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Day 1 takeaways from Chasing Growth, KIE’s annual global investor conference.
Feb 9, the first day of our conference saw eight expert speakers and 21 companies rivet
our institutional investors. Our speakers today included Arun Shourie, Varad Pande, Dr.
Narendra Jadhav, Mani Shankar Aiyar, Labanyendu Mansingh, Adi Godrej, TN Ninan
and YM Deosthalee. More on their insights and our takeaways inside. Watch this space
for today’s speakers – six more experts will take the stage and 39 more companies will
meet investors in an action-packed day.
SPEAKER SESSIONS: CRYSTAL ROOM, THE TAJ MAHAL PALACE
1. ARUN SHOURIE: Getting things done in a parliamentary democracy
Key takeaways
Removal of “dead hand” of the government in the early 1990s led to faster growth in the
economy; reforms have taken place in spurts and not on a sustained basis
The next two years will be difficult as the opposition will likely become more
confrontational as the government is in disarray; elections will play an important role in
determining policies of the government over the next two years; disarray in government is
not democracy
Leadership is a problem at every level in India; how we select the right leaders is
important; the parliamentary system has not delivered the kind of leadership that is
important for taking the country forward
Race with China is important for India; China can learn from India three things—(1) defanging
secessionism, (2) respect for basic life and (3) innovation in a free world is more
than in a state-controlled regime; India can learn from China several things—(1) sourcing
of resources from various parts of the world with promise of Chinese aid, (2) national
strength and (3) exercise of power
Freedom is not going to solve things automatically; it is just as an add-on; the system has
to deliver; entrepreneurs and middle-class professionals have to keep on doing the right
things; otherwise, we will fall into the middle-income class trap
2. VARAD PANDE: Ecology and economy: the twain shall meet
Key takeaways
Five main laws that determine the policies of the government of India; forest cover in
India has increased as a result of strict implementation of the Forest Conservation Act,
1980
Current context—pressure on ecology, a perception that the system can be “managed”,
judicial activism, growing environmental movement; the ministry has been working on a
culture of compliance
Core principles of the MoEF—(1) inclusiveness (based on national consultations), (2)
objectivity and (3) transparency (decisions put on the website immediately)
Approach of the MoEF—(1) a clear ‘No’ for certain projects or ideas, (2) over 90% of the
projects are approved and within stipulated timelines, (3) find solutions that work for all
stakeholders (POSCO, Navi Mumbai airports are good examples)
Proactive domestic agenda—reduce emissions intensity of GDP (reduce by 20-25%
between 2005 and 2020), eight missions on climate change; the ministry is also working
on institution building (National Environmental Assessment and Monitoring Authority, or
NEAMA, an autonomous body for assessing projects and National Green Tribunal)
3. DR. NARENDRA JADHAV: Inclusive growth in the context of India’s demographic surge
Key takeaways
Dr Jadhav had a new definition of LPG in the context of economic reforms—liberalization,
privatization and globalization
The three key achievements of the Indian economy in the past two decades since LPG
began have been—(1) distinct improvement in the rate of economic growth, (2) the
number of people below the poverty line has come down to 27% currently, (3) forex
reserves have increased significantly; at US$300 bn, India is the seventh-largest forex
holder in the world; India is a net lender to the IMF
The three major negatives or challenges facing the Indian economy—(1) poor ranking by
most social indicators, (2) benefits of reforms have not been uniform and (3) inflation; it is
the most iniquitous form of taxation
The positives of Indian economy are favorable demographics; average age is 24 years and
average in 2020 will be 29; in the same year, median age of China and USA will be 37
years,
Areas of development are (1) gross enrolment ratio (access to college education) is 12.4%
in FY2007; expenditure on education is about 3.5% of GDP, (2) 10% of people have
access to proper training, (3) health sector; expenditure on health is about 1% of GDP
4. MANI SHANKAR AIYAR: Why is India prospering but Indians are not?
Key takeaways
17% of the GDP is contributed by the agriculture sector, which employs 65% of India’s
population
The process of growth has become very skewed; the fruits of growth are being cornered
by a small section of the population
Government’s capacity to spend on anti-poverty programs has increased due to a
spectacular increase in government’s revenues; in the past 15 years (1994-2009),
expenditure on social welfare programs has increased 15X; however, India’s rank in HDI
has not improved much (it’s #134 currently)
The size of the unaccounted economy has grown to 43% from 27% in 1991 of GDP
Empowerment of people took place immediately after independence; middle class sought
its entitlement and secured it and this resulted in enrichment; the rural population has not
felt the benefits though; so far, the rural class has sought to show its dissatisfaction
through changing the government in elections; however, it could lead to more radical
forms of dissatisfaction and it could be in the form of insurgency and armed rebellion
It is important for basic services to be provided to the rural population, which will lead to
true empowerment of these people; there are 3.2 mn elected representatives in local
bodies out of which 1.2 mn are women representatives—a little known fact that is not
lauded enough
5. LABANYENDU MANSINGH: Development of the gas market in India
Key takeaways
8 EOIs received for additional long-distance pipelines; four pipelines put through bidding
process after public consultation
73 EOIs received for building city gas distribution networks; PNGRB has identified 243
cities additionally for building CGDs
Currently there are 0.7 mn CNG vehicles but this could rise to 2.5 mn in the next three
years and 3.3 mn in the next five years; the number of city gas distribution networks
could increase to 125 in the next five years from 25 currently
In PNGRB’s view, a competitive market would lead to price discovery, optimal use of
scarce energy resource, optimization of infrastructure and lead to flow of investment for
E&P, development of infrastructure for transportation and distribution
6. ADI GODREJ: Understanding the Indian multinational
Key takeaways
470 mn Indians use at least one Godrej product daily
35% of Godrej Consumer Products Ltd comes from outside India; it has a very sizeable
presence in Indonesia
Godrej Properties has projects in 11 cities in India; it has a joint development model,
which results in an asset-light model
Overseas strategy driven by desire to grow faster than what is available in India (about
15% CAGR in revenues on an organic basis); acquisitions can add another 10% to the
growth per annum but the acquisitions have to make strategic sense
Godrej group has ambitions to grow the palm oil business, which is a cooperation model
with farmers; farmers grow the crops on behalf of Godrej and Godrej purchases the fruit
from farmers
7. T. N. NINAN: Can India make the journey from functional anarchy to future global power?
Key takeaways
India’s per capital income can increase to US$4,000 by FY2021; growth is underwritten
by a high savings rate
Key vulnerabilities include areas such as (1) institutional including among others weak
regulators, scarcely functional parliament and judicial delays, (2) political including
populist politics, weak reforms impulse and corruption and (3) economical such as twin
deficits with combined fiscal deficit of 7.7% and CAD of 3.7%, high public debt
Some East Asian economies grew rapidly driven by openness, high savings and
investment, stable macro-economy, good leadership and administration and commitment
to growth and inclusion
India could easily get to a middle-income economy (US$4,000 per capita) over the next
10 years but transformation to a high-income economy may be more difficult since this
would require moving up the value chain, specialization and transformation to a
knowledge economy
Escaping the middle-income trap for India would require skills acquisition, infrastructure
development (electricity, highways, and telecom connectivity), focus on soft infrastructure;
Mr. Ninan highlighted that certain changes such as RTI, UIDAI, rise of ‘BIMARU’ sites,
growth of manufacturing (frugal engineering and innovation) could lead to stronger
performance
India likely to be a great power (one among a few)
8. Y. M. DEOSTHALEE: Overcoming India’s infrastructure deficit
Key takeaways
Infrastructure development would require strong government, monetary and fiscal
policies
Globally, infrastructure has been developed by governments; in India, 50% of the
investment in infrastructure development has been left to private companies but they are
handicapped due to procedural issues (land, demolition) and other issues
Processes need to be strengthened in the areas of award of coal blocks, highways and
other infrastructure projects; also, project preparation can be higher before inviting
private sector participation
Availability of skilled manpower is a big issue; it is just not about engineers but also
manual labor such as welders and carpenters; only 25% of the population entering the
construction sector is properly trained
Long-term funding is also a big issue for developing infrastructure projects; banks have
short-term deposits typically with only one-third of their deposits under the long-term
category; thus, bank funding is not appropriate for long-term infrastructure projects,
which require loans of 10-15 years; long-term corporate debt market is virtually absent
currently; India can facilitate investment through fiscal measures
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Day 1 takeaways from Chasing Growth, KIE’s annual global investor conference.
Feb 9, the first day of our conference saw eight expert speakers and 21 companies rivet
our institutional investors. Our speakers today included Arun Shourie, Varad Pande, Dr.
Narendra Jadhav, Mani Shankar Aiyar, Labanyendu Mansingh, Adi Godrej, TN Ninan
and YM Deosthalee. More on their insights and our takeaways inside. Watch this space
for today’s speakers – six more experts will take the stage and 39 more companies will
meet investors in an action-packed day.
SPEAKER SESSIONS: CRYSTAL ROOM, THE TAJ MAHAL PALACE
1. ARUN SHOURIE: Getting things done in a parliamentary democracy
Key takeaways
Removal of “dead hand” of the government in the early 1990s led to faster growth in the
economy; reforms have taken place in spurts and not on a sustained basis
The next two years will be difficult as the opposition will likely become more
confrontational as the government is in disarray; elections will play an important role in
determining policies of the government over the next two years; disarray in government is
not democracy
Leadership is a problem at every level in India; how we select the right leaders is
important; the parliamentary system has not delivered the kind of leadership that is
important for taking the country forward
Race with China is important for India; China can learn from India three things—(1) defanging
secessionism, (2) respect for basic life and (3) innovation in a free world is more
than in a state-controlled regime; India can learn from China several things—(1) sourcing
of resources from various parts of the world with promise of Chinese aid, (2) national
strength and (3) exercise of power
Freedom is not going to solve things automatically; it is just as an add-on; the system has
to deliver; entrepreneurs and middle-class professionals have to keep on doing the right
things; otherwise, we will fall into the middle-income class trap
2. VARAD PANDE: Ecology and economy: the twain shall meet
Key takeaways
Five main laws that determine the policies of the government of India; forest cover in
India has increased as a result of strict implementation of the Forest Conservation Act,
1980
Current context—pressure on ecology, a perception that the system can be “managed”,
judicial activism, growing environmental movement; the ministry has been working on a
culture of compliance
Core principles of the MoEF—(1) inclusiveness (based on national consultations), (2)
objectivity and (3) transparency (decisions put on the website immediately)
Approach of the MoEF—(1) a clear ‘No’ for certain projects or ideas, (2) over 90% of the
projects are approved and within stipulated timelines, (3) find solutions that work for all
stakeholders (POSCO, Navi Mumbai airports are good examples)
Proactive domestic agenda—reduce emissions intensity of GDP (reduce by 20-25%
between 2005 and 2020), eight missions on climate change; the ministry is also working
on institution building (National Environmental Assessment and Monitoring Authority, or
NEAMA, an autonomous body for assessing projects and National Green Tribunal)
3. DR. NARENDRA JADHAV: Inclusive growth in the context of India’s demographic surge
Key takeaways
Dr Jadhav had a new definition of LPG in the context of economic reforms—liberalization,
privatization and globalization
The three key achievements of the Indian economy in the past two decades since LPG
began have been—(1) distinct improvement in the rate of economic growth, (2) the
number of people below the poverty line has come down to 27% currently, (3) forex
reserves have increased significantly; at US$300 bn, India is the seventh-largest forex
holder in the world; India is a net lender to the IMF
The three major negatives or challenges facing the Indian economy—(1) poor ranking by
most social indicators, (2) benefits of reforms have not been uniform and (3) inflation; it is
the most iniquitous form of taxation
The positives of Indian economy are favorable demographics; average age is 24 years and
average in 2020 will be 29; in the same year, median age of China and USA will be 37
years,
Areas of development are (1) gross enrolment ratio (access to college education) is 12.4%
in FY2007; expenditure on education is about 3.5% of GDP, (2) 10% of people have
access to proper training, (3) health sector; expenditure on health is about 1% of GDP
4. MANI SHANKAR AIYAR: Why is India prospering but Indians are not?
Key takeaways
17% of the GDP is contributed by the agriculture sector, which employs 65% of India’s
population
The process of growth has become very skewed; the fruits of growth are being cornered
by a small section of the population
Government’s capacity to spend on anti-poverty programs has increased due to a
spectacular increase in government’s revenues; in the past 15 years (1994-2009),
expenditure on social welfare programs has increased 15X; however, India’s rank in HDI
has not improved much (it’s #134 currently)
The size of the unaccounted economy has grown to 43% from 27% in 1991 of GDP
Empowerment of people took place immediately after independence; middle class sought
its entitlement and secured it and this resulted in enrichment; the rural population has not
felt the benefits though; so far, the rural class has sought to show its dissatisfaction
through changing the government in elections; however, it could lead to more radical
forms of dissatisfaction and it could be in the form of insurgency and armed rebellion
It is important for basic services to be provided to the rural population, which will lead to
true empowerment of these people; there are 3.2 mn elected representatives in local
bodies out of which 1.2 mn are women representatives—a little known fact that is not
lauded enough
5. LABANYENDU MANSINGH: Development of the gas market in India
Key takeaways
8 EOIs received for additional long-distance pipelines; four pipelines put through bidding
process after public consultation
73 EOIs received for building city gas distribution networks; PNGRB has identified 243
cities additionally for building CGDs
Currently there are 0.7 mn CNG vehicles but this could rise to 2.5 mn in the next three
years and 3.3 mn in the next five years; the number of city gas distribution networks
could increase to 125 in the next five years from 25 currently
In PNGRB’s view, a competitive market would lead to price discovery, optimal use of
scarce energy resource, optimization of infrastructure and lead to flow of investment for
E&P, development of infrastructure for transportation and distribution
6. ADI GODREJ: Understanding the Indian multinational
Key takeaways
470 mn Indians use at least one Godrej product daily
35% of Godrej Consumer Products Ltd comes from outside India; it has a very sizeable
presence in Indonesia
Godrej Properties has projects in 11 cities in India; it has a joint development model,
which results in an asset-light model
Overseas strategy driven by desire to grow faster than what is available in India (about
15% CAGR in revenues on an organic basis); acquisitions can add another 10% to the
growth per annum but the acquisitions have to make strategic sense
Godrej group has ambitions to grow the palm oil business, which is a cooperation model
with farmers; farmers grow the crops on behalf of Godrej and Godrej purchases the fruit
from farmers
7. T. N. NINAN: Can India make the journey from functional anarchy to future global power?
Key takeaways
India’s per capital income can increase to US$4,000 by FY2021; growth is underwritten
by a high savings rate
Key vulnerabilities include areas such as (1) institutional including among others weak
regulators, scarcely functional parliament and judicial delays, (2) political including
populist politics, weak reforms impulse and corruption and (3) economical such as twin
deficits with combined fiscal deficit of 7.7% and CAD of 3.7%, high public debt
Some East Asian economies grew rapidly driven by openness, high savings and
investment, stable macro-economy, good leadership and administration and commitment
to growth and inclusion
India could easily get to a middle-income economy (US$4,000 per capita) over the next
10 years but transformation to a high-income economy may be more difficult since this
would require moving up the value chain, specialization and transformation to a
knowledge economy
Escaping the middle-income trap for India would require skills acquisition, infrastructure
development (electricity, highways, and telecom connectivity), focus on soft infrastructure;
Mr. Ninan highlighted that certain changes such as RTI, UIDAI, rise of ‘BIMARU’ sites,
growth of manufacturing (frugal engineering and innovation) could lead to stronger
performance
India likely to be a great power (one among a few)
8. Y. M. DEOSTHALEE: Overcoming India’s infrastructure deficit
Key takeaways
Infrastructure development would require strong government, monetary and fiscal
policies
Globally, infrastructure has been developed by governments; in India, 50% of the
investment in infrastructure development has been left to private companies but they are
handicapped due to procedural issues (land, demolition) and other issues
Processes need to be strengthened in the areas of award of coal blocks, highways and
other infrastructure projects; also, project preparation can be higher before inviting
private sector participation
Availability of skilled manpower is a big issue; it is just not about engineers but also
manual labor such as welders and carpenters; only 25% of the population entering the
construction sector is properly trained
Long-term funding is also a big issue for developing infrastructure projects; banks have
short-term deposits typically with only one-third of their deposits under the long-term
category; thus, bank funding is not appropriate for long-term infrastructure projects,
which require loans of 10-15 years; long-term corporate debt market is virtually absent
currently; India can facilitate investment through fiscal measures
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