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India's economic agenda: An interview with Manmohan Singh

Excerpts from the article ... the complete text is available on
the website of The McKinsey Quarterly at:

http://www.mckinseyquarterly.com/article_abstract.aspx?ar=1674&L2=19&L3=67

The prime minister discusses his plans to modernize the country's infrastructure, attract foreign investment, and create jobs—all in the service of eliminating chronic poverty and disease in India.

Rajat K. Gupta

The Quarterly: Mr. Prime Minister, what are your aspirations for the country, and what progress do you think India has made? What are your priorities?

Manmohan Singh: The first and foremost priority is to finish the unfinished task which the founding fathers of our republic set out for us at the time of our independence: to get rid of chronic poverty, ignorance, and disease, which have afflicted millions and millions of our people. Great progress has been made. Particularly in the last 20 years, the India economy has done quite well, social indicators and development have improved, but we are not quite where we ought to be. The next 5 to 10 years are crucial for moving forward in areas to stimulate economic growth and also to ensure that this accelerated economic growth really benefits the poorest segments of our society. We need a growth rate of about 7 to 8 percent per annum, sustained over a period of the next 10 to 15 years. We need to underpin that growth by strong performance of our agriculture, strong performance of our physical and our social infrastructure. These are our key priorities.

The Quarterly: As we talk with our clients, the first question they ask about is infrastructure. Has India made enough progress?

Manmohan Singh: We have a lot of backlog in improving our infrastructure. We have made substantial progress. Work is in place to ensure that our road system is modernized. But our railway system also requires massive investments. We are working with the Japanese government to draw up a program in which the freight corridors between Mumbai1–Delhi, Mumbai–Chennai,2 and Delhi–Kolkata3 can be modernized. Our estimate is that that will cost about 25 thousand crore of rupees [$5.7 billion], and that's our high priority as far as the railway system is concerned. We need to modernize our airports in a big way. Already plans are under way to modernize and expand the airport facilities in Delhi, Mumbai, Hyderabad, and Bangalore. We also are now in the process of modernizing our seaports. Privatization, public-private partnerships, and new initiatives have been tried. My own estimate is that we need an investment of about $150 billion in the next seven to eight years to realize our ambition to provide our country with an infrastructure which is equal to the economic and social challenges that we face. I'm not saying that everything is in place, but I think that in the last year that our government has been in office we have set in motion the processes through innovative public-private partnerships to explore new pathways to make the infrastructure ambitions a realizable goal.

...

The Quarterly: What is India doing to make sure that its economic success continues, by building on both the primary-education system and the higher-education system? Related to that is health. The government spends very little on health and health infrastructure.

Manmohan Singh: You are right. As a nation, we should be doing more in both health and education ... With regard to education, I think at the top we have an excellent superstructure. The IIMs and IITs, the regional engineering colleges, they have served us well. But ultimately, if the educational pyramid is not right there are limits to getting dividends. Therefore we are making, for the first time, the most determined effort to ensure that all our children—particularly children coming from disadvantaged families, particularly the girl child—in the next four or five years have the benefit of minimum primary schooling. But that will generate demand for upgrading the quality of our secondary schools. We have not given that much attention toward upgrading our secondary-school system, and that is our next step. After what we have done in the last one year, primary education is well looked after. What we have now in place is a system which will ensure that all our children who are of school-going age are in primary school. But the secondary-school system will require a major effort, and it worries me.

When I look at countries like South Korea, all children who are of secondary-school-going age are in school; our children drop out even before they complete primary school. Therefore, yesterday, in my address to the nation, I laid a great deal of emphasis toward improving the quality of our education, both at the primary level and the secondary level. We will attend to that because I believe empowering our people means empowering by investing more in their education and health.

And as far as the system of higher education and research is concerned, I just appointed, under Sam Pitroda, a knowledge commission to look at what needs to be done, where we are, and where we ought to be. In the next one or two years, the knowledge sector will receive our attention to the extent that it deserves. I do recognize that India has to be the center, the hub of activity as far as the knowledge economy is concerned. We don't want to miss the chance.

...

The Quarterly: What message would you like to give global managers as they think about India?

Manmohan Singh: If I have any message, it is that it is our ambition to integrate our country into the evolving global economy. We accept the logic of globalization. We recognize that globalization offers us enormous opportunities in the race to leapfrog in development processes. It also obliges us to set in motion processes which would minimize its risks. I think, overall, India is today on the move. The economic reforms that our salvation lies in—operating an open society, political system, an open economy, economic system—this has widespread support. Fifteen years ago, a Congress government launched this economic-liberalization program, integrating India into the world economy. Since then, three governments have come and gone, but the direction of economic policy has been, year after year, toward more liberalization. The pace may be slow, may not be as quick as some people would want, but the direction is unmistakable. India's future lies in being an open society, an open polity, a functioning democracy respecting all fundamental human freedoms, accepting the rule of law and, at the same time, to emerge as a successful, internationally competitive market economy.

About the Authors

Rajat Gupta is a past managing director of McKinsey and a director in the Stamford office.

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