Submitted by 2point6billion.com Blog

Kamal Nath, India’s Minister of Commerce provides his comments on how to maintain India’s growth and what lies ahead.

The full interview with Chris Devonshire-Ellis, Senior Partner, Dezan Shira & Associates in Delhi

Kamal Nath is the third of the big three of Indian foreign politics – after Dr. Manmohan Singh, the Prime Minister, the Minister of Finance, Mr. Chidambaram, who we interviewed yesterday, and Kamal Nath, the charismatic and globe trotting Minister of Commerce. Together, these men represent the unified force of a resurgent India, united in views and passion for the country, and amongst the most recognizable Indian politicians around the world, these are globe trotting reformists, determined to battle the negativity of coalition politics and underpin India’s long awaited position at the high table of world trade. In this frank discussion, Mr. Nath touched on many issues, but especially the desire to get government out of the way and allow the private sector to flourish.

Kamal Nath:
Five years ago, when we first met if you recall, I said that we had to plan a structure for India to move the country forward, and to attract investment and growth into our country. Now, we have come to the end of that task. Much remains to be done of course, but much has been achieved. The time has come for India to manage its growth rather than concentrate purely on planning it. We want to shift from a model that has growth driven by the private sector rather than by the state. This seems to be working. Just last year, our receipt of FDI into India went up by 300%.

However, we have imbalances. We are still too reliant on our services sector in a manner which is not going to later be sustainable for a healthy economy. A key issue we face is the development of our Industrial sector, and I want to focus on this today.

Firstly though, let me give some background as regards our agricultural sector, as this is where a major revolution, which will affect the industrial base, will occur.

We have a population of about 650 million people in rural areas that are existing on sustenance farming, that is, just enough to stay alive. Much of this is unsustainable, and we need to look at how to lift these people out of poverty and into the workforce. Accordingly we have to invest in things such as roads between villages, potable drinking water, and education. Unlike China, we can’t just put up a new skyscraper. We have responsibilities, and the rural farmer doesn’t care about a new office block. He just wants a future for his family.

This is why, when people sometimes complain about the state of India’s airports and other cosmetic things, they are not seeing the full picture. I also would like a beautiful airport to fly in and out of India. But instead of blowing a huge amount of money on marble, we are more modest, and with the money we save I can build roads interlinking several villages, build a few schools and have new drinking wells installed in 100 villages. So a lot of the development that is going on in our country you may not see.

These efforts to empower our latent rural workforce are working. A fact I am very proud of is that over the past twelve months, another 15 million families in India can now eat two meals a day instead of one. This effect is also happening across Asia. Poverty amongst the poor is diminishing, and they are eating more – a primary reason the prices of edible oils and basic food essentials has gone up. In fact it is such a turn around that countries like Malaysia have banned the export of grains, just to keep up. The Asian economies are consuming more.

Now what will happen is a new revolution in India. We already had an IT revolution a few years ago which spurred much of our existing growth, but now we need another, and it will be the agricultural revolution. We want to take 200 million people out of subsistence farming and place them into the industrial workforce. The demographics are on our side – we have the people, we have the right age group, and we have the ability to empower this. This policy is crucial for us to properly develop our industrial growth and provide a sustainable longer term economic foundation.

Our existing management pool is very talented – and we can pass on skills, and develop skills at technical and management levels by stimulating skills development. Our model is different than that say of China. They have a national model based on mass employment, mass production. There are political system reasons why this is their only option. But India is more technology driven, and the constant topping up of technologies as they are developed and made available – much of it from our own local R&D capabilities – will prove to be consistent and also drive growth.

There are a few other things I would like to add. In India, we are a nation who respects other people’s copyrights. You do not see the fake LV bags or the ripped off DVD’s or other clothing or materials like you do in China. There is some, but we do try and stamp it out, it is not sustainable business and it gives us a poor reputation. In China, it is all over the place (largely true: Chris) so much so tourist buses are driven to Beijing’s silk market to buy fake goods. That would never happen here. It’s not our way.

I also would like to point out differences between the strength of our private sector. Indian companies are buying companies in other countries and are doing so for value added reasons. Today, Tata just acquired Land Rover and Jaguar from Ford for US$2 billion. Of private investors money! That is nothing to do with the government! Our private sector is buoyant and the acquisition of these types of businesses will help our private companies grow more. I do not think that Chinese companies have this ability; they are too insular and in fact actively discouraged by their own government to move overseas unless it is for state supported strategic acquisitions of national importance. Their private sector is subdued. Ours however has now given itself a big challenge – can Indian businesses absorb multinational companies ? That’s an interesting question and we shall see what will happen – but at least our private sector has the confidence, finance and freedom to be able to have such adventures.

In my mind, globalization is a two way street, not just the exports of your products overseas while protecting your domestic markets. Indian businesses are investing overseas from the private sector in billions of dollars worth of acquisitions, and our FDI remains high and constant. We are committed to further liberalizing our markets as and when we can – India is a global player and is open for business.

For sure there are problems with investing into emerging economies, things are not always smooth and so on – however, in India I can provide growth of 8% per annum, while US growth is slowing down to zero. Even if you lose a couple of percentage points because of inconveniences – and we want to eradicate these – that is still a better deal than just staying at home and making 2 or 3% growth, if that. We understand that economic activities must have a fiscal stimulus – and that is what we are delivering to India today.”