India Economic Summit Implementing India New Delhi, India 14-16 November 2010 The views expressed in this publication do not necessarily reflect those of the World Economic Forum. World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 (0)22 869 1212 Fax: +41 (0)22 786 2744 E-mail: contact@weforum.org www.weforum.org © 2010 World Economic Forum All rights reserved. No part of this publication can be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information retrieval or storage system. REF: 021210 The electronic version of the India Economic Summit Report allows access to a richer level of content from the Summit, including photographs, session summaries and webcasts of selected sessions. It is available on the World Economic Forum website: http://www.weforum.org/summitreports/india2010 (HTML) http://www.weforum.org/pdf/summitreports/india2010.pdf (PDF) Other specific information on the India Economic Summit in New Delhi, India, on 14-16 November 2010, can be found at the following links: Interviews www.weforum.org/india2010/interviews Summit News www.weforum.org/india2010 Partners www.weforum.org/india2010/Partners Photographs www.weforum.org/india2010/Photos Programme www.weforum.org/india2010/Programme Session Summaries www.weforum.org/india2010/Summaries Webcasts www.weforum.org/india2010/Webcasts Sub-themes India’s Implementation Imperative Security and Sustainability Imperative Inclusive Growth Imperative Innovation and Competitiveness Imperative Contents > Preface Page 3 > Executive Summary: Implementing India Page 4 > India’s Implementation Imperative Page 6 > Security and Sustainability Imperative Page 10 > Inclusive Growth Imperative Page 14 > Innovation and Competitiveness Imperative Page 18 > Acknowledgements Page 22 2 | India Economic Summit India Economic Summit | 3 Preface Co-chairs of the 2010 India Economic Summit Jon Fredrik Baksaas, President and Chief Executive Officer, Telenor, Norway Ajit Gulabchand, Chairman and Managing Director, Hindustan Construction Company, India Ellen Kullman, Chair of the Board and Chief Executive Officer, DuPont, USA Pawan Munjal, Managing Director and Chief Executive Officer, Hero Group, India Dennis Nally, Chairman, PwC International, PwC, USA This year, the World Economic Forum hosted the India Economic Summit in partnership with the Confederation of Indian Industry (CII) under the theme “Implementing India”. With over 800 participants from 44 countries convened in New Delhi, the Summit focused on India’s need to implement a variety of imperatives to make economic progress more socially inclusive. After two years of economic growth at 7%, India has succeeded in turning the trend towards an even more impressive increase of over 8%. This puts India among the frontrunners of the G20 countries in terms of growth. However, this mainly domestic-driven development is unbalanced. The majority of opportunities and wealth associated with this economic success remains in urban areas, while the majority in India’s heartland is still waiting for the benefits. The political and social impacts are driving India’s daily agenda – the call for turning the rapid economic growth into an inclusive growth is echoed more and more. Therefore, the India Economic Summit programme was structured along India’s imperatives of building critical infrastructure, expanding skills development, achieving income and gender equality. The unbalanced distribution of economic growth is also reflected in the way India is facing the threat of a water crisis, which is even more serious than an energy crisis. In both cases, the poor are particularly hard hit – innovation must be inclusive. And, in a country with an overwhelming majority of young people, it is essential to include younger voices in the discussions. To highlight a significant part of India’s global outreach, there were specific sessions in the programme devoted to the ways in which trade and general exchanges with countries in Africa and Latin America are developing and will shape the future global economic and political agendas. To generate insight on India’s competitive strengths and weaknesses, the India Economic Summit served as an occasion to launch the study on Using Information and Communication Technologies to Boost India’s Competitiveness. The study draws on the findings of the World Economic Forum’s Networked Readiness Index 2009-2010, which analyses India’s advances and challenges related to information and communication technology (ICT) development for enhanced competitiveness and the creation of a truly networked society. In addition, the Schwab Foundation for Social Entrepreneurship, in partnership with the Jubilant Bhartia Foundation, presented the India Social Entrepreneur of the Year Award. In the spirit of generating insight and shaping India’s agenda, the India Economic Summit programme tapped into the collective intellect, local experience and global insight of its community of multistakeholders. With the central government in power for just over a year, the programme was designed to assess where and to which degree certain implementation needs are progressing. As a result, concrete recommendations were made on a variety of topics that will shape the future of India, including the modernization of India’s agriculture sector, greater transparency, and making transportation sustainable and safe. As you read the key points and outcomes presented in this report, we welcome your thoughts and suggestions as we prepare the programme for the next India Economic Summit, which will take place on 12-14 November 2011. The internal and external challenges India is facing and the way in which the country is finding appropriate answers and solutions is compelling – for many other parts of the world as well. Therefore, we hope that the India Economic Summit will continue to serve as an important platform for stimulating thoughts, creative solutions and sharing experiences in a constructive way. Sushant Palakurthi Rao Director, Head of Asia World Economic Forum 4 | India Economic Summit 4 | In d i a E co n o mi c Su mmi t Executive Summary The challenge put before participants in this year’s India Economic Summit was to find ways in which India can spread its rapid economic growth more evenly so that it reaches the hundreds of millions of Indians still living in rural poverty. It is a tall order. While India’s fast-growing, dynamic economy has become the envy of the world, its growth has been lopsided. Opportunities and wealth have flowed largely to educated urbanites. Those in India’s heartland are still waiting for the tide to lift them up. Their impatience and frustration have become evident in election results, in rural protests, in simmering insurrections and, most dramatically, in the steady march of migrants into India’s bulging cities. India may have rapid growth, but it needs inclusive growth. Over the course of the three-day Summit, participants offered a wide range of recommendations. Most centred on a single, fundamental concept: to make India’s economic growth broader and more inclusive, the country needs to take up late author C. K. Prahalad’s call to stop looking at rural India as a social problem and instead see it as a market rich with opportunities. Technology increasingly provides the means to offer goods and services affordably to remote areas – healthcare, for example. Mindsets need to change. Governments and businesses must help release the wealth and enterprise that lie trapped on India’s farms and in its villages. This approach goes beyond seeking ways to deliver products and services to rural India profitably and at the same time raise living standards and create new opportunities. The most effective way to achieve inclusive economic growth, participants concluded, is to remove the barriers preventing poor Indians from seizing the opportunities India’s growth is creating. Lack of education among rural Indians remains a big problem, but one that can be overcome with improved access to information. Corruption, gender discrimination and the hazards on India’s roads, on the other hand, are hurdles only government and society can remove with determined policy and regulation. The principles of market economics, moreover, are just as true in rural India as they are in cities. So, scarce resources like power and clean water, without which rural India can never advance, will only be available in sufficient supply there when they are appropriately priced. To tackle these issues, the Summit’s sessions were organized into four sub- themes: s India’s Implementation Imperative s Security and Sustainability Imperative s Inclusive Growth Imperative s Innovation and Competitiveness Imperative India’s Implementation Imperative To avoid social unrest, India needs to use its accelerating economic growth to push jobs and skills into the countryside. s India must boost investment in primary education and vocational training. Companies need to help not only with funding new schools, but also by staffing them and devising practical curricula. s Governments need to remove subsidies on electricity generated from fossil fuels and eliminate flat rates for power consumption. s The power industry should be deregulated to stimulate rural investment. The sector should also be opened further to private investment. s India’s cities must be given greater control over their own finances so they can invest more effectively in their own infrastructure. India Economic Summit | 5 Inclusive Growth Imperative Achieving inclusive growth in India will require changing entrenched attitudes. Government corruption drives away talent, hiring quotas implicitly underestimate talent in women, and efforts to help the poor often fail to recognize that they have wealth and talent as well. s Reduce regulations and cut red tape to eliminate opportunities for corruption. Governments must compete for talent with the private sector by restoring meritocracy and offering reasonable pay. s Targets are preferable to quotas when it comes to achieving gender equality. s Companies should stop seeing poor, rural Indians as a cause and start seeing them as customers and employees. s Microloans have created lots of credit – and controversy – in rural India. More needs to be done to service the other side of the rural balance sheet – deposit accounts, insurance, remittances and pension products. Security and Sustainability Imperative India’s progress so far has turned the country into a role model for other developing nations. How it addresses thorny issues such as agriculture, water and road safety are adding policy to the mix of cultural strengths that give India global “soft power”. s Governments and corporations must recognize India’s mostly small farmers as entrepreneurs and view agriculture as an industry. s India needs to impose higher standards for vehicles and roads, crack down on violations and create a more effective emergency service to handle accidents. s India faces a water shortfall of 50% in 20 years. To avert a crisis, it needs to set up a progressive tariff on water use. s By hewing to its tradition of diversity, tolerance and non-violence, India can position itself as a power for moderation, equity and justice in the world. Innovation and Competitiveness Imperative To its own people, India’s domestic challenges may at times seem insurmountable. But its advances are not only giving it influence abroad, they are also making India more globally competitive. s With their widespread popularity and expanding capabilities, mobile devices should be used to expand healthcare to poor people in isolated rural villages. s Investments in solar energy should be accompanied by a phase-out of subsidies on fossil fuels. s Companies looking to build brands in India need to combine universal appeal with market-segment customization. s India should build more economic bridges with other developing countries, like those in Africa, with which it shares similar levels of development and historical experience. I ndia Economic S ummit | 5 Inclusive G rowth Im p erativ e A c hi ev i ng i nc l us i ve growt h i n I n di a w ill require chan g in g entrenched attitudes. Government corru p tion drives awa y talent, hirin g quotas implicitly underestimate talent in women, and efforts to hel p the poor often fail to reco g nize that they have w ea lth a n d t a l e nt as w e ll . s Reduce re g ulations and cut red tape to eliminate o pp ortunities for corru p tion. Governments must com p ete for talent with the private sector by restorin g meritocracy and offerin g reasonable p a y. s Tar g ets are preferable to quotas when it comes to achievin g g ender equality. s Companies should stop seein g p oor, rural Indians as a cause and start seein g them as customers and em p lo y ees . s Mi c r o l oa n s h a v e c r ea t ed l o t s o f c r ed it – an d controvers y – i n rura l I n di a. M o r e n eeds t o be do n e t o se rvi ce t he o t he r side of t he r u r al bala n ce s h eet – d e p os i t accounts, i nsurance, rem i ttances an d p ens i on p ro d ucts . S ecurity and S ustainability Imperative I n di a ’ s pro g ress so f ar h as turne d t h e countr y i nto a ro l e mo d e l f or ot h er d eve l op i n g nat i ons. H ow i t a dd resses thorny issues such as a g riculture, wate r a n d roa d sa f ety are a ddi n g po li cy to t h e mix of cultural stren g ths that g ive India gl o b a l “ so f t power ”. s G overnments and cor p orations must r eco g n i ze I n di a ’ s most l y sma ll f armers as entrepreneurs and view agriculture as an i n d ustr y . s I n di a nee d s to i mpose high e r stan d ar d s f or ve hi c l es an d roa d s , crac k d own on v i o l at i ons an d create a more e ff ect i ve emergency serv i ce to h an dl e acc id ents . s India faces a water shortfall of 50 % in 2 0 y ears. T o avert a cr i s i s, i t nee d s to set up a pro g ress i ve tar iff on water use . s B y h ew i ng to i ts tra di t i on o f di vers i ty, to l erance an d non-v i o l ence, I n di a can pos i t i on i tse lf as a power f or m o d erat i on, equ i ty an d j ust i ce i n t h e wor ld. Innovation and C om p etitiveness I mperat i v e T o i ts own peop l e, I n di a ’ s d omest i c c h a ll enges may at t i mes seem i nsurmounta bl e. B ut i ts a d vances are not on l y g i v i ng i t i n fl uence a b roa d , t h ey are a l so ma ki ng I n di a more g l o b a ll y compet i t i ve . s Wi t h t h e i r w id esprea d popu l ar i ty an d expan di ng capa bili t i es, mo bil e d ev i ces s h ou ld b e use d to expan d h ea l t h care to poor peop l e i n i so l ate d rura l v ill ages. s I nvestments i n so l ar energy s h ou ld b e accompan i e d b y a p h ase-out o f su b s idi es on f oss il f ue l s . s C ompanies looking to build brands in I n di a nee d to com bi ne un i versa l appea l w i t h mar k et-segment custom i zat i on . s I n di a s h ou ld b u ild more econom i c b r id ges w i t h ot h er d eve l op i ng countr i es, lik e t h ose i n Af r i ca, w i t h w hi c h i t s h ares s i m il ar l eve l s o f d eve l opment an d hi stor i ca l exper i ence . 6 | India Economic Summit India’s Implementation Imperative India Economic Summit | 7 India’s economic growth has regained momentum in the wake of the global economic crisis. The government’s aim now is to raise it to at least 10%. Faster growth provides India with the means to expand development into its poorest and least developed areas. It has no option but to do so: if India fails to make sure that investment and opportunities flow to its poorest regions, more and more rural Indians will pour into the nation’s crowded cities, sink into despair, or turn to radicalism in a desperate effort to achieve what economic growth has not – social equity. There are promising gains to be made by boosting productivity in India’s agricultural sector, where 70% of its people make their living. The more urgent riddle India faces, though, is how to bring more of the rural workforce into manufacturing and service jobs when the workers lack the skills to do them and when cities lack the capacity to provide housing. The answer: find ways to push the jobs and skills out of the cities and into the countryside where they are needed. Recommendations • CapitalizeonIndia’sHumanCapital India must boost investment in primary education and vocational training. Companies need to help not only by funding new schools, but by staffing them and devising the most useful curricula. • EmpowerthePowerless Power’s price must reflect its real cost. Governments need to remove subsidies on electricity generated from fossil fuels to encourage investment in renewable energy. Likewise, flat rates for power consumption need to be eliminated to discourage waste. • SwitchonthePowerSector The power industry should be deregulated to stimulate investment into poorer, rural areas. In particular, the sector should be opened further to private investment. • De-stressUrbanInfrastructure India’s cities must be given greater control over their own government. This will enable them to collect taxes they can invest more efficiently in their own infrastructure. Capitalize on India’s Human Capital India’s educational system is the root of the country’s economic success but is also to blame for many of its failings. India has the largest number of illiterate people and the lowest educational standards in the G20. Every year, 12 million Indians join the workforce, yet few have even a high- school education. As a result, India faces a critical shortage of tradesmen – from carpenters and electricians to pipe-fitters and plumbers. “We tend to think of rural development as something for government. But the private sector has an equal role to play.” Chanda Kochhar Managing Director and Chief Executive Officer, ICICI Bank, India 8 | India Economic Summit What is needed is new focus on and investment in primary education, English literacy and vocational training. The private sector has a critical role to play in providing improved vocational training, either by offering apprenticeships or by working with the government to make sure that training matches the skills employers need. Many believe that might be best achieved by turning more of education over to the private sector, thereby ensuring that competition provides higher quality at lower prices. Empower the Powerless Power is a key to development: power drives telecommunications, which in turn transmits information and access to markets, training, healthcare and financial services. While India’s power grid is expanding by almost 10% every year, two- fifths of the country still has no electricity. The lack of clean, affordable power and other major infrastructure remains one of the biggest obstacles to India achieving sustainable and inclusive growth. India’s poor are willing to pay for reliable, affordable power as long as it is fairly priced. Flat rates for consumption only “The demographic dividend can only happen if you educate the young. If not, it will be a disaster.” Hari S. Bhartia Co-Chairman and Managing Director, Jubilant Bhartia Group; President, Confederation of Indian Industry (CII), India Source: World Bank World Development Indicators (2010); NSF Science and Technology Indicators 2010 [...]... Religare Enterprises 22 | India Economic Summit Host Broadcaster NDTV Profit India Economic Summit | 23 24 | India Economic Summit Contributors The 2010 India Economic Summit was under the direct responsibility of Sushant Palakurthi Rao, Director, Head of Asia, at the World Economic Forum, with Kim Hugot, Events Manager and Summit Coordinator, and Christoph S Sprung, Senior Manager, India and South Asia... rotation.” Dennis Nally Chairman, PwC International, PwC, USA; CoChair of the India Economic Summit India Economic Summit | 17 Innovation and Competitiveness Imperative 18 | India Economic Summit A new term is gaining currency among Africans to describe a unique combination of ingenuity and inventiveness: Indovation To its own citizens, India s domestic challenges may seem insurmountable and a concept like... The World Economic Forum would like to thank the officers and staff of the Confederation of Indian Industry for their partnership in the India Economic Summit The World Economic Forum wishes to recognize the support of the following companies as Partners of the India Economic Summit: Strategic Partners Meeting Supporters Abraaj Capital Accel Partners Accenture Apax Partners AUDI AG Bahrain Economic. .. welfare More important is to pull these people onto the economic ladder You need to go that extra mile – that last mile – to extend economic benefits to all these people.” Pawan Munjal Managing Director and Chief Executive Officer, Hero Group, India; Co-Chair of the India Economic Summit India Economic Summit | 15 Create Transparency; Foster Leadership India seems to be accepting the principles of caste... and low-cost housing Cities will need land, so efforts must be made to clarify the conditions under which they can acquire it and how much they should pay India Economic Summit | 9 Security and Sustainability Imperative 10 | India Economic Summit India is facing its dilemmas and developing new models for mitigating risk and ensuring sustainability while respecting its democratic pluralism “You have... Centre, Indian Institute of Technology Delhi, India 40 35 30 25 India China 20 Turkey 15 Indonesia Russia Brazil 10 Mexico 5 0 1970 1975 1980 1985 1990 1995 2000 2005 2008 Source: World Bank “For a country that invented yoga, [it is odd that] we did not learn to stretch until China forced us to.” Anil Gupta Chair and Professor of Strategy, INSEAD, Singapore 12 | India Economic Summit How Will India Avert... to be accepting the principles of caste and dynasty It’s replacing meritocracy.” Arun Jaitley Leader of Opposition, Rajya Sabha, Parliament of India, India 16 | India Economic Summit Companies and governments need to restore the allure of politics and bring India s best and brightest back into the realm of policy The government must create a clear, merit-based system that rewards performance Likewise,... that India has the lowest proportion of females in the workforce among G20 economies Women are by no means the only segment of India s population that remains marginalized, however More than nine out of every 10 Indian workers are informal, undocumented and often migrant Two- thirds of the nation’s population still lives in rural India, which still produces close to 40% of India s GDP Yet, rural Indians... African universities and hospitals with those in India Young Africans have come to India to study for decades – there are currently 15,000 African students in India India’s development holds important lessons for Africa as it emerges from decades of dictatorship The business model of some Indian telecom companies, for instance, is relevant to African conditions Indian cellular companies also have experience... the moment, but India has a special relationship with the continent Not only do India and African countries have a shared history of colonialism, but Mahatma Gandhi spent 22 years in South Africa, where he conceived his principles of non-violence and began to forge the political links between Indian and African leaders that have become so important after independence India Economic Summit | 21 Acknowledgements . Acknowledgements Page 22 2 | India Economic Summit India Economic Summit | 3 Preface Co-chairs of the 2010 India Economic Summit Jon Fredrik Baksaas, President. hi stor i ca l exper i ence . 6 | India Economic Summit India s Implementation Imperative India Economic Summit | 7 India s economic growth has regained momentum