India Economic Summit (Dec 5-7, 2004, New Delhi, India)

Over the past few years, India has chosen for itself a path of high growth through economic reforms, which clearly benefited the country. But it will be difficult to achieve the targeted growth of 8% GDP unless agricultural growth is doubled from the present rate of 1.8%. Since 72% of the population lives in rural India, it is imperative to increase agricultural growth and make agriculture more efficient.

Over the past few years, India has chosen for itself a path of high growth through economic reforms, which clearly benefited the country. But it will be difficult to achieve the targeted growth of 8% GDP unless agricultural growth is doubled from the present rate of 1.8%. Since 72% of the population lives in rural India, it is imperative to increase agricultural growth and make agriculture more efficient. India needs a fundamental re-direction of agricultural growth patterns by moving away from cereal-based production to diversified productions in horticulture, poultry, floriculture, etc. Indian states need legislative and policy changes to allow more diversified growth.[br]

Presently, there is a lot of resistance to corporate farming; certain political and legislative changes are needed to encourage contract farming. The Essential Commodities Act has to be amended to allow the private sector to help in marketing. The Planning Commission proposes to suggest certain changes in the agriculture policy, as part of its mid-term economic review. This will make it more comprehensive including allied sectors such as poultry, fisheries and livestock. It is important that funds allocated to agriculture must be spent on creating infrastructure projects like irrigation, linking rural roads, etc., and not on farm subsidies.

The second focus area is infrastructure, if India wants a growth rate of 8 % or above. Special efforts are needed to overcome infrastructure deficiency, for which both public and private investment is necessary. Also, emphasis must be given to strengthening the manufacturing base, as a development strategy, which relies on a services revolution for growth, is not sustainable. Thus placing priority on social sectors, agriculture and infrastructure is urgent. Improvement in human development indicators like primary healthcare and primary education, in which India lags behind, is imperative to higher growth. India needs huge investment in rural electrification, rural connectivity and improvements in urban infrastructure. It was indicated that the central government would provide resources to state governments and also make local authorities more accountable.

Despite India’s growing IT industry presence worldwide, domestic IT growth lags behind with a high cost of access to connectivity in most areas and no connectivity in some areas. Also, India needs to improve its infrastructure-airports, power and roads- and further develop its manpower.

There exist a positive relation between knowledge workers and economic zones. Knowledge workers prefer to stay near cultural and entertainment centres rather than in remote locations. India should go up the value chain and promote public-private partnerships for infrastructure development. Foreign companies are interested in India because of the rapid growth of its large talent pool and the low cost of operation. India should invest

in infrastructure through public-private collaboration, and invest in education and centres of excellence. Government should apply more IT within its offices, widen education and promote infrastructure at the national level through public-private partnerships.[br]

If India wants more global operations, some key points should be considered: attracting and integrating local talent, building brand equity and having a different mindset on investment.

Social investment in the form of investing in college faculty, laboratory and education infrastructure is also necessary. Further, India faces challenges in making IT work in automation and data management, growing the domestic manufacturing market and focusing on upcoming verticals such as pharma and automobiles.

India and china both of whom were economic superpowers in the 17th and 18th century are once again reasserting themselves in the world economy. India no longer sees China as a threat, as was the case a few years ago. Since China will become competitive across the spectrum and not only in hardware and manufacturing, it will be in India’s own interest to become more competitive in manufacturing and not only in IT. For these two countries there is also an ample scope for cooperation in energy and environment, especially at the WTO.

Chinese companies are particularly concerned about the long procedures for setting up subsidiaries or representative offices in India. It sometimes takes six months to one year to get a business license, which is a hindrance. Also, Chinese companies have a long wait for business visas and the necessity to renew business visas every month is also cumbersome.

To realize the full potential of Indo-China trade, the Indian government has to play a major role in taking steps towards reducing trade barriers on the Indian side. The threat perception in the west can be removed when India and China come together on a common platform and tackle issues such as tariffs and subsidies.

Lastly, on the issue of trade negotiations Indian commerce minister Kamal Nath asserted that though India has doubtless benefited from the kind of multilateral trade talks that culminated in the creation of the World Trade Organization, persistent inequities in trade with the developed world will necessitate that India continue to pursue narrower regional and bilateral agreements with other developing nations.

Country-to-country links in the developing world would serve as the basis for the global trading system until the WTO can provide a truly fair deal for the developed world. However, Supachai Panitchpakdi, Director General WTO Geneva didn’t agree with this view and favoured ‘multilateralism’.

However, the biggest challenge to emerging markets in the future will not come from tariffs, quotas or subsidies. Non-tariff barriers such as consumer safety regulations and health standards will eventually replace these. Such qualifications will erect import hurdles that Indian producers, working with the nation’s limited infrastructure, may find difficult to leap. Thus, immediate policy attention is needed in these areas.