With Europe’s economy somewhere between stalling and first gear and the US’ finally shifting into second, the world is looking to high-growth countries like India to help get the global economy revving faster again. And well it should. India continues to produce some impressive results relative to the rest of the world. In the last quarter of 2011, the country’s economy grew at 6.1 per cent — a great result by today’s developed-world standard, but disappointing by Indian.
The combination of inflation and spillover from Europe’s debt debacle saw India growing at its slowest pace in over two years during 2011’s last quarter. Though this is hardly a reason for doom and gloom, now is as good a time as any to recommit the nation to strengthening its competitiveness at home and abroad.
In 2010, when I visited India during President Barack Obama’s summit with Prime Minster Manmohan Singh, I called for India to focus on three steps that could help not only boost India’s economic competitiveness, but help millions of Indians in – or entering – the workforce to achieve their full potential. Today, there’s an even greater need to move forward on those three priorities.
First, investment. India’s infrastructure remains a significant challenge. Even a casual visitor can see the tremendous contrast, for example, between 21st century research and development (R&D) centres and the infrastructure needs in many cities and villages. Like the famous line – “The future is already here, it’s just not evenly distributed” – India needs to distribute its future more widely. One estimate of India’s infrastructure needs puts it at more than $1 trillion in the last five-year Plan covering 2012-2017.
On way to help fund these much-needed projects is through the implementation of the infrastructure investment fund and a greater issuance of bonds. India is already showing progress on this front, including through its viability-gap funding model that is essentially a public subsidy to attract private investment, and is proving quite effective. Hybrid debt-equity securities, used by Tata Power and others, are also helping raise capital. But $1 trillion to meet critical infrastructure needs is a lot of money — more needs to be done.
Another investment-related change that could help would be moving quickly towards concluding a bilateral investment treaty between India and the US, protecting investments made in either country. Although political roadblocks remain in both countries, we should work towards an economic cooperation arrangement between India and the world’s largest economy to stimulate growth and jobs — a win-win for both countries.
Second, innovation. India also needs to focus on how it can ramp itself up on the global value chain. For example, the Confederation of Indian Industry’s India@75 initiative, endorsed by the prime minister, includes the ambitious goal of Indian companies becoming home to 30 of the global Fortune 100 by 2022. At the same time, the initiative also concedes that “India [currently] focuses on the bottom of the pyramid as a source of innovations for the world”. Call centres, for example, have unquestionably been lucrative for India. But that’s not the link along the global value chain that India should be vying for longer term. It should aim higher and innovation must remain the key to getting there. Innovation will also be spurred by rewarding and protecting intellectual property — an area in which there is always room for improvement in any country.
Third, inclusion. Education is key to any individual’s future and probably no country understands this better than India. The India@75 initiative correctly identifies universal literacy as a critical goal and there remains the question of how the country – already home to the world’s largest pool of trained manpower – can successfully move its workers up the value chain for the more knowledge-intensive jobs of the future.
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One way to achieve his is to tap into what I call the opportunity of the century: the digitisation of education. Instead of the linear, text-and chalkboard-based teaching methods of the past, digital education opens up new horizons with interactive, adaptive and personalised learning with proven outcomes for both instructors and students — especially today’s digital natives. It would be ironic if India – home already to some of the world’s best information technology – did not, in turn, better use digital advancements to empower its own people for the opportunities and jobs of the futures.
For decades now, the world has been seeing India’s economic success and has been deeply impressed. But there’s more India can do to meet its full economic potential both domestically and on the world stage. A focus on the three areas I mentioned could help. And speaking of help, we all know a more prosperous India could move us closer towards a goal everyone around the world wants: a global economy at full throttle. India can add more power to the world’s economic engine so we’re all moving faster. Let’s make it happen.
The author is visiting India in March in his capacity as Chairman, CEO and President of The McGraw-Hill Companies and as Chair of the US-India Business Council. McGraw-Hill has more than 6,000 employees in India and is the parent company of Crisil