Distinguished speakers, including India’s Minister of Finance Jayant Sinha, address latest reform efforts
The Emerging Markets Institute’s fifth annual conference, “The Modi-fication of the Indian Economy,” was held at Cornell University’s Industrial and Labor Relations offices in New York City Oct. 13 and attended by Cornell and Johnson alumni, business professionals, and students. The conference was highly interactive, with several question and answer sessions. Lourdes Casanova, academic director, Emerging Markets Institute, opened the conference by welcoming guests and acknowledging Northeastern University for serving as co-host and co-sponsor of event. She pointed out the timely nature of the conference, noting new efforts by the U.S. and India to build stronger ties, and citing Indian Prime Minister Narendra Modi’s recent visit to the U.S. and President Barack Obama’s two visits to India.
“This marks the phase of a new development for India, and we’re honored to host this historic gathering with so many prominent speakers and panelists,” said Casanova.
Opening remarks were provided by Soumitra Dutta, Anne and Elmer Lindseth Dean and professor of management and organizations, who said the title of the conference was apt in view of the large-scale efforts to transform the Indian economy through a number of ongoing reforms and campaigns. He recalled hearing Prime Minister Modi speak at Madison Square Garden in September 2014. “It was electrifying the way he connected with people [then]; and yet he was humble in the way he addressed the Council of India and U.S. CEOs” during his visit, said Dutta. “With India’s rapid economic growth and its campaigns, ‘Make in India’ and ‘Digital India,’ the country is not just a new destination for global manufacturing; it is also a center for innovation, research, and development.”
Throughout the day, conference presenters focused on the themes of Make in India, GDP growth rate, human resources and education challenges, bank and finance reforms, and support for the startup ecosystem.
Jayant Sinha, Honorable Minister of State for Finance, Government of India, addressed the audience via videoconference and touched on several of the conference themes. In the area of India’s economic philosophy; he outlined five principles which the government is planning to enact in order to maintain the current rate of 7 percent economic growth. The first area is to focus on “pro-poor,” with goals of ending hunger and providing the underserved with access to government benefits to help “lift those out of poverty.” The second item is a “pro-market” stance which includes the Make in India program designed to keep manufacturing in the country and increase GDP growth and tax revenue. The campaign, designed by the American advertising agency Wieden and Kennedy, has been widely promoted on a global scale. It focuses on 25 sectors of the economy for job creation and skill enhancement and intends to entice foreign direct investment. The third area is empowerment and opportunities, not entitlements, for Indian citizens. The fourth area is minimum government, but maximum governance, which means the national government’s influence should be limited and allow states more control to deal with local issues. The fifth item is cooperative federalism, which will allow for autonomy of natural resources for individual states in India and create better collaboration between national, state, and local governments.
In the area of actual policies and priorities, Sinha shared that the Indian government plans to offer universal social security and make it easier for people in rural areas to open bank accounts. In agriculture, the government hopes to ensure farmers’ access to improved irrigation and crop insurance. Another priority is to create more job opportunities for citizens and small business through access to small loans and micro-lending. He said the government recognizes there is a need to overhaul the tax system and was glad to report the corporate tax rate had dropped to 25 percent from 35 percent. “Since nationalization there have been more changes in the public sector,” said Sinha. “Small banks and payment banks opened up the financial sector which is tremendously transformational for India.”
Sinha says the Indian government recognizes that in order for many of the policies to succeed there needs to be an emphasis on the correct execution of goals. “For the last 10 years working with the government machinery became dysfunctional,” said Sinha. “We’re trying to clean it up from the top to the bottom, but it takes time.”
A question and answer session with conference attendees followed Sinha’s talk.
The first question posed was: “What is happening to reform the judiciary, as there is a concern that investors are wary due to disputes?
Sinha responded: “The Judicial system is independent from the government. There is a backlog of cases. We plan to hire more judges and provide funding support so that we can strengthen the judicial system to improve the processes of contract disputes, bankruptcy cases and arbitration. We can only move so fast.” Sinha then welcomed attendees to email him with any suggestions.
The second question posed was: “What’s India’s attitude towards direct foreign investment?”
Sinha replied: “India is open for business and there are far fewer restrictions in just the last year. We have a federation of chambers of commerce which are very active and well developed and allow for foreigners to invest in many sectors.”
The third question was posed by a young female entrepreneur from Bangladesh. “Why is women’s access to education and literacy in India less than men’s in comparison?”
Sinha replied: “We believe in gender equality and empowerment. Women hold important positions in government. We very much have a society that is thriving and flourishing.”
The last question was posed by Johnson Dean Dutta. “How can American universities such as Cornell play a role in the economic growth of India?”
Sinha said: “We would like to see more scholarship opportunities for students from India. We would also like universities such as Cornell to send more students and professors to India. We want universities to develop research in India and work to develop a deeper understanding of our culture.”
Next on the program, a panel addressed India’s capital markets, foreign portfolio investment challenges from the past, and opportunities for the future. Panel moderator Sandiip Bhammer, MBA ’04, managing director, Tarragon Capital Advisors (India) Private Limited, said India is the fastest growing economy in the world, but questioned whether the country can stay on course. He asked panelists “Has the Make in India program been successful since its inception on September 25 of last year?”
Ray Prasad, lead portfolio manager at TCW Emerging Markets Equities, said it would take years for India to realize progress with Make in India and the success would be reflected in the GDP. “Modi set up a lot of expectations. They think it’s going to happen tomorrow. I haven’t heard anything on the topic of human resources. There is a focus on low-end jobs, which is the wrong emphasis. Education gives you the highest return. We need an educated workforce because the returns from education are evident and we’re not doing enough.”
Sarath Sathkumara, managing director at Taiyo Pacific Partners, agreed with Prasad, adding, “There is a need to reform labor laws and develop privatization in order for Make in India to work.”
“Public sector banks are in bad shape and in need of reform. They are sitting on non-performing loans from the last government financial crisis and we need to change the underwriting culture in these banks in order for Make in India to progress,” said Ashish Chugh, managing director of long/short emerging markets equity investing, Bay Pond Hedge Fund, Wellington Management Company.
Tarun Das, former director general, CII, and founder trustee, Ananta Aspen Centre, shared his view of the Make in India program and its role in business development and expansion. Das said he helped build two plants one year ago for the multi-national, JCB, a $1 billion construction equipment firm. The land acquisition was straightforward because the company bought land from the private sector and skilled people were available.
Mukesh Aghi, president, U.S.-India Business Council, said the competition in business is global and there is a need for labor reform in order for Make in India to move forward. Most of the hiring is done on a temporary basis. “We need to reform our bureaucracy from the ’60s and ’70s era, with the state-level government taking the lead in order to make improvements.”
The next panel, “Research and Development and Innovation: Opportunities in India,” was moderated by Ravi Ramamurti, distinguished professor of international business and strategy and director of the Center for Emerging Markets at Northeastern University. Ramamurti asked, “Is there much opportunity for startups in India?”
“India has been very bullish when it comes to e-commerce, e-finance, cloud and mobile applications, but it doesn’t really give value to the full innovation capabilities and money is chasing the wrong things,” said Kanishka Acharya, director, Unik Systems, a cyber- encryption company.
Ramamurti then asked, “Is India producing innovation relevant to other countries?
Panelists then shared examples of areas where India has developed innovation and launched products or services globally. Ambar Chowdhury, a principal with Deloitte Consulting LLP who leads the U.S. strategy service line, Monitor Deloitte,, pointed out that the Indian company Vortex designed solar-powered ATM machines, which are available globally, and General Electric created an ultrasound hand-held device which launched in the U.S.
In a similar fashion, Microsoft has done quite a bit in terms of service software in the schools, according to Vidur Luthra, founder of Resultrix (currently part of Publicis group). “The multi-point server which originated in India is now being used worldwide. We see the same type of innovation in electronic delivery of medical services, broadband, and delivery of information to farmers,”
Following lunch, Rustom Desai, MBA ’95, managing director, Corning India, delivered the keynote address and shared the experience of building a Corning plant in India to house 250 employees, over the last five years. He detailedthe hurdles encountered when it came to land acquisition, approvals, permitting, access to resources and infrastructure. “We didn’t have a road for three years, were short on power, and we weren’t sure how we were going to transport our glass products,” said Desai. “We realized we needed to apply our entrepreneurial skills and redesigned our packaging materials and developed a rotary uninterruptible power supply (UPS) as a result.”
Desai spoke about Digital India and the need for pulling rural and poor India into the economy by empowering the states. “The India market is real and vibrant, not for [the] faint of heart, said Desai. “U.S. companies have been successful, but well-planned execution is required. India will reach a tipping point within [the] next 12 months or [it’s] back to ‘India as usual.’ People are getting impatient.”
Next, a keynote address was delivered by Arun Kumar Singh, Ambassador of India to the United States who spoke about the importance of building smart cities with adequate waste management, affordable power, improved infrastructure and services.
“We see American firms such as GM, GE, Ford, Uber, Cisco, and Qualcomm making serious investments in India. In the startup sector, we have seen a $5 billion flow of foreign direct investment over the last year, which encourages innovation and entrepreneurship. India is the fastest growing economy in the world and India’s efforts are being watched by the world. India is the top recipient of foreign direct investment, which totals $31 billion, and is ahead of the US and China,” said Singh.