated youth. The
unemployment and poverty resulting from inadequate growth will retard other
efforts to place India amongst the top global economic powers. Therefore, the
acceleration of economic growth and the employment of skilled youth in the next
two decades are key concerns for India Inc.
Perhaps, we have for too long looked to others for models of growth. We have
marvelled at the tigers and the dragon and wondered what we could do to copy
their success. But that is denying us our unique place in the world. Perhaps if we
start with our own strengths, we can find an opportunity in our uniquely large and
skilled workforce – an opportunity that distinguishes our model of growth and that
is opening up for India as a result of global developments this report analyses.
While India faces an unemployment crisis, ironically, many countries are projected
to face workforce shortages in the same period due to lower birth rates and an
increase in the proportion of the elderly in their population. While skilled
workforce requirements are increasing in line with economic growth, availability is
not keeping pace, as a result of fewer people entering the workforce and the trend
towards early retirement. Select professions are already witnessing a shortfall (IT
services, medical, education). The workforce shortages (mostly in skilled categories)
EXECUTIVE SUMMARY 3
can slow down economic growth in these countries and have other adverse socioeconomic
implications. Adjusting for initiatives taken by governments to manage
this crisis, the High Level Strategic Group (HLSG) estimates a net workforce
shortfall of 32-39 million by 2020 in the developed countries of today.
This challenge faced by some countries presents a great opportunity for some
developing countries, such as India. India can target this shortage by providing
remote services to these countries and also by importing customers and servicing
their needs in India. The contribution of remote services alone, which is the main
focus of this report, will be $133-315 billion of additional revenue flowing into the
country and the addition of 10-24 million jobs (direct and indirect) by 2020.
Further, importing customers into India (medical tourism, educational services,
leisure tourism) could add $6-50 billion in revenue and create 10-48 million jobs
(direct and indirect) by 2020. HLSG estimates that through remote services and
the importation of customers India could enhance year-to-year GDP growth by up
to 1.5% over current growth rates, most of which (~80-85%) would be through
remote services.
India is positioned well against these opportunities given its large pool of qualified
manpower, track record in service delivery in sectors like IT, and lower costs
(specifically in areas such as medical treatment and education services). However,
in order to convert these opportunities into actual revenues, India Inc. will have to
take several initiatives.
HLSG has identified six thrust areas for action to boost demand for India’s services:
o Strengthen India Inc. image/brand
o Focus marketing on select countries with select services
o Build customer credibility
o Promote acceptability of the ‘offshore’ concept
o Improve service experience for customers
o Invest in promoting trials
HLSG has also identified six thrust areas for action to boost supply of India’s
services:
o Develop domain expertise in specific areas
o Reform education and training sector to increase base of skilled professionals
o Strengthen connectivity infrastructure (telecom, IT, airports)
o Promote public-private partnerships
o Form interest groups around opportunities
o Align legal and regulatory structure
INDIA’S NEW OPPORTUNITY – 2020
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Why is this report different?
Over the last few years, many reports have been written on how to lead India onto
the path of accelerated development. While most reports correctly identify
opportunities and build a coherent roadmap, they often do not result in effective
implementation and hence opportunities are not realized. We would like our report
to stimulate actions towards the goal. Therefore, we have analysed why reports fail
to engage the implementers, and we have used this understanding to shape our
report. We have found that reports that fail to have much impact fall into two
categories:
1. The first category involves a lot of analysis and lays down detailed sets of
instructions for those who have to implement whatever ideas are in the
report. The focus of the process is to first complete the report. Once
completed, such reports often end up on the shelf. The biggest shortcoming
in such cases is that the people who have to implement the instructions do
not fully comprehend what needs to be done and/or do not take ownership of
the task, as they are not involved in its development
2. The second category starts by analysing the situation and outlining broad
themes. However, the follow-up process is not documented well and is largely
unstructured. The driving principle in this case is to provide an idea and
hope that it will work. Here again, the report hits the shelf and gathers
dust.
This report takes a different approach. The approach adopted here rests on two
simple principles, which have been found to be highly effective in situations
involving disparate interest groups:
1. Create an appreciation of the opportunities that exist and prioritise areas
for action
2. Align processes and participants (implementation partners) towards a
common goal
In addition to identifying areas where action needs to be taken, this report provides
a structured framework for key stakeholders to participate in the assimilation of
ideas and development of their implementation plans. The report is the first in a
series of steps necessary to fulfill the overall goal. In the next step, appropriate
agencies will develop implementation plans for the critical areas identified. These
agencies may be inter-departmental task forces for the key areas, or joint industrygovernment
task forces, or business organisations that pilot and implement projects
to realize the benefits of the opportunities analysed in this report.
EXECUTIVE SUMMARY 5
INDIA’S NEW OPPORTUNITY – 2020
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Introduction
The idea of providing professional services to the developed world remotely from
India is not new. However, little analysis has been done so far on the exact nature
of this opportunity and the action steps required to exploit it. The All India
Management Association (AIMA) set up a High Level Strategic Group (HLSG) to
examine these issues. The HLSG comprised leaders from industry, academia, and
the government. The objective of the HLSG was to:
o Identify the opportunities available to Indian companies
o Highlight the need for policy makers to act quickly in view of the urgent
job-creation requirements
o Develop a process that creates alignment between the various stakeholders and
the common goal
A key consideration for the HLSG during the development of this report was its
ability to bring about real change. To this end, the HLSG invested significant time
in understanding the reasons why India, despite having sufficient knowledge of
what needs to be done, often fails to ‘make it happen.’ The collective experience of
the HLSG members suggested that the inability to make things happen faster, with
alignment, is the main reason why India misses opportunities. On further study, it
was felt that the lack of speed was generally a result of an implementation model
that enforces compliance rather than obtaining commitment (Exhibit 1). The
power of commitment amongst stakeholders to relentlessly obtain the desired
outcome cannot be underestimated. Unfortunately, most approaches to implement
change are designed to obtain compliance rather than commitment. As a result, the
energy in the process peters out. To obtain commitment from all stakeholders, the
HLSG embarked on a path that architects and guides the process of involvement
and action using the report as a stimulus.
The chosen approach was based on the analysis of several initiatives, some of them
national in scope, and some within corporations. In almost all cases, the members
reached a similar conclusion – the quality of process has a far greater impact on the
outcome than the amount of detail (recommendations) in the report. Therefore,
the HLSG adopted an approach that entailed the structured involvement of all
concerned stakeholders as opposed to those approaches adopted in the past that
have not been found to be effective (Exhibit 2).