India's Next Aspiration..!!

India has a potential workforce of 200 million college graduates and 500 million skilled workers, and the ability to generate over 10% of world trade in the next 15 years, provided leaders prioritize this goal.

How can these expectations be fulfilled?

Key Points
• Strong leadership with a clearly articulated vision must augment technological vitality and economic strength – a vision that complements India’s rise as a global economic force.
• Corruption must be dealt with aggressively.
• Business leadership should focus on affordable, high-tech solutions that can be scaled up across India.

Synopsis
Panellists discussed the relationship between government and market forces, and envisioned new models for success and the problems that both business and political leaders face. Economic strength and technological vitality are necessary, but strong leadership is clearly crucial for future growth.

A young, skilled workforce will be an extraordinary resource for an ageing population in Europe and elsewhere, India is in a tremendous position to continue growing economically. But, there is a crucial need to improve access to basic services such as literacy programmes, healthcare and clean water. There was agreement that abject poverty must be reduced, that income inequality will become a dramatically more complex and divisive issue in the future, and that sustainable development is not optional. High-tech solutions are essential but, in a country of India’s size, will only be successful if they can be scaled up.

India has chosen a unique model for development: rather than focusing on a subsidized manufacturing sector, India’s economy has surged atop the services sector, and done so organically with the government relatively in the background. However, concern remains that this has not received due recognition by India’s political leadership. Indeed, politicians have not articulated a clear vision in general to the country.

In terms of higher education, what India lacks is not talent in engineers, but enough skills development in sectors such as advertising, finance, innovation and design.

Concern for providing the poor with world-class services should be a priority for business leaders. One example of innovation in India that recognizes the needs of the people is the Tata Nano, the world’s most affordable car. Another is an eye hospital that performs the same number of cataract surgeries as performed in the United Kingdom, but at approximately 1% the cost. These challenges provide tremendous opportunities for all kinds of products that are needed not only in India but also in Africa, the Middle East and emerging economies.

As India becomes more comfortable and confident in its position on the global stage as an economic leader, its role as global leader must emerge with a proactive voice. Indian leadership must think about their intellectual as well as economic influence. To reach this point, Indian leaders must debate among themselves, but too often they are mired in regional and local politics.

Pervasive corruption is hampering leadership, and must be dealt with head on. India will not develop past a certain point if corruption is not severely curtailed. Not only does corruption raise the ire of the middle class, but it also stands in the way of further economic growth. E-commerce solutions can be a part of the fight against corruption.

Leaders in the private sector have a key role to play, although ostentatious lifestyles and a growing income disparity can often mean they face growing challenges of maintaining the trust and respect of the country’s majority. Although this problem has improved over the years, political leaders must recognize the value of private sector solutions and look beyond the public sector perspective.

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Bucking the Trend: Growth Opportunities in India..!!

While the global recession has forced many Asian economies to rethink their export dependency, India surpassed China this year in auto exports.

As renewed investor confidence contributes to an expansion in private consumption and investment, how are companies adjusting their growth strategies in India?

Key Points
• To attract more investment, India has to deal with perceptions – whether real or not – that it is a difficult place in which to do business, even for Indians themselves
• Infrastructure deficiencies are widely regarded as an obstacle that has to be removed
• India must develop its capacity to absorb investment funds and efficiently deploy the capital and successfully execute projects, especially major infrastructure projects such as airports

Synopsis
India’s resilience in weathering the global economic crisis and maintaining robust growth fuelled significant interest among institutional investors in the country’s markets in recent months, especially after the national elections in May. FDI, however, has not risen in tandem. Yet, growth opportunities in India appear to be multiplying rapidly. Robust exports of autos and auto components are one positive indicator.

The injection of stimulus funds has, in part, been responsible for India’s strong performance during the crisis. But eventually India will have to wean itself off of the stimulus “drug”. To be sure, the flow of institutional funds into the financial markets has already slowed. Investors have become more discriminating. The challenge for India will be to attract the investments required to drive the growth it needs over the long term.

Whatever the realities on the ground, India will have to overcome perceptions, especially among investors outside the country, that it remains a difficult place in which to do business, even for Indians themselves. Beyond that, India must break significant bottlenecks that are preventing it from achieving higher growth.

Infrastructure deficiencies are widely regarded as an obstacle that has to be removed. India’s global ambitions for its auto and auto parts industry will not be realized if it does not build the roads and ports it needs. Raising the funds for these projects may be challenging, but even more difficult is the actual deployment of the capital. Relatively efficient execution is possible in India. Hyderabad’s new airport is a good example. Other airports have taken much longer to complete.

Hardware and software deficiencies have undermined India’s capacity to absorb investments and facilitate the execution of projects, hampering the country’s economic performance. The economy could do much better than it is doing, and more jobs could be created if India were able to successfully reduce these inefficiencies. Every reform measure will help increase India’s competitiveness and make it more attractive to overseas investors.

In addition, India could boost its growth by investing in innovation and R&D, focusing on the sectors where it has developed a competitive advantage. In IT, for example, India already has built up innovation clusters across the country that could help attract more investments.

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The Future of Indian Media and Entertainment..!!

The globalization of Indian cinema is only the beginning of a booming media and entertainment market, which has witnessed tremendous growth in the television, Internet, advertising, music and animation industries.

With growth forecast at 17-18% for next year alone, what must be done to increase access to investment and lower regulatory barriers?

Key Points
• The Indian government is pushing for reform in the media and entertainment sectors
• India’s media industry has an opportunity to leapfrog and avoid the mistakes of mature markets, such as in the US
• The advertising sector can grow as the economy expands
• Parts of the media are likely to see consolidation; only the best content will survive

Synopsis
The current government in India has been proactive in its FDI policy with regard to the media. The Press and Registration of Books Act of 1867 will be amended by the end of 2009 to allow, among other things, foreign newspapers to enter the market or have their Indian editions printed locally.

The government is working to improve the advertising rate structure. Some areas previously considered taboo, such as broadcasting news on private channels, are likely to be allowed. The third auctioning phase of radio stations will begin soon, with FDI in the sector increasing from 20% to 26%. The government is also encouraging foreign filmmakers to make films in India, offering incentives to the nascent but fast-growing animation and gaming industry.

The opportunity that the growing Indian market offers is huge, but it will not last forever. Indian media should take a cue from foreign conglomerates. They should aggregate the various types of media and prepare a digital platform for the future where content can be profitably monetized.

India is one of the most under-advertised and under-branded markets in the world; it spends about 0.5% of its GDP on advertising. The reason: the economy is dominated by the services sector, which is a very reluctant advertiser. However, manufacturing is increasing its market share and, as its branding needs increase, demand for advertising will rise. There are some 470 television channels in the country, yet about 70 of them monopolize the advertising revenue. Yet, content by and large is qualitatively mediocre, as the share in revenue of the content producer/creator is small. It is difficult to make advertisers pay “good money for poor content”, which further hinders growth of advertising.

Of the many channels on air, merely 10% break even; few make a profit. Due to the way the broadcast industry has grown in India, subscription is not part of broadcast economics, whose business model remains advertising-based. Increasingly, there is realization that for all media – especially news media – quality must match quantity. This will entail investment in training professionals to create quality content.

Some panellists opined that the Indian media industry is in for a period of consolidation based on quality content – where quality is driven by competition, and content by quality. The entry of foreign media could encourage consolidation through joint ventures and collaborations, which could raise the bar for the entire industry.

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Post-Crisis Economic Order: How Can Free Market and Control Be Balanced?

National responses to the global economic crisis have included traditional and innovative means of protectionism, challenging the paradigm of globalization and the force of free market.

What must be done to restore balance between regulatory and oversight mechanisms and India’s ongoing reform agenda?

Key Points
• Protectionism is not the answer – there should be collective cooperation among all nations
• The government responded to the financial crisis by stimulating domestic demand – this will have to continue until developed country economies recover
• The government’s three priorities now are investment in agriculture, investment in infrastructure and getting fiscal and monetary policy right
• The free market must be balanced with transparent, innovative regulation – self-regulation has also contributed to India’s resilience during the crisis
• Corruption and red tape are perennial problems holding India back from double-digit growth
• The two key drivers of Indian growth are domestic consumption and investment. The finance minister would be happy with GDP growth of 7%-plus next year and 8%-plus the year after

Synopsis
The spectre of protectionism that seemed likely a year ago has not materialized and global trade flows are now, if anything, more liberal than before. India’s finance minister clearly stated that protectionism is not the answer and called for collective cooperation among all nations.

The minister recounted how his government, faced with shrinking export markets and soaring oil prices, responded to 2008’s financial crisis with two stimulus packages that generated greater domestic demand – enabling India to post modest GDP growth of 6.7% in financial year 2008-2009. This focus on domestic demand will have to continue until the developed world economies, particularly the United States, Europe and Japan, make a more robust recovery. Going forward, the government’s three key priorities are investment in agriculture, investment in infrastructure and getting fiscal and monetary policy right.

In terms of regulation, there was consensus between industry leaders and the government that, while too rule-bound a market would stifle growth, a balance has to be struck in which the free market is governed with sufficient regulation to safeguard the weaker sectors of society. The minister championed regulation that is transparent, innovative and constantly adjusting to the conditions of the market. Self-regulation also emerged as a key factor in limiting India’s exposure to the financial downturn – from banks maintaining strong liquidity ratios and lending only against income to borrowers keeping a close eye on their repayment capacities.

The minister agreed with a comment from the floor that corruption and delays due to red tape remain perennial issues – and may be holding India back from double-digit growth. India’s recent subscription to the OECD’s rules on sharing information about tax evasion is a positive move.

Looking ahead, the key drivers for the Indian economy will be domestic demand and investment. The minister said he would be happy with GDP growth of 7%-plus next year and 8%-plus the year after – with the possibility of 9% or 10% thereafter.

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Trade and Climate Change: Economic Imperative or Green Imperialism?

Trade and climate policies have become increasingly entwined as countries grapple with the challenge of integrating economic interests with the management of climate change.

What are the economic effects of trade and climate change policies, and how can different viewpoints between developed and developing countries be reconciled?

Key Points
• The big growth story of the next two to three decades will be low-carbon technologies
• The climate change debate cannot allow for the introduction of protectionist trade barriers
• A respect for green-friendly technological innovations in developing countries may shift the terms of debate on intellectual property

Synopsis
The process of carbon mitigation can either improve the lives of everyone or bring global economic trade to a grinding halt. Business leaders recognize both the urgency of the problem and the opportunities. For example, both pension fund managers in New York overseeing trillions of dollars and China's next Five-Year Plan place low-carbon and energy-efficient technologies at the top of their list of priorities.

The alternative energy sector – comprised of hydropower, solar, wind, biomass and ocean energy, among others – is a US$ 125 billion industry. By 2050, that figure might rise to US$ 1 trillion. Investors will seize upon opportunities in this sector if policy is properly set, there is the right balance of incentive structures and protectionist trade barriers are mitigated. A clear, strong agreement at the UNFCCC meeting in Copenhagen is fundamental to unleashing private sector forces, although expectations for a legally binding treaty have recently been downgraded, with some now saying that an agreement may take another few years. Discussions in the lead-up to the climate change conference reveal that developed economies fear losing their standard of living, while developing countries are afraid their growth process will be stymied.

However, India recognizes that achieving growth rates of 8-9% will be impossible unless they shift to renewable energy. India's national action plan calls for the installation of 20,000 megawatts of solar power in the next 10-12 years at a cost of billions of dollars. This plan has not been imposed by the outside, but decided on by the government because “it is good for India”. Improving the lives of hundreds of millions of people, climate change and development are interlinked.

Panellists from the private sector voiced concern that climate change negotiations can dominate trade. The reality is that costs associated with adopting green technologies are far less (1-2%) than the tariffs that trade lobbies are requesting (around 20%). A narrow view of costs, self interest and an artificial competition between growth and responsibility can slow progress.

Failure to put a price on greenhouse gases results in subsidizing pollution. At the same time, if customers demand products that are green, then businesses will rise to meet that demand.

Instead of blaming each other, countries must collaborate, especially in developing energy-saving technology, renewable energy and alternative fuels.

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How Can India Become a Global Manufacturing Hub?

While manufacturing in India has remained healthy due to strong domestic demand, its contribution to GDP is only 16%, compared to 34% in China, and largely oriented to the domestic market.

How can India increase its manufacturing competitiveness while employing millions of new entrants into the workforce?

Key Points
• India’s manufacturing sector will be driven by a US$ 500 billion investment in infrastructure across sectors in the near term
• Innovation in manufacturing is crucial; India’s competitive edge is not only in labour arbitrage but in technologically intensive manufacturing
• Both a shortage of roads and power and a skills shortage pose challenges to the manufacturing sector

Synopsis
The manufacturing sector in India faces acute challenges. From problems with power, ports, railroads and roads to a shortage of human capital, manufacturing in India has long lagged behind targeted goals. But the Indian government's commitment to raise its investment in infrastructure from 7% to 9% represents a US$ 500 billion opportunity for growth within India's manufacturing sector.

A number of foreign manufacturers have met India’s infrastructure bottlenecks head on, with considerable success: LG has looked at India as an export hub; Hyundai has set up its small car manufacturing base in India; Nokia's handset manufacturing in the southern state of Tamil Nadu costs 12% less than its counterpart in China.

India offers potential investors in the manufacturing sector a number of competitive advantages. India's own domestic market is large, with over 600 million rural consumers. Workers’ wages in India are less than half of those in China. India has a large talent pool from which to draw, including a strong engineering ecosystem.

From a strategic point of view, growth in the coming decades will come from the developing world. India is in an excellent position to serve emerging economies in Latin America, Africa and elsewhere in Asia. Currently, that represents 11% of India's export market, but it is set to grow dramatically.

India's competitive advantage is in technology-intensive manufacturing. Indian manufacturers must lead by innovation, following the example of the Tata Nano, the world's most affordable car, which was designed from the bottom up.

One challenge facing Indian manufacturing at a time of tremendous growth is high turnover. When the economy grows at a rate beyond 7-8%, companies face a skills shortage and turnover increases from a manageable 2-3% to as much as 20-30%. This creates an unstable environment for manufacturing. The challenge can be mitigated by dramatically increasing the capacity of human resources.

Another challenge is public sector control and the requirement that companies bidding on very large infrastructure projects must have previous experience in the field, which many India companies lack. This results in Indian companies losing out in the competitive bidding process to foreign firms.

At the same time, state governments have been proactive in making manufacturing zones attractive to automobile and other manufacturers. The Indian government has identified areas where its intervention is required, such as social services, and infrastructure, where private industry is more capable.

Innovation in the modes and models of manufacturing can be a solution to the surplus of India's labour pool, which is largely unskilled but highly entrepreneurial. At the same time, core manufacturing capabilities are important for creating a first-world economy.

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How Will India Shape Future Global Cooperation?

India has a unique combination of membership in the G20, non-NPT status and a tradition of non-alignment. As it seeks to increase its voice in global cooperation, what will be India’s future role and responsibility?

The recommended actions from this session will be discussed in the Closing Plenary session.

Key Points
• In the multipolar world of “multi-alignments”, India will need to balance its national interests with regional and global responsibilities.
• While it has always possessed a sense of global citizenship, India cannot be altruistic at the expense of its citizens.
• As a major emerging economy, India has an increasing responsibility to promote regional integration and cooperation in its neighbourhood.

Synopsis
The global economic crisis has focused the international community’s attention on how international institutions and mechanisms of governance should be redesigned. This would include the rebalancing of global responsibility, with major developing economies such as India taking on greater roles. This is important in a multipolar world racked by contending pressures of globalization – the increasing sense of mutual dependence simultaneous with the intensification of forces of disruption and intolerance. The problems the world faces have no passports and cannot be solved by any single country.

The designation of the G20 as the premier forum for international economic cooperation is a significant reform measure. It gives developing economies a greater voice over the reshaping of the international financial architecture. But this is only a first step. The challenge will be to find ways to further redesign the global system to reflect current geopolitical and international economic relations.

Future systems may in fact be somewhat chaotic. After the dichotomous Cold War era of alignment or non-alignment, pragmatic “multi-alignment” is the norm. Countries align according to issue or interests, sometimes partnering, sometimes contending. For India, the challenge is to figure out what to do now that it has a seat at the global table. Like any country with greatness thrust upon it, India has to figure out how to balance national interests with its regional and global responsibilities. This is a difficult task for a nation that does not typically wield its hard power but relies more on its soft power.

What does this mean for emerging India? First, it must have its own domestic house in order to preserve its moral authority as a democracy and as a progressive country that has been pursuing tough reforms for two decades. Second, India must be able to assert itself on the international stage, defending its interests even if it means opposing majority pressure to accept agreements or terms that would negatively impact Indians. Yet, India cannot be an argumentative spoiler, an accusation often lodged by critics of its approach to trade talks. Third, India needs to develop its leadership in South Asia to boost cooperation in the region and promote stability and peace in the neighbourhood.

As India takes in hand more levers of global power, it must examine and come to terms with what it actually means to wield significant influence in the world. Like any other emergent nation, can India perform on the world stage without thinking only along the paradigm of its own national interests? If countries at the negotiating table use nationalist instincts as their default position, the only outcome is deadlock. The impasses over the Doha Round and climate change are cases in point.

India nonetheless has a track record of global collaboration that is often overlooked or under-appreciated. Its soldiers consistently participate in international peacekeeping operations, for example. This is evidence of India’s long-held sense of global citizenship. India wants to be a responsible global player. But it must always keep at the forefront the fact that it is still a developing economy, with more than half a billion people without access to electricity. At this stage of its development, India cannot afford to be altruistic at the expense of its own population.

On the regional front, India has in fact made efforts to promote regional integration and collaboration, with positive results. Bhutan’s use of Indian assistance to develop its electricity sector, now the top contributor to its GDP, is a good example. But geopolitical circumstances have meant that South Asia is decidedly less connected than other regions. India needs to explore ways to deepen and broaden relationships with its neighbours, both in South Asia and to the East.

While relations with China are marked by disagreements on a range of issues including territory, it is important not to exaggerate the differences, which are not unusual in any complex relationship. India’s interaction with China will be a critical dynamic to watch in the future. The emergence of India is proving that democracy need not have a high growth penalty, an implicit challenge to the Chinese model of directed growth under an authoritarian system. On these two fast-growing countries lies the responsibility for bolstering Asia’s position in the world in what is supposed to be the Asian Century.

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