Dear Shri Piyush Goyalji :
On 03 April 2025 , POTUS Donald Trump unleashed a “ Trade / Tariff War “ –
a much stronger redux of the similar battle he had launched , exactly 7 years
ago
That made me send to our Cabinet Ministers , following email :
Ø A # TradeWar Epidemic
?............... 22
March 2018
Extract from my E Mail :
“ Only way to survive, will be by ensuring
that we turn India into a :
# LOW-COST-ECONOMY,
where we can compete
with the rest of the world ( for our share of the World trade ), on the basis
of a BETTER QUALITY / LOWER PRICE / FASTER DELIVERY , of our products and
services
We must immediately
implement #REFORMS which will help
our companies lower their costs of :
# Manpower ( Salaries
/ Wages )
# Materials ( Raw
materials / Components / Sub Assys )
# Money ( Funds
/ Finance / Capital )
# Space ( Constructed
factories / offices / homes )
# Management ( Manufacturing
and Marketing Overheads )
# Compliance ( Forms
/ Reports to be filled / filed )
# Corruption ( Bribes
to be paid to Govt Agencies / IT dept )
# Non-Governance ( MPs
– MLAs fail their responsibility )
As far as enabling Indian companies to lower their costs is concerned , ( -
thereby , effectively making them more competitive in export market ), there is an
urgent need for our governments ( both at the Centre and at the States ) , to :
Ø Speed
up the pace of REFORMS already initiated during past 4 years
Ø Initiate NEW
REFORMS
During the past 4 YEARS , I have sent many suggestions to
our Policy Makers
It is not possible to list all of
these here, but readers interested to know , may look up a few of these at :
Ø Agenda
for Reforms …………………………….. ........ 01 Oct
2015
Ø Citizen Monologues ………………………… ......... 24 Oct 2017
Ø HaveA Good Suggestion
? Send it to PM 08 Nov 2016
Ø An App for
Everything ? ………………………….. 18 Aug 2017
Ø Level-PlayingField
is a Double Edged Sword ! 08 Feb 2017 “
Dear Shri Goyalji ,
This time around, I would like to encapsulate my previous suggestions { for
improvement of India’s Competitiveness } into a FORMULA which would tell us
sharply, where do we stand vis-à-vis other countries, when it comes to figure out (
QUANTITATIVELY ), our INDIA
COMPETITIVE INDEX { ICI
}
I arrived at this INDEX by taking into account the following factors :
Extracting Factors from my earlier Blog
My blog
lists detailed “Industrial Inputs” that shape a country’s competitive
landscape. I’ll interpret these as factors for the ICI, aligning them with the
tariff-driven push for cost reduction and productivity:
1.
Manpower:
o
Sub-factors: Average age, education level, skills, work ethics,
productivity, working hours, holidays, salaries.
o
India Context: Young population (demographic advantage), literacy 74% (2024), labor
productivity $7/hour (manufacturing), 48-hour workweek, 10+ holidays/year,
wages ~$1/hour (PPP).
2.
Raw Materials/Components Availability:
o
Sub-factors: Local vs. imported, supply chain, logistics, duties/taxes,
quality.
o
India Context: 60% raw materials imported (e.g., steel, electronics), logistics cost 13%
of GDP (vs. 8% in China), 17.6% average tariff rate, variable quality.
3.
Finance/Bank Interest Rates:
o
Sub-factors: Equity, loans, interest rates, collateral, duration, terms.
o
India Context: Interest rates ~6.5% (2024, RBI), NPA ratio 3.2%, moderate access to
credit for MSMEs.
4.
Land/Location:
o
Sub-factors: Availability, prices, transport, skilled manpower access.
o
India Context: Land acquisition delays, prices vary ($10–$100/sq.m.), transport
connectivity improving (e.g., 40,000 km highways added 2014–2024), uneven skill
distribution.
5.
Industrial Policy:
o
Sub-factors: Exemptions, incentives, restrictions, inspections,
permissions, compliance.
o
India Context: “Make in India” incentives, 15+ approvals for manufacturing, high
compliance costs (2% of revenue for SMEs).
6.
Market:
o
Sub-factors: Domestic, overseas.
o
India Context: 1.4B domestic market, exports $437B (2023), growing EV demand (100,000
units sold 2024).
7.
Technology:
o
Sub-factors: IPR, patents regime, copyrights, home-grown, licensing,
royalty.
o
India Context: R&D 0.7% of GDP, 60,000 patents filed (2023), growing IT sector,
licensing costs moderate.
8.
Taxation:
o
Sub-factors: Corporate income tax, capital gains tax.
o
India Context: Corporate tax 22% (25% for new firms), capital gains tax 10–20%, high
compared to Kuwait (0%).
9.
Infrastructure:
o
Sub-factors: Road-rail network, air-sea connectivity, warehouses.
o
India Context: LPI 3.1/5, 1.4M km roads, 68,000 km rail, 13 major ports, warehouse
capacity growing (100M sq.ft. added 2020–2024).
10.
Competition:
o
Sub-factors: Monopoly, oligopoly, cartels, fierce/free competition.
o
India Context: Mixed market, oligopolies in telecom (e.g., Jio), fierce competition in
IT/services, cartels in some sectors (e.g., cement).
My blog also lists benchmarks (e.g., Ireland’s business-friendliness, Switzerland’s
productivity), suggesting a comparative approach. I’ll use these to normalize
India’s performance.
Additional Factors
To address
tariff-driven competitiveness and modern economic realities, I’ll add:
11. Energy Costs:
Critical for manufacturing cost (India: $0.08/kWh vs.$0.06/kWh in China,
2024).
12. Environmental Compliance:
Growing factor in trade (India’s carbon intensity 0.6 kg CO2/$
vs. 0.3 in EU,
2024).
13. Digital Infrastructure:
E-commerce and Industry 4.0 (India’s internet penetration 60% vs. 90% in
South
Formula for India Competitive Index (ICI)
Based on my
blog’s factors and added elements, here’s the formula:
ICI =
w1⋅MP+w2⋅RM+w3⋅FI+w4⋅LL+w5⋅IP+w6⋅MK+w7⋅TC+w8⋅TX+w9⋅IN+w10⋅CP+w11⋅EC+w12⋅EN+w13⋅DIICI = w_1 \cdot MP + w_2
\cdot RM + w_3 \cdot FI + w_4 \cdot LL + w_5 \cdot IP + w_6 \cdot MK + w_7
\cdot TC + w_8 \cdot TX + w_9 \cdot IN + w_{10} \cdot CP + w_{11} \cdot EC +
w_{12} \cdot EN + w_{13} \cdot DIICI=w1⋅MP+w2⋅RM+w3⋅FI+w4⋅LL+w5⋅IP+w6⋅MK+w7⋅TC+w8⋅TX+w9⋅IN+w10⋅CP+w11⋅EC+w12⋅EN+w13⋅DI
Where:
- ICI : India Competitive Index
(0–100, benchmarked against global leaders).
- MP : Manpower (weighted average of age, education, skills, productivity,
- hours, holidays,
salaries; normalized 0–1).
- RM : Raw Materials Availability (supply chain efficiency, logistics cost, tariff
- impact;
normalized 0–1).
- FI : Finance (interest
rates, credit access; normalized 0–1).
- LL : Land/Location (availability, price, transport, skill access; normalized 0–
- 1).
- IP : Industrial Policy
(incentives, compliance cost; normalized 0–1).
- MK : Market (domestic +
export potential; normalized 0–1).
- TC : Technology (R&D,
patents, licensing costs; normalized 0–1).
- TX : Taxation (corporate +
capital gains tax; inverse normalized 0–1).
- IN : Infrastructure (LPI,
connectivity, warehouses; normalized 0–1).
- CP : Competition (market
structure diversity; normalized 0–1).
- EC : Energy Costs (cost/kWh;
inverse normalized 0–1).
- EN : Environmental
Compliance (carbon intensity; inverse normalized 0–1).
- DI : Digital Infrastructure (internet penetration, e-governance; normalized
- 0–1).
- w₁ to w₁₃ : Weighting factors (sum to 1), adjustable based on trade
- priorities.
Normalization
- Positive factors (e.g., MP, IN) are normalized to the global leader (e.g., MP =
- India’s
productivity $7/hour / Switzerland’s $50/hour = 0.14).
- Inverse factors (e.g.,
TX, EC) are 1 - (India’s value / Global max), e.g., TX = 1 - (22% / 35%) =
0.37.
Weighting Example
Reflecting
tariff-driven cost focus and your blog’s emphasis on inputs:
- w₁ (MP) = 0.15
- w₂ (RM) = 0.10
- w₃ (FI) = 0.10
- w₄ (LL) = 0.10
- w₅ (IP) = 0.10
- w₆ (MK) = 0.10
- w₇ (TC) = 0.10
- w₈ (TX) = 0.05
- w₉ (IN) = 0.10
- w₁₀ (CP) = 0.05
- w₁₁ (EC) = 0.05
- w₁₂ (EN) = 0.05
- w₁₃ (DI) = 0.05
Sample Calculation (Hypothetical Data)
- MP = 0.30 ( young workforce, low productivity )
-
- RM = 0.50 ( high imports,
logistics cost 13% )
- FI = 0.65 ( 6.5% interest,
moderate credit )
- LL = 0.55 ( land delays,
improving transport )
- IP = 0.60 ( incentives
offset compliance costs )
- MK = 0.85 ( large market,
growing exports )
- TC = 0.15 ( low R&D )
- TX = 0.37 ( 22% tax vs.
35% max )
- IN = 0.62 ( LPI 3.1 )
- CP = 0.70 ( mixed
competition )
- EC = 0.25 ( 1 - 0.08/0.10 )
- EN = 0.50 ( 1 - 0.6/1.2 )
- DI = 0.67 ( 60%
penetration )
- ICI
- = ( 0.15 × 0.30) + (0.10 × 0.50) + (0.10 × 0.65) + (0.10 × 0.55) + (0.10 ×
- 0.60) + (0.10 × 0.85) + (0.10 × 0.15) + (0.05 × 0.37) + (0.10 × 0.62) +
- (0.05 × 0.70) + (0.05 × 0.25) + (0.05 × 0.50) + (0.05 × 0.67) = 0.045 +
- 0.05 + 0.065 + 0.055 + 0.06 + 0.085 + 0.015 + 0.0185 + 0.062 + 0.035 +
- 0.0125 + 0.025 +
0.0335 = 0.5615 (or 56.15/100).
This score suggests India is moderately competitive, reflecting its market size and
policy efforts but highlighting gaps in technology and energy costs.
Dear Shri Goyalji :
Obviously , what ICI that I have come up with above , is certainly not the " last word " on the subject. Look upon it, more as a " Conseptual Framework " , which enables us to figure out where do we stand, vis a vis , rest of the world
And what do we need to do to catch up with more productive countries
If you are wondering : " Does this Conceptual Framework, make sense ? "
Then , please look up the following charts , prepared using my formula
Even a cursory glance is enough to drive home the following " Home Truth " :
> Higher the COMPETITIVE SCORE of a country , higher its PER CAPITA, GDP
I rest my case
with regards ,
hemen parekh
www.HemenParekh.ai / www.HemenParekh.in / www.My-Teacher.in
05 April 2025
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