Welcome Address by Mr Rajendra S Lodha, President, FICCI

Dr Arun Shourie (Hon'ble Union Minister)
Mr Prabhu Chawla (Editor, India Today )
Mr Onkar S Kanwar (CMD, Apollo Tyres Ltd)
Mr Deepak Puri [CMD, Moser Baer (India) Ltd]
Senior Officials from the Government
Colleagues from Trade & Industry
Ladies and Gentlemen

It gives me great pleasure to extend a warm welcome to you all. We are indeed privileged and honoured to have Dr Arun Shourie, Hon'ble Union Minister for Disinvestment, Commerce & Industry and Development of North-Eastern Region, with us this morning.

Hon'ble Minister Sir, while it is natural that FICCI's Platinum Jubilee Celebrations have a Special Session on 'Sharpening our Competitive Edge Post WTO', it is most befitting that you have graced the occasion to deliver the Keynote Address. We are grateful to you Sir, for kindly accepting our invitation.

We are particularly thankful to the Panelists who are here to share their views and insight on such an important subject.

I do not have to remind such a distinguished gathering that the business and economic landscape all over the world is changing fast. The far-reaching transformation we have witnessed in recent years has been driven by constantly emerging, rapidly spreading new technologies that are altering the relationship among enterprises, the State, markets and other entities. Global trading rules have also changed and are changing in the post-WTO scenario.

With the pace and extent of globalisation and liberalisation on the rise, it is obvious that countries must be globally competitive to survive and grow. Governments have reduced or in the process of reducing restrictions on trade, international finance and foreign direct investment. Domestic liberalisation is also being strengthened and production across national boundaries is being increasingly integrated. The result is that enterprises are exposed to global competition with an immediacy and intensity rarely seen before.

Becoming internationally competitive, sustaining as well as sharpening the competitive edge can be much tougher than it sounds - especially because competition is constantly taking new forms.

India's track record against this backdrop, I am afraid, is far from encouraging. The UNIDO-published 'Industrial Development Report 2002-2003' has portrayed a worrying picture of industrial decline and loss of competitiveness of the Indian manufacturing sector in 1985-1998. During this period, as the Report pointed out, not only had India's industrial structure remained static but, more damagingly, India had fallen further behind its competitors. The UNIDO-Report constructed a 'Competitive Industrial Performance Index' (CIP) and while India's CIP rank stood unchanged at 50 between 1985 and 1998, every East and South-East Asian country improved its position with that of China moving up to 37 from 61.

India's large technological and competitive gaps relative to world frontiers is the result of both past policies and weaknesses in industrial drivers. Indeed on each of the five 'drivers of industrial performance', the factors that have contributed to the vastly improved competitiveness of East Asian and Latin American newly industrialising economies, India has experienced a deterioration in these 13 years.

All this, of course, make very depressed reading notwithstanding the fact that India has acquired global competitive advantage in several service sectors, which have not been captured in the UNIDO-Report. I do not intend to undermine the rising significance of services; nevertheless I strongly feel we cannot ignore the critical importance of creating and sustaining a domestic manufacturing sector with globally viable and competitive scales of production.

As regards post-WTO trading regime, the new set of multilateral rules and disciplines offer potential benefits and opportunities. At the same time they also impose significant costs. For instance, even though tariffs and quantitative restrictions are lowered, standards and various quality-related regulations have emerged as formidable entry barriers. Non-tariff measures like technical specifications, testing & certification procedures, environmental and labour standards can substantially increase the cost of entering international markets.

Obviously, enormous challenges confront us in the years ahead. We have to get our acts together and put our house in order so as to retain and sharpen the competitive edge as the full impact and implications of various WTO-agreements unfold.

For illustration, I could cite the case of Agreement on Textiles and Clothing. While the phase-out of MFA quotas should lead to expansion of our textile exports, the fall-out might turn out to be a mixed bag. This is because following the phase-out, Indian exports would be directly competing with exports from China, Korea, Taiwan, Sri Lanka, Bangladesh and others. Naturally, the ability of Indian exporters to take advantage of the quota phase-out will depend upon their ability to enhance international competitiveness with productivity & efficiency improvements, quality control and the ability to move up the value chain.

Similar imperatives apply in other sectors and sub-sectors. And certainly, we can pull it through if we believe we could do it. We may have fallen behind but definitely are not out of the race. Some positive indicators are in sight as the latest "Global Competitiveness Report" shows that India's growth competitiveness rank improved from 57 in 2001 to 48 in 2002.

It is not just IT, Indians are now top draw for global auto majors like General Motors and Toyota. An Indian firm has been General Motors' most preferred supplier for several years together. Again, Hindustan Lever has the lowest production costs when compared with those at 87 other Unilever manufacturing facilities worldwide.

There is no room for getting into the defeatist mode. I am confident, we could build competitive industrial capabilities in the post-WTO setting. While Indian business will have to make all-out efforts, it is also clear that building such capabilities needs extensive policy support. A nurturing environment is necessary along with complementary policies to create skills, technological competence and network of supporting institutions. I am sure, our Government will take all necessary measures to ensure an 'enabling environment', so essential to get on the high road to competitiveness.

With these words I would like to welcome you all once again. Thank you.