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India to grow faster if firms innovate - World Bank

NEW DELHI (Reuters) - India’s economy could expand even faster if there was more use of innovative technology and schools and colleges raised the calibre of their teaching, a World Bank official said on Thursday.

File photo of cars being assembled in an automobile unit in Maharashtra, April 2, 2007. India's economy could expand even faster if there was more use of innovative technology and schools and colleges raised the calibre of their teaching, a World Bank official said on Thursday. REUTERS/Danish Ismail

Mark Dutz, a senior economist at the bank, told Reuters India needs to increase competition, build stronger skills and provide more public and private finance for research and development to keep up with major competitors.

“The disparities in productivity levels across firms within manufacturing sectors is wider in India than in China, Mexico, Russia and South Korea,” said Dutz, the author of a report entitled Unleashing India’s Innovation.

“The output of the economy could increase more than five-fold if all enterprises could achieve national best practices based on knowledge already in use in India,” he said at the bank’s New Delhi office.

Dutz said greater private participation in higher education is needed as India, the world’s second fastest growing major economy, would need 2.3 million highly-trained professionals by 2010 to maintain its share of the knowledge economy.

But if standards don’t improve it could face a shortfall of 500,000 workers, he added.

“There should be much more private participation in college and university training,” Dutz said.

“And then there could be ... better certification standards across the board to make sure that certain minimum standards are met.”

With Asia’s third-largest economy set for another year of 8 percent growth, employers ranging from technology firms to financial service providers are complaining of talent shortages, rising vacancies and rapidly rising wages.

The supply of cheap, English-speaking labour has been a prime draw for companies in the booming services sector but now firms are finding it hard to train new workers fast enough.

However, if a skills deficit persists and wages keep growing, analysts say economic growth will suffer and India could lose its edge as a destination for foreign manufacturing and services firms.

That would put at risk the government’s plan to push growth to 10 percent.

Another key area, according to Dutz, is to ensure companies work harder to contantly upgrade staff skills.

“Indian firms that provide in-service training are 23-28 percent more productive than those that do not, according World Bank data,” he said.

“Only 16 percent of Indian manufacturing firms offer in service training, compared with 92 percent in China,” Dutz added, quoting a World Bank survey.

Dutz also called for greater tapping of the knowledge and resources of Indians living overseas.

“Some two percent of Indians live abroad, together they earn (the equivalent of) almost two-thirds of India’s gross domestic product. New ways must be explored to leverage the entrepreneurs and technologists of India’s diaspora.”

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