Page 297 - DMGT509_RURAL MARKETING

Rural Marketing

Notes Second, although private enterprise must provide the main thrust for real growth in any
national economy, it cannot function optimally if the institutions “created and maintained
by the Government” (with whom it has to interact on a daily basis) do not provide the
required support.
Third, there can be no sustainable economic growth (in contrast to the diminishing returns
scenario associated with principal inputs like labour and capital) unless there is healthy
technological progress which, in the real world, has shown signs of accelerating over time
instead of decelerating.
As the GCR 2003 says, these three “pillars of growth” are interwoven: “strong institutions,
for example, are needed for technological development to occur; a sophisticated technology
base will contribute greatly to macroeconomic stability, but they do each have close and
statistically distinct relationships with recent trends in economic growth”.
How do India and China fare under these three distinct categories? In the macroeconomic
environment index (which, as we have seen, basically measures stability and predictability)
China scores handsomely with a 25th ranking with India occupying the 52nd place.
Curiously, as regards the other two indices, public institutions and technology, the two
economies are very close to each other.
Thus, while in the former China and India are at 52nd and 55th positions, in the latter
(technology) India is No 64 followed by China’s No 65. An important point to consider is
whether China’s pre-eminence vis-à-vis India in the sphere of macroeconomic stability
has anything to do with the form of political governance that is prevalent in Communist
China as opposed to the parliamentary democratic babel that holds sway in India.
The Business Competitiveness Index is the micro counterpart of the macro approach that
is encapsulated in the GCI. As the report puts it succinctly: “It is well understood that
sound fiscal and monetary policies, a trusted and efficient legal system, a stable set of
democratic institutions and progress on social conditions contribute greatly to a healthy
economy.

“However, these broader conditions are necessary but not sufficient. They provide the
opportunity to create wealth but do not themselves create wealth. Wealth is actually
created (at) the micro-economic level of the economy, rooted in the sophistication of
actual companies as well as in the quality of the micro-economic business environment in
which a nation’s firms compete. Unless these micro-economic capabilities improve,
macroeconomic, political, legal, and social reforms will not bear full fruit”.
In another place, the report says: “The productivity of a country is ultimately set by the
productivity of its companies. An economy cannot be competitive unless companies
operating there are competitive, whether they are domestic firms or subsidiaries of foreign
companies. However, the sophistication and productivity of companies (are) inextricably
intertwined with the quality of the national business environment. More productive
company strategies require more highly skilled people, better information, more efficient
Government processes, improved infrastructure, better suppliers, more advanced research
institutions, and more intense competitive pressure, among other things. This is what the
BCI tries to capture”.

Like the GCI, this particular index too is broken down into component parts, namely,
sophistication of company operations and strategy, and quality of the national business
environment. How do India and China fare here vis-à-vis each other?
These figures, basically evaluating the quality of the business environment at the grassroots
level where freedom to operate is of the essence, throw up an interesting departure from
Contd...

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