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Last Updated : Jan 23, 2019 07:53 PM IST | Source: Moneycontrol.com

Podcast | Digging deeper - Davos: Indian story in Swiss Alps

For over four days, the world and its affairs are debated, reviewed and scrutinised while the international media capture ponderous soundbytes and entertaining sights.

Moneycontrol Contributor @moneycontrolcom

RIMA M. | RAKESH SHARMA

Moneycontrol Contributors

World Economic Forum's (WEF) annual January meeting in Davos-Klosters, a mountain resort in Graubünden, in the eastern Alps region of Switzerland is a much awaited coming together of over 2,500 international business and political leaders, economists, celebrities and eager beaver journalists.

For over four days, the world and its affairs are debated, reviewed and scrutinised while the international media capture ponderous soundbytes and entertaining sights.

The World Economic Forum (WEF) is based in Cologny-Geneva, Switzerland, and was founded in 1971 as a not-for-profit organization and subsequently, it evolved into an International Institution for Public-Private Cooperation "committed to improving the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas."

Every year, it also convenes six to eight regional meetings in locations across Africa, East Asia, Latin America, China, India, and the United Arab Emirates. Basically, the idea is to synergise stakeholders from business, government and civil society and find solutions to some of the most pressing issues the world is facing right now.

This year, the news coverage of the summit  has already informed us that the super rich at Davos are scared of American Congresswoman Alexandria Ocasio-Cortez's tax hike idea for the moneyed. We have also been told that naturalist Sir David Attenborough has categorically stated at Davos that the world as we once knew as the 'The Garden of Eden' is no more. And it is becoming increasingly clear that this time at Davos, there will be a few discomforting facts that even the world's most powerful men and women will find it hard to ignore.

But there is also trivia to make you smile. As CNBC reported recently, at Davos, attendees habitually hitch a ride across snow-covered pathways in electric golf carts, proudly wear knitted blue bobble hats, attend innovative virtual reality workshops where they can pretend to be trees, and arrive at meetings swishing their colour-coded passes. So yes, this is a spectacle much like any other but also like no other. Ironic too, considering all the noise about climate change, and how Davos is expecting the highest number of private jets landing this year.

But on this edition of Digging Deeper with Moneycontrol with me Rakesh Sharma, we will focus on the India story at Davos and what multiple growth projections are prognosticating. This India story at the Swiss Alps, not the Yash Raj kind, is our topic today.

A story of many highs and a few lows

Let us begin with the International Monetary Fund's first woman chief economist Gita Gopinath, who on January 21, as Bloomberg Quint reported, flagged in Davos the risks associated with India’s “high” fiscal deficit while refusing to comment on specific government policies.

Gopinath stated and we quote, "In the case of India what we flag is the fact that the overall consolidated fiscal deficit remains high and it has been the case for the last five years. We certainly need to fix that."

Her comments came at a time when the India government in the run up to the elections, is said to be planning a cash handout to distressed farmers. Bloomberg reported that the plan to give cash to farmers instead of subsidies will come at an additional cost of roughly Rs 70,000 crore to the exchequer annually. However, India has already exceeded its fiscal deficit target. This means the government would have very limited fiscal space to boost spending in an election year.

The report also states that part of India’s fiscal slippage risks come from the continued weakness in the goods and services tax collections and Gopinath said and we quote again: “GST revenues haven’t come in at the rate with which it was expected and that would be an area for continued improvement.”

Another cautionary voice was that of International Monetary Fund's (IMF) Managing Director Christine Lagarde at Davos. In an interview to India Today TV, Lagarde said that given the demographic conditions, Indian economy should be growing faster than the rate at which it is growing now. She conceded that while multiple reforms have been undertaken by the government, there is still a lot left to be done.

Earlier this week, you will remember that IMF had projected India to grow at 7.5 percent in 2019 and 7.7 percent in 2020 and had said that the country would be the fastest among the major growing economies of the world. Lagarde further told India Today that while it is a good sign that the projected growth is high, still the government needs to address the crisis in the agriculture sector as a large number of people depend on this sector. She further stated that the creation of activity and economic value that leads to employment generation is critical for the country to grow.

One of the most contentious issues faced by the current government is growing unemployment and International Labour Organisation (ILO), has pegged India's unemployment rate at 3.5 percent in 2018, and says India Today, it is most likely to continue in 2019.

We quote, "According to the data, there will be 18.9 million jobless people in India in 2019, a little more than 18.6 million in 2018. Economic crisis, unemployment and farm loan crisis has been some of the critical issues over which the government is being targeted by the Opposition and will continue to dominate the headlines in the coming days as the country enters the election phase. Giving thumbs down to the loan waiving tendencies of the Indian government, the IMF chief said that “such policies need to be revisited."

Let us not forget though the happy projections according to which, India’s growth in 2018 is expected to be at 7.3 percent, which is 10 basis points higher than the government’s own estimate. As IMF put it, India’s economy is poised to pick up in 2019, benefiting from lower oil prices and a slower pace of monetary tightening than previously expected, as inflation pressures ease. These projections are reassuring that India's economy stumbled significantly post demonetisation and the reconfiguration of its indirect tax structure.

As Bloomberg Quint pointed out, it would be prudent though to weigh the risks inherent in the IMF’s outlook. Cross-border trade tensions are escalating and global trade, investment and output remains under threat. For that reason, multilateral and domestic policies must   prevent additional deceleration and also strengthen resilience, says the piece.

IMF has cautioned not just India but all countries of escalating trade tensions, and public and private debt affecting growth and has also urged policymakers to cooperate and work towards resolving these issues and also to acknowledge the clear and present danger of climate change. Other potential triggers that could slow down global economy, says CNBC, include a "no-deal" Brexit for the UK and a deeper-than-envisaged slowdown in China.

In a significant move, IMF revised down its estimates for global growth earlier this week and now projects a 3.5 percent growth rate worldwide for 2019 and 3.6 percent for 2020. CNBC reports that these are 0.2 and 0.1 percentage points below its last forecasts in October — making it the second downturn revision in three months.

India would do well to heed Lagarde's advice to policy makers at Davos that   government debt must be reduced, monetary policy should be data dependent and economic reforms should aim to lift growth, including in the labour market.

The naysaying critics

Yahoo Finance chose to touch upon the downside of the global elite coming together to serve their own interests. The organisers of the WEF meet claim that for almost 50 years, the Forum has been the catalyst for global initiatives, historic shifts, industry breakthroughs, economic ideas, and tens of thousands of projects and collaborations.

Yet, as Yahoo points out, critics of the summit have often feared more dangerous consequences from the global elite coming together in one place, sceptical about whose interests it serves and how much participants really want to improve the planet.

The piece quotes JP Morgan Chase chief executive Jamie Dimon who once famously said, “Where billionaires tell millionaires what the middle-class feels.”

As multiple news sources have reported, Davos will host more than 350 official sessions, over 900 civil society and 1,700 business leaders during the event.

The event would also be attended by CEOs of a large number of MNCs, including Adidas, Rio Tinto, Embraer, AXA, Societe Generale, Total, Allianz, Bayer, Deutsche Bank, Lufthansa, KPMG, Siemens, Generali, Hitachi, Nomura, Sumitomo, IKEA, Royal Dutch Shell, Telenor, Alibaba, Credit Suisse, Nestle, Novartis, UBS, Barclays, BP, Standard Chartered, Unilever, Bank of America, Cargill, Citi, Cisco, Dell, IBM, Morgan Stanley, PepsiCo, Pfizer, Coca-Cola and Visa.

Oxfam's damning annual report just before the Davos meet highlights the unequal distribution of wealth across the globe and as Yahoo says, for some the summit has come to symbolise the failures of globalisation and free market economics.

Is the 2019 summit addressing these issues?

Well, the theme of this year’s summit is 'Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution.' While the summit addresses the impact of technological changes like automation, digitisation and artificial intelligence on human life, it is also conceding that this is a time of “unprecedented uncertainty, fragility and controversy.” Yahoo adds issues like increased global tensions, nationalistic politics and sluggish global growth in the mix to complicate the debate further.

Indian voices at Davos

Press Trust of India captured a moment of national pride on January 23, 2019, when it recounted a statement made by the former RBI Governor Raghuram Rajan who said in Davos that India will eventually surpass China in economic size and will be in a better position to create infrastructure.

Addressing a session on Strategic Outlook for South Asia at Davos, Rajan also said that the Indian economy would continue to grow.

Rajan said, "Historically, India had a bigger role in the region but China has now grown much bigger than India and has presented itself as a counter balance to India in the region. India will become bigger than China eventually as China would slow down and India would continue to grow. So India will be in a better position to create the infrastructure in the region which China is promising today. But this competition is good for the region and it will benefit for sure."

The comments assume significance, according to PTI, with China working on a lot of infrastructure projects across the region, including in Nepal and in Pakistan.

In 2017, India became the sixth largest economy with a GDP of $2.59 trillion while China was the second largest with a GDP of $12.23 trillion, as per World Bank data.

Rajan also said that said there is an opportunity to create regional companies, initiate free trade, student exchange et al for better understanding among Asian countries.

On 23 January, 2019, India Today brought another important Indian voice to light and reported what Bharti Enterprises chief Sunil Mittal said at Davos.

Mittal said, "Foreign investors certainly look for stability and if they look at...a lot of loose arrangements...in the government, people may start to hold back investment. Stability...in any nation is important -- and especially for a country as diverse as India, stability is always good."

The Indian presence at Davos is substantial. NDTV reported on January 20, 2019 that among the Indian political leaders attending the summit are Madhya Pradesh Chief Minister Kamal Nath, Union Commerce and Industry Minister Suresh Prabhu, Andhra Pradesh minister Lokesh Nara and Punjab minister Manpreet Badal.

The Indian corporate presence at Davos is significant too and includes names like Gautam Adani, Mukesh Ambani (with wife Neeta and children Akash and Isha), Sanjiv Bajaj, N Chandrasekaran, Sajjan Jindal, Anand Mahindra, Pawan Goenka (with wife Mamta), Sunil Mittal, Nandan Nilekani, Salil Parekh, Azim Premji and son Rishad, Ravi Ruia, and Ajay Singh.

The ever-ubiquitous Karan Johar is there too and so is New Development Bank President K V Kamath.

Members of the media will be eagerly rubber necking from the sidelines to catch a glimpse of Microsoft's Indian-origin CEO Satya Nadella who is expected to make his appearance as well.

The summit says NDTV, will have several India-focussed sessions though the impetus is upon identifying new models for peace, inclusiveness and sustainability and addressing global risks including rising geopolitical and geoeconomic tensions.

Another session, reports NDTV, would focus on "India and the World", which would cover the country's emergence as a compelling growth story and the questions being raised about its long-term sustainability due to a falling rupee, volatile external financial markets, worsening current account deficit and stress in the banking sector.

In summation

Possibly the most important statement was made by WEF's Founder and Executive Chairman Klaus Schwab who said and we quote, "This fourth wave of globalisation needs to be human-centred, inclusive and sustainable. We are entering a period of profound global instability brought on by the technological disruption of the Fourth Industrial Revolution and the realignment of geo-economics and geopolitical forces.

We need principals from all stakeholder groups in Davos to summon the imagination and commitment necessary to tackle it."

Beyond press pieces critiquing jet setting global elite fretting about climate as the Straits Times put it or the puff paste profiles celebrating six millennials including Nadella co-chairing WEF, there is something to be said about the optimism that a gathering like this generates in the possibility of a planet better equipped to deal with economical, political and environmental challenges.

Every year Davos rekindles the hope that the world can be fixed if enough people decide to fix it.  So we wait and watch. Till next year. And the next.
First Published on Jan 23, 2019 07:53 pm
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