New York, March 1, 2011- "A budget with a confident face on it," was how one panelist summarized India's 2011 Union Budget in a program convened by Asia Society in partnership with KPMG and US India Business Council.
Comprised of leading experts in government, business, and academia, the panel discussed the success of India's resurgent economy as well as the challenges that lie ahead.
Moderator Arun Kumar of U.S. India Practice, KPMG LLP, and USIBC Board Member, began by quoting President Obama: "India is not an emerging economy; India has emerged." He noted that India is back to high growth, with both production and consumption on the rise. He cited changes to the 2011 budget, such as tax reforms like tax-free infrastructure bonds, and measures to liberalize foreign investment.
India is on track to reach pre-crisis growth rate of over 9% in the coming year, while its fiscal deficit has been reduced to 4.6% of GDP. "It's a budget with a confident face on it," stated former US Ambassador to India Frank G. Wisner. The Indian economy has grown ten-fold over the last two decades, and remains on-track to become one of the biggest economies in the world in upcoming two decades.
K.R. Garish gave an introduction to the Indian economy. "The budget certainly does not have any big-bang reforms. Nevertheless, corporate India, as well as the stock markets, have given a thumbs-up to the finance minister, because what was expected was maintaining fiscal equilibrium, and with that, they have done a commendable job."
The panel also included Dr. Ajay Gondane, Deputy Consul General of India, New York; Arvind Panagariya, Jagdish Bhagwati Professor of Indian Political Economy, Columbia University; and Wilbur Ross Jr., Chairman & CEO, WL Ross & Co; Chairman, Invesco Private Limited.
Despite this confident outlook, challenges remain, such as what one speaker described as a "mismatch" in India's supply chain, especially on commodities and on food. Other challenges include removing bureaucratic obstacles to foreign investment, tackling inflation, declining agriculture, and the pace of reform.
"Most developing countries are far more export-based than India, so purely domestic activities certainly are the critical component," stated Ross. In this vain, the panel noted the need to create better infrastructure within India in order to link workers to the places where they are most needed. Drawing in more foreign investment was another key issue for developing the economy. Curbing inflation in India was of utmost importance in India, as in much of the rest of the world.
The panel was optimistic that India can overcome challenges and come out ahead. "Today the Indian economy is about $1.25 trillion dollars, 11th globally. From that perspective, you would say, What is the big deal? China is ahead of India, Russia is ahead of India. Brazil is ahead of India. But, if you just think 1.25 trillion dollars today, growing at 10% over the next ten years, it turns into about 6 trillion. The power of compounding is just enormous. That is the promise of India."