19 November 2008

Getting India back on the growth path

Yesterday I moderated a panel at the India Economic Summit organised by the World Economic Forum and CII. It was titled "Securing India’s Future Growth in a World@Risk".

Here is the official Press Release of the discussion at the panel:
• Neeraj Bharadwaj • Pramod Bhasin • Ghanshyam Dass • Habil F. Khorakiwala • Sunil Mehta Moderated by • Sandeep Parekh Monday 17 November
With the long-term consequences of the global economic crisis unclear, the panel considered its impact on India and the priorities for business and government. They differed as to whether this should be seen as a time for pessimism or opportunity.

Declaring himself a pessimist, Sandeep Parekh, Visiting Associate Faculty, Indian Institute of Management Ahmedabad, India; a Young Global Leader, opened the session by describing India as a slowed-down economy with worse still to come. He said a “vicious cycle” has been created with banks and financial institutions clinging to their assets, not giving loans and inhibiting spending. “The key element is people don’t trust one another, don’t want to lend … and people don’t know whether the bank is going to be solvent 48 hours from now.”

Sunil Mehta, Country Head and Chief Executive Officer, India, American International Group, India, said India should use this time of “slowdown” to go back to basics and to focus on “soft infrastructure – the institutional framework on which our growth is anchored”. He pointed out that while, now, people are looking to government to resolve the crisis, in times of economic prosperity, they demand space to grow. He called for an input from the private sector into government and for the creation of a “a pool of talent”.

Habil F. Khorakiwala, Chairman, Wockhardt, India, said: “When we say Indian growth is at risk, we mean Indian high growth is at risk.” He said there has been a crisis of confidence and swift action is needed to address it. He added: “When your house is on fire, what do you do? You need to act fast!” He called for increased liberalization of the economy and the lowering of interest rates. “It’s not a time to worry about fiscal deficit and inflation. What we’ve got to think about is growth,” he said. “We have do everything possible to get growth going and everything will fall back in place.” He added that India sits on a fairly large Forex reserve and questioned whether it would be better to invest that money in India.

Pramod Bhasin, President and Chief Executive Officer, Genpact, India, declared himself a huge pessimist: “I strongly believe that we are in the midst of a huge crisis. If you go around and talk to people in small scale enterprises or medium scale enterprises, the story is dismal.” However, he also said it presents a unique opportunity for India to develop new cost and operational models because India will be operating in a market where former competitors will/may not be operating.

Ghanshyam Dass, Managing Director, NASDAQ, India, agreed that “in every adversity there is an opportunity” and it is a time to rethink market structures and regulatory controls. “We need to ensure markets are efficient, inclusive, transparent and well regulated,” he said.
Neeraj Bharadwaj, Managing Director and Country Head, Apax Partners India Advisers, India; Young Global Leader, said he is an optimist. He said India is not at risk but simply experiencing a slower growth rate. “Is India at risk? Definitely not! Are we going to choke? Definitely not!” He conceded that there has been a stock market correction and the real estate bubble has burst. However, he pointed out that exports in India account for less than 20% of GDP. The economy is underpinned by a young demographic and growing middle class. He added that there are also opportunities to be had: “The best deals are done when valuations are cheap.”
One participant suggested that the current pessimism in India has followed a time of “irrational hubris” and added that it is wrong to draw too many parallels with the West. Parekh replied that it is impossible to deny that the global downturn has resulted in a material impact for India.

You can find the Press Release and profile of the participants at the WEF's site on the IES.

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