On the 60th anniversary of India's independence, two Indian trailblazers discuss their country's economic future. In a CEO exclusive, HSBC India's Naina Lal Kidwai meets Kamal Nath, India's Minister of Commerce and Industry.
Kamal Nath, India's Minister of Commerce and Industry, has played a key role in transforming his country into a formidable entrepreneurial democracy. In an exclusive extract from his forthcoming book, India's Century, Nath interviews Naina Lal Kidwai, group general manager and country head of HSBC in India. The Wall Street Journal, Time and Fortune have all ranked her among the most powerful women in global business.
A graduate of India's elite Loreto School in Shimla, she also holds an MBA from Harvard Business School and a BA in economics from Delhi University.
India's Century will be published by McGraw-Hill in December 2007.
Kamal Nath: Do you believe that India is headed toward economic superstar status?
Naina Lal Kidwai: There is very little doubt in the minds of most people that India has the potential to become an economic superstar. The facts tell their own story: India is one of the fastest growing economies in the world – its GDP is currently rising at 9% with potential for further growth. This growth may have started with India's cost advantage, but it has now evolved into a value offering.
Indian companies have gained the confidence to make overseas acquisitions of companies much larger in size, emerging among the top players globally in their industries. Acquisitions are also happening across the spectrum, right down to smaller companies wishing to expand their marketplace and enhance their production capacities.
The role of the very large talent pool available in India, thanks to a favourable demographic situation, cannot be emphasised enough. This will be the fuel that drives India to global economic superpower status. At the same time, the brain drain has significantly contributed to positioning Indians as capable professionals, and those non-resident Indians are now returning for the opportunity here.
KN: What are your concerns and reservations about India that you feel may thwart its economic ambitions?
NLK: Infrastructure – power, roads and airports – remains a major concern that will affect productivity and profitability, and slow the entry of foreign firms into the country. We also need to emphasise the need for inclusive growth. Rising GDP must be translated into employment growth, especially in rural India where the bulk of our population resides. Our major strength, the large number of young people in the country, can also be our biggest weakness. The government needs to promote employment generation and help the more talented and entrepreneurial to set up businesses and create employment.
With cities bursting at the seams, encouraging agriculture and non-farm opportunities such as food processing to provide rural employment, and improving infrastructure in villages should help reduce migration. Our yields also need to be increased, as they are currently much lower than world averages. Simultaneously, we need to establish transparent and robust export policies to ensure that high production does not reduce farmers' earnings. If migration into cities continues at the same pace, it will lead to bigger problems and cause more tension between the haves and the have-nots.
We also need to project different segments of the population 20 years ahead and plan for the future, which could include establishing new cities. China, for example, plans for new cities well in advance.
Finally, India must take care of its environment. Climate change could have a serious impact on India, where a large percentage of people still live in villages and rely on agriculture. The government would do well to harness our natural resources, especially focusing on fresh water management and afforestation.
KN: Do you see prospects of strong economic, commercial and political ties between the industrialised countries and India? What more might be done?
NLK: India's biggest trading partners are the US, the UK, the EU and China, and our economic and political relationships are becoming stronger.
The industrialised countries have realised the value of India and China as value suppliers and large consumer markets. The 9% growth rate, in addition to the breaking of economic barriers, should further improve ties, as economic considerations influence political decisions and mutual interest takes precedence over political posturing.
As more Indian companies invest overseas and foreign companies increase their investments into the country, the cross-flows of people and understanding of cultures can only get better.
KN: What new opportunities do you see for women in the new India's corporate and business communities?
NLK: Women in corporate and business India are part of the mainstream today. In banks such as ICICI and HSBC women represent 20% of the senior management and are above the banking industry average of 30% women in the total workforce.
A recent survey showed that 16.6% of urban women are engaged in economic activity. According to Nasscom, of India’s 1.6 million employees, approximately 30% are women – which is predicted to grow to 40% by 2010. In the BPO sector, women already make up 50%.