Current General Studies Magazine: "Make in India: How to mobilize external support for India's Economic Growth" February 2015

Current General Studies Magazine (February 2015)

General Studies - III: Economy Based Article (Make in India: How to mobilize external support for India's Economic Growth)

Introduction

Deepening India’s manufacture base is vital to creating jobs, & giving effective impetus to economic development. Three main areas for action are:

A. Market India abroad, to attract FDI, trade + technology
B. Build partnerships: conclude FTAs, Comprehensive Economic Partnership Agreements, plus accords covering double taxation, investment protection, copyright.
C. Help Indian companies to pursue foreign markets + overseas direct investment (ODI).

All these actions require:

Govt. agencies working closely with Indian business, to help them in their foreign engagement
Mobilizing our embassies to serve as close partners of Indian companies.
Understanding the foreign environment, and global business practices; management schools have a role in teaching and researching this.

The diplomatic system is both a facilitator, as also a vital asset to be used for India’s economic resurgence.

A.1 What is Country Image?

‘County Image’ is a blend of impressions, images, even illusions; taken together theses add up to a ‘stereotype’ – which is a kind of shorthand through which we evoke and retain images. Its’ characteristics are:

It evolves slowly, each encounter or communication adds a layer to existing memory
Experts argue image is not amenable to easy change, but it evolves and can be molded (e.g. the writings of Simon Arnholt, and his ‘country brand index’)
Country Image affects business decisions indirectly; surveys show that while business takes place in all kinds of circumstances, people prefer to do business with those they like.
Country brand indices – of which there are many – track change, and give rankings that measure image.

A.2 Image & Reality

India typically ranks at around 130 out of 150 countries in terms of ‘ease of doing business’. This low rank hurts us on the global market, in terms of attracting business and foreign investments.

As Indians we often make excuses: ‘things are not really so bad…’ or ‘change is coming’.
Foreign investors don’t buy this; they want to see real change. Today, expectations are high, and we now have to deliver on these.
India’s positives are very substantial: market size, human & managerial talent, ability to handle complexity – these are often not adequately taken into account, and some elements in such rankings are unfair.
Country ratings (S&P, Moody) are seemingly based on hard criteria, but they also indirectly reflect image, as well as reputation.

A.3 India’s Needs

The Modi govt. has set its objective of improving India’s ‘Business Environment’ rank from 130 to the top 50 – but this will take much effort over some years. Elements that need improvement are complex issues such as labor laws, and changes in land laws, which are hard to tackle.
Most sophisticated products now involve ‘supply chains’, with components sourced around world; India needs to integrate itself in such supply chains.
That entails much smoother transport infrastructure, as well as real improvement in customs, port, and airport facilities, plus altered mindset.
Infrastructure investment both depends upon and contributes to image, reputation, reality. This is also a question of managing and living up to expectations.

A.4 Marketing India

We have no ‘Brand India Board’, or any entity that is charged with oversight over our country image, or to help with image marketing. We need to take an integrated approach to such issues.
The ‘Incredible India’ tourism campaign has delivered great value, but it lacks a business promotion counterpart.
‘Kenya Brand Board’; Thailand: ‘Think Asia, Invest Thailand’; South Africa, ‘Brand SA’; Spain: PM chairs ‘public diplomacy board’; France & UK: foreign ministries oversee image issues
‘Invest India’ (JV between FICCI and Industry Min) works quietly; same with ‘India Brand Equity Fund’ – they both need more visible roles.

B.1 Building External Networks

In a globalized world, countries need external networks to facilitate trade, investments, and technology flows. This is established through global, regional & bilateral agreements; examples of agreements that are currently in the pipeline, include the following:

WTO is key global framework; Doha Round remains incomplete, though talks continue.
At present there is slight hope that a ‘Trans Pacific Partnership’, (TPP) may move forward; it is a US-led coalition of those seeking high new norms that would apply to international trade, minimizing the role of state enterprises and establishing standards that would appear to benefit advanced countries.
‘Regional Comprehensive Economic Partnership’ (RCEP) is another proposal that covers 16 countries, ASEAN plus six other states that includes India, which has been under negotiation since 2012
Bilateral economic arrangements include: free trade agreements, (FTAs); comprehensive economic partnerships that typically cover services and investments, (CEPs); double taxation avoidance agreements (DTAAs); and investment protection agreements (IPAs).

B.2 India’s Posture

In global negotiations India has sometimes been sometimes been called an ‘outlier’; do we ‘over-negotiate’? Do we need to show more flexibility at WTO? These are issues that call for wider debate; India’s negotiation image is now perhaps changing for the better.
We have ignored the US-led moves to create a (TPP), but China may join, overcoming current doubts – we need to rethink our standpoint.
RCEP needs momentum; ASEAN Economic Community may happen in 2015; SAFTA seems stuck, despite Indian efforts.
In bilateral FTAs we lament lack of gains – is that due to home policy failures? Should we blame others for not using FTAs optimally? Example: India-SL FTA; during his visit to Colombo in March 2015, PM Modi declared that India would move forward on a comprehensive partnership agreement. That is a welcome development.

B.3 Rethinking policy

In terms of intra-region trade, SAARC has been called the world’s ‘least integrated region’ (World Bank), because the trade exchanges among the members-states represent only 7% of their global trade (the comparable figure for ASEAN is 25%; for the much more integrated EU, this stands at 50%)
The world over, regional arrangements are ‘trade-creating’; they help to expand real trade exchanges, as also investment flows, and lead to new jobs.
Do we get stuck on doctrinal positions, in lieu of more pragmatic approaches? Deeper debate on such macro issues is needed in our country, in which youth should participate.
Building deeper consensus among business, academia, thinktanks should be our priority.
Economics is today the main driver of political relations between countries; it also holds the potential for overcoming, or moderating, disputes.

C.1 Role of Embassies

In 2010 British PM Cameron told UK embassies: ‘Your first task is to help British business’, frills don’t count. This was aimed at improving the direct benefit that the diplomatic system brings to the country.
Located in over 120 countries Indian embassies – & consulates – are ‘natural’ promoters of home business. They should provide: market information, local business norms, match-making, help delegations + trade exhibitors.
Using them is a chicken-&-egg story: more used, better will be their quality of assistance; that would also help in the development of professionalism.

C.2 Economic Diplomacy: PPP Model

All countries use similar methods and techniques to advance the home country’s economic objectives. There exists much scope for mutual learning, and sharing experiences, but this is still largely missing.
At business schools, as also among commercial & industry apex bodies there is need for deeper study; there is also potential for personnel swaps, to deepen mutual experience.
CII, and to slightly lesser extent FICCI + ASSOCHAM work rather closely with Indian embassies, and this delivers great value.
Some 30+ countries have combined their foreign and trade ministries (most recently France); this model calls for close examination.
Relatively few books focus on the practical side of economic diplomacy; these include: Singapore: Heart Work, 2002; India: Economic Diplomacy: India’s Experience, 2012. This too is part of experience capture and sharing with a wider audience.

C.3 Examples

UK, Australia use ‘challenge funds’ to encourage embassies to come up with innovative promotion methods, and to develop ‘best practices’ in terms of methods that can apply in comparable situations.
US State Dept. has a ‘best commercial diplomat’ award; that is a good method.
Should not MEA have a ‘business advisory group’ drawn from CEOs & apex bodies of business and industry?
Business schools should study economic promotion methods, and carry out surveys, as some European business institutes have done.
Indian aid actions are now coordinated by ‘Development Partnership Administration’, which connects with business prospects for Indian companies. Indian embassies work very closely with Indian companies, for exports of Indian equipment as also project exports.

C.4 Empower, Encourage Business

International agreements and facilities offered by official agencies, including embassies, are enablers; governments do not typically produce deals. On the flip side, business needs deeper direct involvement in promotional activities, and also needs to partner government more closely.
Governments also need to listen more to business – thus on both sides, we need to do more.
Canada uses net-based questionnaires to get deep feedback from its business enterprises, and this is tracked over time.
Our trade exhibitions seem to follow set models; there is need adaptation as well as innovation. We also apply information and communication technology in a deeper fashion (ICT), for instance to hold ‘virtual’ exhibitions that showcase Indian products, especially from SMEs.
Business leaders play a key role in ‘eminent person’ groups, and this method can be expanded on a selective basis.

Conclusion

MEA & embassies are key resource to operationalize ‘Make in India’, still under-used.
Involves sensitizing business + all economic information multipliers on potential available
With Indian companies active in mergers and acquisitions (M&As) abroad, by way of growing ‘overseas direct investment’, embassies serve as discreet guides, and help open doors.
Harmonized actions across broad front would improve value delivery,
Business schools should be partners

Source- Amb (Retd) Kishan S Rana @ Ministry of External Affairs , GoI