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Home / Politics / Policy /  Macroeconomic stability is back in India: Tharman Shanmugaratnam

Mumbai: Macroeconomic stability is back in India, according to Singapore’s deputy prime minister and coordinating minister for economic and social policies Tharman Shanmugaratnam.

“The country’s bureaucracy is getting more efficient in terms of policy implementation, infrastructure development has kick-started, and state devolution is well underway. Both on the monetary and fiscal side something has been achieved in the face of challenging global economics," he said.

“It frankly gives me confidence in India, not just based on what has been happening in the last few years of GDP (gross domestic product) growth above 7%, but confidence that this is now a new journey that we in Singapore want to be part of, contribute to and want to benefit from at the same time," he said at the Singapore Symposium in Mumbai last week in an interactive session with Reserve Bank of India (RBI) governor Raghuram Rajan.

About 250, mostly business leaders and policymakers, attended the third symposium organized by the Institute of South Asian Studies (ISAS) of the National University of Singapore in partnership with the Confederation of Indian Industry (CII).

The first two editions were held in New Delhi in 2009 and 2012 and helmed by former prime minister Lee Kuan Yew and Prime Minister Lee Hsien Loong, respectively.

Placing India’s growth in the context of a restructuring Asia amid a global slowdown, Singapore’s deputy prime minister said: “Whether Asia will deliver on its promise or not will depend on what we do, the reforms we put in place, and the connectivity we develop with each other."

Shanmugaratnam added that Asian countries should focus on the “fundamentals of the real economy which have to do with skills, technology, and connectivity".

Highlighting the opportunity for a more comprehensive bilateral collaboration between India and Singapore in financial connectivity, air connectivity, in education and skills training, and building smart cities, he said, “India’s rate of productivity growth in the last few years has been close to 4%. While productivity is increasing, it is well below India’s potential. Connectivity and skills will be critical factors for India’s productivity potential to be achieved. Singapore can play a role in this regard."

Singapore and India have close political and economic ties which grew after they signed a Comprehensive Economic Cooperation Agreement in 2005.

Singapore is among the top foreign investors in India, contributing $5.98 billion (S$8 billion) in foreign direct investment in 2014.

Noting that Singapore-India relations have grown significantly in the last decade, Shanmugaratnam emphasized a lot more can be done to expand ties between the two nations.

“Infrastructure is a major opportunity," he noted. “We can do a lot more to catalyze private finance in infrastructure. Both nations can benefit from it."

Singapore, he said, is working closely with the World Bank and private sector to develop better project documentation so that there is better certainty on dispute resolution and termination clauses which can provide confidence in infrastructure investment.

He added that Singapore is also working on developing infrastructure as an asset class to catalyze investments from big institutional investors like sovereign wealth funds, pension funds and insurers. “We can also work together to build cross-border finance in both banking and non-banking. There is potential for offshore rupee-denominated bond issuance. While large and medium size Indian firms are interested, there is also a diverse investor pool in Singapore that is interested. India can take advantage of it."

Listing catastrophe insurance as yet another area of collaboration between India and Singapore, he pointed out that according to a UN study, India loses $10 billion a year in natural disasters. Add to this the emerging catastrophes today of cybercrime, pandemics and terrorism.

“Catastrophe risk needs to be better insured in India. Given its scale and complexity, the risk needs to be diversified across global insurers and across markets. Singapore’s insurance industry is well placed and keen to be able to play a role in catastrophe insurance in India."

In addition to deepening financial connectivity in infrastructure, cross-border finance and insurance, the deputy prime minister noted his country could support India’s development agenda by helping improve India’s air connectivity to the region. “Air connectivity is critical for foreign direct investment and creating a business-friendly environment and boosting tourism," he said. “There is an opportunity today for world-class airports in Delhi and Mumbai to become major hubs in West Asia and not cede that space to your competitors. Singapore can play a role in this regard."

He also emphasized education and skills training as a critical area of cooperation. “One of the most fundamental drivers of Singapore’s success has been investment in human capital," he said. “We can deepen our relationship in this area at a stage when India is focused on this agenda."

“Singapore and India have the potential to do a lot more together in the near future. Singapore is a very small player but one that is intrinsically globalized and based on human capital development. And India is on a journey of achieving its full promise as a large society. It is still very far from what it is able to achieve but is now moving in a very impressive rate," added Shanmugaratnam.

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