On November 22nd, Mr. Singh, ambassador for India in France, came to talk to students about Indian economy, its challenges and its opportunity.
The ambassador, during his talk, insisted on the importance of seeing how complex India is, before even trying to understand this huge country. India has complex societies (23 official languages, thousands unofficial), complex economies and complex politics. Democracy is an important challenge: the size of the electorate is 730 million, and any election requires 1 million voting booths across the country. Votes are electronic and public information is widely available, creating very large expectations from the population around election times.
A current challenge is recent economic growth (around 5%) which is too low at the moment to draw people out of poverty. Even though India has a domestic demand driven economy, integration with the rest of the world was deeper than previously thought: credit availability has been squeezed, constraining production and growth. The currency has been extremely volatile recently because of high inflation, a high current account deficit (around 4% of GDP) and investors’ withdrawal of capital short term from emerging markets.
But the rupee has recovered since the end of the summer and foreign direct investment (FDI) in the country remains high. The government of India notes that the fundamentals of the Indian economy remain strong in terms of demographics (large working age bracket, availability of skilled workers); international economic integration (flow of technology, significant entrepreneurship, globalized Indian firms); financial systems (investment is 35% of GDP, savings are 30%); and democracy (building consensus with society, walking in the same direction).
As ambassador to France, Mr. Singh went on to give a few facts about India and France’s relationship. For example, France is India’s strongest partner in space (joint satellites); there are also strong partnerships in defense (production and supply) and nuclear energy. More than 700 French firms are present in India. One weak area would be on bilateral trade with France, where there exist imbalances levels are low compared to other major economies in Europe.
Mr. Singh told us that he was impressed by the heterogeneity of origins of students in the room, as well as by the quality and pertinence of the questions asked. Questions concerned a wide range of topics: foreign companies in India, food inflation, FDI and retail, health and education, relations with China, Green Revolution, bureaucracy, growth and redistribution, safety for women, the job market...
We met Mr. Singh after his talk to ask him our own questions about India.
Could you give us further details on Indian economics?
The fundamentals of Indian economy are very strong. Growth in any society is based on resources, capacity and opportunity. Looking at these aspects, Indian has the necessary tools to pursue it. From a demographic point of view, there is an adequate availability of technically trained manpower to provide resources for growth. India has a huge unexplored demand. Nowadays, there are people that don't have enough income. As incomes will grow, this unexplored demand will grow as well. The capacity of Indian firms and management to engage with the world economy has increased. There have been investments from abroad, experience abroad, engagement with international trends and technology development.
We have to remember also that FDI has increased by 30% from last year, and it is an indicator of how investors are looking at the fundamentals of the Indian economy.
What do you think about the future of the Indian economy?
We need to generate significant employment and we cannot rely just on the services sector, even though it makes a good contribution in terms of GDP and export revenue. Also, we cannot rely only on agriculture. There's already a lot of pressure of people in the agricultural sector and the amount of land per person devoted to agriculture is very small. Further productivity increases support the assessment that we need to reduce the pressure we have on agriculture. To do this we have to pull people into the manufacturing sector and we have to build the capacity of the manufacturing sector.
What is your personal opinion about Sen Vs Bhagwati debate?
Growth and redistribution are equally important. We need to have conscious polices to ensure that the benefits of growth will go to all the segments of the population. Otherwise, they don't happen at the necessary levels. For instance, we have the National Rural Employment Guarantee scheme: a certain number of days of employment are guaranteed to one person in every family. Also, we have the national food security bill. Let's consider the right to education. It leads to empowerment, which leads to opportunities. In India, children under 14 get free compulsory education.
What do you think about the National Food Security bill?
It is important to bring a policy like this to ensure that even at the bottom segment of the society there is adequate nutrition. I don't doubt there could be some inefficiency in the mechanism. But I guess the challenge of the government is to address those inefficiencies and to make sure that the delivery mechanism works well.
What do you think about disaster management in India? You had big gains, like the fact that a lot of people were saved during the last cyclone, Phailin, but on the other side you also have challenges. With this I am referring to the fact that 115 people had been crushed to death during a stampede in Madhya Pradesh.
In India things are complex; however, over the last years, we have built up an institutional framework to deal with these problems. We have, for example, the National Disaster Management Authority. Cyclone Phailin was anticipated and the government prepared for this adequately. The Indian system managed to evacuate more than 700,000 people and all that was done really well. On the other side, the preparation for the last stampede was not adequate. But, we have for instance, the KUMBH festival. For about a month 40 million people came for that at one place and there were no incidents. So, to conclude, it is proven that the Indian system has the capacity to manage large numbers when proper effort is put into the preparation.