India Economic Summit 2018

India Foundation, in collaboration with the Bombay Stock Exchange (BSE) organised the India Economic Summit 2018 on April 27-28, 2018 at the Bombay Stock Exchange Hall, Mumbai, on the theme “A New Economy for a New India.” The summit explored how India can develop its own unique growth model by being a globally competitive and innovation driven economy that creates jobs and raises the standard of living for India’s 1.25 billion citizens.

April 27, 2018
Inaugural Session

Delivering the welcome address, Shri Shaurya Doval, Member of Board of Governors, India Foundation said that this summit was the first big event organised by India Foundation in Mumbai. Explaining the theme of the Summit, he said that India is being reset in multiple dimensions and architecture is being laid for India to deal with the opportunities and challenges of the 21st century.

Shri Ashish kumar Chauhan, MD and CEO of BSE said that India was a bright spot in the global economy. Its macroeconomic fundamentals were strong and the government had initiated unprecedented reforms in various spheres. He also highlighted India’s demographic opportunity saying that India’s young population would drive the third great wave of Asia’s growth. Further, he spoke about the rapid adoption of technology around the world which were forcing companies and industries to adapt at a rapid pace. He said that the changes brought about by this 4th industrial revolution were inevitable, not optional. He spoke about changes in India’s entrepreneurship system and the role of capital markets as a catalyst for India’s growth. He said that the country’s economy is changing rapidly and is on the right course to achieve a high level of growth.

Shri Jayant Sinha, Minister of State for Civil Aviation, Government of India, said that the Union Government had done a lot of heavy lifting on the economy in the last four years including introducing Goods and Services Tax (GST), bankruptcy code, Monetary Policy Committee (MPC), undertaking massive investments in infrastructure and Direct Benefit Transfer (DBT). The big challenge in the near future is to transform India from a low-income country to a middle-income country. There is need to triple India’s current per capita income and grow from a 2.5 trillion dollar economy to a 10 trillion dollar economy. This will require a 7 percent long term growth rate, which is within India’s capability since it had grown for the last 27 years at a 9 percent rate, he said.

Shri Sinha noted that along with India’s growth challenges it also has to confront big issues such as regional disparity and constraint of natural resources. India has 2.5 percent of the world’s land mass, 4 percent of its freshwater, 17 percent of global population and interestingly, 17 percent of cattle. With these constraints, the conventional wisdom of Farm to Factory model may not work for India. He said that at forums like the India Economic Summit we have to debate on new ideas for India’s development model. He proposed a Farm to Frontier model for India wherein we compete and win in the cutting-edge industries. By way of illustration, he mentioned that two-wheelers, telecom and the aviation sectors are India’s frontier industries where it can compete with the best in the world.
Shri Suresh Prabhu, Minister of Commerce and Industry, Government of India, delivered the keynote address at the inaugural session. He recollected India Foundation’s event on economic issues in February 2014 when the then Prime Ministerial candidate Shri Narendra Modi laid out his economic vision and set the tone for economic policies unveiled in four years of the government. The India Economic Summit 2018 was an opportunity to take stock and discuss new ideas to make India a 5 trillion dollar economy in the next seven years. He said that 20 percent of this 5 trillion dollars should come from manufacturing which will include modernising existing industries and also creating new industries which will drive tomorrow’s growth. India will need to partner with countries like Japan to create these new industries. 60 percent of GDP will come from services sector and accordingly, the government focussed on 12 champion sectors for which INR 5000 crore was set aside. On agriculture, the government was committed to doubling farmers income and was exploring ways of doing so besides agricultural activities.

Shri Prabhu explained the scope of the challenge by emphasising that creating a USD 5 trillion dollar economy implies doubling India’s current economy and creating one more India within the country. He said that there are several approaches to achieve this target. Firstly, as a result of several startup schemes launched by the government, entrepreneurship which was consigned to few companies has become all-pervasive. In fact there is now innovation in delivery of public goods by government itself. Secondly, tax to GDP ratio in India is going to rise very fast. For example, number of Income Tax payers has doubled in last two years, indirect tax compliance is improving and tax base is widening. Thirdly, savings rate in India is improving which means that investment and consumption will drive India’s growth. Fourthly, huge foreign investment is waiting to happen. Other measures taken by the government include setting up of task forces to manufacture aeroplanes and drones in India, announcement of a new cargo policy, a new EXIM policy and creation of the GeM portal to facilitate all government purchases and make these acquisitions more transparent. Shri Prabhu concluded by saying that for India to grow, integration with global economy is crucial and the government is proactively engaging with all countries in the world.

The Chief Ministers’ Panel

The session was addressed by Shri Devendra Fadnavis, Chief Minister of Maharashtra and by Shri Sarbananda Sonowal, Chief Minister of Assam. Shri Jayant Sinha and Shri Suresh Prabhu were also present on the dais.
Shri Devendra Fadnavis quoted Prime Minister Modi saying that India lives in its states. He said that the Prime Minister had always encouraged sub-national entities to interact more with their foreign counterparts and as a result, in last four years, cooperative federalism has transformed into competitive federalism where the states are becoming engines of India’s growth story. Talking about Maharashtra, Shri Fadnavis mentioned that it contributes about 15% of national GDP. In earlier decade, Maharashtra slipped as an investment destination due to lack of good governance. However, in the last few years, due to sustained effort of proper policy and implementation and great synergy with the central government, it has regained its position as the most competitive state and become a growth engine of India again. Shri Fadnavis quoted a Deutsche Bank report which said that of all big infrastructure projects in India, 50% are in Maharashtra. Maharashtra has also regained the faith of global investors. He said that of all the FDI that came to India, 47% came to Maharashtra.

Shri Fadnavis went on to add that agrarian crisis is a big challenge for Maharastra and the state government has undertaken several efforts for water conservation to ensure that agriculture is sustainable. As a result, water table in even drought prone regions like Marathawada has gone up. Maharashtra’s current GDP is USD 400 billion with an average growth rate of 8-9 percent. Shri Fadnavis asserted that Maharashtra can become a trillion dollar economy by 2025 and the PM’s dream of 5 trillion dollar Indian economy would also be achieved. Apart from agriculture, the thin line between industries and services has gone away and under Industry 4.0, Maharashtra can accelerate its growth rate by combining these two sectors. Under this approach, Maharashtra aims to be a leader in fintech industry. At Magnetic Maharashtra Summit earlier this year, the state announced first fintech policy.

Shri Fadnavis said that infrastructure led growth is a new way to make India a developed nation. This is why state government is aggressively working on expanding the metro footprint in Mumbai and aggressively building highways in the state. He concluded by emphasising that benefits of growth should go to all districts and not just to Mumbai, Nashik and Pune. To ensure this, a 700 km expressway is being built between Mumbai and Nagpur which would provide port connectivity to districts in Maharashtra.

Shri Sarbananda Sonowal, Chief Minister of Assam said that under the visionary leadership of Prime Minister Modi, every state has an opportunity to grow. He was the first PM to refer to North-East as Ashta Lakshmi and encourage the region to become a new growth engine for India. Shri Sonowal acknowledged the problem of transparency faced by investors in the region and said that his priority was to provide good, corruption-free governance. In the last 23 months, a non-stop campaign against corruption had been launched to ensure that corrupt officials are put in jail, while citizens and investors are treated with respect. As a result of this campaign, there has been a 22% revenue growth and similar exponential growth in government’s expenditure.

Shri Sonowal highlighted that the North-East is rich in natural resources and biodiversity and has the potential to become an organic hub. He asserted that the economic growth must be without compromising the ecology. PM Modi had given a mandate to Union Ministers to visit the North East region regularly and follow-up on the implementation of their respective Ministry projects. Shri Sonowal reiterated the importance of connectivity in economic progress. The Udaan scheme for example has provided cheap connectivity to the region and several infrastructure projects have been launched by the Union Government. The North-East can become India’s gateway to the ASEAN region. Shri Sonowal said that the North-East would not stay behind in India’s growth story and his government was working with the right intentions to ensure that the region fulfils its growth potential.

April 28, 2018
Session 1
Jobs for All: Harnessing
India’s Demographic Dividend

The session saw an engaging panel discussion on harnessing India’s demographic dividend with the panellists Shri Rajan Bharti Mittal, vice chairman and managing director of Bharti Enterprises; Shri Abhishek Lodha, managing director and CEO of Lodha Group, and Shri Amitabh Kant, CEO of NITI Aayog. The session was moderated by Ms. Shamika Ravi, a member of the Economic Advisory Council to the Prime Minister of India and director of research at Brookings India. Ms. Ravi dismissed the idea that India has experienced jobless growth. Shri Rajan Mittal highlighted a McKinsey study that found that over the last three years between 20 and 26 million jobs had been created. He focused his talk on the need for the manufacturing sector to become more competitive while simultaneously creating more employment and remaining profitable. Shri Abhishek Lodha pointed to India’s peculiar situation of rising growth and rising unhappiness, and asked the panel what India’s model of capitalism is. Agreeing with Shri Rajan Mittal, he said that one must understand that profit and job creation go hand in hand. Shri Amitabh Kant said that the biggest opportunity lies in opening up the social sector — health and education — and pointed that startups working in this sector are already disrupting the industry. The panel, at large, was in agreement that India is in the midst of a job struggle and that entrepreneurs have to be supported to take on more risks.

Session 2
Future of Centre-State Finances

As a prelude to this session, Shri N. K. Singh, Chairman of the 15th Finance Commission, delivered a special address on the future of centre-state finances. He explained the structure and composition of the Finance Commission, addressed the institutional mechanisms that were visualised in creating the Finance Commission and dwelled on the future of centrally sponsored schemes stressing that the Commission has nothing to do with the terms of reference of the Finance Commission, as they are given by the President of India.
The special session was followed by a panel discussion comprising Shri Haseeb Drabu, former Minister of Finance, Government of Jammu and Kashmir, and Shri Himanta Biswa Sarma, Minister of Finance, Government of Assam. The panel was moderated by Ms. Latha Venkatesh, Executive Editor of CNBC TV18 News. Shri Haseeb Drabu emphasised that states are driving the new economy and therefore, in an economic context, India must be looked at as a federation of states and not a union of states. He proposed a new model for India that moves from a tax sharing system to a resource sharing system. He said that a “New India” has to emerge from the states. Shri Himanta Biswa Sarma also highlighted the importance of a federal institution, and said that while the relationship between the centre and the state is clear on the political front, the relationship is still evolving on the economic front. He highlighted how he believes India will move along the right path in Centre-State relationships, as Shri Narendra Modi had previously served as a Chief Minister.

Session 3
Emerging Technologies:
Their Impact and Challenges

The panel on emerging technologies was moderated by Shri Sanjeev Sanyal, Principal Economic Adviser, Ministry of Finance, Government of India and was made up of Shri Mark Lippert, Vice President, Boeing International; Shri Adil Zainulbhai, Chairman, Quality Council of India, and Shri Sudhir Mishra, CEO and Managing Director, BrahMos Aerospace. Shri Adil Zainulbhai highlighted how the world is in a unique point in history of unparalleled technological change, and India in particular, as it can take advantage of technology to promote change. Shri Mark Lippert spoke of the interesting technology that will change the world, but noted that regulation needs to move quickly to take account of the changes disruption technology brings. Shri Adil Zainulbhai noted that while technology changes at a very fast pace, regulation is sometimes a few steps behind, and in many cases, regulation is unnecessary. Shri Sudhir Mishra emphasised India being at the forefront of technology development having developed the world’s fastest missile. He also spoke about how warfare will be different in the future, but cautioned that “soldiers will continue to fight wars”, as artificial intelligence, although being researched, is still largely only in the research phase.

Session 4
Crafting A Unique
Development Model for India

This session was hosted by Shri Jayant Sinha, Minister of State for Civil Aviation and comprised of Shri Rajiv Kumar, Vice Chairman, NITI Aayog; Shri Shashi Shanker, Chairman and Managing Director, ONGC, and Shri Vijay Shekhar Sharma, Chairman and Managing Director, One97 Communications Ltd. Shri Jayant Sinha asked the panellists whether India needs a unique development model, and if so, what it should be. Shri Vijay Shekhar Sharma argued that India needs its own model, as the Western model is suffocating for countries that try to replicate it, and East Asian models are undemocratic. He argued that India needs a model that focuses on low cost and high skill and captures India’s diversity, while remaining scalable and affordable. Rajiv Kumar noted that India has greater respect for human rights and the rule of law than other countries, and this needs to be taken into account for India’s development. He further stated that India is the only country in the world to undertake the mammoth task of transitioning (economic, political and social) simultaneously. The implications of a simultaneous transition need to be considered while developing a unique, homegrown model for India. Shri Shashi Shanker suggested that the key to India’s continued development are education, energy, equity and most importantly, empowerment of its citizens. Shri A. K. Mishra argued that local institutions and better jobs in villages will be the key to driving India forwarded.

Session 5
Financing For New Economy

The session was chaired by Shri Rajiv Lall, Founder MD & CEO, IDFC Bank and was made up of Shri Rana Kapoor, Founder and CEO, Yes Bank; Shri Rashesh Shah, Chairman and Chief Executive Officer, Edelweiss Group; Shri Raamdeo Agrawal, Joint Managing Director, Oswal Group and Shri Sanjay Nayar, Member and CEO, KKR India. Shri Rana Kapoor noted that India becoming a $10 trillion economy by 2030 is the country’s most important goal, and if the population reaches 1.5 billion by then, this would require a GDP per capita of $ 6,666. Shri Sanjay Nayar argued that India’s deficit needs to be shrunk and savings need to be released for investment to happen and for India to grow. Shri Raamdeo Agrawal supported this view and further highlighted how if people can be encouraged to save in fixed income, rather than gold or land, this can encourage India’s growth. Shri Rajiv Lall further also supported this by noting that India’s saving rate is above 20%, but that a very small part of this is financial saving in banks. Rashesh Shah that the financial sector will be key for India’s future growth, and what is important for the financial sector is a diversification of who holds financial savings. All panellists agreed that it be easier for Indians to save and invest.

Valedictory Session

The valedictory address was delivered by Shri Hardeep Singh Puri, Minister of State (Independent Charge) for Housing and Urban Affairs, Government of India. Shri Puri noted that urban spaces in India had been subject to neglect for years, and that the current government was rectifying this. He highlighted how every Indian should have their own home by 2022, and how between 3,00,000 and 5,00,000 homes are approved every month. Shri Puri pointed how the Modi government has embraced urbanisation and how this is crucial for India, as cities produced 90% of India’s tax revenue. He also spoke about the future of cities, and how technology and embracing smart cities can create a brighter future.

(This report is carried in the print edition of July-August 2018 issue of India Foundation Journal.)