Understanding Competitiveness

TRANSFORMING INDIA into an economic powerhouse has been a subject of extensive discussion. With the country's growing ambitions, what is needed is a new conceptualization of India's ambitions and a renewed development approach.

- Amit Kapoor & Amitabh Kant

The Competitiveness approach serves as a promising approach to address India's challenges and help achieve the aspired transformation. The term competitiveness comes to be associated with a range of factors - higher market share, a competitive exchange rate, exports, greater FDI inflows, higher exports, etc. Before delving into the nuances of the approach, it is essential to make a clear demarcation between what competitiveness is and what it is not.

One of the parameters that gets more frequently associated with the term competitiveness is an export success. The two are often used synonymously even though the difference between them is significant. There is sufficient evidence pointing to the lack of a direct causal relationship between exports and overall economic growth. A sole focus on an export-led growth strategy puts export-oriented sectors at the centre stage. While they are the engine of the economy, without an equal focus on local industries and other aspects of the economy, the value generated through exports will not translate into a higher standard of living for the broader population. As opposed to a narrow focus on exports, competitiveness strategies are broadly based, emphasizing the need to enhance performance across the entire economy, not just the export-oriented sectors. A focus on export success should be a part of the broader competitiveness and growth strategy. The focus, thus, should be on the actual policies that can increase competitiveness rather than just exports.