The 21st India Economic Summit, organised jointly by the Confederation of Indian Industry (CII) and the World Economic Forum, was held in November in New Delhi with participants including CEOs, and political and business leaders from India and abroad.

With the emergence of India as a global economic power, there seems to be universal acceptance that India is riding high on the wave of economic reforms and growth. The Summit provided a unique opportunity to meet and network with global business and political leaders, discuss new business opportunities, and strengthen existing partnerships. The Summit covered a broad spectrum of opportunities existing in sectors ranging from infrastructure, manufacturing, knowledge-based industries, agri-business, rural economy, biotechnology, energy, environment, water, healthcare, tourism and hospitality, media and entertainment, retail, real estate, social development and demographic advantage among others. The style was interactive, with discussions aimed at providing answers and proposing a future path.

In the opening plenary of the Summit, Indian Finance Minister P Chidambaram outlined key priorities for the country to achieve and sustain 8 percent economic growth. In most services, he said that the government should get out of the way, while in health and education it should invest more. Most of all, India’s serious infrastructure shortage had to be addressed with the private sector leading the way when it was more efficient for it to do so. For the agriculture sector to grow between 3.5 and 4 percent, more land had to be adequately irrigated and the corporate sector should be allowed to participate in agricultural supply and distribution. In the industrial sector, innovation must be encouraged through heavy investment in research and development. “It’s not enough to become an industrial society; we must become an innovative society,” said the minister.

In an interactive “Town Hall” meeting held on the first day of the Summit, it was felt that vast infrastructural improvements were needed to boost India’s competitiveness. Improving basic infrastructure and also reducing waste in government spending were imperative for building competitiveness in the new global economy. Augusto Lopez-Claros, Chief Economist and Director of the Global Competitiveness Programme at the World Economic Forum, said, “An inadequate supply of infrastructure is rated by business as the biggest obstacle to operating in India. Improving basic infrastructure would drive up foreign direct investment.”

The biotech sector in India has been forecasted to grow fivefold to US$5 billion by 2010. Training new generations of talented Indians and protecting intellectual property rights (IPR) will unlock the potential of India’s biotech industry was the consensus at the Summit. Philippe Petit, Deputy Director-General of the World Intellectual Property Organization, said, “Biotech and pharmaceutical sectors are vulnerable to intellectual property abuses and so effective intellectual property management is important.” India introduced in January 2005 a new patent regime in line with international standards.

The CFO of Tata Consultancy Services—India’s largest software company—S. Mahalingam, said, “However, human resources in India are a real challenge, from both the quality point of view and the number of trained Indians returning from abroad.” Attracting qualified engineers to biotech industries will require more than competitive wages and establishing centres of excellence, and IPR will also be crucial, he added.

Indian Secretary of Industrial Policy and Promotion Ajay Dua at the Summit session ‘FDI: Boom times ahead,’ said, “India has all the ingredients of a knowledge-based economy by virtue of its human resource strength.” He said that among the 102 countries listed in World Economic Forum, India ranks third as far as availability of engineers and scientists is concerned, its quality of management schools comes eighth, its educational institutions are ranked 28, while the quality of its research institutions stands at 20.

Jim Goodnight, CEO, SAS, USA, and co-chairman of the India Economic Summit, stressed that India was lagging behind in inviting FDI despite its strong points—a strong economic base, an enviable IT manpower and low labour cost compared to the United States.

Highlighting the strong points of the Indian economy, Dua said that India had maintained a growth rate of 6 percent in the last ten years of which the services sector had over 50 percent share in GDP and manufacturing sector had grown at 8.8 percent in 2004-05, accounting for 17.4 percent share in 2004-05. However, he admitted that India had not been able to attract as much FDI as it should have but ‘things are changing.’ The FDI policy, he pointed out, was evolving in a big way since 1991 and more sectors had been opened up to FDI while the equity caps in the existing ones were being raised and procedures were being simplified. He pointed out that up to 100 percent investment through the automotive route in almost all sectors (barring a few) had already been opened up in 2000. From June 2004, FDI in domestic airlines had been increased from 40 percent to 49 percent and FDI up to 100 percent under the automatic route had been allowed in development of townships, housing and construction of development projects. The telecom sector had been another major attraction for FDI, where the limit had been raised to 74 percent, he pointed out.

Dua agreed that there were problems in clearance of projects that caused irritation, but major initiatives were being taken to improve this scenario. Under the National e-governance Action Plan, projects have been undertaken by the Centre and the state governments to ensure transparency and efficiency. One of the most important initiatives taken by the government to remove many of these misgivings has been the passage of the Rights to Information Act, which should go a long way in assuring foreign investors that they are welcome to work in India without any hindrance, he asserted.

To meet India’s oil and gas requirements in the coming years, both long- and short-term measures will have to be adopted. As oil prices are increasing and domestic reserves are drying up, there is an imminent need for Asian countries to come together and form a regional strategy. Regarding India’s surging energy demands, Indian Minister of Petroleum and Natural Gas Mani Shankar Aiyar declared, “The future of this country depends on meeting our energy requirements and this is at the heart of our energy security strategy. He said that India is pursuing a policy of international agreements to secure access to oil and natural gas supplies needed to fuel the country’s growth. He stated, “If we are to grow at 7-8 percent in order to get rid of poverty in the next 20 years, India will have to increase the current production of oil from 32 million tons to 50 million tons in the next five decades. Gross production of natural gas will need to be boosted from 90 standard cubic metres a year to 200 million. We need to jack up domestic production as much as we can,” he said. Even at these rates, India’s dependence on external sources will continue. Nevertheless, the minister assured that “a fear of physical supplies is not too bad because any shortage is a worldwide problem.”

The minister said that the trilateral negotiations on an oil pipeline from Iran to India running through Pakistan were proceeding well and are expected to move forward significantly early next year. India is committed to further liberalization of oil exploration, and invited foreign companies to partner with domestic firms. “India’s energy security does not depend on India going to the world, but we need to bring the world to India,” he said. Supporting new approaches to economic growth in the wake of the country’s power shortage, Aiyar said that the artificial division between foreign and Indian, and private and public sectors must be removed for the common good of poverty alleviation.

Jin Liqun, Vice-President, Operations 1, Asian Development Bank, Manila, said that no substantial investment had been made in the last 10 or 20 years in the oil and gas sectors in Asia. “We have an increasing middle class that needs better housing and more air-conditioning in both India and China, and to maintain its living standards, a growth rate of 8 percent in the next ten years or so is a must,” Jin said. He further stated that both China and India will have to spend much more on R&D in order to significantly improve the region’s energy situation.

Addressing the leaders gathered at the Summit, Indian Minister of Commerce and Industry Kamal Nath said that the nation will “exploit the potential to transform the world economy” to the fullest. “India continues to grab world attention… the confidence of the world in India has been growing and so has India’s confidence in itself,” he said. Economic reforms begun in 1991 have resulted in a paradigm shift, Mr Nath added. “The Indian people have come to see globalization not as something thrust on them by government, but as something they want and value.”

Mr Nath assured business leaders that India would respect the rule of law, making particular reference to IPR protection. “Our patent law is compatible with the best countries in the world,” he said. The minister cited India’s young and qualified population as “another demographic factor in India’s favour, which is giving us a rich resource for our factories…. It is because of this that we are witnessing a resurgence in the manufacturing sector,” he stated.

On the concluding day of the Summit, in the session entitled ‘India’s Talent Pyramid: Time to Rebuild,’ a leading international human resource expert warned that foreign companies could soon be put off by the ‘delays’ in infrastructure development in India, affecting FDI inflow into the country. “A major issue of concern among the foreign companies is whether governments in India can meet their infrastructure commitments. Global CEOs don’t trust India anymore as commitments are not being met,” Manpower, USA, executive board member David Arkless said at the India Economic Summit 2005.

Placing India in the ‘danger zone’ in terms of global companies beginning to lose interest in the country, he said the escalation in pay rates of the workforce was proving to be another deterrent for them. “Some jobs, such as consultancy and domain jobs, in India are now costing as much as in London, Paris, Rome or New York,” Arkless said. Another issue, he said, was the shortage of skilled workforce. “India will have to work really hard in the next five to 10 years to create a pool of talented workforce, or it may be left behind in the global competition,” he added.

Klaus Schwab, founder and executive chairman, World Economic Forum, while speaking at the session on ‘Global Challenges in India’ at the Summit listed ten major challenges that the contemporary world confronts. According to him the rise of India and China, which has shifted the global gravity centre from west to east, was one of them, followed by competition for resources, global interdependence in a multipolar world as well as global jobs deficit and search for decent work. Schwab said that global economic imbalance in production, consumption, savings and investment patterns needed to be solved by proactive procedures. And the search for identity in a fast changing world, in particular the fight against negativism, extremism, fundamentalism, nationalism and protectionism need to be addressed. He stressed the importance of implementing the democratic agenda on an individual as well as on a collective level and also spoke about the new age intergenerational tensions concerning pensions, climate change, clean water, education and debt that need to be mastered. “The world has to fight the unacceptable: illicit global networks, failed states, poverty, infectious diseases, lack of basic healthcare,” he asserted. He also elaborated on a global leadership deficit, “which is capable of managing complexity, understanding new paradigms and following the creative imperative.”

Schwab suggested that the race against time could be won not through confrontation but through the ‘3Bs’ process, which are:

• Bonding in terms of problem identification,

• Binding in the meaning of objective identification, and

• Building action identification.

Schwab emphasised the importance of ‘social entrepreneurship’ to cope with challenges on a micro level. The biggest hope and belief today, is in the world’s ability to cope with problems but the biggest fear is the scarcity of water, with potential to become a major problem, he stated.

At the close of India Economic Summit 2005, Indian Prime Minister Dr. Manmohan Singh said that in two to three years, India should be targeting 10 percent growth if its savings rate improves, agricultural output increases, and infrastructure is substantially upgraded. The Indian Prime Minister outlined his government’s vision of an “inclusive, prosperous, democratic and equitable India.”

He said that after two decades of economic reform, “we have today a broad-based national consensus that the process of economic growth must enhance both equity and efficiency.” He promised to continue efforts to boost agricultural productivity, address the social strains caused by urbanization, eliminate the “infrastructure deficit”, and encourage more foreign direct investment. Singh also vowed to invest in education and social safety nets.

“We have to carry everyone along on this road to national prosperity,” he declared.

Source: World Economic Forum and Confederation of Indian Industry.