"The real economy, including manufacturing, is what is important and the appreciation of the rupee is making that economy suffer". Rahul Bajaj, Chairman, Bajaj Auto; Member of Parliament, India.

To do that, it is important not to see India's problems as insoluble, nor to take India's success as preordained. Indeed, talk of India as a new economic superpower may be premature, warned Palaniappan Chidambaram, Minister of Finance of India. He added that a superpower is a magnet for knowledge, a financial centre and has access to abundant natural resources. India has yet to secure these things and so must avoid hubris or chauvinism.

India must not, therefore, let economic success be narrowly defined by the middle class ideal as seen on television. Between peasantry and prosperity, India needs to fill the burgeoning demand for skilled labour. "The concept of dignity of labour has to be established to a much greater degree than we have", said Anjali Raina, Country Training Director, Citibank, India. And as large and complex as it is, India cannot afford to turn its back on the world's problems - they have historically had a way of pulling India in.

HIV/ AIDS is an example of an imported problem that will require Indian solutions to solve. With at least 5.7 million HIV-positive people, India last year overtook South Africa as the country with the largest number of people infected with the virus that causes AIDS.

Global warming, meanwhile, is exacerbating the rapid decline in India's freshwater supplies (see Figure 1). By 2025, India's per capita supply of renewable water is projected to drop to only a quarter of what it was in 1975. India, however, receives more rainfall than it can manage, which often results in flooding. Harnessing those floodwaters will require that India build dams and reservoirs, as China has built infrastructure such as the Three Gorges dam. "India must summon that kind of determination and will to execute the projects", said Chidambaram.

"Along with national security, the three pillars of security - human, economic and physical - need to be raised to bring the economy to a position where the challenges can be met. The risks were identified because of their interconnectedness, which magnifies their impact". Shamsher S. Mehta, Director-General, Confederation of Indian Industry (CII), India

Many worry that the government has adopted a short-sighted approach to the environment, however, rejecting calls to cap emissions growth despite abundant evidence that India is choking on its pollution. While critics agree with India that the West must lead the world in cutting emissions, many say India shouldn't use development as an excuse for repeating the West's mistakes. Instead, said Stuart Popham, Senior Partner, Clifford Chance, United Kingdom, India has an opportunity to leapfrog ahead, "and formulate regulations that might be the template for the rest of the world".

Protectionism, both at home and abroad, is another looming risk to India's growth. India has its own opponents to free trade and capital flows, and many Indians who are afraid of displacement want to block the creation of special economic zones that stand to boost investment and create centres of job growth outside major cities. In the United States, a growing number of people see the rise of India and China as a threat to their own prosperity.

India is fortunate in that, relative to export-dependent East Asia, it is somewhat insulated from the market turmoil emanating from the troubled US housing market. India relies largely on coal for its energy, and its economic growth is driven primarily by domestic demand rather than exports.

Nonetheless, India relies on imports for as much as 80% of its fuel needs and is trying to substitute coal with cleaner, but imported, natural gas. Rising oil prices have repercussions for India, and India has room to play a more assertive diplomatic role where its energy supply is concerned.

The prospect of a US economic slowdown next year, while of greater concern to East Asia's exporters, also has a potentially negative impact for India. Already this year, the US dollar has fallen dramatically against the rupee, making it harder for Indian exporters to compete overseas and luring speculative investments into India, which is in turn pushing the rupee up even faster (see Figure 2). Normally a rising currency helps keep a lid on inflation but, in India, the flood of cash into the country and rapid growth are combining to accelerate price increases.

Some Indian industrialists suggested capital controls to help stem the inflow of portfolio investments. "Something has to be put there - not for money going out but for money coming in", said Rahul Bajaj, Chairman, Bajaj Auto; Member of Parliament, India. Despite the experiences of Malaysia and Chile, economists warn that capital controls would be a mistake. The strong rupee lowers the cost of importing much - needed capital goods, which can in turn be used to boost productivity. India's capital markets need to be liberalized, they say, so they grow and become less volatile. But until that happens, Indian companies will have to get used to bigger swings in the rupee's value. A longer-term risk to Indian economic growth is its rising population of new job entrants. With half of the population under 25, the Indian working-age population is expected to rise by more than 10% to 762 million by 2012. The added savings and consumption will propel the Indian economy even faster. With most of these young people counted among the rural poor, however, the worry is that limited access to education has left most of them lacking marketable skills. That could leave India short of skilled workers, but teeming with restive unemployed. The government aims to broaden access to primary and secondary education, and increase college enrolment. But economists and executives stress that it is the quality, not just quantity, of education that counts. They feel that too many colleges are producing under-qualified graduates. At the same time, many college graduates are often over-qualified for service sector jobs such as plumbing and electrical work. Vocational training is an area into which companies can invest directly and reap rewards in a relatively short time. If India can manage to train more of its poor, rural young people to take up skilled jobs, it will be able to fill not only its own need for labour, but find more jobs to meet the rising shortage of skilled workers in nations with ageing populations overseas.		Business Leaders in India Take on the Climate Change Challenge Business leaders sat down at the India Economic Summit to discuss the climate change challenge. The high number and level of participants during the programme's two sessions on the topic showed that there is rising business concern in India about the issue. Participants were given expert overviews of the scale and urgency of the climate change problem facing the subcontinent. As well as the adaptation challenge - which, if not met, has huge potential to stunt future national growth - there are predictions of a seven-fold increase in energy consumption in India by 2030, 60-70% of which will be provided by coal. India will soon become a major emitter of greenhouse gases and will face increasing international pressure to reduce emissions levels. Urgent action is required to avoid the tipping point that scientists say will be reached if fast-growing countries emit as rapidly as others have in the past. Business participants stated that the case for action in India is simple and undeniable, and they are willing to step forward if government hesitates. Participants expressed their view that, irrespective of the United Nations Climate Change Conference 2007 outcome, the Indian business community should show leadership and start taking the first steps forward.
India@Risk: Six Global Challenges Ahead session: Robert D. Blackwill, President, Barbour Griffith and Rogers International, USA; Chaly C. K. Mah, Chief Executive Officer, Asia Pacific, Deloitte, Singapore; Shekhar Dutt, Deputy National Security Adviser, National Security Council (NSC), India; Madeleine K. Albright, President, The Albright Group, USA; Stuart Popham, Senior Partner, Clifford Chance, United Kingdom and Shamsher S. Mehta, Director-General, Confederation of Indian Industry (CII), India

India@Risk

India is at an inflection point - while the prospect of sustaining 8 - 10% growth is achievable, it is not a given, according to a report released by the World Economic Forum's Global Risk Network and the Confederation of Indian Industry (CII). Decision-makers cannot assume that tomorrow's growth story in India will read like today's. The economic fundamentals are in place, but political dynamics and the scope of structural reforms are more likely to shape the next chapter, according to the India@Risk 2007 report released at the India Economic Summit. In the short term, three economic threats loom large: a rising rupee, an oil price shock and a collapse of asset prices (especially property or shares) triggered by a global re-appreciation of risk. In the medium and long term, risk mitigation should focus on building increased resilience via continued investment in basic infrastructure and education, in order to reap the demographic dividend of a young, aspirational and growing populace. With more than 71 million new jobs required over the next five years, inclusive growth is an imperative for India. Another key priority highlighted in the report is water - per capita supply in 2025 is expected to be less than half of that in 1975 (see chart). There is no doubt that the current water situation in India will get much worse unless different approaches are taken. India has enough precipitation but not enough storage in terms of dams and reservoirs; it needs improved groundwater recharge and should explore opportunities for further public-private partnerships. Other risks that could derail India's future growth prospects include climate change, infectious diseases and the potential backlash against globalization (i.e. rising protectionism). "Some of these risks are beyond India's control, including exogenous economic crises and an oil price shock", said Palaniappan Chidambaram, Minister of Finance of India, adding, "Other risks are endogenous and can be overcome - for example, risks associated with demographics and the lack of freshwater". The report concludes that for India - a country characterized by huge opportunities and ever-increasing regional and global interdependence - the imperative is for collective action to mitigate these shared risks. For the full report go to: http://www.weforum.org/pdf/grn/indiarisk.pdf