Two recent reports, among others, clearly identify some areas that need attention in 2014 for recovery to continue across economies and down to the local level.
Societe Generale’s 2014 Global Economic Forecast highlights India’s rising inflation and steadily weakening industrial production.
The remaining BRIC countries have their own challenges. In China, though, manufacturers are set to enjoy higher profit margins especially with demand surging ahead of capacity. Brazil, in particular, will compete with China in the area of manufacturing exports. For countries such as Taiwan, economic stability will hinge on higher export orders and improved retail sales.
The US will mainly worry about healthier employment figures and consistent housing recovery.
Europe is a mixed bag with Germany likely to remain resilient, as France teeters on the brink of recession once again, Spain feels the effects of the credit crisis of 2008 and many of Italy’s corporations deal with unaffordable and restrained lending.
In the UK, unemployment will be a major factor hindering recovery.
How should India orient itself to face the future?
BALANCING ACTIndia benefits with its services sector, which is useful for employment generation. This in turn introduces more people into the middle-class bracket and they largely fuel consumption here.
However, Deloitte’s report on Karnataka that was released some days ago shows deceleration in both industry and services sectors over two financial years.
Karnataka’s six per cent growth stood lower than the national average of seven per cent while other States did better. But this really points to a larger issue.
Disparity in employment and income across the state stems from an imbalanced spread of industries in Karnataka, and especially those clustered around Bangalore’s urban and rural districts.
This is the downside to viewing Bangalore as the country’s start-up capital and promoting it as such.
From a discussion earlier this year on the feasibility and need for multiple cities in India to develop as start-up hubs, it became clear that the ecosystem deserves more attention rather than an excessive focus on branding cities as start-up destinations.
Mukund Mohan, CEO-in-Residence at Microsoft Accelerator, feels that the way forward was to have entrepreneurs, investors and governments finding a niche to operate in. “For start-ups to thrive anywhere, entrepreneurs require easier access to capital and early adopters (customers),” he said.
EMBRACING RISKFor India to find its balance, every State needs to concentrate on helping SMEs thrive in its semi-urban and rural segments. Deloitte’s report underlines that agricultural and manufacturing sectors need investment and attention.
Japan, a very strong market with respect to the purchasing power of consumers, has also understood that SMEs will be responsible in a large way for generating jobs in the future.
Some months ago, the UK Government’s Department of Business, Innovation and Skills had recruited 15,000 mentors to help support start-ups across the UK.
Hopeful for a GDP growth of 2.4 per cent over the next year or two rather than 0.6 per cent expected earlier in 2013, the recruitment drive was one of the indicators for how vital the UK considers small businesses. With the middle-class in India increasingly turning entrepreneurial, investor confidence has also been steady. But there remains a need for real innovation and Bangalore cannot be India’s only mascot, at least not for hitherto touted reasons.
Professor G. Sabarinathan, Chairperson of the NS Raghavan Centre for Entrepreneurial Learning at IIMB, says, “Climate will become irrelevant. India already has high quality human capital in places like Pune, Hyderabad, Coimbatore and Gurgaon.” Notably, both the NSRCEL and firms like Kae Capital are sector agnostic. The focus remains then on finding capable entrepreneurs – this is what India needs.
Bottom-line: In 2014, Tier -2, -3 and -4 towns lie open for small and mid-size enterprises to make the big difference.
This requires every player in the ecosystem to take some strategic risks.