Positive Chidambaram cautious at the Indian Economic Summit (IES)
With India and China now contributing 60% or more to global GDP growth, it is clear that the drivers have shifted from the developed world to developing economies, said Palaniappan Chidambaram, Minister of Finance at the Indian Economic Summit (IES) organised by the Confederation of Indian Industry (CII) and World Economic Forum (WEF) yesterday. However, he went on to say that this does not mean that economic power has shifted; developed countries have enormous competitive advantages in the areas of knowledge (and attracting human talent) and financial resources, and in the control of material resources (especially oil and gas).
Chidambaram pointed out that India's competitive advantage will come from its ability to produce quality goods and services at lower cost, its nimbleness and ability to innovate, its diversity and its huge human asset - its demographic dividend.
The FM stressed that, while the economic outlook is favourable, there are some risks that could derail India's future growth prospects. Some of these risks are beyond India's control, he argued, including exogenous economic crises and an oil price shock. Other risks are endogenous and can be overcome - for example, risks associated with demographics and the lack of freshwater.
"India can reap the benefit of its demographic dividend and avoid it turning into a demographic liability by ensuring that every child can access quality education and stay in school for at least 10 years," Chidambaram stated.
With respect to freshwater, he pointed out that India has enough precipitation, but not enough storage in terms of dams and reservoirs, and needs improved groundwater recharge. On the larger issue of climate change, the minister stated that, "India will play its part," but the focus must be on reducing emissions in the developed world, which remain many times higher in GDP per capita terms.
Chidambaram was asked to elaborate on the reform of which he is most proud. "The major economic success, of which any government would be proud, is the average 8.6% growth over five years, as well as the acceptance that inclusive growth is an imperative for India," he said.
Concluding his formal remarks, Chidambaram stressed that India's immediate task is to achieve the Millennium Development Goals. Like many countries, India is behind in some areas, and the global community that helped to set the dates and targets can still do much to help meet them.