Banking for 7 billion and 7 million

GLOBAL INVESTOR 3.06 Lead — 18
The elephant can dance
Despite a well-educated and technologically adept workforce, and immense natural resources,
India faces huge obstacles to growth and development. But where there are risks, there are
also opportunities, and where there are challenges, there are solutions, says Nand Kishore Singh,
Deputy Chairman of the Planning Commission of the Government of Bihar and former main
advisor to India’s Prime Minister. Marcus Balogh, Bulletin Magazine
Marcus Balogh: India is supposed to be
an emerging superpower. The question is:
can it really fly?
Nand Kishore Singh: Yes, India can fly.
Absolutely. Or perhaps, as we are speaking
about India, it would be better to say: “the
elephant can dance!”
For a long time, it seemed as if India
was not progressing very rapidly. Has this
changed?
Nand Kishore Singh: You must take
into consideration that India started its
current reforms only in 1991. The nineties
saw overall economic growth of 6% – 6.2%.
In the last three years, India has grown
over 8% and the draft of its 11th five-year
plan spanning from 2007 to 2012 projects
average growth of 8.5%, which means that
there will also be years with growth of
9% – 10%.
How are you going to achieve this?
Nand Kishore Singh: In my view, what
we have to do is fivefold. First and foremost,
we have to continue with strong
macroeconomic fundamentals. We
need fiscal consolidation, which is now
enacted by law, and inflation, which is hovering
around 4% – 5%, and the revenue
deficit to drop to zero by 2008. We also
need a fiscal deficit of 3% by that time,
and finally, we need to finance the current
account deficit through foreign direct
investment. We also have to work on the
composition of India’s Gross Domestic
Product (GDP). About 24% of our GDP
stems from agriculture, 50% from services,
and 25% from manufacturing industries.
This is not the ideal ratio, particularly from
an employment angle. China, in compar-
ison, has managed to transform itself. For
example, 38% – 40% of its GDP is
derived from industry and manufacturing.
This is the direction we will have to take.
Let’s talk about the four other areas that
need improvement.
Nand Kishore Singh: It is equally
important that we modernize agriculture,
where 58% of the working population finds
its subsistence. India’s agriculture has
been growing by 1.5% – 2%. But we need
to grow to at least 4% – 5%, not only to
give us continued food security, but also to
meet changing consumer preferences.
What about infrastructure? For many
outside of India, infrastructure reform
seems to be a major issue.
Nand Kishore Singh: It is a major issue.
India has been very deficient in the quality
and effectiveness of infrastructure. But I
can say there is now a serious political will
for improvement.
“But I can say
there is now a serious
political will for
improvement.”
Can you give an example?
Nand Kishore Singh: Five years ago,
we opened up India’s telecom sector.
Today, it is totally deregulated, and the
cost of data transmission or the cost of
voice transmission is lower than in the rest
of the world. This has enabled India to
become one of the world’s most dominant
players in terms of attraction of global
outsourcing. The telecom story is more or
less a complete story of very high quality
and dependable infrastructure. The only
challenges that remain are the questions
of how to use the spectrum more efficiently,
and how to penetrate India’s rural
sector with higher density telephony.
What about India’s transport sector – does
it still deserve the reputation of being large,
diverse and very chaotic?
Nand Kishore Singh: When you visit
India two years from now, that story will
have dramatically changed. The previous
government began a program called
the national highway development program,
in which, for example, the big four metropolitan
ports of Delhi, Mumbai, Chennai
and Calcutta, popularly called the Golden
Quadrilateral, were connected by muchimproved
roads. In addition to that, we
have something called the North-South/
East-West spine, which links Cashmere to
the south of India, and the eastern part
of Calcutta to the western part by a spine
that will be completed in three years.
There are three other phases of that program,
including linking every village
in India of a population of 1,000 and more
with a road. India’s road-building program
is, in my view, one of the most massive
programs that the world has ever seen. It
will require an investment of at least 150
billion dollars. That program is substantially
under way, and is enticing the interest of
many foreign investors.
Let’s move to the third area. What is it?
Nand Kishore Singh: Energy! Energy
will be the touchstone of India’s ability
to improve its infrastructure. We have a