India: Challenge & Opportunity of a Lifetime

December 13, 2006

Last week I had the opportunity to attend three events in Delhi – the 3rd Sat Pal Mittal Memorial Lecture by Montek Singh Ahluwalia, Deputy Chair of the Planning Commission, on the 11th plan; the India-Japan Energy Forum organized by TERI and NEDO; and the London School of Economics (LSE) Asia Forum. The timing of these events was fortuitous, giving a just-returned expat an eye-opening glimpse into India.

3rd Sat Pal Memorial Lecture: Development Priorities for Inclusive Growth
It is perhaps appropriate to start my exploration of India from a public policy perspective. And public policy has set a target of 9% growth over the 11th plan period.

One may wonder if this target is conservative, as it likely is, considering GDP grew at 9.25% in the last quarter. One may also question whether, in an era when large governments are frowned upon, such targets are advisable or even necessary. But one cannot argue about the planning process itself. For, if government is to make resource allocation choices it must make informed choices by prioritizing social services. For the 11th plan, Dr. Ahluwalia was quick to point out what those priorities would be: infrastructure, agriculture, health, and education.

It is hard to complain about this list. Infrastructure is creaking, when it exists. Agriculture has grown at a meager 2%, with almost no improvements in productivity, while still employing a majority of the workforce. And both public health and education are virtually non-existent, causing us to loose an entire generation of potential talent.

India Japan Energy Forum: Tackling Infrastructure
No discussion of India’s inadequate infrastructure is complete without mention of the power sector. It is estimated that by 2010 India will require 400,000MW of electricity, against a current capacity of 130,000MW. As the preceding discussion suggests, energy is an important area for India’s future ability to grow. While this forum was very specific and often technical, it was also the clearest evidence of India’s desire, indeed ability to change, and do so rapidly.

To begin with, it threw up a few surprises. For instance, Japan is the most efficient user of energy, with the lowest energy efficiency per GDP. And unlike most countries, that figure has gone down by 30% since the 1970s due to an obsessive attention to efficiency.

Second, while India is hardly efficient, things may actually be improving. In the face of energy constraints, Indian industry has had to become efficient and is now benchmarking itself against the best (that is a critical area of interest for Japanese companies such as Mitsubishi, Hitachi, and Marubeni). This drive for efficiency will only expand with initiatives from the Bureau of Energy Efficiency (BEE).

India also has been the most aggressive of the developing countries in embracing renewable energy. It now has the 5th largest wind energy program in the world. With strong public incentives, financing through the CDM, and a committed rural electrification program, India’s target of 20,000MW from renewable sources is likely to be met well before 2012.

One overarching theme was evident from the many speeches - that the power sector is in a state of crises and may well nix India’s future. With the world now used to 8% growth in India the challenge is to keep growth at those levels without choking ourselves in the process. In the emerging policy environment, both the development and environment impact can only be positive.

London School of Economics Asia Forum: India and the World
The LSE Asia Forum is an annual event held for the first time in India. It brings together LSE Alumni and partners, and in this instance managed to convene celebrities including Manmohan Singh (Prime Minister of India), Shiela Dixit (Chief Minister of Delhi), Nandan Nilekani (CEO of Infosys), the Chinese Ambassador to India, and Prof. Lord Meghnad Desai.

As expected, the day-long event was heavy on economics, trade, and international relations, giving rise to many interesting discussions, not least questions posed to the Chinese ambassador on Tibet’s right to freedom and an argument between Oxfam India and Prof. XXX on the pros and cons of globalization.

However, the Forum was more interesting for what it represented than for what was actually discussed. Because an event of this scale is neither about the LSE, nor about India. It is about India and the world. And the mere presence of the event indicates that things are going well for the host country.

A Mixed, but Optimistic, Future
During these three days the phrase ‘inclusive growth’ came up often, so often in fact that one may mistake it for political posturing. Yet, it was important to formulate a necessary question – what is the purpose of growth?

In that context even the champions of industry realize that the only thing preventing India’s growth is India itself. For when Infosys faces a shortage of skilled labor and operates the largest in-house training program, it isn't simply a corporate challenge. It is a corporate challenge that is, at heart, a social challenge.

This challenge provides an interesting insight into India I could not have had from outside. Yes, India is home to bad infrastructure, poor education and health, and non-existent accountability. But when the head of the Bureau of Energy Efficiency, a government institution, comes from Suzlon Energy and the World Bank, one is forced to ask why he would make the organizational shift. His answer was candid – this is the opportunity of a lifetime.

And that, in essence is the critical lesson for anyone not in India. Nehru said famously in 1947, “a moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends and when the soul of a nation, long suppressed, finds utterance.” This can be that moment.

Dweep works in Swiss private banking. He studied Management in International Organizations, focusing on emerging markets and international political economy and writes at The Discomfort Zone on a range of related issues. His expressed views are personal and do not reflect those of his employers, past or present.
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December 13, 2006
11:59 AM

Good article Dweep.

You make a good point about infrastructure, agriculture, public health and education being inadequte. I feel they're grossly inadequate and urgent measures have to be taken. Unfortunately, the political parties are more concerned with caste and religious issues than genuine growth. And the Lunatic Left arent helping either (when did they?) Hopefully, that will change and we'll increase our attention on those four issues.

The biggest problem, to me, is agriculture. Something is seriously wrong. The rest of the country is moving along but agriculture, which employs about 60% of India's population (10% of all humanity), is hardly growing. Something needs to be done. Otherwise, it'll be problems because we're talking about 60% of our population. Our 8% growth rate wont have much meaning if our 600 million farmers also dont share in the growth!

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