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Insights on India

http://www.weforum.org/sessions/summary/insights-india

Insights on India

Wednesday 26 January, 10.45 - 12.00


 

What are the economic changes, political priorities and global issues shaping India?

The following dimensions will be addressed:

- The state of government and business relations


- Priorities in infrastructure development
- The political and economic challenges of inclusive growth

Key Points

Achieving inclusive growth requires more than just reducing income disparities; instead, major
gaps in healthcare, food security and education – among other issues – must be addressed.
There are growing fears about India reaching its capacity for growth, particularly in terms of
labour and energy.
Improving education in India is one of the most important challenges on the nation’s agenda.
Corruption and other political hurdles undercut growth and threaten to disenfranchise portions
of the population.
Future job growth and economic prosperity in India will likely not come from expansion of the
manufacturing sector, which often drives growth in developing nations.
Instead, India’s job growth model depends on developing its service industry, construction and
domestic markets.

Synopsis

The prosperity and wealth that India has achieved over the past two decades has been an inspiration
to many other developing nations; however, these gains have not been distributed evenly in Indian
society. Greater inclusiveness is a goal for future development, as many investors already fear the
nation is reaching the limits of its capacity for growth. Power shortages have become more common.
Many Indian companies cite insufficient talent in their workforce. From a macroeconomic
perspective, increasing inflation and fiscal debt complicate the long-term picture for growth.

Achieving sustainable, inclusive levels of growth will require more than simply narrowing income
gaps. Healthcare, food security, social mobility and education are also challenges that India must
address. Education in particular could extend prosperity to larger portions of the population. While
India has succeeded in increasing school attendance levels, the next hurdle will be improving the
quality of public education. This responsibility falls primarily on the state; however, the private sector
must also participate. Companies need to communicate with education leaders about the skills
necessary to increase the competitiveness of India’s workforce.

Corruption and political inefficiency have complicated inclusive growth initiatives on national and
local levels. For example, farmers whose land rights are violated may receive little help from local
police or court systems, which are often controlled by the community’s elite. These governance gaps
risk disenfranchising segments of the population – particularly the underprivileged – and some
politicians are already concerned about emerging factions.

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Insights on India
http://www.weforum.org/sessions/summary/insights-india

India has the opportunity to present a model of growth for developing nations based on consent
rather than control and achieving this end will require greater democratic inclusiveness. However,
neither India nor the rest of the world can afford to wait for the government to lead. The nation’s
information technology sector, for example, has taken a leadership role in private sector-initiated
reforms.

In many developing countries, job growth models depend on increasing the manufacturing sector as
the dominant source of employment. In India, manufacturing has not grown as dramatically as other
sectors, and the nation’s model for growth could be different. Construction will be a key source of
future employment as the number of public sector infrastructure projects increases. In addition, by
fostering entrepreneurship and improving education, India’s economy could rely on a diverse set of
sources – from services to domestic manufacturing to construction.

Other Key Takeaways

While the economic growth in India and China is often compared, India’s focus on inclusive
growth represents a different approach from China’s “harmonious growth” model.
In many cases, India has an advantage in attracting foreign capital, particularly related to
service industry companies, because its legal framework protects outside investors.
Venture capital is not as well developed in India as it is in China; expanding this sector could
accelerate the creation of new businesses.
While each country can learn valuable lessons from the other’s growth, political and social
differences make it impossible for India to simply copy Shanghai’s infrastructure development,
for example.

Discussion Leaders

Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, India


Hari S. Bhartia, Co-Chairman and Managing Director, Jubilant Bhartia Group; President,
Confederation of Indian Industry (CII), India
Harold McGraw III, Chairman, President and Chief Executive Officer, McGraw-Hill Companies, USA
Sandeep A. Naik, Co-Head, Apax Partners India Advisers, India; Young Global Leader
Raghuram G. Rajan, Eric J. Gleacher Distinguished Service Professor of Finance, University of
Chicago Booth School of Business, USA; Global Agenda Council on the International Monetary System
Ingrid Srinath Narasimhan, Secretary-General and Chief Executive Officer, Civicus: World Alliance
for Citizen Participation, South Africa

Moderated by
Shekhar Gupta, Editor-in-Chief, The Indian Express, India

Disclosures

This summary was prepared by Mary Bridges. The views expressed are those of certain participants
in the discussion and do not necessarily reflect the views of all participants or of the World Economic
Forum.

Copyright 2011 World Economic Forum

No part of this material may be copied, photocopied or duplicated in any form by any means or
redistributed without the prior written consent of the World Economic Forum.

Keywords: India, inclusive growth, China, employment, education, governance

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