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"As long as advanced and developed economies have an edge over developing countries in knowledge, financial and material resources, I do not think we should rush to the conclusion that power has shifted". Palaniappan Chidambaram,
Minister of Finance of India |
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"The greatest challenge facing India is to build an effective, efficient, scaleable
and sustainable infrastructure for this fast-emerging economy". Hector de J. Ruiz,
Chairman of the Board and Chief Executive Officer, AMD (Advanced Micro Devices), USA; Co-Chair of the India Economic Summit |
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 | "India has always been outside the epicentre of events and yet we get drawn in by the sheer gravitational pull of our geography, resources and potential".
Anand G. Mahindra, Vice-Chairman and Managing Director, Mahindra & Mahindra, India; Co-Chair of the India Economic Summit |
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While there was confidence among the participants at the 23rd India Economic Summit, there was no complacency. India's Finance Minister Palaniappan Chidambaram, for example, was candid in his assessment of the challenges ahead. Despite all the progress India has made in recent years, particularly as a result of substantial investment and spending growth, "my worry is whether we are getting bang for the buck", he said. "While outlays have increased manyfold from 2003-2004 to 2008, are these outlays resulting in outcomes in the field?"
That was the main question on participants' minds: Is India getting the results it needs now that it is achieving 8-9% growth a year and foreign investment has risen sharply? It was not enough to recognize problems; participants focused on finding solutions to the root causes of India's competitiveness deficiencies. Minister Chidambaram, for his part, pinpointed the lack of sufficient restructuring in the financial sector as an obvious failing. "The financial sector is the heart of the economy and we haven't been able to pushthrough reforms; that's a disappointment".
At the end of the Summit, participants agreed on the areas in which action will have the greatest impact. The agenda of priorities for the coming year includes skills development, improving governance, upgrading education, building public-private partnerships (PPPs) in infrastructure, and addressing environmental degradation and water scarcity. All are enormous tasks, but perhaps the most challenging will be the development of India's enormous human resources through skills training and education. In many of the sessions, time after time, participants stressed that it is critical for India to take full advantage of its demographic advantages by providing the schooling and instruction necessary to raise the skill levels of its expanding workforce and to create the millions of jobs necessary to allow them to be productive and contribute to inclusive economic growth.
India will be able to build the many centres of excellence it needs to sustain high growth with equity over the long term only if it can educate and train its people to be productive at all levels of society and in both the rural and urban areas. "What we now need to do is roll up our sleeves and deliver on the expectations for India that exist around the world", stated Anand G. Mahindra, Vice-Chairman and Managing Director, Mahindra & Mahindra, India, and Co-Chair of the India Economic Summit. He added that the country needs to develop the competencies that will deliver on the promise of India.
The India Economic Summit, convened in partnership with the Confederation of Indian Industry (CII), was organized under four sub-themes: State and National Competitiveness, Inclusive Growth, Infrastructure Development and Risk Management. In addition, for the first time at the India meeting, four WorkSpace sessions were held on the following topics: Innovative Models: Expanding India's Competitive Advantage, Getting Ahead of the Climate Change Curve, Excellence Despite the Odds: The Social Entrepreneur in India and Unlocking the DNA of an Indian Multinational.
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State and National Competitiveness
A key to future growth is the enormous domestic market and the consumption-led
economy, which has powered India's growth and provided a degree of resilience and protection from global ebbs and flows.
Orit Gadiesh, Chairman, Bain & Company, USA; Member of the Foundation Board of the World Economic Forum; Co-Chair of the India Economic Summit
India has become one of the most successful economies in the world in attracting the attention of global business strategists and investors. But to improve its competitiveness in the long term, it will have to address its economic weaknesses. The most pressing among them is the need to increase skills training to better prepare its young population to enter the workforce.
Poor infrastructure, differences in regulatory and policy regimes across states, the absence of a single national market, deficiencies in the manufacturing sector, bureaucratic red tape and corruption are among the key obstacles to improving India's global competitiveness. |
| • | A major priority is the skills deficit. While labour productivity has improved, India does not have the skill levels to sustain 9% growth |
| • | TTraining young people for vocational work is critical if India is to take full advantage of the demographic dividend it can gain from its fast-growing workforce |
| • | Government-controlled education and vocational schemes may not be sufficient to address the problem. The private sector must be involved to create jobs for new entrants |
| • | Investors should be encouraged or even required to set up training institutes in their respective sectors |
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Inclusive Growth
"There are great opportunities in India, but don’t take anything for granted. Keep investing in education and address infrastructure."
Edward J. Zander, Chairman and Chief Executive Officer, Motorola, USA; Co-Chair of the India Economic Summit
India faces a major challenge in dealing with its urban poor and the even larger numbers of people who live in poverty in rural areas. As India aims for growth with equity, it may be difficult to improve conditions in the countryside without making the situation worse in the cities. |
| • | About a quarter of Indians live below the poverty line, while almost 70% of the population is in the countryside |
| • | The rising discontent among the poor has led to a political backlash, including violent protests and insurgency. The growth of regional parties is, in part, a result of the need for the disadvantaged to have their voices heard |
| • | To address the concerns of the poor and disenfranchised, the government and national parties will need to embrace local interests. A key priority must be to increase spending on rural infrastructure |
| • | The private sector has a role to play. Banks, for example, can promote microfinance and provide rural Indians with education on the basics of finance |
| • | The government must raise incomes in the
countryside without accelerating the rush to the cities. Tools to achieve this include technology to turn rural India into a service centre for urban areas and regulations and incentives to encourage companies to "ruralize" |
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Ben J. Verwaayen, Chief Executive Officer, BT, United Kingdom; Co-Chair of the India Economic Summit |
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Infrastructure Development
"Within India, the challenge is how to create 100 million new jobs in the next 15 years."
Mukesh Ambani, Chairman and Managing Director, Reliance Industries, India; Co-Chair of the India Economic Summit
One of the biggest challenges India faces is to address its lack of adequate and well-maintained infrastructure. Infrastructure investment must rise to around 9% if India is to sustain 10% growth. The challenge: to forge the public-private partnerships necessary to marshal the resources and expertise needed to dramatically improve the situation. |
| • | The public sector has insufficient resources to tackle the infrastructure deficit, while the private sector has funding and talent issues of its own |
| • | The successful completion of the National Highways Authority's Golden Quadrilateral project is an example of a public-private revenue sharing agreement |
| • | Even if clearly defined projects existed, pricing and risk management, especially between public and private entities, need more sophistication and should move away from the traditional "cheapest supplier" mindset |
| • | Cross-sector government cooperation must be improved so that an integrated approach may be taken in constructing infrastructure projects such as airports, which will need roads and transport links to allow easy access |
| • | India does not have sufficient capacity to execute multiple mega-construction projects due to the lack of qualified engineering firms and the paucity of trained manpower |
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Risk Management
Kamal Nath, Minister of Commerce and Industry of India
In managing the risks that threaten its current expansion, India must aim to turn some of the threats into opportunities. Although the rest of the world
considers India to be an emerging superpower, it is in the country's strategic interest to resist complacency and to avoid hubris. |
| • | Economic success should not be narrowly defined by the middle class, white-collar ideal. India needs to fill the burgeoning demand for skilled, blue-collar labour |
| • | India must address global problems such as
HIV/ AIDS and global warming |
| • | Climate change is exacerbating the rapid decline of India's freshwater supplies. India must focus on building the necessary infrastructure to harness rainfall and floodwaters for productive use |
| • | Protectionism, both at home and abroad, is
another looming risk to India's growth. |
| • | The prospect of a US economic slowdown may also have a negative impact, but India may be better insulated from a recession in America than East Asian economies |
| • | India could risk raising social tensions if not enough jobs are created to absorb the increase in the workforce. A major challenge is to provide young people the skills they need to be productively employed |
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Building Centres of Excellence in the WorkSpace
Participants at the India Economic Summit had the opportunity to take part in four WorkSpace sessions, which focused on different issues important to India's future and sought a uniquely Indian perspective in addressing them. |
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