India Economic Summit, jointly organized by the Confederation of Indian Industry (CII) and the World Economic Forum (WEF) was held in New Delhi from 8-10 November 2009. The theme was India’s next generation of growth. Its underlying agenda was to ensure India’s emergence as one of the world’s four largest economies by 2020 in terms of skill development and financial empowerment of the poor and female gender.

The summit, which completed its 25th edition this year, was remarkable in many ways. It came at a time when India bucked the global trend of recession and stood out to post a growth of 6.7 per cent in 2008-09 and 6.13 per cent in the April-June 2009 quarter. The global slowdown did pull down India from its high pedestal of 9 per cent growth in 2007-08, but the Indian growth story remains unhurt.

Leaders from industry, government, civil society and academia from over 40 countries attended. The three-day event saw phenomenal participation from 300 global and 480 Indian senior corporate executives. Besides the Prime Minister, 9 Union ministers attended the event and the summit saw liberal exchange of industry-government perceptions about the road ahead for the country.

The summit had six top industry leaders serving as Co-Chairs. They were Mr. Shumeet Banerji, CEO, Booz & Company, United Kingdom; Mr. Carlos Ghosn, Chairman and CEO, Renault, France; Mr. William D. Green, Chairman and CEO, Accenture, USA; Mr. Baba N. Kalyani, Chairman and Managing Director, Bharat Forge, India; Mrs. Chanda Kochhar, Managing Director and CEO, ICICI Bank, India; and Mrs. Indra Nooyi, Chairman and CEO, PepsiCo, USA.

PM’s Tough Talk

Inaugurating the Summit, India’s Prime Minister Dr. Manmohan Singh observed that the “worst is behind us” but cautioned that the path to global recovery would be long and uncertain. He scotched the speculation that his government was readying another economic stimulus package. Dr. Manmohan Singh said, “we will take appropriate action next year to wind it down”. Noting signs of an “upturn in the economy”, he said, “like other countries we also resorted to a significant stimulus”.

Singh’s comments were significant and varied from the G20 Summit stand that it was too early to withdraw fiscal sops meant for global recovery. India’s apex bank-the Reserve Bank of India (RBI) has already announced in October, the plan to tighten the monetary policy to tame down inflationary pressures.

The PM continued, “As a medium term objective, Indian will work to achieve a high growth rate of 9 percent per annum on the back of a strong domestic demand created by a large investment in infrastructure sector”. Despite the global slowdown and the adverse impact of an inadequate monsoon, Singh said India is expected to grow at around 6.5 percent in 2009-10 and “with a normal monsoon next year, we hope to achieve a growth rate of over 7 percent.” He underlined the need for reforming the financial sector, including the insurance and pension sub-sector. “Only a strong financial system can provide the financing needed for development of the infrastructure sector. This opens up a broad agenda for reform”, he said.

“Some of the reforms needed, especially in insurance, involve legislative changes,” Dr. Singh said. “We have taken initiative in this area and will strive to build the political consensus needed for these legislative actions to be completed”, he added.

The government plans to introduce a number of bills in parliament in December 2009, including one on Insurance to increase the foreign direct investment cap to 49 percent from the present level of 26 percent. The government may also introduce a Pension Bill to open up the sector. On Foreign Direct Investment (FDI), the PM said, “We are particularly keen to rationalize and simplify procedures to create an investor friendly environment.”

With most developed economies still struggling to come out of the grip of recession, recovery of India’s exports can take time. But Dr. Singh consoled, saying, “Our strategy must aim at sustaining a high rate of growth on the strength of strong domestic demand. We seek to achieve this through a large increase in investment in infrastructure. We have an ambitious programme of investment in all the key infrastructure sectors: Power, Roads, Ports, Airports, Telecommu-nications, Irrigation and Urban infrastructure.”

Emphasising the need for inclusive growth, the PM also called for increasing expenditure on education and health to 6 percent and 2.5 percent of GDP, respectively. Dr. Singh concluded his speech with the hope of achieving 9 percent growth rate in the medium term on the high savings rate at 35 percent of GDP.

Commerce and Industry Minister Mr. Anand Sharma counseled the need to diversify India’s exports to other markets such as Africa and Latin America, till the demand in the traditional markets of US, EU and Japan picks up gradually, which collectively account for 60 per cent of India’s exports.

Frustrated by the delay in Doha Round of WTO talks, India has been aggressively signing trade agreements with a number of countries, to diversify its exports. India recently concluded comprehensive trade deals with Korea and Association of Southeast Asian Nations (ASEAN), while significant deals with EU and Southern African Customs Union (SACU) are in the pipeline.

Economist and Planning Commission deputy chairman Montek Singh Ahluwalia also said about increasing infrastructure funding till global demand picks up. He said, “The government would maintain its high spending on infrastructure to create high rural demand and sustain high growth. For the time being the country could go for a high current account deficit, which is funded by the foreign inflows, of up to 2.5 percent of GDP. This would not only help improve the efficiency of Indian companies but also provide huge opportunities to the private sector”.

Optimism

The curtain raiser report, India Competitiveness Review 2009, summed up the real spirit; it was one of optimism. India has moved up one rank to 49 out of 133 economies in the global competitiveness index. It fared badly in the basic sub-index comprising health and primary education, but showed competitive advantages in institutions, financial market sophistication and innovation. The overall sentiment of the report was positive in contrast to last year’s edition when the curtain raiser report was titled the India@Risk 2008.

However, the report noted that the Indian economy is still the smallest among the four emerging market BRIC economies. “There is a major difference in the sentiment compared to last year, when we met just as the global economic crisis had started unfolding. Now, we have seen that India is one of the few economies to post a GDP growth which is more than 5 per cent,” says Sushant P. Rao, Director and Asia head of WEF.

The summit truly succeeded in trying to spell out what can be done to return to the high growth path even if the coming year may be shorn of the pre-slowdown buoyancy.