At the World Economic Forum (WEF) 2012, NDTV speaks to Lee Howell, managing director of WEF about the focus on the growth of Indian economy, energy deficit and the decoupling of India from the global economy. According to Mr. Howell, India will not be able to isolate itself from the world economy because of its heavy dependence on fuel imports.
Here is the full transcript of the interview.
NDTV: Hello and welcome to the World Economic Forum (WEF). Here we are with Lee Howell, managing director of WEF - The Indian Chapter. Lee, one thing about the WEF is that it is always a platform for pushing the policy reforms in respective countries and you have been doing it like the Confederation of Indian Industries (CII). So how is it different this time?
LEE HOWELL: Well, it very much reflects the natural evolution about the set of issues in India that were exploring. In the previous years, this summit was known as the Indian Economic Summit and obviously was very much focused around the economic development around the country. In this time's WEF in India, we are really talking about a multi-stake holder conversation around all the sets of policy, business as well to settle issues that really are going to be part of the fabric of India's future growth and evolution. So for example, it's like just about direct investments in certain sectors or reform in x sector, but it's also discussions about governance, how to deal with issues around certain risks, civil society, technology, etc. So really, it reflects a whole spectrum of issues that we need to discuss holistically to talk about India's future growth.
NDTV: During this time, India is going through a part-time shift on not just policy, but also corruption; as you said, the civil societies' involvement in policy making norm and all that. So what are the things that WEF - The Indian Chapter is doing in this conference? What are the issues that are going to be discussed?
LEE HOWELL: I think one of the key issues is sustainability and growth. Sustainability has three obvious mentions - one is about the economic side and environmental side of sustainability; looking at ways to manage scarce and actual resources. There is another part of sustainability which is focusing around income inequality. For example, we are seeing a phenomenal high growth in economies around the world, but also seeing widening income disparity and that has political societal cost to contain with. Also, another area of sustainability is a look at the future of enterprises into new markets that they are going into, both in the country and also abroad. So it's a broad definition of sustainability and we are looking at each aspect.
NDTV: And this conference is happening at a time when the US Presidential elections have just happened. So President Obama winning in the 2nd term, how will that translate into work for the whole economy and also for India?
LEE HOWELL: First, we live in such an uncertain time that when we can see leadership-transition come out in a very clear and definitive manner. But what is happening in the US election, that's a very positive time, as it is one less uncertainty to deal with in the global economy. What we do know is that the US leadership will remain the same in the White House. We also know that the Democratic Party will be in-charge of the Senate. But we also see that the control of the Congress has to be with representatives of the Republican Party. So it's really the same. But the key question is, first and foremost, what do they do with the budget issue? The so-called fiscal cliff that we know has to be dealt with. It is the other big uncertainty. So first, the political uncertainty in terms of the election results, that has been cleared; the next political uncertainty with bigger economic impact is around the US budget situation.
NDTV: What about India's linkage with Obama winning the 2nd term? Why I am asking is because the election campaign actually included the outsourcing issue. It was one of the major issues in Obama's election campaign. So is that going to be impacting Indian economy in a big way because he was against outsourcing?
LEE HOWELL: I think there are 3 elements for India to consider. First element is unemployment, which is quite high in US. How to address that? In the US case, I think there is employment but there is a mismatch between the skill sets. I think, we have to be, in terms of analysing that issue, be very aware that India actually has a positive role with addressing the skills gap. Point 2 is the banking sector, which plays very big part of the economy; supported by services like the I.T., it is still working its way through in the US. We see health in that, that'll be positive. The third is a bit more geopolitical; it is around what's going to happen in the energy frontier, particularly US policy in the region and more importantly, the open question on Iran; those things really will impact India's growth, direct impact on energy.
NDTV: When we talk about Indian security, how is that going to impact not just the oil pricing, but also the gas as gas is becoming more relevant in India's energy mix? How is that going to impact India's energy security?
LEE HOWELL: What's interesting is that in US they have this shell gas phenomenon; they are actually getting the cheapest, most successful natural gas in the world. That actually may bring back some of the manufacturing that was seen to be going abroad particularly in China and South East Asia, even India. That dynamic might not change because the enterprise is so low. At the same time, parts of world are still paying quite higher prices, not only for crude, but natural gas too. US gets shell gas at about fourth the cost than what India pays for its natural gas. So it is a big difference. We don't know how it's going to play out. So it is something to watch carefully over time to see how that manufacturing boom that people are talking about, is going to happen here, and how will that impact future investment into India.
NDTV: Right, when you talk about India, do you think India's economy is really decoupled with the world economy? Can it grow separately? That's where the economy is concerned. When we are talking about growth rate of 9-10 per cent in coming years, is that possible really?
LEE HOWELL: In few years, yes because a part of Indian growth is domestic consumption. But that said, we have just talked about how energy markets, financial markets are interlinked. So you really can't decouple. I think the bigger issue is that, there has never been a great rebalancing that people had predicted after the financial crisis, that the west would spend less and save more and east would spend more save less; that hasn't happened. So, it is still the same model and so I think the premise starts from there; since they didn't rebalance at that point, what's going to be driving it going forward. I really don't see that happening.
NDTV: What would the key points or key topic be that'll be taken from IEF to WEF to Davos? What are the issues that you'll be carrying forward from here?
LEE HOWELL: I think there are 3 points - one, I do think we are very keen to understand in particularl, what's happening in India viz a viz just core basis issues like energy security, food security, water security. They are very fundamental because the size and importance of the markets in India in those areas. I think we need to understand what is happening in there. The other point is this - I am very interested in what are the real opportunities; the story in the rest of the world is austerity and there is no growth, but in India there is still growth; exciting things are happening. Where is it happening? Who's making it happen? What is exciting about India is that it's been successful in other high growth markets; if you look at the broader Indian Ocean, the Indian investment is really changing things in the nearer markets, but also in Africa, and of course major acquisitions are turning out to be quite successful that were made in the outer sector. For example in Europe and other parts of the world, there is a lot to be said about understanding, appreciating and celebrating some of the entrepreneurs' successes in India.
NDTV: So what are the challenges India can actually deal with and can it cut out all those challenges and go ahead with its growth story?
LEE HOWELL: One of the key things I think is how do you make this growth more equitable? You can have high growth; it is positive; it has brought out millions of people from poverty. How, in the long run, do you have a better distribution and more equitable distribution in growth and wealth? I think it's important because the key will be the growing middle class. In other parts of the world, middle class is, in a way, sinking. But in India, it is growing. What is really the key to any successful economy is the middle class; so, I think, cultivating and fostering and growing the middle class is a very important part of not just India's growth, but the future global growth, because if that rebalancing does happen, a big driver of future global growth will be Indian middle class.
NDTV: So it is the middle class, which will be driving the growth, and also India can't decouple itself from the world economy because of the energy supplies. Thank you so much for talking to us.