India Economic Summit

Welcome to the Forum's liveblog for the India Economic Summit 2016 in New Delhi. Come here for all the highlights of what's happened and details of what's coming up next.

Whether it's the start-up boom or skills crisis, energy progress or infrastructure gap, India's greatest challenges will be tackled by a global community of experts, policy-makers and business leaders at this year's meeting in New Delhi.

The idea behind this session is that India has reached a crossroads -- it's now the world's fastest growing major economy but has myriad growth challenges.

Will it be able to break out and achieve growth of, say, 8% and catch up with the rest of the world.

Or will it run out of steam under all the constraints it faces?

For those that would like to remind themselves of the formal definition of an 'inflection point' here's the simplest explanation we can find.

Johan Aurik, Managing Partner and Chairman of the Board at AT Kearney agrees that the Indian economy is at a crossroads. He's written an interesting analysis of the forces bearing on India.

Much of the discussion has cented on the idea of sustained Indian growth of 8% or more. To achieve that, the Indian government is going to need the strength and stamina to clear a series of major hurdles. The panel think the most important of these are education and training, investment in infrastructure, and deregulation.

Before the partition of India and Pakistan in 1947, South Asia was one of the most integrated parts of the world. Intra-regional trade then was estimated at about 20% of the total.

One indication of the scale of the challenge facing the region is that India only conducts around 5% of its trade with regional neighbours, says Sri Lankan trade minister Malik Samarawickrama.

He adds that it is hard to see progress in economic integration without India and Pakistan finding a way to work together.

KPMG's Richard Rekhy points out that international firms do not yet treat South Asia as a single economy. He adds that they don't even treat India as a single economy, preferring to focus on individual states.

Samir Saran, Vice President of the Observer Research Foundation, believes that global trade deals are fading and that India needs to do more to create regional alternatives.

He adds that there has been too great a focus on boosting exports -- a route that certainly served China well but belongs to a different era.

"We will have to invest in niche manufacturing and services and we’ll have to invest in regional supply chains."

Concerns about the impact of new technology on jobs dominated the 4th Industrial Revolution session.

There's a focus on skills and training from Indian Railways Minister Suresh Prabhu and General Electric's John Rice:

After the session is over Suresh Prabhu, whose ministry uses Twitter as part of its customer service system, summarises his thinking on the 4th Industrial Revolution in a series of tweets:

It's been 25 years since India liberalized its economy. The India Economic Update session sees the participants taking stock of the changes and looking ahead to the next few decades. India grew faster than China in 2015 - can that be sustained? And who really benefits from India's growth. Has "trickle down" really worked?

"Clearly it hasn't," says Vineet Nayyar, Vice-Chairman of Tech Mahindra Ltd. "Growth has been patchy, and the most underprivileged have seen the least benefit." But other speakers disagree:

One of the key themes of our India meeting is the idea of India at a crossroads - one path seeing the country achieving consistently high growth while the other sees it stagnating under the constraints it faces.

What determines which path the economy takes? Investment for one. "Our interest rates have been way too high to encourage capital formation," says Vineet Nayyar. "This is why actual investment in our industries has been coming down."

And what of the future of the economy - what are the main risks it faces? Harvard Economics Professor Gita Gopinath says increases in the price of commodities - and in particular oil - would have an important effect, although it shouldn't be as severe as previously. Pawan Munjal, Chairman, Managing Director and Chief Executive Officer of Hero MotoCorp Limited, agrees, and adds a lack of infrastructure development to the list of risks.

Gita Gopinath believes there are also international headwinds, particularly following the latest IMF global growth predictions: "There is a real risk to global growth - what is going to happen in Europe, the UK, Japan? There's no way to insulate India from it completely."

How should the Indian government manage the risks? Pawan Munjal was clear on what he wants to see.

Can India overcome internal challenges to become a top global destination for businesses and investors?

What can India learn from the mistakes that the US, France and Japan have made? The World Economic Forum's Chief Economist, Jennifer Blanke, spoke to the Business Standard on India's competitiveness and the challenges it faces.

India needs to learn from the mistakes of advanced economies: Jennifer Blanke

India has 18% of the world population, but accounts for 6% of the world’s primary energy consumption, says Dharmendra Pradhan, India’s Minister of State for Petroleum and Natural Gas, in this session on the country's energy future.

But although it has one of the lowest per capita power consumption rates, India - the world’s fastest growing large economy - needs accessible and better quality energy, and to achieve the right mix of energy sources.

It's possible to combine the transformation of energy systems without harming economic growth, says Ibrahim Baylan, Minister for Policy Coordination and Energy of Sweden.

The cost of renewables is coming down and the development of smart grids presents new opportunities to hugely improve energy efficiency.

“In Sweden if we changed all the lighting in the country in to LED, we’d save enough energy to power our transportation system,” he says.

On the subject of how to boost private sector investment in energy, Leocadia Zak, Director of the US Trade and Development Agency, says that businesses in the United States are interested in helping India to meet its energy goals, and see significant opportunities. “Clearly there are people who want to be in the market."

The pricing of energy is crucial to increasing private sector investment, the panellists agree. But India needs the political will to price it close to the cost of production, says Banmali Agrawala, President and CEO of GE South Asia.

Asked where he sees India’s biggest energy growth over the next 10 years, Mr Pradhan, Minister of State for Petroleum and Natural Gas, says he expects a steady rise in renewables “because this is the business model”, and that gas will take the place of coal in India's energy basket.

India has a $1.5 trillion financing gap, and the government has set itself a target of investing US$377 billion in infrastructure over the next three years. In the session "Building Blocks for Infrastructure Investment" the participants discuss how the country can unlock large-scale infrastructure development.

The critical part is attracting investment capital. "There is a wall of money out there, waiting to find bankable projects in India," says Nick Chism of KPMG. "Countries are competing for investment money, and India is a magnet - it has a great story to tell: demographics, innovation, technology and progress."

India has been working to improve its reputation with investors by tackling historical problems with the speed of infrastructure approvals. Nitin Jairam Gadkari, Indian Minister of Road Transport, Highways and Shipping, says his government has removed blocks on dozens of projects.

"What I admire about the Indian government is that it tracks investors and investments. Countries with a good rule of law and clear plans will attract investment around the world," Fred Hochberg, Chairman, Export-Import Bank of the United States

One of the primary sources of infrastructure investment in India is public-private partnerships, or PPPs. "In the last 20 years, India has done more PPPs than any other country in the world," says Sunil Kanoria, Vice-Chairman of SREI Infrastructure Finance Limited. There were problems, he says, "but we have also learned more than any other country in the world."

India has a vibrant start-up culture and has produced a number of 'unicorns' -- private companies worth more than a billion dollars. But it's way behind China, which has far more successful start-ups and where the top 10 software companies invest 11% of turnover in R&D against just 1% for India.

Indian start-ups have breadth -- this is not just about tech, start-ups are there in most sectors of the Indian economy. And they have depth (there are lots of players). But the sector lacks the critical quality of scale (few world-beaters.)

If India wants to create a Silicon Valley-style growth engine it will need to create start-ups with much greater scale.

Easy to say, harder to do. But three themes emerge from the discussion.

1. Positioning

One thing appears to be clear -- there's more to this than simply taking what has worked in the US and replicating it, according to VC investor Mahesh Murthy, who says that all Indian copycat companies have failed.

Mahesh Murthy adds that India needs to stop behaving like the "fag-end of the first world and more like the leader of the second world."

The thought here is that India can scale up by targeting countries facing the same kind of challenges -- perhaps looking East rather than West and looking at areas that have similar quality infrastructure.

Finance

Vijay Shekhar Sharma, founder of ecommerce startup Paytm, laments the lack of Indian finance for startups. "We do not have local support from investors."

Srivatsan Rajan, Chairman of Bain & Company India, points out that India does have institutional money available, it's just that the rules don't let them get involved in the start-up world.

Regulation

Industrial Policy and Promotion Secretary Ramesh Abhishek is admirably frank about how much work is to be done in untangling legacy regulations designed for a different age.

He offers an example: epharmacies are starting up. But they are being bothered by police inspectors who are unaware that they are doing nothing illegal. He talks of 'sensitizing' other ministries to the needs of the start-up world and ends by asking the panellists to help him with any ideas on how to make things easier.

India currently has five megacities. But heavy rural-to-urban migration will boost this figure to seven in the next 15 years.

“I’ve never been more optimistic about India than now,” argues Johan Aurik, co-chair of this year’s India Economic Summit and Global Managing Partner and Chairman of the Board, A.T. Kearney Inc. This is a sentiment echoed throughout this session.

All participants acknowledge the challenges, but are clear on the steps needed to drive manufacturing in India – and ensure ‘Make in India’ is a success. Its importance is underlined by Amitabh Kant, CEO, National Institution for Transforming India (NITI) Aayog.

Sanjeev Sharma, CEO and Managing Director of ABB Ltd, argues that India is starting from a strong base. “India has a robust ecosystem and a demographic dividend ready to take advantage,” he says.

Baba N. Kalyani agrees. The ecosystem, workforce and cost of raw materials make India very competitive, he says, but the challenge begins when it comes to export. Though these are largely external, he believes – namely the volatility of the global market. So India should look at what it can make for itself – but is currently importing.

Aurik agrees, arguing that India shouldn’t copy the Chinese model. India’s vast domestic market offers significant opportunities, and it shouldn’t build its hopes on exports – although they’re still important.

“India must go and penetrate global markets,” says Kant. For Kalyani, the brand has been overlooked. “Indian companies need to create products that are known around the world,” he argued.

To drive inclusive growth, job creation remains a big challenge. Infrastructure development must take place, says Aurik. Kalyani agrees. Spreading the manufacturing base requires high speed transport and communication networks, he says.

By 2031, 40% of India’s population will live in urban areas. This will bring new challenges and opportunities, says Shivnath Thukral, Managing Director of the Carnegie Endowment for International Peace, and moderator of this session.

N. Chandrababu Naidu, Chief Minister of Andhra Pradesh, describes how he helped to drive the transformation of Hyderabad, including the development of "Cyberabad," and the challenges he faced along the way.

Mr Thukral adds that urbanization is often blamed for everything during election years, and India needs strong leadership to show that urban areas are engines for growth.

The government is planning to create 100 smart cities in India. Amitabh Kant, CEO National Institution for Transforming India (NITI) Aayog, says smart cities are a way for the country to urbanize rapidly. But he adds that the process of urbanization is still in its infancy:

But India should not attempt to emulate Western models of urbanization: “American cities were made for cars not people. That model is not applicable anymore,” he says.

Cities that recycle water and waste and “embed” transportation first, like Singapore, are good models, he says. “If we do it right, we’ll create model for the rest of the world."

India is the fastest growing large economy in the world, having overtaken China last year. But how should it leverage this rapid growth? Introducing our meeting's closing plenary on India’s take-off, Prannoy Roy, Founder and Executive Co-Chairperson of New Delhi Television (NDTV), says the participants have promised not to make “motherhood and apple pie” statements about what India needs to do.

"To use a cricketing analogy, if you bat well, bowl well and catch, you’ll win the game," he says. "But what we need to know is how do you bat well, how do you bowl well, and how do you catch a catch?"

The session kicks off with discussion on foreign direct investment (FDI) in India. Amitabh Kant, CEO National Institution for Transforming India (NITI) Aayog, says Indian entrepreneurs need to be able to “take on the Amazons of this world”, and to do this they need FDI.

Vijay Shekhar Sharma, Founder and CEO of Paytm, says Indian entrepreneurs can build global companies, but they also need to build Indian markets. He adds that “if money is your answer”, you haven’t really found the solution to your problem yet.

Johan Aurik, Global Managing Partner and Chairman of the Board at A.T. Kearney, says that the most entrepreneurial areas in the world often do not get help from their governments. He points to the example of mobile money in Kenya.

Mr Roy turns to the audience to take a straw poll on whether they believe start-ups should get government protection for five years. Nobody raises their hand. Moving on to the topic of technology, he asks if the panel believe that digital and “bricks and mortar” companies are in competition with each other.

Small retailers must embrace technology, you can do bricks and mortar and ecommerce, says Mr Kant. Technology helps consumption to grow, says Mr Sharma.

Should the government intervene when it comes to helping India make the transition to new technologies? Mr Kant says governments should be “hands off”, while also encouraging the private sector to embrace smart technology.

Asking governments not to interfere is difficult, says Gita Gopinath, Professor of Economics at Harvard University. Politicians often don’t make the best economic decisions because they care too much about votes.

Taking a question from the audience about whether India is on a path to equitable growth, Professor Gopinath replies that the country faces a skills deficit, and people aren’t equipped for the new jobs that Fourth Industrial Revolution will bring.

The session draws to an end with a debate over whether India should give protection to its farmers, like some countries in the West.

And Professor Gopinath offers a final thought about the role of women in India’s future growth:

That brings us to the end of the India Economic Summit 2016, thank you for following our live blog. Our next event is the World Forum on Sport and Culture, taking place from 20th-22nd October in Tokyo, Japan.