Raghuram Rajan, honorary economic advisor to the Prime Minister, today said India should not follow the US “blindly” on environment.
“Environment protection is important, but the question is whether you can stretch it beyond a point. At this stage of its development, India needs factories as well,” he said at a session on ‘How will India grow faster than China?”
The comments of the Eric J Gleacher Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business are important in the context of the controversy surrounding the environment ministry’s rigid stand on giving clearance to many industrial projects.
Referring to Rajan’s concerns on pushing the environment agenda too far, Planning Commission Deputy Chairman Montek Singh Ahluwalia said opinions like these are welcome as India is seeing the early stages of debate on sustainability issues. On one side are non-government organisations (NGOs) who think environment protection is a costless exercise, and on the other is the opinion whether India is being over-protective and pushing the environment agenda too far. “You can expect transparent policies after deliberations,” he said.
In this context, Ahluwalia talked about the use of technology and innovation which can go a long way in environment protection. Giving the example of Chotukool, a nano refrigerator developed by Godrej & Boyce for the rural markets, Ahluwalia said such frugal engineering is the way to go. Chotukool is compact, cheap and it does not use electric power. Responding to the constraints of reliable power in India’s villages, Godrej created an easy-to-use, energy-efficient, battery-operated refrigerator.
Essar Group Chief Executive Prashant Ruia did not refer to the environment ministry’s stand, but said while he sees a long runway for India’s manufacturing sector, India Inc’s accessibility to natural resources is a big concern. “You need domestic sources of raw material ad hence access to the country’s natural resources is a necessity,” Ruia said.
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The discussions were moderated by Martin Wolf, chief economics commentator, Financial Times.
Responding to questions on the other key challenges that the Indian economy faces, Rajan said the fiscal deficit, mounting debt, quality of spending, archaic laws and inflation threatening to touch double digits were the danger signals. “We must take corrective action to ensure that the economic growth rate doesn’t slip back to the Hindu rate,” Rajan said at a session on “How will India grow faster than China?”
He agreed with Ahluwalia’s view that some corrective actions are required to avoid a situation where Brazil found itself in. “History is replete with examples of economies hitting a brick wall after sustained stupendous performance. Brazil’s economic growth, for example, touched 2 per cent after sustained double digit rates,” Ahluwalia had said.
Rajan said talent shortage — not necessarily at the very top — is another huge area of concern. “We’re running out of electricians and plumbers because our education system is not keeping pace,” he added.
On his part, Ahluwalia said these are important issues, but he was confident about India’s economic growth staying on course. While admitting that India has to get its act together on infrastructure, Ahluwalia said he expects half the investments in infrastructure projects to come from pubic-private partnerships in the next five years. The share last year was just 13 per cent.
On inflation, Ahluwalia said that is the “least of his worries” as he expects inflation to come down to 7 per cent by the year-end, a sharp decline from the double-digit levels last year due to unseasonal weather.
On his part, State Bank of India Chairman O P Bhatt said a comparison between India and China is not fair as the latter started its industrialisation drive at least 15 years before India’s. “China’s infrastructure is already 10 times bigger than us, and yet they are talking about investing at least two times our outlay,” he said.
Bhatt wondered whether India’s growth rate is sustainable at a time when the rich is getting richer and the poor is getting poorer, and advocated quick action in areas such as agriculture as 40 per cent of the produce is still getting wasted.
He also talked about the need to increase the size of India’s banks so that they can take part in the growth story more meaningfully. “We need to be at least five times bigger than the existing size,” he said.