india: A new global economy driven by size is emerging — the UK has lost a key advantage while India is rising: Christian H. M. Ketels

What is the core of your research?

I focus on the long-term sustainable growth dynamics of countries. By ‘growth’, alongside GDP, I look at the ability of nations to support rising living standards for their populations over time. I work with both private sector leaders and governments to figure out how nations can become more strategic in their choices to achieve higher levels of performance.

You study competitiveness — what defines this today?

Competitiveness is at the core of a productive economy. It is the ability to generate higher standards of living. This depends on the capacity of companies to produce goods and services that create value for people and businesses. Alongside, policy makers must build environments that enable companies to provide that kind of value. Competitiveness involves many factors, from the education people get to the rules and regulations governing markets, the financial sector, etc. Building competitiveness means dealing with that kind of complexity.

How do you read the current face-off developing between the US and China over semiconductors?

This is one of the world’s critical issues now and it will shape much of the global economy’s dynamics in the years to come. I’d argue this isn’t so much about making the US or China more productive but the geopolitical rivalry between these two nations — this situation is about shaping the rules of the game to be more conducive to one’s own country. Arguably, the Chinese have played this game for some time and fairly successfully — they’ve used industrial power and economic and political weight to create structures that benefitted them, from attracting investors and their technology into their markets to buying out strategic tech in other countries, etc. It appears the US is trying to get into that game now. Traditionally, the US has been about free markets and growing productivity — now, there is a realisation that you also need to think about the rules of the game and how these affect outcomes.

You research economic clusters. Has the UK taken a hit after it left the EU?

Clusters are a geographic concentration of related economic activities, from value chain collaborations to labour markets, knowledge pools, etc. These hot spots enable companies to become more productive and create more value for a regional economy.

For many years, the UK’s competitive advantage was being very global and dynamic, having a strong financial sector and providing international companies access to the EU’s internal market. That’s gone after Brexit — the question now is, what is the UK’s new competitive position in the global economy? Importantly, a new world economy is emerging where size matters in terms of political clout being able to influence market outcomes more. The UK’s ability to affect outcomes in this scenario is shrinking while one of its key competitive advantages has gone.

Importantly, Brexit also happened because of the skewed development of the UK, one of the most geographically unbalanced economies of the OECD. It is very strong economically around London and the southwest, with Oxford and Cambridge leading science and tech development, but with very low productivity in the rest of the country. The tension between those who have benefitted from such growth versus those who haven’t is a problem. There’s been some talk of ‘levelling up’ and the Confederation of British Industry using more clusters to develop other regions but this remains a significant challenge for the UK.

India recently overtook the UK as the world’s fifth largest economy. How do you analyse this?

It’s a sign of India rising — and this will only continue. The Indian economy will probably become the world’s third largest in the foreseeable future. The demographics are beneficial. India has a lot of people ready to enter the labour force in the next few years. India is also becoming more attractive to foreign investors for its own market and as an alternative supplier to China. At the same time, what ultimately matters to people is the prosperity level of individuals. As our recent report for the Indian government shows, there has been some growth in this but there is also rising inequality to deal with. It is important to ensure shared and sustainable prosperity growth across wider regions. India is a success story — it is one of the few countries to deliver sustained high growth for decades now. That is a huge achievement which should be recognised.

Alongside, it needs more job creation. The economy has become much more skill intensive but many workers lack skills. One suggestion we’ve made is to explore employment possibilities for people in the bottom half of the labour force by pairing them with technology in sectors like healthcare and transportation. These offer a growing market and an opportunity for such workers to get a foot in the door.

(Views expressed are personal)