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India represents the world’s second fastest-growing economy, behind China, and it is the world’s most populous democracy. But it’s a country that suffers from extreme poverty and a lack of widespread education, two problems that must be fixed for the country to continue its upward economic growth.
That was the general consensus among panelists at a talk called “Reforms: The Key to Growth” on May 15 at the annual Tata India Leadership Summit, a daylong event hosted by the student-led South Asia Business Group.
“India is a contradiction,” said Vijay Talwar, CEO of the Clinton Health Access Initiative. “One of my favorite quotes is from a colleague who says, ‘In India if you go deep enough, the opposite is always true.’”
According to Ram Ramakrishnan, executive director of Bajaj Electricals Ltd., India’s GDP grew by 7.2 percent last year. Meanwhile, 37.2 percent of the country’s population falls below the poverty line. “That number is 410 million people,” Ramakrishnan said.
Other statistics are perhaps even more startling: Some 77 percent of India’s population lives on less than 50 cents a day, 50 percent of India’s children are malnourished, and one-third of children drop out of school before the fifth grade.
“We have fantastic GDP growth. Then why is it that in terms of human development index we are still languishing?” Ramakrishnan asked.
“On one hand the economy is vibrant, but the larger concern is can a 21st century economy coexist with 19th century politics?” said Jayaprakash Narayan, founder and president of the Lok Satta Party.
Key to any reform is limiting the vast influence of money on politics, Narayan said. Also important is to reduce bureaucracy and the “over structured and underpowered local governments” found in India’s 28 states.
“You have to empower the people,” he said.
Also important are banking reforms, according to Paresh Sukthankar, the director of HDFC Bank. While India’s banks are strong, evidenced by a 17 percent loan growth last year, basic financial services have yet to reach the brunt of India’s 1.18 billion people, he said.
“Fifty-nine percent of the adult population has no bank account,” Sukthankar said. “The context of these reforms is not to fix something that is broken. This sector of the economy has been OK. But, the financial system could clearly do a lot better to ensure that the fruits of that GDP growth actually trickle down.”
“As I am hearing all of you, there is one theme, and that is the need for education,” said the panel’s moderator, Marianne Bertrand, Chris P. Dialynas Professor of Economics and Neubauer Family Faculty Fellow. “At Chicago Booth, we think that human capital growth is the key to economic success. India clearly has a problem in terms of education. At some point, with all the growth that we are seeing, there is going to be a lack of talent.
“I would like to get some of your perspective on why it is so hard to achieve good education reform in India. It seems to me that this is something that companies should be behind it; social activists should be pushing for this.”
“It’s a complex crisis,” Narayan said. “As school education declined, the products that went to higher education were of substandard quality, and so higher education declined, too. The good news is the demand side is very, very strong in India. Even the poorest Indian is willing to spend out of pocket, way beyond his means, to get a good education.”
Among the educational reforms that Narayan suggested are the need for sufficient testing mechanisms to find problems in schools and a strong inspection system to identify and help low-performing schools.
Despite some of the social problems now facing the country, panelists agreed that reforms will take place in India, allowing its economy to continue outpacing that of others. “India has made it through many challenges before; we will get through this one,” Narayan said.
Talwar told a story of attending a political dinner where they ran out of plates, and so diners began using dessert plates. When a large tray of ice cream was later brought out, since the dessert plates had all been used for dinner, the only man able to eat dessert was the one who kept his coffee saucer from earlier in the meal: “If you are innovative in India, you can eat as much ice cream as you want.”
— Patrick Farrell
Read what experts said about improving education in India at the conference.