In an interview with CNBC-TV18's Shereen Bhan, Stefan Lofven, Prime Minister of Sweden, talked about his view of the Indian economy, his expectations of what the Sweden-India economic partnership could look like and how Sweden's own economy is looking like back home, among other things.
Lofven was in the country to attend the Make in India summit organized by the central government.
Below is the verbatim transcript of Stefan Lofven's interview with Shereen Bhan on CNBC-TV18.
Q: While you were addressing the audience and the Prime Minister, Narendra Modi, you said that the world's focus has shifted away from China to India and all eyes are on India today. What has changed about India to your mind to get this kind of attention?
A: India is going through a dramatic development in its economy. Growing, India will be the largest country in the world in few years. It is the world's largest democracy so it is a development that is attracting a lot of the world's view.
Q: What that means for Sweden in specific because you are here with the largest business delegation. Swedish companies have been operating in India for a while now, in fact we have about 1,200 companies registered in India, but if I were to look at the numbers as far as exports and imports are concerned or bilateral trade, it is still subpar, there is a lot of promise and potential but we have been able to achieve that, in fact the numbers for this year are lower than what we saw in FY12 for instance. Why do you see that gap and why do you believe that we haven't been able to capitalise on the full potential yet?
A: As you point out, Swedish companies have been present here for many years. Ericson since 1903 and Swedish companies employ some 150,000-160,000 people in India. Let's say if a company put up a plant in India, so they do export but it is not necessarily only to Sweden of course, so they export in this region but they export worldwide, so that is how the global economy function.
I see the possibility of increase in trade between India and Sweden of course but the most important thing now is that the Indian economy is growing and we want to be part of that and we do know that we can deliver very good services and products. So we have a huge possibility.
Q: In terms of the government to government partnership or government to government participation, when you talk about Sweden wanting to participate in India's transformation, what is that going to mean exactly. In your conversation with the prime minister for instance what can we expect now on the bilateral front. What independent companies do, that will depend on their strategy, not just for India but for the world, so that's aside, but on government to government basis what can we expect in terms of outcomes?
A: Both the governments of course want to support this cooperation between our companies, the enterprises because we both know that we need manufacturing of goods and services in order to have a good welfare also in our countries. So I think the support but also the view that we have so many areas in which we can cooperate, let's take Smart Cities for example, the environmental change is a risk for the whole world. We need to address it. When two governments, when two countries cooperate with a focus on creating a much better environment for our kids and our youth - that is an important cooperation.
Q: And that's a speciality of Sweden, so have you identified the cities that you would like to partner with. We have already seen France and US put down the cities that they will partner with the Indian government to build Smart Cities, but have you identified cities that you would like to partner?
A: That is up to the Indian society and the companies that are present here and all the, also the authorities, Swedish authorities that can be of assistance, that need to be addressed to be detailed, to be decided but Smart Cities, the green technology in general, infrastructure, water, all these things that means a lot to people in their daily life, we can do a lot to improve.
Q: Coming back to bilateral dialogue and the conversation that you have had with the PM, the defence sector is seen as the big area of opportunity. I know that SAAB has expressed its interest in being able to participate much more in India's defence space perhaps even try and take the grip in project forward here in India if the Indian government were to be open to that idea. Has there been any conversation or any specific project within the defence sector for instance?
A: We identify that the defence sector is important, it is important to India. It's up to India to decide what they want, how they want to develop its defence forces but we are ready both SAAB as a company and as Swedish government, we are ready to go through with that, to develop those thoughts and I know that the grip in projects, we have a fantastic fighter aircraft, it's very competitive, so whatever we can do to handle that in a good way, we want to do that.
Q: Has there been any conversation in this particular visit on this specific issue at all?
A: Not in detail, of course not but we have stated clearly that we are ready. So if India decides to do so, we are ready and we are there.
Q: Let me ask you about what you are seeing as far as the global economic context is concerned and in fact I want to pick up on a quote and I think you said this a couple of months ago that Sweden is facing some of the biggest challenges that it has seen in modern times. There is of course crisis in schools, higher unemployment and there is refugee crisis. You have been forced to close your borders and you do that in November of last year given the kind of influx that we saw on the immigrant front. How challenging is the economic scenario for you particularly in Sweden and as well as the rest of Europe. What does that mean than as far as global outlook is concerned?
A: Of course it is a huge challenge. This migration crisis is the biggest we have seen since the Second World War. Sixty million people are refugees either within the country or outside the countries. It is a huge human tragedy that we are witnessing right now and of course many people also come to Sweden and we had to take measures to decrease the number.
We haven't closed the borders but we did decrease dramatically because it was absolutely necessary to do that but my point is that the European Union as a whole European Union with 28 member countries, some 500 million inhabitants, we could cope with this challenge. So my focus is now to make sure that 28 member countries, all the countries take their responsibilities.
Q: But do you feel confident and optimistic of that happening?
A: It is going too slow but we will discuss it in next week again in March and the commission, I believe, is preparing some proposals. We need to act now and now we need to act also in cooperation with Turkey, Lebanon, Jordan and Syria because the first thing we want to do is to prevent people from having to take this huge risks as they are doing but there will be people also coming to Europe of course and when that happens, we need to cooperate all the 28 member countries.
Q: Are you going to be forced to change your position as far as allowing immigrants in or your action on the immigration policy is concerned, given the fact that it is probably costing you politically within Sweden?
A: We have changed our policy, right now changing the policy. So we have introduced ID controls for example at our borders and we are changing the policy right now to have the same standard that the European Union minimum standards. We are of course respecting the right to seek asylum, that is human right, it is a global right. So we will respect that.
Q: What does all this mean as far as this Swedish economy is concerned because if I were to look at the numbers, the gross domestic product (GDP) growth in 2015 about 3.6 percent the expectation as per the EU commission is that it will go down to about 3.6 percent in 2016 and at 2.9 percent in 2017, unemployment numbers are high expected to be about 6.9 percent in 2016, what could be the drivers now as far as your economic policies are concerned?
A: First it is important to see that we do have a quite the growth, it is not bad.
Q: In comparison to the rest of Europe, yes.
A: Exactly. What is happening right now is that unemployment is going down. In total, for youth, for people coming from other countries, the unemployment is going down, the employment is going up. So we need to use this momentum right now to invest even more.
Yes, there was a situation that we couldn’t cope with that because of the increase of immigrants was so dramatic, it happened over three months and that we need to handle. But in general, of course it is good for country also when people come to your country, we are happy that the country is growing, it is a challenge we need to build much more, we need to increase our housing, we need to do much more on infrastructure, on schools.
However, at the same time it is a positive challenge that we are growing, more kids, more young people coming, people with experiences and knowledge from other countries, which we need in global economy. However, we couldn’t handle that dramatic situation and that we have dealt with, we have taken the decision that was necessary and now we will make sure that people stay in Sweden that they are given the best possibilities to take part of the building of our society.
Q: You were talking about the government having to spent more on things like infrastructure innovate to try and stimulate the economy and that is the challenge and the dilemma that the government here in India is also dealing with and grappling with. Do you feel that it will largely be government spending for you in Sweden as well to try and stimulate growth?
A: Yes and because our society needs to function, we need to be able to send goods all over the country and out of the country, people need to go to work. So we need trains and transportation facilities in different ways and that is again something that is positive. That is also while we have decided as government not to stop the tax cutting policy and go for investment. We need investment in infrastructure, in housing, in education, training for adults, those kind of investments and also in our welfare system.
Q: One of the other things that Sweden does that and the government in Sweden specifically is that it spends a significant amount of money or a higher degree of your budget on R&D and innovation in comparison to other countries. How important has that been in order to Sweden to be able to leverage the sort of brand that you now enjoy and the pricing power that these companies enjoy as well?
A: It is very important. The R&D is crucial but not only R&D and we have to be aware now that the most of the R&D is being done in the companies. So we need to have a right mixture of R&D resources from the society and the companies.
Another thing that is important though, for us, is innovation because it is one thing to invent new products but you need to be able to put it on the market as well. So innovation is perhaps more important, it is as important as R&D and that is why I introduced a new national innovation council that I lead myself. I share those meetings, we discuss with business leaders, with academia, with civil society, how do we develop Sweden in the best way in terms of infrastructure but also education, digitalisation and other issues.
Q: Did you have any conversation with Prime Minister Modi because this is an area of interest for him as well? He has launched a start-up policy here in India on national front as well, was there any conversation with him on this?
A: We do share this focus and this interest and we both see the same challenges and opportunities absolutely. So I also invited people that are interested in India to come to Sweden so we can continue that dialogue on innovation especially. So I think we can cooperate on that.
Q: Since we are talking about Make In India and the opportunity for Swedish companies in India, all the big brands are here whether it is IKEA, H&M, Volvo, so on and so forth and there has been an annual Business Confidence Survey that has been done of Swedish companies operating in India, it has been on for about the last five-six years perhaps even longer and while the trend in general has been positive, this year, it shows a decline as far as business confidence is concerned. In your conversation with your business delegation, have they raised any specific issues about the operating environment in India and what they would like addressed in terms of government action from India?
A: I think when you do this service, from time to time you see changes. It doesn’t have to be dramatic. I believe that companies, enterprises when they look at investments for example, they explore different realities. It could be educational training, it could be taxes, it could be tariffs, it could be different things and they add all these into the total picture of the possibility of making an investment.
They haven’t complained about something special and I leave that to the companies on the local politicians and politicians in India of course to deal with that. So in general, we do agree, both the Prime Minister and me, that we have so many possibilities and we will cooperate.
Q: What is it like to run a coalition government in Sweden? In India, we have not a very good experience of running coalition government. We finally got a majority government here under Prime Minister Modi but how challenging is it to run a coalition government particularly in the difficult times that we just talked about?
A: There is even another challenge in Sweden because it's a coalition government but still in minority, of course, with different parties but we have decided on the long-term view what we want to do, what is it that we want to achieve. We want to reduce unemployment, we want to raise skills, we want to improve the education for our kids and our youth, we want to attack the climate change and make sure that our kids will have a good environment when they grow up. Those are the things that we focus on and along the road, we will solve the problem.
Q: How closely you are watching the poll numbers at this point in time. It seems to suggest that the opposition party is gaining in strength?
A: The poll number is, of course, I see them but I cannot be stressed of that. We have four years now to make a difference. We have shifted now. The policy in Sweden from just tax cut and reducing in the welfare system and privatising -- that is not the answer for Sweden.
We have shifted now; we are investing in jobs, in schools, in the welfare system, in infrastructure, in housing. We are expanding, we are developing the country. So I am confident that this is what we need, this is a right path for Sweden and we have taken that path.
Q: What is the role of the private sector that you see in this plan of yours and government in private sector participation because once again that is an issue that India is grappling with as well that what should be the right model of the government in private sector participation?
A: I am a strong believer in the cooperation. That is also why I set up the innovation council where government representatives, ministers together with business leaders, together with civil society, academia when we cooperate and discuss what do we need to do, how do we need to act to make sure that the country is developed in the right direction in the best way we can.
So the interaction between the private sector and the public sector is very important. We want to make sure that the business climate is the best that we can deliver in Sweden because we need investment. However, it is not only about cutting taxes, it is also about showing companies that we have well educated people in Sweden. That is the most important thing in a global economy when we are competing with other companies. We need to show that we have well educated people, so that is an important ingredient in all this.
Q: You were talking about drawing in investments into Sweden. We have talked about the kind of investments that Sweden can make in India or Swedish companies can make in India but what about the other way round, where would you like to see investments from India coming in, any sectors in specific that you would like to focus on?
A: The manufacturing as a whole, the manufacturing sector is important but in Sweden we need investment in infrastructure, we have a huge challenge ahead of us because we want to develop the train system and other systems connected to transportation. So there is a lot of possibilities for Indian investment in Sweden.
Q: You have spent about a day-and-a-half in India, most of it here in Mumbai and you are headed to Pune after this. What has been the experience in India for you so far?
A: It has been very good. I know since many years our two countries enjoy a very good relationship and I can see that relationship is even stronger and I can see the possibility of strengthening the relationship. It is a positive experience for me because I also see that so much is happening in India. I read about it, I see on TV and now I see in real life that so many positive things are happening in India. So I would like to come back and stay for few more days.
Q: Does it match up to what you have read about and to the perception that you perhaps came to India with?
A: Yes absolutely. Now I can see that for real life and when I discuss with business leaders both the Swedish and the Indian business leaders, I can see there is something going on here and that is positive.
Q: Any targets that you have set out in terms of bilateral trade in your conversation with the Prime Minister. How would you like this relationship to be measured at the end of the day?
A: We didn't decide about specific numbers that this is a goal for our trade. No, we didn't do that, but we do see the possibility. I think the most important thing for the governments is to support this development in the best way we can and we do that both governments are very interested, are very active in this process and that is the best we can do.
Q: If I may take you away from India and Make In India and ask you about another issue that's been dominating the headlines and that has to do with the UN Panel's recommendations as far as Julian Assange is concerned and saying that the detention has been unlawful. What is the Swedish government's position going to be on this?
A: We took note of the panel's decision, their view. We are following the Swedish legal system and it has been dealt within our legal system, so I do not interfere in that issue. It is totally up to our legal system.
Q: So the UN Panel recommendation is not binding?
A: Not binding. We have to follow our legal system of course.
Q: You said that you would like to come back, visit India and stay in India perhaps even visit the Taj Mahal, if that could be on the agenda for you. We can all talk about outcomes in the long-term but if I were to ask you about outcomes in the medium-term, the short to medium-term, what would you like to see happen over the next 12-18 months for instance, to deepen the engagement between the two countries?
A: I would see both developments in terms of manufacturing; as I mentioned the future of the climate issue, we need to take on that, but I also want to deepen out cooperation when it comes to human rights. We live in a global economy and global labour market and I think we need to as leaders be aware of other challenges and we are aware of that.
The Prime Minister Modi and I discussed, for example that we need to address the issue of women rights. The fact that all over the world women are abused and killed; young girls are being sold; I am talking about the trafficking. So there is so much evil in that that we need to address and the Prime Minister Modi and I, we agreed upon our responsibility to address the issue and make sure that women and girls also have their rights respected and that is something totally different but that is as important as the other issues.