Transcript Priya Basu & Taye Mengistae, World Bank Mumbai, November 24

Investment Climate Assessment of India 2004
Why does infrastructure and business regulation matter?:
Findings from World Bank ICA 2004
Priya Basu & Taye Mengistae, World Bank
Mumbai, November 24, 2004
Figure 1.1 GDP per capita at PPP US$ (1980=100)
Annual per
capital GDP,
PPP
1000
China
900
800
700
600
500
India
Malaysia
400
300
Bangladesh
200
100
CHN
IND
19
98
20
01
19
86
19
89
BGD
19
92
19
95
19
80
19
83
0
MAL
Figure 1.2. Values of exports: 1990-2001
(1991=100)
Figure 1.3. Gross foreign direct investment (percent
of GDP)
400
10
350
9
300
8
250
7
200
6
150
5
100
4
50
3
0
2
Malaysia
1
India
Bangladesh
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
China
0
CHN
IND
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
B
G
D
CH
N
IN
D
MA
L
7%
Figure 1.4. World market shares of India and China in manufactured
exports
India
6%
China
5%
4%
3%
2%
1%
0%
1995
2002
25.9
18.4
20.0
28.2
10.9 12.1
B
Utt
ar P ih ar
rad
es h
Or
issa
Pu
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b
Ha
rya
An
na
d ra
Pra
des
h
Ra
jas
th a
n
Ma
Ke
dh y
r
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rad
esh
Ka
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tak
Ta
a
mil
N
ad
We
st B u
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ng a
Ma
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har
ash
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at
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ar
Pra
Ma
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Pra h
An
dh
de
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sh
Pr
ad
es
Ka
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Ke
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at
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Ha al
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Figure 1.6. Per Capita GSDP 2001
Figure 1.7. GSDP growth rate (%):1991-
99
31.5
8.0 8.2
21.7 22.1 22.1 22.5
7
5.2
4.8 5.1
2.9
5.6 5.6 5.9 5.9 6
3.6 3.6
Source: Ahluwwalia (2001)
Improving the competitiveness of manufacturing
industry
Objective of the report:
Assess the costs of deficiencies
in business environment to
Indian industry.
Context:
Consensus that although India’s
GDP has grown at an impressive
rate over the past 12 years it
needs to and can grow
significantly faster over the
coming decade.
The need arises from the
poverty reduction imperative
Evidence of potential for faster growth:
(a)
India’s natural comparator, China, has grown
at an average rate of 10 percent against India’s 6
percent over the same period in spite of similarities in
initial conditions;
(b)
There are huge disparities in the growth
performance of India’s own regions.
(c) Performance gaps at both levels (national and sub
national) have a great deal to do with differences in
investment climate.
The focus of the report
Limited to manufacturing industry
primarily for reasons of availability of
data. Do nonetheless believe that many
of policy conclusions drawn here might
apply to other sectors.
In any case, manufacturing industry is a
major contributor to GDP and
employment. Improvement in its
international competitiveness should
therefore be an important source of
potential for faster growth of the overall
economy.
7%
World market shares of India and China in
manufactured exports
India
6%
China
5%
4%
3%
2%
1%
0%
1995
2002
World market shares of India and China in 'complex' manufactured exports
India
7%
China
6%
5%
4%
3%
2%
1%
0%
1995
2002
Medium technology
1995
2002
Engineering
1995
High technology
2002
Top ten exporters of manufactures in the developing world ($000m.)
300
1990
2000
250
2002
200
150
100
50
0
a
in
Ch
rea
Ko
w
Tai
an
o
x ic
Me
re
o
gap
Sin
a
y si
la
Ma
d
ilan
Tha
a
i
nes
o
d
In
zil
Bra
ia
Ind
es
pin
ilip
Ph
k
Tur
ey
Manufacturing value added per worker per annum
(US $, 1999 prices)
Manufacturing wages per worker per annum (US
$, 1999 prices)
3787
12571
10780
3092
2666
8087
2089
6956
1571 1623
5451 5557
4193 4335
1151
808
BGD
NIC
IND
HND
MAR
CHN
Source: World Bank IC Surveys
PER
BRA
BGD
IND
CHN
NIC
HND
PER
Source: World Bank IC Surveys
MAR
BRA
Productivity gaps within India
Manufacturing value added per worker,
All India = 100
Better IC rated states
105
Others
86
Lower FDI inflow states
87
High FDI inflow states
107
Lower growth states
90
High growth states
104
Lower income states
93
High income states
105
Source: ASI 1999-2001
Cities covered by the investment climate survey of 2003
Metropolitan citiesLarge cities
Smaller cities
Delhi
Pune
Chandigarh
Gwalior
Mumbai
Surat
Cochin
Mangalore
Kolkata
Lucknow
Mysore
Nashik
Chennai
Kanpur
Vijayawanda
Nagpur
Bangalore
Bhopal
Guntur
Thane
Ahmedabad
Ludhiana
Gurgaon
Jalandhar
Hyderabad
Indore
Panipat
Coimbatore
Vadodara
Hubli
-Dharwad Hosur
Faridabad
Calicut
Madurai
Palakkad
Ghaziabad
Noida
Howrah
Shahjahan
pur-Lakimpur
Manufacturing productivity indices by
city types: ICS data
81
TFP
125
76
Fixed assets
123
79
Wages
122
81
Value added
150
0
20
40
60
80
100
120
140
Per employee figures, medium cost cities=100
Low cost cities
High cost cities
160
Annual value added per worker (US $):
some counterfactuals for "high cost" cities
10407
7208
4124
4433
4780
3855
actual
(1): No
excess labor
regulation
(2): +No
barrier to
external
finance
(3): +No
problem of
access to
land
(4):+ No
complaint
against
tax/custom
admin
(5):
+Resolve
power
supply
problem
Number of inspections by government officials
Num
13.0 13.6
10.8
9.3
3.9
1.9
5.0 5.4 5.5 5.6
6.8 7.6
Senior management time spent
dealing with regulations (%)
24.3
21.0
7.0
7.9
11.2
9.9 10.7
12.7 12.8 13.4
15.7
17.8
Days to clear customs (imports)
7.1
5.7
2.6
3.0
7.1
7.6
8.1
8.8
9.6
9.6
10.1 10.8