BackRaising India’s resilience to risk
A more resilient India will be better placed to seize the promise of future demographics and a rising middle class
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Although India is South Asia’s most competitive nation, according to the World Economic Forum’s (WEF’s) Global Competitiveness Report 2012-13, the country ranks only 59th worldwide, three places lower than it was ranked in last year’s findings, and slipping 10 places over the past three years. With India expected to overtake Japan as the world’s third largest economy by 2015 and surpass China as the world’s most populous nation by 2030, the country is reaching a critical inflection point.
Future global growth appears fraught with uncertainty and volatility. Are the country’s institutions up to the task of navigating a hyperconnected world that is increasingly shocked by exogenous events? If we are judging from the recent past, then the answer is an unqualified yes. Twenty years after the liberalization of the Indian economy, there has been an unparalleled period of sustained high growth. But when looking into the near future, the challenges of rising inflation, a slowing growth rate, delays in much-needed reforms and exposure to the wider malaise of a faltering global economy, then the answer is less certain.
The best group to answer this question are Indian entrepreneurs themselves—and Indian business leaders, it seems, are cautious about their government’s ability to respond to global risks. Defining global risks as external threats cutting across regions and industries, a WEF survey asked entrepreneurs to rate their national government’s overall global risk management effectiveness. The response from India ranked the country 22nd globally, ahead of its BRICS counterparts Brazil and Russia, but behind China and South Africa.
A second more focused survey on global risks was completed this October. It showed among Indian experts that the global risks of greatest concern over the next decade included pervasive entrenched corruption, water crises and severe income disparity. It signals that this year’s “summer of discontent" demonstrations against corruption and the doubling of income inequality over the past two decades remain serious concerns for the remainder of this decade. Partially in response to these concerns, but more so to overcome a growing sense of policy drift, the government’s latest round of reforms has focused on reviving investor confidence. It is long overdue when considering that foreign direct investment fell 20% in August compared with a year earlier.
But foreign investor confidence can be quickly lost and always takes time to rebuild. In a hyperconnected world, leaders should give greater attention to bolstering India’s risk resilience—a topic leaders and experts will discuss at WEF on India this week. Resilience is the capacity of an organization, a community or a country to continually evolve and adapt to gradual changes and sudden shocks, while remaining able to fulfil its core function.
It naturally flows from policy efforts of nearly 30 years ago, as it requires recognizing that interconnectedness is a function of liberalization. Interconnectedness, in turn, limits a country or organization’s ability to effectively manage and mitigate global risks—thus making resilience the first line of defence in a hyperconnected world. A more resilient India will be better placed to seize the promise of its future demographics, a rising middle class, improve trade relations with its closest neighbours and foster a culture of entrepreneurship among its youth.
Lee Howell is managing director, member of the managing board, World Economic Forum.
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