India and the other South Asian countries need to boost the productivity of their firms by at least 2 percent year-on-year to push exports significantly from the region, a new World Bank report has said.
NEW DELHI: “South Asia could become the fastest growing exporting region of the world if India and its South Asian neighbors enhance the productivity of their firms by at least two percentage points each year,” according to the report titled ‘South Asia’s Turn: Policies to Boost Competitiveness and Create the Next Export Powerhouse’, and released on Wednesday.
“A broad set of constraints limit the growth and export potential of Indian firms’ vis-a-vis their competitors in East Asia and the rest of the world,” it said, arguing that increasing productivity of firms in India and the rest of South Asia is the only sustainable path to improving competitiveness.
“Improving productivity requires a greater shift of resources from agriculture to manufacturing and services, reforms to current practices inhibiting firm formation and growth, strengthening of economies that take advantage of proximity of suppliers and qualified workers, more widespread adoption of new technologies and investments into skills training,” it said.
World Bank Country Director in India Junaid Ahmad said that while India’s leading firms are comparable to many in Organisation for Economic Co-operation and Development countries when it comes to productivity and technology adoption but “with stronger global competitive pressures and slowing world trade”, ensuring that all Indian firms are “able to improve their productivity to create jobs, reduce poverty, and boost shared prosperity is the key policy and regulatory challenge for the government”.
The region’s great potential to boost its competitiveness is evidenced through a number of examples in the report, ranging from the highly successful apparel industries in Bangladesh and Sri Lanka to India’s auto parts, agribusiness, software and Business Processing Offshoring (BPO) sectors.
“With the right set of productivity-enhancing policies, South Asia, led by India, could more than triple its share in global markets of electronics and motor vehicles and come close to doubling its already significant market share in wearing apparel (excluding textiles and leather) by 2030,” it said.
Productivity of India’s firms could also be enhanced by improving managerial capabilities and making more effective use of technology, the report says.
“While nearly all firms in India have access to the internet (similar to the levels observed in high income countries), only 50 percent (a level similar to Africa) use it to better connect with customers and suppliers. And while innovation is widespread, it consists mostly in adopting existing technology, with only 2 percent of Indian firms introducing new products and processes to the world,” it said.”