Making growth inclusive

THE CHALLENGE for any fast-growing economy is to make its growth more inclusive so that the disparities and gaps between regions, and between the rural and urban parts of countries, which growth often brings with it, can be bridged. So believes Rajiva Misra, India’s ambassador to Slovakia. Misra, who previously served in Croatia as the representative of his country of over a billion people and hundreds of languages and dialects, says that Slovakia has a distinct character, like that of an individual, and for him the description “little big country” is very apt.

Indian Ambassador Rajiva Misra Indian Ambassador Rajiva Misra (Source: Jana Liptáková)

THE CHALLENGE for any fast-growing economy is to make its growth more inclusive so that the disparities and gaps between regions, and between the rural and urban parts of countries, which growth often brings with it, can be bridged. So believes Rajiva Misra, India’s ambassador to Slovakia. Misra, who previously served in Croatia as the representative of his country of over a billion people and hundreds of languages and dialects, says that Slovakia has a distinct character, like that of an individual, and for him the description “little big country” is very apt.

The Slovak Spectator spoke with Misra about India’s economic growth and the challenges it brings, about regional disparities, the potential for cooperation in the energy sector, and about the phenomenon of outsourcing, which continues to fascinate people.

The Slovak Spectator (TSS): Economic growth in India has been averaging between 7 and 9 percent over the last five years, a pace of development which puts India among those countries with the fastest growth. What has been fuelling this growth and what challenges does it pose for your country?
Rajiva Misra (RM):
I think now we seem to be heading towards somewhere around 8.2 percent average growth for the years 2007-11, while we targeted 9 percent in our five-year plan. This marks a little slippage, but one could have not foreseen the global economic crisis, from which we did not come out completely unscathed. But yes, our economy has been doing pretty well. We attribute this growth to a number of things: in the early 1990s we carried out a series of fundamental economic reforms which have made the economy much freer and have integrated us into the global economy. We were able to free the entrepreneurial drive of Indian businesses, which had been held back by the previous model of development, the so-called mixed economy. It was clearly a fundamental move from which everything else flowed.

As for India’s advantages, we have a large pool of college-educated, English-speaking people as well as a large number of students graduating from science-oriented faculties, which works to our benefit. We also have a considerable number of people graduating from managerial disciplines, accounting and information technologies.

The focus on information technologies, which certainly is one of our major strengths, has helped us to link with the global economy. Nevertheless, the economic momentum has become broader than just the IT sector and it has now spread to other sectors as well.

TSS: Tuning the education system to meet the demands of business is a challenge that Slovakia has been facing as well.
In India, the availability of human resources to fit the needs of business was very helpful and it also pushed the education system to expand further. But now, due to our high growth rate, we are beginning to run into a scarcity of human resources with the right skills and the right education. We need to expand higher education and secondary education even further.

So one of the challenges is to expand the base from which qualified human resources come.

But the high growth rate has also brought deeper disparities, disparities between different sectors, between rural and urban India, different regions, which creates a challenge that needs to be addressed. A major challenge for us now is to make growth more inclusive.

TSS: Regional disparities are among Slovakia’s problems and this small central European country has been asking the same question: how to make growth more inclusive?
I think the approach is twofold: one is when the weakest regions or groups get direct help from the government. In the past few years, a very successful employment generation programme in the rural areas, the Mahatma Gandhi Rural Employment Guarantee Scheme providing for minimum guaranteed employment to one member of each family below the poverty line, has been applied. People are paid for working on rural infrastructure: they create water facilities, digging wells, or they work on rural roads. Thus the state in some ways addresses rural employment and rural poverty while creating rural infrastructure.

The second approach is when the government directs state funding into higher-priority sectors such as education or health. Over the longer term, growth will become broader only if the benefits of education and health spread to everyone. This is what we have been trying to do over the past few years, while a much higher percentage of governmental resources have been devoted to education, health and social issues.

TSS: There have been many stereotypes about outsourcing to India but, regardless, India is a strong power in outsourcing and the question is how sustainable this is and what the next steps will be?
I think outsourcing has got a lot of attention not because of its intrinsically important role in the economy, but because it represented a new business model and that’s why it excited people. If you look at the Indian IT sector, the total contribution of that sector is just about $65 billion to $70 billion in an economy of $1.5 trillion. Even within this, outsourcing creates only part of that sector. But nevertheless, it is exciting.

It enables businesses all over the world to enhance efficiency and lower costs, and thus there is no way that the model will fail. It is a model which emerged after technology erased distances and brought more flexibility into working relations while allowing people to access resources at the lowest cost and highest efficiency in whatever part of the world. Of course, the way this model will change is that countries will want to move higher up the value chain.

Also, at first sight, it may look like outsourcing is actually taking jobs away, but if you look at a longer timeframe, at a totality of a corporation’s operation, outsourcing is not taking jobs away, because you may take jobs from here, but you create jobs there and expand purchasing power and export markets for your products and services. Yet there are arguments that outsourcing is taking jobs from advanced countries and it’s therefore bad, but this is a simplistic approach. The model itself will gradually get modified, because costs are going up in India as well. Now other countries provide services similar to what we have been providing, so naturally the logic of business will tend to drive this model to a higher level – from back-office operations we would provide, for example, architectural services or you would provide legal services. I think outsourcing will move up to a higher level of specialisation and skills, while countries will move up, and go up or down the value chain.

TSS: The 2011 census has produced some interesting numbers for India: its population has grown by 181 million people over the past decade. What are the challenges that such population growth brings?
We are the second most populous country in the world, while based on projections at a certain stage we will overtake China, which brings along a number of challenges. We first of all need to address literacy and the situation of women so that they have a decisive say in reproductive decisions in the family. Empowering women through education is the way to bring population growth down. It is already showing results, since fertility rates are coming down precisely in those parts of India where higher literacy rates have been achieved. It’s not something that delivers results immediately, but I don’t think we have other options for doing this in a democracy.

TSS: During an April road show organised by the Slovak Ministry of Economy, India showed interest in cooperation in the energy sector, including construction of hydropower stations as well as in nuclear energy. Why are these sectors interesting for India?
We appreciate very much the initiative that Minister [Juraj] Miškov took in taking a group of businessmen and policymakers to India, since a number of useful contacts have been established. The energy sector figured prominently in their discussions since India has been facing a serious energy deficiency and thus the energy issue is a big challenge for us. If we are going to grow at an 8-percent rate, our energy needs will expand by 7 percent. The positive thing is that India’s growth is energy-efficient: for one unit of extra output we need less than one unit of extra energy. Nevertheless, our energy requirements are expanding and thus we want to expand our nuclear energy programme, as well as our solar and wind-energy programmes.

We are aware of Slovakia’s interesting and diverse energy mix as well as the role that nuclear energy plays in this mix. We look upon Slovakia as an interesting partner in the area of generation of nuclear energy, while the country also has interesting hydro-electric projects, especially smaller ones, which in a sense are more interesting since larger hydro-projects in India have in the past raised some concerns regarding displacement of population and ecological impact and thus smaller hydro-projects would be more manageable.

TSS: Earlier this year, some Indian companies showed interest in directing their investments towards Slovakia. Is there any update in these developments? What areas of the Slovak market are potentially interesting for Indian investors?
I fear not in very precise terms. But one of the projects that was discussed and which has not yet progressed but for which there is potential is an Indian investment proposal to manufacture electric cars in Slovakia. I think Slovakia’s resource of young, educated people would be of interest to Indian companies in information technology when they might plan to expand into European markets. It will make sense for them to look at Slovakia as a base to provide IT services, using both Slovak and Indian resources. I recently visited Košice and there are some Slovak IT companies which already have contacts with teams in India. These contacts within the IT sector have a lot of potential.

The pharmaceuticals industry is another area where I see huge potential, or more broadly the health sector. India has a lot of experience in generic medicines. Now, when the public finance belts are tightening and there are efforts to bring down public expenditure on health, it might be in Slovakia’s interest to explore the possibility of procurement of generic medicines from India.

In recent years, we have also witnessed the growth of medical tourism, when people from western societies travel to India to access high-quality medical services at a lower cost. Then there is also the traditional system of medicine, Ayurveda, which I think already has recognition and familiarity here and more broadly links up with the traditional systems of therapy which are strong in Slovakia, for example your wellness sector, your spas.

TSS: Do you think Slovaks have discovered India as a tourism destination? What items on Slovakia’s tourism menu could be interesting for Indians?
A good number of Slovaks have been attracted to India for its tourist destinations, Yoga, or for India’s traditions. However, we now also see highly qualified professionals in Slovakia who go to deliver business services to Indian companies in different sectors.

But what I would also like to see is more Indian tourists in Slovakia. This number has, though, been growing: when I take walks in the downtown area, I can see more Indians around. But my suspicion is that much of this is one-day tourism originating in Vienna. I think the population of Indians in Bratislava goes up during daylight, and as evening progresses that traffic goes back to Vienna.

We need to bring them to Slovakia and take them beyond Bratislava, showing them the old castles or the High Tatras. If Slovakia’s fantastic natural beauty became known widely to Indian tourists, the country could become a popular tourist destination. There are Indians who have already seen the traditional tourist destinations and are now searching for new ones.

TSS: India has been providing several grants to Slovak students to help them better access a culture that is rather distant to their own. What has been the interest so far?
We have a programme of technical-economic cooperation under which we invite not only students but even working professionals and public servants to come and do academic courses at Indian institutions. We would be happier with an even better response than we have been getting in Slovakia, but it’s understandable. India is not somewhere across the border. Nevertheless, we will continue to try to reach out to those professionals who are interested in the benefits of such cultural exchange. There are already Slovak students who have been studying Hindi and there are also chances to be trained in classical Indian dance.

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