India Economic Summit

India Economic SummitIndia's Next Generation of Growth

New Delhi, India 8-10 November 2009

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> Preface

> Executive Summary: India's Next Generation of Growth Page 4

> Resilient India Page 10

> A Region at Risk Page 14

> Green Growth and Inclusive Development Page 18

> Tomorrow’s India Page 22

> Acknowledgements Page 26

Contents

2 | India Economic Summit

India Economic Summit | 3

This year, the World Economic Forumcelebrated 25 years of partnership andengagement in India. Under the theme “India’sNext Generation of Growth”, over 800participants from over 40 countries convenedin New Delhi for a milestone India EconomicSummit. The inauguration of the Summit bythe prime minister of India, the activeparticipation of 14 senior ministers as well asthe contributions of over 100 global CEOsunderlined the extraordinary calibre of thisyear’s gathering and attendant discussions.

While the mood for this year’s India EconomicSummit was in part celebratory, it did notdivert from the reality of the global economiccrisis and its impact on India’s remarkablesocial and economic progress over the pastyears. At the time of the last India EconomicSummit, the world witnessed the unfolding ofwhat is now regarded as the worst financialcrisis since the Great Depression. As amember of the G20 and an integrated playerin the global economy, the impact of severeinternational economic imbalances on Indiawas inevitable.

Notwithstanding the immensity of thisunprecedented economic transformation, theoutcomes of the deliberations throughout theprogramme suggested the broad consensusthat India could contribute in a substantial wayto a global recovery provided key challengesare addressed without delay. India is one ofthe few economies to have posted positiveGDP growth above 5% in 2009. With its vastdomestic market, comparatively less exportdependency and relative macroeconomicstability, India’s economy has proven resilientin a challenging global context. Accordingly,leaders sought to identify both the keyenablers as well as the key obstacles toachieving India’s ambitious high-growthagenda.

To generate insight on India's competitivestrengths and weaknesses, the IndiaEconomic Summit served as an occasion tolaunch The India Competitiveness Review2009, a comprehensive overview of thecountry’s current competitiveness landscape,highlighting strengths and problematic areas,

and shedding light on India’s future economicprospects. For the fifth consecutive year, theSchwab Foundation for SocialEntrepreneurship presented the India SocialEntrepreneur of the Year Award, this time tothree winners. In addition, two specialsessions were devoted to the ways in whichempowering women and educating girls –who represent half of India’s productivehuman capital – can be prioritized as aneconomic imperative.

Next to its strong economic fundamentals,India’s youthful population calls attention to ademographic dividend that could see Indiabecome a hub for manufacturing,technological innovation and education,among other things. India’s young and eagerpopulation has set the bar even higher forfurther action and will expect implementationof solutions with the same tempo that hascharacterized the past two decades of India’sgrowth. To this end, the programme wasdesigned to lend a generational perspectiveon India’s growth priorities. As a result,concrete recommendations were made on avariety of salient topics that will shape thefuture of India’s young population, includingaccess to affordable housing, financialempowerment of the poor and developmentof female talent.

As you read the key points and datapresented in this report, we welcome yourthoughts and suggestions as we prepare theprogramme for the next India EconomicSummit, which will take place on 13-15November 2010. Following 25 years of theForum’s successful partnership in India, weare ever more committed to action-orienteddialogue drawing on the insights and expertiseof our multistakeholder platform, and hopethat the India Economic Summit will continueto serve as an important platform forstimulating thought and creative solutions.

Sushant Palakurthi RaoDirector, Head of AsiaWorld Economic Forum

Preface


Executive Summary: India’s Next Generation of Growth

“Potential” was the leitmotif of this year’sSummit – a word that evokes much promise,but also spells the significant challengesahead. Few nations have the growthpotential that India enjoys. Its manyattributes are renowned: resilience,innovation, creativity, entrepreneurial spirit, ayoung population and cultural diversity, toname a few.

Celebrating the World Economic Forum’s 25years of engagement with India, the Summittook place at a time when confidence in theIndian growth story is intact. The country hasweathered the financial crisis and, althoughgrowth dipped from 9% during the five yearspreceding the meltdown, it is expected to bewhat the prime minister called a“respectable” 6.5% for 2009-2010. Mosteconomic experts are predicting a return to9% growth post-2010.

The World Economic Forum’s IndiaCompetitiveness Review 2009 reports thatthe country benefits from well-functioninginstitutions, a fairly developed financialmarket, innovative and sophisticatedbusinesses, and sheer market size.However, India faces shortcomings in somecritical areas – health, education,infrastructure, fiscal management, ICTdiffusion and labour market efficiency.

The question hanging over the Summit wasnot only how to deliver rapid growth, butalso how to deliver “rapid and inclusivegrowth” – a promise made by Prime MinisterManmohan Singh during the openingplenary.

Klaus Schwab, Founder and ExecutiveChairman, World Economic Forum, pointedto entrepreneurship as the way forward.“Few nations have the growth potential thatIndia already enjoys. India holds the promiseof a most successful future,” he said.“Entrepreneurship drives social andeconomic progress; however, [it] always hasto serve the public interest. This should be atthe base of India’s way into a bright future.”

Business leaders debated what will be thenext big driver for India’s growth story. Manypointed to the latent potential in the urbanmarkets. Rural retail markets are expected toreach US$ 58 billion by 2015. Already, ruralconsumption accounts for more than 69% oftotal consumption and is growing faster thanurban consumption.

But, does India have the right infrastructureto realize this potential? The country has ahuge deficit in key sectors – power, roads,ports, airports, telecommunications,irrigation and urban infrastructure. The primeminister is looking to innovative public-

“India looks to the future withconfidence. We are confident ofmeeting the domestic andinternational challenges to fast andinclusive growth. We are alsobetter placed than any time in therecent past to push the reformprocess forward. I believe wehave a bright future if we make useof strengths and the opportunitiesthat we get.”

Manmohan SinghPrime Minister of India


Forum; Co-Chair of the India EconomicSummit, pointed to the country’s potentialcrippling “say-do gap”, which drew a roundof applause during the closing session. “Theproblems are not growing faster than ourcapacity to find solutions. Where the gap isgrowing is in accountability. We are notholding people accountable,” observedPalaniappan Chidambaram, Minister ofHome Affairs of India.

The results of the May 2009 election and ofthe past five elections, where voters oustedmore than 40% of the members ofParliament, show that, while democracy isentrenched in India and coalitiongovernments are not going to go away,people’s expectations are high and they aredemanding accountability. In the lastparliamentary elections, 100 million eligiblevoters were aged between 18 and 24.

The younger generation – the nextgeneration – is huge. Nearly one-fifth of theworld’s population lives in India and one-third of them are less than 15 years old.Young people want greater transparency ingovernance and a more participativegovernment. They see themselves aspotential creators of wealth and stakeholdersin India’s future.

This “youth bulge” holds out both challengesand opportunities. Chanda Kochhar,Managing Director and Chief ExecutiveOfficer, ICICI Bank, India; Co-Chair of theIndia Economic Summit, pointed out: “If weskill [our young people] and train themproperly, they will be a huge asset. If we donot, they will become a liability.”

Prime Minister Singh promised that “inclusivegrowth” will provide productive employmentto India’s young population and raise livingstandards in rural areas across the country.

private partnerships to eliminate this deficit,but must continue his efforts to make Indiaan attractive destination for FDI.

At the same time, the country should focuson broadening its economic base. Theagricultural sector, which accounts for one-quarter of the economy, could be a goodplace to start. Three-quarters of thepopulation depend on farming and couldbenefit from activities higher up theagricultural value chain, such as foodprocessing and better land management.There is potential in green technologies ifIndia decides to turn climate change on itshead and meet its energy challenges.

As the country’s growth rate recovers, thepeople at the bottom of the pyramid are stillfacing economic and social exclusion. AWorld Bank report notes that more peoplelive on less than US$ 2 a day in India than insub-Saharan Africa, and a large proportionof the population is excluded from educationand skills development – about 7.1 millionchildren are out of school and, among 15-29year olds, only 2% have received formalvocational training.

On a positive note, India’s PlanningCommission reports that, by 2020, the worldwill need 56.5 million more skilled workers.This is a huge opportunity if India gets itseducation and skills development right.Policy-makers and business leaders shouldseize this opportunity. The World Bankestimates that increasing the proportion ofworking age Indians who are economicallyactive from 60% to 75% would add US$ 3.7trillion to the country’s GDP by 2020.

But, how can India realize its huge potential?Indra Nooyi, Chairman and Chief ExecutiveOfficer, PepsiCo, USA; Member of theFoundation Board of the World Economic

“The world has come to recognizethe potential of India for its abilityto innovate and its growing role onthe global stage. [India has theopportunity to become] a highperformance nation.”

William D. Green

Chairman and Chief Executive Officer,Accenture, USA; Co-Chair of the IndiaEconomic Summit


also promised to move ahead withfinancial reform, including deepeningfinancial markets. He also committed toworking with the private sector to findeffective models of public-privatepartnership. Investment in vocationaleducation and training is needed tobridge the skills gap.

• To broaden its economic base, India mustboost rural markets and focus on itsstrengths. India has a large domesticmarket and the government needs to domore to mobilize domestic savings,currently about 25% of GDP. However,escalating rural consumption may well bethe next big trigger of growth. India’scompetitive advantage is in technology-intensive manufacturing – India’smanufacturers must lead by innovation,tapping the inherent creativity andentrepreneurial spirit of its people.

• To realize fast-track growth, India musteliminate its infrastructure deficit. Theprime minister described an ambitiousprogramme of investment in all of the keysectors – power, roads, ports, airports,telecommunications, irrigation and urbaninfrastructure – which must be carriedout. The lack of roads remains thegreatest obstacle. The government mustrise to the challenge of building 20kilometres per day, and follow throughwith its public-private partnershipscheme. It must also address a majorroadblock for foreign firms – India’scumbersome bureaucracy.

• India must invest in education andtraining to resolve the growth conundrum.With nearly two-thirds of its populationyounger than 35, India has the world's

“India is in a sweet spot. We canbuild banks and a variety ofservices for all sorts of people. Themarket has opened up and themarket looks like us. It doesn't looklike the West anymore.”

Raghuram Rajan

Eric J. Gleacher Distinguished ServiceProfessor of Finance, University of ChicagoBooth School of Business, USA

The prime minister and his government havea huge job ahead; keeping the government’sambitious reform agenda on track will be noeasy task. In addition, India must close thegender gap if growth is to be truly inclusive.This is no longer a “nice to have”, it is aneconomic imperative.

However, Montek S. Ahluwalia, DeputyChairman, Planning Commission, India,remained upbeat: “It is true that there aremany reform-related initiatives on theagenda. Every one of these appearscontroversial in one way or another. But inthe last 10-15 years, we have handled theseproblems and moved ahead.”

This report on the 2009 India EconomicSummit is centred on the programme’s fourthemes: Resilient India, A Region at Risk,Green Growth and Inclusive Development,and Tomorrow’s India.

Resilient India

India is one of the few economies to post aGDP growth rate of more than 5% since thefinancial crisis. Growth this year is predictedto be a respectable 6.5%. But how can thisgrowth be sustained and accelerated? Howcan the serious constraints from deficienciesin infrastructure, education, healthcare, thelegal system and the financial sector beovercome?

Recommendations• India must keep its reforms on track.Prime Minister Singh must keep hispromise of inclusive growth. India can seea return to increased growth rates ifcurrent reforms – particularly in education,healthcare and the financial sector – stayon track and expand. The prime minister


largest pool of young people. Of the 22million children who attend school, only12.4% pursue further education. India’simmediate goal is to raise this number to20% by 2020. The government hasincreased the national budget for highereducation, but much remains to be done.Reform is urgently needed. Participantscalled for a complete overhaul of theeducation system.

A Region at Risk

India can always fall back on its domesticmarket to weather the internationaleconomic storm. However, the country’seconomic destiny cannot be decoupled fromthat of its neighbours. India is dependent toa large extent on how South Asianeconomies fare and how the regioncollectively manages risks, including socialinstability, climate change, pandemics anddwindling natural resources.

Recommendations• India must develop energy resources,with alternative energy leading the way, tohelp meet the country’s growing needswhile keeping a lid on carbon emissions.However, 45% of Indians remain off thegrid and 70% of the nation’s energyresources are imported. India’s capacitymust be boosted seven to eight times inthe next 15-20 years. Some consider thisan opportunity to boost the country’spower supply with alternative energies.Most participants agreed that the trend isand will continue to be away fromtraditional fuels like coal and towardscleaner options.

• To attract more investment, India mustaddress perceptions that it is a difficultplace to do business. The country caughtthe eye of portfolio investors following theMay 2009 national elections and its quickand strong comeback from the 2008global financial crisis. But, there has beenno corresponding jump in FDI so far andinstitutional investors appear slightly lessenthusiastic. A more assertive India – onewith an image that reflects its G20 status– could be a more attractive India.

• To increase capital flows from abroad anddomestically, and as a buffer against anyfuture global crisis, India should enact thefinancial system reforms announced bythe prime minister. Top executives fromIndian and international financialinstitutions endorsed these capital marketreforms, adding that the futures marketneeds to be improved by better pricediscovery and regulation. In addition,institutional hurdles must be removed tofacilitate better intermediation. Theypointed to the insurance bill as a goodstart in the asset management area.

• To boost agricultural production andensure food security, water resourcesmust be managed more prudently andfarmers, corporations and governmentmust work in harmony. Indian agriculturelies stagnant due to poor watermanagement and scant innovation infarming inputs and practices.Compounding problems of groundwaterdepletion and contamination, climatechange will likely disrupt rainfall. Just asfarmers must diversify their crops, amyriad of responses will be needed toaddress the problem.

“During the next two-and-a-half days,we do not want to look back, but[want] to develop a roadmap for thefuture. We must turn our attention tothose challenges that have to beaddressed as we redesign [theworld] for the next generation.”

Klaus Schwab

Founder and Executive Chairman, WorldEconomic Forum


Green Growth and InclusiveDevelopment

Building a low-carbon economy thatgradually embraces millions of poor citizenswill require India to forge “next practices” – inother words, to innovate in the pursuit ofenvironmentally sustainable growth andinclusive development. As it expands, theIndian economy will need growing numbersof skilled workers. Women, who are mostlymarginalized in today’s economy, can fill thatgap in the future if girls receive educationand training today.

Recommendations• India must invest in girls to enable themto make greater contributions to Indiansociety and its economy. The Summitfocused on the contribution girls canmake to a growing Indian economy whenthey grow up. Unleashing this potentialwould provide India with a major engineof growth and could add US$ 56 billion tothe Indian economy annually, accordingto some estimates.

• To guarantee continuity on inclusivedevelopment after the India EconomicSummit, participants called for a taskforce to be convened by the WorldEconomic Forum, similar to the Forum’shighly successful disaster relief initiative.

They also called for engaging politiciansand policy-makers and convincing men totake more interest in the issue.

• Working to ensure the success ofinternational negotiations on climatechange and taking a leadership role in thedevelopment of green technologies arecrucial. A supportive climate changeregime will help India achieve what it isalready doing in its own interest. Ratherthan blaming each other, countries mustcollaborate, especially in developingenergy-saving technologies, renewableenergies and alternative fuels. Manynoted that such innovations will come outof India and China.

• India must redouble efforts to become aworld leader in technological innovationsthat provide low-cost and sociallyinclusive solutions. India already leads theworld in frugal product planning. Thegovernment can harness and expand thatcapability by improving education andproviding incentives for entrepreneurs andresearchers to address the problems andneeds of average citizens. The idea is tofocus on solutions that are bothaccessible and scalable.

“[In India] there is a gap betweenwhat we say and what we do. Weneed focus on the say-do gap. Wehave talked about a lot of issues –we need to show progress. It has tobe faster. I think the issues aregrowing exponentially. The solutionsare coming at a slow pace and thisis not a good equation.”

Indra Nooyi

Chairman and Chief Executive Officer,PepsiCo, USA; Member of the FoundationBoard of the World Economic Forum; GlobalAgenda Council on the Role of Business; Co-Chair of the India Economic Summit


Tomorrow’s India

Few nations have the growth potential thatIndia enjoys. But there is much work to do ifIndia is to realize its potential and fulfil theambitions of the many who see it as the neweconomic frontier.

Recommendations• India must strengthen its entrepreneurialecosystem if it is to prosper from newmarkets and enjoy sustainable economicgrowth. It needs to maximize the latentpotential in “sunrise” industries such asIT-related business services, renewableenergy, healthcare and others. Thecountry must address deficiencies in itsenterprise support system. The educationsystem must be reoriented to teachentrepreneurship. Regulation and taxregimes need to be reformed to provideincentives to entrepreneurs and banksmust make it easier to access capital.

• To become an incubator for innovation,India must act fast if it is to survivegrowing and fierce global competition.India has the potential to boost itsmanufacturing competitiveness. However,because of problems with power, ports,railroads, roads and water, and ashortage of human capital, manufacturinghas lagged behind targets. At the sametime, India offers potential investors in the

manufacturing sector a number ofcompetitive advantages. While India is inan excellent position to serve emergingeconomies, the government mustaddress the bottlenecks.

• India must close the gender gap if it is tounleash the country’s vast economicpotential. Equal rights for women is abusiness and economic imperative. It isfundamentally important to ensure theirtalent is not wasted. Success withincompanies should be determined bymerit, not gender. To this end, companiesshould be made more accountable; theyneed to measure their progress ongender parity and report on it. Genderparity within business is achievable –possibly within the next 10-15 years –depending on political and corporate will.

• Responsible and collaborative politicaldialogue must become the norm ifIndians are to get the government theydeserve. The results of the nationalelections in May gave clear evidence thatpeople’s expectations are very high.About 40% of the members of Parliamentwere not re-elected during the last fiveelections. A mechanism must be createdto facilitate collaboration between rulingand opposition parties to enablecooperation on the big-picture issues.


Resilient India


India weathered the perfect storm of 2008 –rocketing oil prices, increasing food scarcityand hunger, accelerating climate change andthe global financial meltdown – as one of thefastest growing economies in the world. In2009, India is set to emerge second only toChina as one of the world’s powerhouseeconomies.

But how can India sustain and acceleratethis growth? As many participants pointedout, sustainable, long-term growth is not agiven. Myriad new challenges – as well asnew opportunities – are on the horizon.

Montek S. Ahluwalia, Deputy Chairman,Planning Commission, India, was optimisticabout India’s potential: “There are inherentstrengths on the supply side, which make itpossible for India to grow. We can handlethe constraints. The moment you look at thesupply side, India has all that is needed totake off.”

Growth accelerated from 5.6% in the 1980sto 9% in the five-year period preceding thefinancial crisis. The economy grew at a rateof 6.7% in 2008-2009 and, despite aninadequate monsoon and a slowdown inagriculture, growth in 2009-2010 ispredicted to be 6.5%. Most economicexperts at the Summit predict a return to 9%growth post-2010.

To keep his promise of “inclusive growth”,Prime Minister Singh needs to include thoseat the bottom of the pyramid in India’ssuccess story and broaden the base ofeconomic growth.

The country faces serious constraints fromdeficiencies in infrastructure, education,healthcare, the legal system and the financialsector. To overcome these, the governmentmust keep reforms on track and work withthe private sector to find effective models ofpublic-private partnership. At the same time,India must increase its appeal to foreigninvestors. More investment in vocationaleducation and training is needed to bridgethe widening skills gap.

Key Recommendations

India must keep its reforms on track.India can see a return to increased growthrates if current reforms stay on track andexpand. The prime minister promised tomove ahead with developing long-term debtmarkets, a corporate bond market, stronginsurance and pensions sectors, and futuresmarkets. Accelerating government“disinvestment” in state-owned companies isalso on his political agenda.

Participants called for swift reform anddeepening of India’s financial markets if thecountry is to attract FDI. Business is stillconstrained by administrative hurdles andhigh costs of doing business. Thegovernment must also support the SMEsector, the backbone of any economy. Thecost of starting up a business remains

excessively high. If the governmentaddresses these issues, it will at once createjobs and help realize India’s enormousinternal and external market opportunities.

The government must also focus ongovernance. India has good laws andglobally comparable legal frameworks, butlacks effective implementation and adequatelaw enforcement. As Shumeet Banerji, ChiefExecutive Officer, Booz & Company, UnitedKingdom; Co-Chair of the India EconomicSummit, observed: “I do think that law inIndia is a massive competitive advantage.The regulatory structures look reasonablyattractive, but there is enormous stickinesswhen trying to get things done.”

To broaden its economic base, Indiamust boost rural markets and focus onits strengths. India has a huge domesticmarket and the government needs to domore to mobilize domestic savings, currentlyabout 25% of GDP.

Escalating rural consumption is potentiallythe next big trigger of growth. Rural India –home to about 70% of the country’s 1.1billion people – has been a sleeper untilrecently. Rural retail markets are expected toreach US$ 58 billion by 2015. Ruralconsumption, including governmentspending, accounts for more than 60% oftotal consumption and is growing faster thanurban consumption.

Telecoms companies, financial serviceproviders, entrepreneurs and governmentregulators should collaborate to drivefinancial inclusion by better serving theunmet needs of the poor, many of whom livein rural areas. For example, mobile telephonyenables the extension of financial services tothe excluded – 188 million Indians withmobile phones have no access to credit orbanking. Already, telecom provider BhartiAirtel has promised to invest US$ 1.5 billionthis year to improve connectivity in ruralareas.

Because of the potential of the Indianmarket, sustainable solutions need to befound for India’s increasing consumption.Opinions differ as to whether these solutionsshould be driven by business or theconsumer. Businesses have a responsibilityto find ways of operating that are sociallyrelevant and environmentally sustainable.Some are already beginning to see thebenefits of having a sustainable value chain.

India’s competitive advantage is intechnology-intensive manufacturing – itsmanufacturers must lead through innovation,tapping into the inherent creativity andentrepreneurial spirit of its people.

To realize fast-track growth, India musteliminate its infrastructure deficit. Thelack of roads remains the greatest challenge.To meet the challenge of building 20kilometres per day, the government haslaunched one of the largest public-private

“Over the long run, the [sustained]9% growth rate is feasible and it isplausible, but it is not ordained.[However] we believe that India inone generation, 30 years fromnow, will be an affluent society.”

Rajat M. Nag

Managing Director-General, AsianDevelopment Bank, Manila


With nearly two-thirds of its populationyounger than 35, India has the world’slargest pool of young people. However, ofthe 22 million children who attend school,only 12.4% pursue higher education. India’simmediate goal is to raise this number to20% by 2020.

The government has increased the nationalbudget for higher education, but muchremains to be done and reform is urgentlyneeded. Participants called for a completeoverhaul of the education system, whichneeds to be made accessible, affordable andaccountable; there needs to be moreflexibility and mobility. Public-privatepartnerships should be explored as a meansof funding educational changes.

Kapil Sibal, Minister of Human ResourceDevelopment of India, invited the privatesector to participate in India’s educationagenda. Sibal emphatically outlined thedistinction between “profit” and “surplus”,stating that enterprises must be allowed tomake surpluses that can be reinvested in thesector. “We cannot allow education to beexposed to risk factors,” he stressed.

Conclusion

These challenges help to explain why Indiaranks 49th out of 133 ranked economies inthe World Economic Forum’s GlobalCompetitiveness Report 2009-2010 and whyit slipped a notch to 133rd place in the WorldBank’s Doing Business 2010 Index.However, there are promising signs that, inpursuing its reform agenda, the governmentis starting to recognize where it should stepback and let the private sector take over.

partnership schemes in history – US$ 20billion, with 60% to be raised by the privatesector. The government is planning to bidout six mega road projects in Rajasthan,Madhya Pradesh, Gujarat and Maharashtra.

Kamal Nath, Minister of Road Transport andHighways of India, said that theExpressways Authority of India would be setup next year to study the specific needs ofdeveloping expressways in the country. “Wehave already set up a division forexpressways. Next year, we are going to seta separate expressway authority …expressways are the next big thing on ourplate,” he said. The minister expressedoptimism that road construction activitywould reach the 8-9 kilometres per day markby December 2009 and the target of 20kilometres per day would be met by March2010.

But foreign firms are often discouraged byIndia’s inefficient bureaucracy. Issues ofconcern include the acquisition of land;lowball project estimates that result in thecontractor bearing extra costs; and tedious,exclusive, decision-making processes.However, the government claims it isaddressing these roadblocks.

India must invest in education andtraining to resolve the growthconundrum. Once India’s growth rate hits7-8%, companies face a critical skillsshortage and turnover increases from amanageable 2-3% to as much as 20-30%.This creates an unstable environment formanufacturing. All sectors in the economyface similar challenges.

“India has come through the crisisbetter than other countries. Wehave growth here. This is a bigmarket and there is opportunity forfirms to come in here. But there isstill room for India to improve theatmosphere for entrepreneurs tooperate.”

Lars H. Thunell

Executive Vice-President and Chief ExecutiveOfficer, International Finance Corporation(IFC), Washington DC


The India Competitiveness Review 2009 released at the Summitprovided participants with a comprehensive overview of the country’scurrent competitiveness landscape. The report highlights strengthsand problematic areas, and sheds light on India’s future economicprospects.

India ranks 49th out of 133 countries in the Global CompetitivenessIndex as a result of mixed performance across the 12 categoriescovered by the Index.

India displays competitive strengths in areas of businesssophistication, innovation and financial market sophistication. Thecountry can also rely on fairly well-functioning institutions.

On the other hand, there is considerable room for improvement inseveral of the basic drivers of competitiveness, in particularinfrastructure, health and primary education, while the runaway fiscal

situation prevents the government from making much-neededinvestments. The diffusion of information and communicationtechnologies remains very low by international standards.Bureaucracy, over-regulation and corruption still affect the functioningof markets, in particular the labour market.

In addition to analysing India’s performance in the GlobalCompetitiveness Index, the review includes two other contributions.The first is by the Confederation of Indian Industry (CII), and examinesIndia’s recent growth drivers as well as challenges presently facingpolicy-makers in their efforts to foster more inclusive growth anddevelopment.

The second contribution is by PricewaterhouseCoopers, andpresents the results of the 13th annual CEO Survey in India,shedding light on how India’s business leaders see the nation’sresilience and competitiveness at a time of crisis and recovery.

India’s Key Economic Strengths and Weaknesses

For example, in the media and entertainmentindustry, the government is pushing forreform and is very proactive in its FDI policy.Ambika Soni, Minister of Information andBroadcasting, said that allowing private radiostations to air news bulletins would help toincrease their economic viability. If approved,FDI in the FM radio sector will be raised to26% from the current 20%.

“We are preparing a cabinet note wherein weplan to allow private radio stations to airnews capsules using certain portions of AllIndia Radio news bulletins along with otheradd-ons. These could be news about localsports events, weather bulletins and evenemployment news,” she said.

The ministry is also developing a revenueshare model between music royalty ownersand FM stations over the controversial issueof royalties.

In addition, the government is aggressivelypursuing FDI to address challenging physicalinfrastructure issues.

However, India must urgently address itsdaunting demographic challenges,particularly its “youth bulge”. It must also bemore effective in educating and mobilizing itsabundant human resources to ensure thatgrowth is indeed inclusive.

Palaniappan Chidambaram, Minister ofHome Affairs of India, summed up thegovernment’s mood: “The mood is one ofcautious optimism. The plans are fine, butwe falter in implementation. We are verytolerant of apathy, lethargy and free riders,”he said. “We have to allow new players in,crack the whip and get the job done.”

“About 40% of the bank network isin rural India but covers just 6% ofvillages. [We] must think far moreinnovatively about leveragingtechnology platforms. Let’s not talkabout a branch in every village,but a branch in the back pocket ofevery individual [or in everywoman’s sari].”

Kalpana Morparia

Chief Executive Officer, J. P. Morgan, India


A Region at Risk


While capable of falling back on its domesticmarket to weather the internationaleconomic storm, India – like all countries –remains tied to developments around theworld. The country also faces securitythreats at home.

Palaniappan Chidambaram, Minister ofHome Affairs of India, addressed thedomestic threat. “Our security challenges areno different than those facing every countryof the world – terrorists,” he said. “We arealive to the challenge. Every day, every weekand every month we are adding capacityand building confidence.”

Sundry cross-border risks were discussed,ranging from the effects of erratic weather onfarmers to the country’s image amongforeign investors. The global economicdownturn received due attention, as did theenergy crunch.

Key Recommendations

India must develop energy resources –with alternative energy leading the way– to help meet the country’s growingneeds while keeping a lid on carbonemissions. Baba N. Kalyani, Chairman andManaging Director, Bharat Forge, India; Co-Chair of the India Economic Summit, notedthat 45% of Indians remain off the grid and70% of the nation’s energy resources areimported. “You’re talking about increasingthe capacity of India by seven or eight timesin the next 15-20 years,” he said.

However overwhelming that may seem, TulsiR. Tanti, Chairman and Managing Director,Suzlon Energy, India, looked on the brightside. “I think it is a great opportunity,” hesaid. “We are quite behind the [United]States, but we can build our power supplywith alternative energy.”

Most panellists agreed that India will have torely on a large basket of both clean and dirtyenergy for the foreseeable future. However,the trend is and will continue to be awayfrom traditional fuels like coal and towardscleaner options – even if international climatechange talks fail. “We will have to addressglobal warming,” said Madhu Koneru,Executive Director, Trimex Group, UnitedArab Emirates. “If we want to attractinvestment, we will have to have de factocompliance [with emissions targets].”

Tejpreet Singh Chopra, National Executivefor India, General Electric, India, laid out athree-point plan for moving forward:• Encourage energy efficiency• Invest immediately in “key technologies”• Aim for energy security by investing onseveral fronts, notably renewable energies

To attract more investment, addressperceptions that India is a difficult placeto do business. Whatever the realities onthe ground, India must overcomeperceptions, especially among investorsoutside the country, that it remains a difficult

place in which to do business, even forIndians themselves. That image is reinforcedby stories like the one told by Sachin Duggal,President and Chief Executive Officer, Nivio,Switzerland; Technology Pioneer. Duggalestablished his company in Europe becausehe found too much red tape and too littleventure capital at home. “I am a patriot, but Iam also a realist,” said the young entrepreneur.

Nevertheless, the country caught the eye ofportfolio investors following the 2009national elections and the quick and strongcomeback from the 2008 global financialcrisis. Still, there has been no correspondingjump in FDI so far and, as the rest of theworld gets back on its feet, institutionalinvestors appear slightly less enthusiasticabout India.

At the Summit, there was a sense that amore assertive India – one with an imagethat reflects its G20 status – could be a moreattractive India. “As we become a moreimportant economic player, we have to alterhow we engage the world,” said RaghuramRajan, Eric J. Gleacher Distinguished ServiceProfessor of Finance, University of ChicagoBooth School of Business, USA. “We stillengage the world as a colonial victim.” Headded: “As we have economic influence, wemust also have intellectual influence.”

India might also do well to call attention tocomments by foreigners like Kevan V. Watts,Country Head, Bank of America MerrillLynch, India. Watts makes no effort to hidehis bullish take on the country: “I haveworked all over the world for 29 years withMerrill Lynch. There is a reason why I am inIndia,” he said.

To increase capital flows from abroadand domestically, and as a bufferagainst any future global crisis, Indiashould enact the financial systemreforms announced by the primeminister. Top executives from Indian andinternational financial institutions endorsedthe capital market reforms outlined by theprime minister at the Summit. “We do needto do the things mentioned by the primeminister,” said Ashok Jha, Chairman, MCXStock Exchange, India.

The prime minister said, “We need to developlong-term debt markets and to deepencorporate bond markets. This, in turn, callsfor strong insurance and pension sub-sectors.” He added: “We need to improvefutures markets for better price discovery andregulation. We also need to remove institutionalhurdles to facilitate better intermediation.”

The proposals for the bond market “willfacilitate capital flows [from abroad] in anenvironment where there is no longer excesscapital,” said Jim Quigley, Global ChiefExecutive Officer, Deloitte, USA. Accordingto Robert Morrice, Chairman and ChiefExecutive, Asia Pacific, Barclays, Hong KongSAR, “The insurance bill will be a good startin the asset management area.”

“We are extremely behind in thepower sector. We need moreenergy. That could bring thebiggest growth.”

Tulsi R. Tanti

Chairman and Managing Director, SuzlonEnergy, India

“Protectionism is not the answer –there should be collectivecooperation among the nations.”

Pranab Mukherjee

Minister of Finance of India


To boost agricultural production andensure food security, water resourcesmust be managed more prudently andfarmers, corporations and governmentmust work in harmony. Forty years afterthe Green Revolution succeeded on thestrength of better irrigation and higher-yielding seeds, Indian agriculture liesstagnant due to poor water managementand scant innovation in farming inputs andpractices. Compounding problems ofgroundwater depletion and contamination,climate change will likely disrupt rainfallpatterns – painting a daunting picture forIndian farmers, who depend on the heavensfor 60% of the moisture that nourishes theirfields.

Just as farmers must diversify their crops,myriad responses are needed to address theproblem. “Instead of a single solution, therewill be a great number of solutions,” saidMargaret Catley-Carlson, Patron, GlobalWater Partnership (GWP), Sweden. In theview of Sekhar Natarajan, Chairman,Monsanto India, India, “The challengerequires us to improve production in asustainable manner. There must be food and

water security for all. We must produce withless land, water and energy. And we shouldimprove farmers’ lives.”

Kushal Pal Singh, Vice-President, NationalInstitute of Agriculture, India, pointed out thatthis could only happen if the government,farmers and corporations join forces andwork together.

Conclusion

Sam Pitroda, Adviser to the Prime Ministeron Public Information Infrastructure andInnovations, Office of the Prime Minister,India, was outspoken in his defence ofIndia’s potential, and his views seemed toreflect those of many participants. “This is acountry of disparity. This is a country ofdiversity. This is a country of confusion,” hesaid. “We have to accept that.”

But Pitroda went beyond mere acceptance.“We are living in exciting times in India,” hesaid. “Building a nation is different frombuilding a company. It takes more than fiveyears. It requires patience – especiallydemocratic patience.”

“This is not about the governmenttrying to do something and industrytrying to take advantage of thesituation. It is time for governmentand industry to work together [onagriculture].”

Sekhar Natarajan

Chairman, Monsanto India, India

“I was encouraged by what theprime minister said because itappears that he intends to goahead with the reforms.”

Kevan V. Watts

Country Head, Bank of America Merrill Lynch,India


The World Economic Forum celebrated 25 years of activeengagement in India at its annual India Economic Summit. This year’sSummit set a new record for total participation with over 800 leadersfrom industry, government, civil society and academia from over 40countries.

Professor Klaus Schwab, Founder and Executive Chairman of theWorld Economic Forum, looked back over a quarter of a century ofpartnership with India, and noted two events in particular as havingplayed an important role in the relationship.

“First, 25 years ago, when the Indian economy was thirsting forreform and liberalization to realize its full productive potential, the latePrime Minister Rajiv Gandhi encouraged us to create a platform withwhich we could show the world that the country was ready to comeout of years of isolation and move towards a trajectory ofmodernization,” Schwab said.

“Second, the 1991 economic reforms spearheaded by the thenFinance Minister – now Prime Minister – Manmohan Singh, not onlychanged the competitive landscape within India, but also changed themindsets in business, government and civil society,” he continued.

Schwab praised the close collaboration with the Confederation ofIndian Industry (CII). “Through the resultant deep partnership andfriendship, year after year we have worked together to host the IndiaEconomic Summit, which leverages our experience in providing thenecessary space for interaction to deliberate challenges to India’sfuture growth and to formulate proposals and recommendations toaddress these with a multistakeholder approach,” he said.

At the same time, Indian industry leaders have been among the mostengaged and committed in Forum activities throughout the year.“They have lent their time and expertise to our initiatives, our IndustryPartnership programmes and our various knowledge capacities, suchas the Global Agenda Councils,” Schwab concluded.

Celebrating 25 Years of Partnership: India and the World Economic Forum


Green Growth and Inclusive Development


The idea of building a low-carbon economythat gradually embraces millions of poorcitizens would seem to fall under the rubricof what C. K. Prahalad, Paul and RuthMcCracken Distinguished UniversityProfessor of Corporate Strategy, Universityof Michigan, USA, calls “next practices”.Said Prahalad: “No country has done thisbefore, so you cannot benchmark bestpractices. You must forge next practices.”

If India adopts many of the groundbreakingideas discussed at the Summit, it maybecome the global leader in next practices.As it expands, the Indian economy will needgrowing numbers of skilled workers; mostlymarginalized in today’s economy, womencan fill that gap in the future if girls receiveeducation and training today.

By turning climate change on its head, usingit to spur innovation, India could achievelower carbon emissions while becoming aworld leader in green technologies. Byfocusing on technologies that address theneeds of average citizens, India can continueto be a world leader in developinginexpensive, practical technologies.

Key Recommendations

India must invest in girls to enable themto make greater contributions to Indiansociety and its economy. Maria Eitel,President, Nike Foundation, Nike, USA,summed up the predicament of many girls inIndia: “There’s a complete population thatprovides the infrastructure of poverty. Anadolescent girl, as she carries water, is theplumbing system. As she carries firewood,she’s the electric grid. As she takes care ofthe sick, she’s the healthcare system. Whena cow dies or when someone gets sick inthe family, she’s the insurance policy. She’sthe transportation system as well. As long asshe continues to provide infrastructure forpoverty, it will continue to exist. What wehave to do is break that cycle. Education isthe answer. She cannot be in school if she’sspending her whole day involved in chores.”

While humanitarian and moral arguments forrelieving girls of their burdens are strong,debate focused on the contribution theycould make to a growing Indian economywhen they grow up. Unleashing this potentialwould provide India with a major engine ofgrowth and could add US$ 56 billion to theIndian economy annually, according to someestimates.

“When you look at the issue, it is no longer a‘nice thing to have’ but an economicimperative,” said Chanda Kochhar,Managing Director and Chief ExecutiveOfficer, ICICI Bank, India; Co-Chair of theIndia Economic Summit. “Companies cannotmiss out on a talent pool equal to 50% of thepopulation.”

To guarantee continuity after the Summit,participants suggested possible next stepsto bridge the gender gap:

• The World Economic Forum shouldconvene a task force based on the modelof its successful disaster relief initiative: “Ican sign KPMG to do that right now,”said Lord Hastings of Scarisbrick, GlobalHead of Citizenship and Diversity, KMPGInternational, United Kingdom.

• Encourage politicians and policy-makers tojoin more fully in the debate: “It is at panelslike this that I want to see policy-makers, Iwant to see ministers,” said RajshreePathy, Chairman and Managing Director,Rajshree Sugars & Chemicals, India.

• Convince men to take more interest in theissue of gender and why bridging thegender gap is an “economic imperative”.

India should work to ensure the successof international negotiations on climatechange and take a leadership role in thedevelopment of green technologies.India wants to have “a supportive climatechange regime to help us do what we arealready doing in our own interest,” saidShyam Saran, Special Envoy of the Prime

“To imagine something that is basicand to build something unique is auseful talent when the world is tryingto use fewer resources.”

Carlos Ghosn

Chairman and Chief Executive Officer, RenaultFrance; President and Chief Executive Officer,Nissan, Japan; Member of the FoundationBoard of the World Economic Forum; Co-Chair of the India Economic Summit

“The historic accumulation of CO2 isnot the result of what we have done,but is the consequence of 150 yearsof industrialization in the majordeveloped countries of the world. It isour hope … that the world’s majoreconomies will be prepared to createan environment where larger capitalflows are available for mitigation andadaptation measures.”

Manmohan Singh

Prime Minister of India


Minister of India on Climate Change. “But weare a developing economy. We are notmaking our action on climate conditional towhat anyone else is doing. If we have to domore, then we do need global support.” Anyglobal climate change agreement has to befair and equitable, he declared.

The argument that growth is not compatiblewith environmental responsibility is a “falsechoice,” argued Lord Stern, IG PatelProfessor of Economics and Government,India Observatory, London School ofEconomics, United Kingdom. Majordeveloping economies such as Brazil, Chinaand India are outlining ambitious and creativeclimate plans, he remarked.

“If the rich world has that deeperunderstanding, then suspicions that they aredoing all these things and others are doingnothing will disappear,” Stern noted. Hewarned that protectionist measures in thename of carbon-emission reduction wouldbe the wrong response. “The right responseis the collaborative one,” he said.

Business leaders agreed. “We shouldreaffirm the need to approach the problemmultilaterally,” said William A. Reinsch,President, National Foreign Trade Council(NFTC), USA. “We need to leap off the clifftogether.” Ben J. Verwaayen, Chief ExecutiveOfficer, Alcatel-Lucent, France, called ongovernments to act now. “If we losemomentum and inspiration, we will not justhave a postponement of a couple of months.It will go off the table for a long time. Wecannot afford it. We need leadership to get itdone and business should speak up.”

Instead of blaming each other, countriesmust collaborate, especially in developingenergy-saving technologies, renewableenergies and alternative fuels. “Theinnovations will come out of China andIndia,” predicted Deepak Puri, Chairman andManaging Director, Moser Baer, India.Suresh Vaswani, Joint Chief ExecutiveOfficer, IT Business, and Member of theBoard, Wipro, India, said that companiesshould “open source” green technology.

India must redouble efforts to become aworld leader in technologicalinnovations that provide low-cost andsocially inclusive solutions. India alreadyleads the world in what Carlos Ghosn,Chairman and Chief Executive Officer,Renault France; President and ChiefExecutive Officer, Nissan, Japan; Member ofthe Foundation Board of the WorldEconomic Forum; Co-Chair of the IndiaEconomic Summit, calls frugal productplanning.

“India has engineers, product planners anddesigners who are second to none in frugalproduct planning,” he said. “Nobody elsecan build a car for US$ 2,000 to US$ 3,000.I have to come to India for that. To imaginesomething that is basic and to buildsomething unique is a useful talent when theworld is trying to use fewer resources.”

The Indian government should harness andexpand that capability by improvingeducation and providing incentives forentrepreneurs and researchers to addressthe problems and needs of average citizens.“The best minds have always been used to

“It’s important to move beyondlooking at girls at victims. One of theissues of girl rights is that it tends tolook at girls as victims; it doesn’t lookat them as a resource or an asset.”

Barkha Dutt

Group Editor, New Delhi Television (NDTV),India

“Our strategy is not just to deliverrapid growth, but to deliver rapidand inclusive growth … that willprovide productive employment toour young population and raiseliving standards in rural areasacross the country.”

Manmohan Singh

Prime Minister of India


solve the problems of the rich – who don’thave that many problems,” said SamPitroda, Adviser to Prime Minister on PublicInformation Infrastructure and Innovations,Office of the Prime Minister, India. “The poorhave lacked this knowledge bank.”

The idea is to focus on solutions that areboth accessible and scalable, according toPitroda. “We want to create a whole newmodel. We don’t want to create fancygadgets but rather look at the needs of thepoor and address them,” he said.

Conclusion

Although he was talking about sociallyinclusive technology, Pitroda’s comment isapplicable to green and inclusivedevelopment: “We want to create a wholenew business model,” he said. “The USconsumption model is not scalable. It is notworkable. And it is not sustainable for Indiaor the rest of the world.”

Noted Prahalad: “We have done work withfocus groups with people in the countryside.Regular people, they are ready. Are we asleaders ready?”

Women, as half of the human capital of India, need to be moreefficiently integrated into the economy in order to boost India’s long-term competitive potential. Two plenary sessions at the Summitinvestigated ways to close the country’s sizeable gender gap, which,according to the Forum’s Global Gender Gap Report 2009, sees itranked 114th out of 134 countries measured.

India has closed 93% of its health gender gap, 84% of its educationgap, 41% of its economic participation gap and 27% of the politicalempowerment gender gap according to The Global Gender GapReport 2009. India holds last place among the BRIC countries in theIndex, behind Russia (51), China (60) and Brazil (82).

In South Asia, the country is in second-to-last place behind Sri Lankaand Bangladesh and ahead of Pakistan. Sri Lanka leads in therankings by far, holding 16th position, followed by Bangladesh (94),Maldives (100), Nepal (110), India (114) and Pakistan (132).

A new Forum report released at the meeting, The India Gender GapReview 2009, shed more light on the issue. The report presented theresults of a comprehensive survey assessing the current state ofgender-related corporate policies and practices in India.

Only 14% of the companies questioned have 40% or more womenamong their employees. These women employees are mainly presentat the entry and middle levels of management, while very few womenattain senior management level. Most companies do not track salarygaps, despite the clear wage gaps between women and men – only4% of the companies surveyed are attempting to monitor salary gaps.

“The Forum’s survey of some of the biggest companies in Indiashows that, to achieve better integration of women in the economy,Indian companies will need to set targets, improve policies to closesalary gaps and promote work-life balance,” said Saadia Zahidi, Co-author of the Forum’s Global Gender Gap Report 2009 and Head ofthe Forum’s Women Leaders and Gender Parity Programme.

Close India’s Gender Gap to Open Its Competitive Potential

“It is usually called governance, butI am an old-timer so I like to call itcorruption. Corruption is an issue.No country that is corrupt is rich;no country that does not build upits human resources is rich; and nocountry that is corrupt builds up itshuman resources. You can run theregressions yourself. It is public data.”

C. K. Prahalad

Paul and Ruth McCracken DistinguishedUniversity Professor of Corporate Strategy,University of Michigan, USA; Global AgendaCouncil on Innovation


Tomorrow’s India


Despite continued GDP growth, India’sentrepreneurial ecosystem is challenged byregulation and lack of seed capital, mentorsand diversification of industry sectors. Yet,India is a potential incubator for innovationfor many sunrise industries, particularly in themanufacturing and healthcare sectors.

“One of the greatest assets we have isentrepreneurship. We came to India becausethe market delivers. We find very good basicskills. What we also need are engineers andpeople who can work on the shop floor.There is a need to do something here,” saidJoerg Mueller, President and ManagingDirector, Volkswagen India, India.

India must close the gender gap. Womencomprise half of India’s human capital, yetthe country ranks a dismal 114th out of 134countries measured by the Forum’s GlobalGender Gap Index 2009. Indra Nooyi,Chairman and Chief Executive Officer,PepsiCo, USA; Member of the FoundationBoard of the World Economic Forum; Co-Chair of the India Economic Summit, calledfor relevant government ministers to meetwith business and civil society leaders toprioritize the issue. “Addressing this isurgent. Why isn’t change happening faster?We have not created the infrastructure forwomen to become achievers,” she said.

As India’s economic prowess increases, sodoes its influence on the global politicalstage. It is speaking up at G20 meetings andengaging in debate at the World TradeOrganization. Indian leaders have committedto finding an equitable solution to the Dohadeadlock. They are also vocal aboutredesigning the global architecture to reflectthe aspirations of emerging economies.

But as India plays the role of good globalcitizen abroad, closer to home politicaldialogue is proving difficult. India is theworld’s largest democracy and coalitiongovernments have ruled for two decades.However, Indian political culture is

confrontational, often violent. Elected officialsand political parties across the spectrumneed to find ways to collaborate to help leadthe country to a brighter future.

Shashi Tharoor, Minister of State for ExternalAffairs of India, raised the concept ofvasudeva kutumbam, which construes theworld as one, and asked the world to openmore windows and doors to make space forIndia.

“We have traditionally been willing to lookbeyond a narrow interpretation of power. Weare a responsible global player. Having saidthat, we are going to have to do things so asnot to deprive our citizens of the basics ofdevelopment. We can’t be altruistic at theexpense of our own population,” he said.

Anand Sharma, Minister of Commerce andIndustry of India, noted that the last fewyears have witnessed major changes in Indiaand the world, during which India has beenable to redefine its engagement with theworld as well as reshape itself and itseconomy, ambitions and policies.

Key Recommendations

India has to strengthen itsentrepreneurial ecosystem if it is toprosper from new markets and enjoysustainable economic growth. India’ssuccess story has many chapters, involvingdomestic and multinational companies. Thecountry’s track record in specific industrysectors is legendary, but it needs tomaximize the latent potential in sunriseindustries such as IT-related businessservices, renewable energy, healthcare andothers.

India must address the deficiencies in itsenterprise support system. The educationsystem must be reoriented to teachentrepreneurship, and role models ofsuccessful entrepreneurs must be promoted.

“We spoke about infrastructure,education, inclusive growth andskills development. The irony is thateach one of these issues can turninto an opportunity or a bottleneck.If we skill young people and trainthem properly, they will become ahuge asset. If we don’t, they willbecome a liability.”

Chanda Kochhar

Managing Director and Chief ExecutiveOfficer, ICICI Bank, India; Co-Chair of theIndia Economic Summit

“There is a really importantopportunity to take the talent thatIndia has and deploy it towardsinnovation. The world is desperatefor new business models. Thedeveloped world needs totransform. The learnings will comefrom the developing world.”

William D. Green

Chairman and Chief Executive Officer,Accenture, USA; Co-Chair of the IndiaEconomic Summit


Regulation and tax regimes need to bereformed to provide incentives toentrepreneurs and banks must make iteasier to access capital.

India’s trade and investment engagementhas shifted to higher trajectories, changingthe way it does business globally. India haseschewed protectionism and recently signedan economic partnership agreement withSouth Korea, a free trade agreement (FTA)with ASEAN, and is working on anagreement with Mercosur (Mercado Comúndel Sur, the South American regional tradeagreement) and Mercosur-Sacu (Mercosur’sFTA with the Southern African CustomsUnion). These new FTAs have the potentialto open India’s manufacturing sector.

To become an incubator for innovation,India must act fast if it is to survivegrowing and fierce global competition.Innovation and entrepreneurship are thelifeblood of the Indian economy. India is aproven centre for cost innovation. Thefamous US$ 2,000 Nano car riveted theattention of manufacturers worldwide,forcing a rethink of production anddistribution economics. General Electric’sUS$ 1,000 made-in-India electrocardiogrammachine is another success story.

India has the potential to boost itsmanufacturing competitiveness whileemploying millions of new workers. However,because of problems with power, ports,railroads, roads and water, and a shortage ofhuman capital, manufacturing has laggedbehind targets.

Numerous foreign manufacturers have metIndia’s infrastructure bottlenecks head-onwith considerable success: LG uses India asan export hub; Hyundai has set up its smallcar manufacturing base there; Nokia’shandset manufactured in the southern stateof Tamil Nadu costs 12% less than itscounterpart in China.

India offers potential investors in themanufacturing sector a number ofcompetitive advantages: a huge domesticmarket, wages less than half of those inChina and a large talent pool, including astrong engineering ecosystem. India is alsoin an excellent position to serve emergingeconomies in Latin America, Africa andelsewhere in Asia. Currently, this represents11% of India’s export market, but it is set togrow dramatically.

India must close the gender gap if it isto unleash the country’s vast economicpotential. Equal rights for women is abusiness and economic imperative. It isfundamentally important to ensure theirtalent is not wasted. Success withincompanies should be determined by merit,not gender. To this end, companies shouldbe made more accountable; they shouldmeasure their progress on gender parity andreport on it.

“The rights of girls and women are built intoour constitution … the time has come for usto say we know what the issues are, weneed to move on to what concrete, specificactions will taken by corporates, bygovernment, by the various ministries. We’ve

“A lot is happening on themanufacturing side. The keyimpediment to becoming a globalhub is not infrastructure bottlenecks,but entrepreneurship andleadership capability. Any countrythat has these two elements canovercome the hurdles.”

Jyotiraditya Scindia

Minister of State for Commerce and Industryof India


had a lot of discussion, but we’ve not seenenough action,” said Vinita Bali, ManagingDirector and Chief Executive Officer,Britannia Industries, India.

Change is happening at village level. Morewomen are elected to panchayats (villagecouncils) since quotas were imposed.Participants agreed that gender parity withinbusiness is achievable – possibly within thenext 10-15 years – depending on politicaland corporate will.

Responsible and collaborative politicaldialogue must become the norm ifIndians are to get the government theydeserve. The results of the national electionsearlier this year gave clear evidence thatvoters’ expectations are very high. Peopleare increasingly demanding accountabilityfrom their elected politicians. Parliamentariansmust fulfil their responsibilities as they enjoytheir privileges, and decisions must be takenthrough dialogue.

Democracy is well entrenched; differences ofopinion and ideology are not only possiblebut also desirable. However, a mechanismmust be created to facilitate collaboration

between ruling and opposition parties.Challenges need to be corrective,constructive and selective, and there mustbe cooperation on the big-picture issues.

Conclusion

Optimists believe India is poised to play apivotal role in shaping the next generation ofglobal growth. The country certainlypossesses all of the qualities to position itselfat the heart of the global economy. But cangovernment push through its reforms todeliver rapid and inclusive growth, and can itcreate an enabling environment for FDI toaddress the infrastructure deficit? To realizeits full potential, India must play on itsstrengths, particularly innovation.

Political will is paramount. “The governmentneeds to execute its plans. Just do it. I thinkit is achievable,” concluded Carlos Ghosn,Chairman and Chief Executive Officer,Renault France; President and ChiefExecutive Officer, Nissan, Japan; Member ofthe Foundation Board of the WorldEconomic Forum; Co-Chair of the IndiaEconomic Summit.

Some 60 participants joined the first “Davos Debates in India” toshare their views on India’s future potential. The video debate onYouTube was also open to the global community, and attracted over5,000 views.

People were asked, “Can India become a superpower?” Amongother participants, Chanda Kochhar, Managing Director and ChiefExecutive Officer, ICICI Bank, India, a Co-Chair of the Summit,answered: “India is sitting at a very exciting stage of economicdevelopment … which means that a rebalancing of economic powerwill take place.”

To gather different perspectives, a street survey in collaboration withone of India's leading broadcasters captured viewpoints from thegeneral public.

The plenary sessions at the Summit were streamed live onLivestream and are available on the Forum’s YouTube channel(www.youtube.com/worldeconomicforum).

Key quotes from the sessions were tweeted live on the Forum’sTwitter stream (www.twitter.com/davos), allowing a worldwideaudience of 1.4 million to follow the discussions. Furthermore, 17

participants tweeted from the meeting, including Shashi Tharoor,Minister of State for External Affairs of India and H.R.H. Crown PrinceHaakon of Norway (www.twitter.com/davos/wefindia), reaching acombined audience of 3.2 million people.

The first Davos Debates in India were watched over 5,000 times

The Davos Debates in India: Can India Become a Superpower?

“The crisis has brought Indiasquarely to the global table. It hasa big role to play – India is themicrocosm of the world. It is a big,fractious place that finds a way tobuild consensus.”

Shumeet Banerji

Chief Executive Officer, Booz & Company,United Kingdom; Co-Chair of the IndiaEconomic Summit


Acknowledgements

The World Economic Forum would like to thank the officers and staff of the Confederation of Indian Industry for their partnership in theIndia Economic Summit.

The World Economic Forum wishes to recognize the support of the following companies as Partners of the India Economic Summit:

Strategic PartnersAbraaj CapitalAccentureAgilityAlcatel-LucentAUDI AGBahrain Economic DevelopmentBoard Bain & CompanyBank of America Merrill Lynch Barclays PLCBooz & CompanyThe Boston Consulting GroupBTCA, Inc.CiscoClifford ChanceThe Coca-Cola CompanyCredit SuisseDeloitte

Deutsche Post DHLErnst & YoungEtihad AirwaysHCL TechnologiesJPMorgan Chase & Co.KPMGManpowerMerck & Co.METRO GroupMicrosoft CorporationNews CorporationNikeNomura HoldingsNYSE EuronextPepsiCoReliance IndustriesSiemensUnileverVolkswagen AGWPP

Summit SupportersDepartment of Industrial Policy and

Promotion, Ministry of Commerce and

Industry of India

Genpact

Greater Paris Investment Agency

Invest in France Agency

MCX-SX

NDTV

Oil and Natural Gas Corporation

Steel Authority of India

Trimex International

Service ProviderTaj Palace Hotel


Contributors

Sushant Palakurthi Rao is Director, Head of Asia at the World Economic Forum. The India Economic Summit was underhis direct responsibility with Samantha Gianora-Dimeck, Senior Event Manager and Summit Coordinator, and Christoph S.Sprung, Senior Manager, India and South Asia.

Samantha Tonkin, Associate Director, Media, World Economic Forum, worked with Dianna Rienstra and Bill Hinchberger,report writers tasked by the World Economic Forum to produce this report.

The World Economic Forum would like to express its appreciation to the summary writers for their work at the Summit.Session summaries are available at: www.weforum.org/india/summaries2009

Editing: Janet Hill, Senior Editing Manager

Design and Layout: Kamal Kimaoui, Associate Director, Production and Design

Layout: Kristina Golubic, Graphic Designer

Photographs: Eric Miller and Matthew Jordaan

Special thanks to Accenture for their help in preparing the data and statistics underpinning this report.

The digital version of this report allows access to a richer level of content from the meeting, including photographs,session summaries and webcasts of selected sessions. It is available on the World Economic Forum website:http://www.weforum.org/summitreports/india2009 (HTML)

The report is also available as a PDF:http://www.weforum.org/pdf/summitreports/india2009.pdf (PDF)

Other specific information on the India Economic Summit, New Delhi, India 8-10 November 2009, can be found at thefollowing links:

Interviews www.weforum.org/india2009/interviewsMeeting News www.weforum.org/india2009Partners www.weforum.org/india2009/PartnersPhotographs www.weforum.org/india2009/PhotosProgramme www.weforum.org/india2009/ProgrammeSession Summaries www.weforum.org/india2009/SummariesWebcasts www.weforum.org/india2009/Webcasts

The World Economic Forum is an independentinternational organization committed to improvingthe state of the world by engaging leaders inpartnerships to shape global, regional and industryagendas.

Incorporated as a foundation in 1971, and basedin Geneva, Switzerland, the World EconomicForum is impartial and not-for-profit; it is tied to nopolitical, partisan or national interests.(www.weforum.org)

India Economic Summit

Documents

Transcript of India Economic Summit