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It is available on the World Economic Forum website: http://www.weforum.org/summitreports/india2010 HTML India’s Implementation Imperative Security and Sustainability Imperative Inclusi

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

© 2010 World Economic Forum

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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)

India’s Implementation Imperative

Security and Sustainability Imperative

Inclusive Growth Imperative

Innovation and Competitiveness Imperative

Contents

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

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

s Imperative

s

s 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.seducation and vocational training Companies need to help not only with funding new schools, but also by staffing them and devising practical curricula

ssubsidies on electricity generated from fossil fuels and eliminate flat rates for power consumption

sderegulated to stimulate rural investment The sector should also be opened further to private investment.scontrol over their own finances so they can invest more effectively in their own infrastructure

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

seliminate opportunities for corruption

Governments must compete for talent with the private sector by restoring meritocracy and offering reasonable pay

s

it comes to achieving gender equality

spoor, rural Indians as a cause and start seeing them as customers and employees

s– 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

recognize India’s mostly small farmers

as entrepreneurs and view agriculture

as an industry

s

standards for vehicles and roads, crack

down on violations and create a more

effective emergency service to handle

accidents

s

20 years To avert a crisis, it needs to

set up a progressive tariff on water use

s

tolerance and non-violence, India

can position itself as a power for

moderation, equity and justice in the

sexpanding capabilities, mobile devices should be used to expand healthcare

to poor people in isolated rural villages s

be accompanied by a phase-out of subsidies on fossil fuels

sIndia need to combine universal appeal with market-segment customization.sbridges with other developing countries, like those in Africa, with which it shares similar levels of development and historical experience

Inclusive Growth Imperative

Achieving inclusive growth in India willrequire changing entrenched attitudes

Government corruption drives away talent,hiring quotas implicitly underestimatetalent in women, and efforts to help thepoor often fail to recognize that they havewealth and talent as well

s Reduce regulations and cut red tape toeliminate opportunities for corruption

Governments must compete for talentwith the private sector by restoringmeritocracy and offering reasonablepay

s Targets are preferable to quotas when

it comes to achieving gender equality

s Companies should stop seeingpoor, rural Indians as a cause andstart seeing them as customers andemployees

s Microloans have created lots of credit– and controversy – in rural India

More needs to be done to servicethe other side of the rural balancesheet – 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

s With their widespread popularity andexpanding capabilities, mobile devicesshould 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 inIndia need to combine universal appealwith market-segment customization

s India should build more economicbridges with other developingcountries, like those in Africa, withwhich it shares similar levels of development and historical experience

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

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

India Economic Summit | 9

reduce profitability, encourage waste and

discourage investment Consumers should

therefore pay for the power they use

Likewise, subsidies on power generated

by fossil fuels need to be eliminated;

they discourage investment in renewable

energy Likewise, the long-term costs of

pollution need to be included in the price

of energy

Switch on the Power Sector

Investment in new power projects is

hindered by a shortage of money from

domestic stock markets and from

domestic lenders Financial institutions,

bond markets and equity markets need to

be further developed so that India’s own

savings – and not just foreign funding –

can be channelled more effectively into key

infrastructure Therefore, barriers to private

investment in power should be removed

Separating the industry into its component

parts – generation, transmission and

distribution – would promote greater

competition and reduce prices

De-stress Urban Infrastructure

No matter how fast or how well India develops its rural areas, it will still need

to tackle the urgent problems in its congested cities India is already working

on a US$ 20 billion, seven-year urban renewal plan, but much more will need to

be done With nearly 70% of all jobs being created in cities, the proportion of Indians living in cities is projected to rise from three

in 10 today to two in five by 2030 That will leave 68 cities with more than a million residents, an expansion that will require what some estimate as at least 90 million new dwellings and US$ 190 billion in additional infrastructure

Indeed, by 2030 the economies of India’s largest cities will be larger than those of many countries Metropolitan governments, therefore, need to take

on more prominent and independent roles, including controlling their own tax-collection and spending In this way, they can better raise money and determine how

to invest it in improving their infrastructure

Metropolitan governments need to create clearer mechanisms for pricing land to reduce property prices, thereby stimulating investment in new infrastructure 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

10 | India Economic Summit

Security and Sustainability Imperative

India Economic Summit | 11

India is facing its dilemmas and developing new models for mitigating risk and ensuring sustainability while respecting its democratic pluralism

India’s most daunting challenges when it comes to sustainability are addressing water scarcity (see Water box), modernizing agriculture, improving transportation and encouraging ethical and balanced consumption As it moves forward to tackle these issues, India is positioning itself to become a new kind of superpower – one based less on military might than on “soft power”

Recommendations

• Modernize Agriculture

Governments and corporations must begin to treat India’s mostly small farmers like entrepreneurs, and view agriculture as an industry

• Make Transportation Sustainable and Safe

India needs to impose higher standards for vehicles and roads, crack down on violations and create a more effective emergency service to handle accidents

• Become a Superpower for Good

By hewing to its diversity, history of tolerance and tradition of non-violence, India can position itself as a power for moderation, equity and justice in the world

“You have to consider agriculture not

as subsistence, but as a profession.”

Ellen Kullman

Chair of the Board and Chief Executive Officer of

DuPont, Co-Chair of the India Economic Summit

“We need to engage in

public-private partnerships with farmers to

take technologies to the land and

help them realize better prices

Government [also] needs to repeal

archaic laws that are detrimental to

Indian public policy has been evolving from patronage networks to a system of rights This has extended beyond conventional areas like civil rights to novel concepts like the right to food, including the changing needs of individuals over their life cycles (e.g infant nutrition), enabling factors such as water, distribution networks and systems, and post-harvest technology

At present, agriculture accounts for only about 17% of the nation’s GDP, but it is the main source of income for more than 60% of its citizens For any scheme to work, therefore, it will need to reflect new thinking on farmers and their work, treating farmers as entrepreneurs and agriculture

as a profession

“We were already a superpower

when Gandhi was living We had

non-violence, something nobody else

had We could have taken that to the

world.”

Joseph Madiath

Executive Director, Gram Vikas, India; Social

Entrepreneur

12 | India Economic Summit

“We need to be consulted and not treated as if we are nạve Farming is

a business You should learn to work with farmers as partners.”

Dinesh Mohan

Professor of Transport Research and Injury Prevention Programme, WHO Collaborating Centre, Indian Institute of Technology Delhi, India

“For a country that invented yoga, [it

is odd that] we did not learn to stretch until China forced us to.”

India’s alarming rate of 100,000 traffic

fatalities per year can be reduced

drastically with a few significant yet simple

steps:

• Better road design to discourage

speeding and to provide separate

spaces for motorists, cyclists and

pedestrians

• Driver and pedestrian education

• A crackdown on traffic violations

• Regulations for automobile design

and maintenance to ensure that

manufacturers build safer cars and that

owners keep them roadworthy

• Effective emergency rescue services

for victims

Despite India having a more agrarian

population, a smaller population and fewer

cars than China, India’s traffic fatality rate

surpassed China’s four years ago and

the toll has continued to rise ever since

Recognizing the gravity of the situation, the

government introduced the National Road

Safety and Traffic Management Board Bill

2010 to create an oversight agency for

road traffic safety

Culture does not determine road behaviour and India’s traffic deaths do not appear

to vary from region to region Yet, cities have their own cultures of safety or recklessness In Delhi, for example, research has shown that some people will not use the metro rail system because they think it is too dangerous to walk to the stations

Become a Superpower for Good

Indians appear to have little ambition as

a superpower in the conventional sense, with a broad influence backed by military might like the United States, the former Soviet Union or China Instead, they seem to prefer using non-military “soft power” (political, economic and cultural)

to influence what most experts believe is

a multipolar world no longer dominated by the US India’s song, dance and drama are its emissaries Its diversity and traditions

of tolerance and non-violence give it the credentials and qualifications to become

a calming power, a trusted mediator

in a world riven by Islamophobia and anti-Americanism India should therefore strive to become a “super-caring power”, ensuring equity and justice for its own citizens and encouraging other nations to emulate its example

Source: World Bank

Emerging markets agriculture value-added

Agriculture represents a larger portion of India's

economy than in other emerging nations

1995 1990

1985

1970 1975 1980

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Turkey Russia Brazil

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Indonesia