University of Pennsylvania's renowned magazine, Knowledge@Wharton, on October 03, 2007 quoted India's finance minister, Palaniappan Chidambaram as saying : 'India Will Be an Economic Power, and Nothing Will Stop Us.' A profound statement by a confident finance minister, who, as part of India's economic dream team, sounded confident in his contribution to the 2007-08 Wharton Leadership Lecture Series.
"Nine percent growth is completely meaningless," says P. Chidambaram, who spoke about his nation's surging economy, currently growing at more than 9% annually. The finance minister also predicted that this 9% growth won't be sustainable if the gains are not shared by hundreds of millions of poverty-stricken Indians still mired in remote villages, and who have no access to clean drinking water, proper sanitation, adequate schooling close to home, basic medical care, electricity and roads.
Chidambaram is however, optimistic that the framework does indeed exist to pull up several hundred million citizens from deep poverty to share in India's current boom. The keys, he said, are better schooling and improved local infrastructure - something that is much more possible today than ever because of the country's soaring economy. The 9% surge in growth affords India the opportunity to make life a little more meaningful to the poor - it provides the revenue volume to allocate more money for health education; it provides room to involve private and public sector players to provide the growth and the liquidity.
Chidambaram's confidence that India will be alone among large countries that will continue to grow for another generation, until roughly 2040, is supported by a working-age population compared to a population of dependents and the expectation that the resulting gains in jobs, income and investment should guarantee a steady cycle of growth "as long as we don't do anything stupid."
Today, India has the world's second-fastest growing economy after China as a result of a succession of economic successes that took place in the decade of the 1990s and continuing to the current decade. Its current gross national product measures an enviable 9.4% in 2006-2007 . Goldman Sachs recently estimated that while the Indian economy is now the world's 12th largest, the country should be number three behind China and the United States by 2035. A growing urban, largely English-speaking middle-class has fueled growth through scalable, sustainable growth in back-office operations, such as call centers, for multinational corporations.
Prime Minister Rajiv Gandhi's economic policies, before his assassination in 1991, helped turned India's policies away from socialism and toward a free market economy; Chidambaram was a key player then, and for more than a decade helped push through the government reforms that helped spur economic growth. He survived various shifts in India's often rough-and-tumble parliamentary-style politics to regain the key job a second time, in 2004.
Chidambaram has served twice as India's finance minister during the era of free-market reforms. The first time he was successful in curbing government spending and then in carrying out tax reforms in a nation where, even today, just 3.5% of the population actually pays taxes. If there was anyone who did not realize the significance of the economic liberalization that began in 1991, Chidambaram carefully retraced that history, when in the space of six weeks, exports and imports were made free, exchange controls relaxed, licensing virtually abolished and Indian businesses put on notice that the socialist model would make way for an open and competitive economy.
The reforms, which allowed Indian companies to compete on a global stage, have today permitted the country's growing array of software and biotechnology companies to acquire foreign rivals - today 32% of India's foreign investment is in the United States.
One of Chidambaram's key mantra is the belief that economic freedom and competition, rather than aggressive state controls, is what will lift the lower classes in a developing nation out of poverty. He acknowledged that the heavily rural nature of India poses special challenges to sharing the spoils of an economic growth. "There is no organized production of goods and services in villages -- only what you can consume locally," Chidambaram said. "There is no market beyond a few kilometers." However, he believes that the rural economy can advance on several fronts. For one, prices paid to farmers for their crops have lagged behind other costs in India, and that needs to change and the Indian government, which has seen tax revenues increase by a whopping 40% in just the current fiscal year needs to reinvest much of that windfall in rural infrastructure for drinking water and sanitation, and better schools and healthcare.
But most importantly is training that will "wean" some of the rural population away from agriculture and into more productive manufacturing jobs, a change that would have a vast "ripple effect" on the overall economy.
Addendum: The above essay was summarised by Catherine Galma-Tucker from a post at Knowledge@Wharton.com . Readers familiar with the Jamaica scenario can draw similarities in certain instances, as well as conclusions in others. We advise our newly appointed ministers in the Ministry of Finance and shadow cabinet leaders to borrow a leaf from this illustriuos finance minister from India in
- putting Jamaica first for the long hurl,
- putting in place strategies and policies that go beyond a term in office,
- sticking with the strategies and policies and riding out the tides.
Look out for Part 2/the completion of this blog in another issue.
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