Rising Indian competitiveness

Raghuram Sudhakar

August 2010

Roadmap

Introduction

Competitiveness diagnostic

CEO voices on India

Case Study: How GE is disrupting itself

Road ahead for India’s exports to U.S.

Key takeaways

Investment in/sourcing from India is expected to increase since India

fares well on all five critical factors

Desire to invest in / source

from India

Competitiveness Quality reliability Dependability Resource

availability

Climate for

Investment

Second only to

China in

manufacturing

competitiveness

Rapidly expanding

capabilities in

engineering

design and

development and

embedded

software

development

Largest number of

Deming award

winners outside

Japan.

153 recipients of

TPM Excellence

award from Japan

Institute of Plant

Maintenance

(JIPM) committee.

Democratic

regime

Economic and

political stability.

Rich talent pool of

scientists,

researchers, and

engineers

Large, well-

educated English-

speaking

workforce

Investor friendly

policies. (Liberal

policy on

Technology

collaboration)

Cost effective

production

facilities.

Large domestic

market.

Critical factors for foreign investment/sourcing

Source: Deloitte and US Council on Competitiveness - 2010 Global Manufacturing Competitiveness Index; ©Deloitte Touche Tohmatsu, 2010

Investment and Technology promotion division, Government of India

Western businesses in the future would not prefer China or India, but China

and India

Rank Country Index

score

1 China 10

2 India 8.15

3 Republic of Korea 6.79

4 U.S. 5.84

5 Brazil 5.41

6 Japan 5.11

7 Mexico 4.84

8 Germany 4.80

9 Singapore 4.69

10 Poland 4.49

Global Manufacturing Competitiveness Trend

Rank Country Index

score

1 China 10

2 India 9.01

3 Republic of Korea 6.53

4 Brazil 6.32

5 U.S. 5.38

6 Mexico 4.84

7 Japan 4.74

8 Germany 4.53

9 Poland 4.52

10 Thailand 4.35

Source: Deloitte and US Council on Competitiveness - 2010 Global Manufacturing Competitiveness Index; ©Deloitte Touche Tohmatsu,

2010

Current competitiveness Competitiveness in the next 5 years

Indian manufacturing companies are on par with the best in the world from the

quality perspective

Source: “India Inc. Passes the Quality Test,”, Business Standard, January 4, 2010

• India has the largest number of

Deming Award winners (21) outside

of Japan, in comparison with

Singapore (1), Taiwan (1), Thailand

(9) and U.S. (3)

• 153 companies have achieved Total

Productive Maintenance (TPM)

Excellence Award for their total

productivity management practices by

the Japan Institute of Plant

Maintenance (JIPM) committee.

“Nano has revolutionised the global automotive thrust towards affordable cars and Godrej’s Chotu Kool will do

the same for the white goods industry, as Sony’s walkman and the Apple iPod and iPhone have done.”

-Surinder Kapur, Chairman, Sona Koyo Steering Systems

Defects in Manufacturing

100ppm

500ppm

1%

10%

1975-88 1998-2000 2006 2008 2009

% of India’s GDP from

Manufacturing

29%

Evolution of quality in Indian Manufacturing (1988-2009)

Quality excellence of Indian Manufacturing

Indian CEOs are optimistic about the manufacturing sector's competitiveness

Source: PricewaterhouseCoopers 13th Annual Global CEO Survey (2009)

21%

24%

47%

31%

37%

42%

Services

Manufacturing

Delined Stayed the same Improved

Do you think that India's manufacturing/services sector has declined, stayed

the same or improved in terms of global competitiveness since the financial crisis began?

Total = 62

CEO voice on India’s manufacturing competitiveness

Global CEOs expect most jobs to be created in Brazil and India in 2011

Source: PricewaterhouseCoopers 13th Annual Global CEO Survey 2010

20

25

14

30

18

30

23

23

27

10

7

9

7

15

17

17

13

7

9

7

19

10

15

3

13

23

27

Global

US

UK

Australia

Canada

Korea

China & Hong Kong

India

Brazil

Increase by less than 5% Increase by 5-8% Increase by more than 8%

What do you expect to happen to the headcount in your organization globally over the

next 12 months?

Total = 1198

CEO voice on job creation in the future

More are set to mark their presence in India in the coming years

Source: PricewaterhouseCoopers 13th Annual Global CEO Survey 2010, Harvard Business Review October 2009

“The structural shifts have already begun. The emerging markets, if you will, are a critical component of the

business environment that we have to compete in. So whether it be the BRIC countries, where we have to

have a strong presence, our clients are demanding that we be in emerging markets. Brazil, Russia, India and

China are markets that we are investing in. We have a very strong competitive position in those markets, and

we will continue to grow it.”

- Michael I. Roth, Chairman and CEO, Interpublic Group, US

India will probably be the second biggest economy in the world by 2035. How much longer can we call that

an emerging market?

- David Rubenstein founding managing director of The Carlyle Group

“I don’t even want to talk about your growth plans for the U.S. You’ve got to triple the size of your Indian

business in the next three years. You’ve got to put more resources , more people, and more products in

there, so you’re deep in that market and not just skimming the very top. Let's figure out how to do it.”

- Jeffrey R. Immelt, CEO of General Electric in conversation with his senior manager – the head of a major

business unit

CEO voice on expanding presence in India

General Electric is into reverse innovation today – developing

products in India and distributing them globally

REVERSE

INNOVATION Developing products in

China and India and

distributing them globally.

GLOCALIZATION Developing high-end

products at home and

adapting them to other

markets around the world

Developing a $1000

handheld

electrocardiogram

(ECG device) for

rural India

Decision in 2009 to

spend $3 billion in

the next 6 years in

creating at least 100

healthcare

innovations to lower

costs, increase

access and improve

quality.

Selling the same in

US, where they are

pioneering new

uses for the

machine.

Plan to create a

separate P&L for all

GE businesses in

India and giving

India considerable

power to tap GE’s

global R&D

resources.

Case study: How GE is disrupting itself

Then Now

Stages of GE’s disruption

GE badly needs low-cost

innovations to not only

expand beyond high end

segments in India, but to

also pre-empt local

competition from creating

similar products and using

them to disrupt GE in rich

countries.

Source: Govindrajan, V, Immelt, Jeffrey and Trimble, Chris, “How GE is disrupting itself,” Harvard Business Review, October 2009

South Asia 18%

U.S. 16%

China 16%

Middle East 11%

E.U. 6%

Russia 3%

Other 9%

None 11%

Don't Know/Refused

10%

Indian CEOs were asked: Which of these will be your most important market

outside of India when economic recovery arrives?

Total = 62

Indian CEOs expect U.S. to be the second largest market for Indian

goods and services after South Asia

• Over the past 10 years, the

shares of Indian exports going to

South Asia, China and the Middle

East have grown, while the

United States and Europe shares

have shrunk.

• In that same period, India’s share

of total world exports grew from

just over 0.6% in 1998 to nearly

1.5% through the first five months

of 2009.

Source: PricewaterhouseCoopers 13th Annual Global CEO Survey (2010)

Important overseas markets for India

0

1

2

3

4

5

6

7

8

9

10

0 50 100 150 200 250 300 350

Cu

rre

nt

Man

ufa

ctu

rin

g C

om

pet

itiv

en

ess

Ind

ex

US Imports (all products) in 2009 ($ billions)

China

India

Republic of Korea

Brazil Japan

Mexico Germany Singapore

Thailand Canada

UK

India lags behind other countries in its imports to U.S. but with high

competitiveness, there is scope to climb up the ladder

Source: Deloitte and US Council on Competitiveness - 2010 Global Manufacturing Competitiveness Index; ©Deloitte Touche Tohmatsu, 2010

TradeMap Statistics

National Competitiveness vs Share of US imports

Note: US imports above include only products, not services

India is an important and inevitable destination to global executives

for it strengths and rising competitiveness

Summary

India is a favorable destination for global investment, considering it satisfies all five critical factors for

investment/sourcing.

CEOs around the world feel that India is where competitiveness is rising, most jobs will be created in

the future and is a strategic location for future expansion.

Companies like GE are already disrupting themselves through reverse innovation – developing

products in India and distributing them globally.

Though India lags behind other countries in its imports to U.S today, high competitiveness will propel

its growth in the days to come.

Key takeaways

END OF PRESENTATION