New Delhi: India and China will continue to drive global expansion as they are more “nimble” and can produce at lower cost, finance minister P. Chidambaram said.
“China and India have much to look forward to,” Chidambaram told the India Economic Summit organized by the World Economic Forum in New Delhi on Sunday. “Developing countries have acquired greater capacity to compete with developed countries.” That doesn’t mean economic power has moved to China and India, the Harvard-trained minister said.
Keeping notes: Chidambaram at the India Economic Summit.
“As long as advanced countries have the edge in knowledge, financial and material resources, I don’t think power has shifted to developing countries,”?Chidambaram said.
“What has changed is that developing countries have acquired greater capacity to compete with?developed?countries.”
India’s $906 billion (Rs36 trillion) economy grew 8.9% last quarter from a year earlier, while China’s $2.6 trillion economy expanded 11.5%. That kind of pace is more than three times the rate of growth in the US and countries sharing the euro. Still, the World Bank estimates more than half of India’s 1.1 billion people live on less than $2 a day.
“Only by solving poverty can India be accepted as a true power in the world,” said Anand Mahindra, managing director of Mahindra & Mahindra Ltd, India’s biggest maker of sport utility vehicles.
Advanced countries hold “pride of place” in building knowledge societies as they have the best universities and laboratories and attract the brightest minds, Chidambaram said. Similarly, the world’s most “influential financial centres” are cities in the US, the UK and other developed nations, which also have substantial control over the world’s gas, oil and other material resources.
The minister said sooner or later, India and China will secure material resources, “but in the next 10-20 years our strength will come from our ability to produce goods and services at lower costs, from nimbleness to adjust to change and from a demographic dividend.”
He said India, where more than half the population is younger than 25, can benefit from its so-called demographic dividend if the government ensures every child goes to school and imparts skills to them when they finish their studies.
Among his regrets after more than three years in office is the government’s failure to deliver results in education, health and irrigation even after more than doubling spending in these areas in the past four years, the minister said.
“While we have expanded outlays in irrigation, education and health, we are still totally dependent on tried-and-failed systems to deliver results,” he said. “We haven’t looked at an alternative solution to the rigid bureaucracies we have.”
Chidambaram said investment was the key to sustain economic growth in India. India’s ratio of investment to gross domestic product touched a record 35.1% in the year ended 31 March, and he expects it to be “slightly more” this year.