WHEN India graced the World Economic Forum (WEF) meet in January this year at Davos, it was the star attraction because of its booming economy, at a time when the world in general tottered amidst forecasts of downturn. And WEF, which India enchanted with its fast growing economy, is not a lackluster caucus: In terms of power and influence, WEF rivals the Group of Eight (G-8), the summit of the world’s eight industrialized countries.
Every year thousands of top executives, politicians and strategic thinkers from across the world take time off their busy schedule and gather for five days of agenda-setting discussions in a plush mountain resort in northern Switzerland. Here they converse mostly about global economics and business, mull over looming problems and their solutions, dabble in predictions and seize the opportunity to network among the crème de la crème of global movers and shakers.
So it was a bit of a surprise — though not entirely unexpected — when the darling of this year’s WEF, held Jan 23-27, turned out to be India. India, along with China, hence was in its true element when it ignited the mood in the cold, snow-clad Swiss town with the warm promise of Eastern growth. In a manner of speaking, the Asian giants came bearing gifts.
And when finally Finance Minister P. Chidambaram with the globe-trotting Commerce and Industry Minister Kamal Nath led the top 80 Indian businessmen turned up, they, buoyed by growing economy home, dismissed talks of a global recession.
“The message we are sending is that India is a fast growing economy, which presents enormous opportunities to countries as well as the business community. To foreign investors, the message is — you can’t afford not to invest in India,” Chidambaram said.
He told the forum’s 2,500 participants that India could help “moderate” the global impact of the current financial downturn if it was able to deal with any sudden capital surges accompanied by declining exports. In tandem, Kamal Nath, meeting with 15 other trade ministers on the sidelines of the event, said it was important for global political leaders to strike a world trade deal by the end of the year.
Backed strongly by United States Trade Representative Susan Schwab and European Union Trade Commissioner Peter Mandelson, the trade ministers decided to meet in Geneva in the third week of March to give a much-needed political boost to the stalled Doha Round of world trade talks.
In fact, after five days of head-scratching among businessmen and economists about whether the world was faced with a mere downturn or a serious recession, the agreement among trade ministers gave the gathering clouds over Davos a silver lining.
A trade deal, Kamal Nath declared, was needed to confront what he called, “the economic crisis facing the developed world.” It is hard to tell, but the optimism exuded by both India and China may just have been responsible for the fact that a little over half the senior executives polled in Davos felt the current financial troubles were a temporary downturn rather than a recession.
However, given the global economic scenario, where increasing numbers of rich nations are trying to seek short-term comfort by erecting protectionist barriers against exports from developing countries such as India, enthusiasm about economic globalization was noticeably muted. Instead, many participants stressed the value of collaboration, where each side works to ensure the other’s interests are served.
“Globalization is probably not the right word. Is it truly a level playing field? If it was then the WTO should have been a walkover [for developing countries],” said K.V. Kamath, managing director and CEO of ICICI Bank, India’s largest private sector bank. Kamath co-chaired the forum along with India-born CEO of Coke, Indra Nooyi, former British Prime Minister Tony Blair, chairperson and CEO of JPMorgan Chase, James Dimon, former US secretary of state, Henry Kissinger, Chevron CEO, David J. O’Reilly, and CEO of China Mobile Communications Corporation, Wang Jianzhou.
This meant that India was literally at the high table throughout the event. It’s presence at Davos kicked off two years ago with the Confederation of Indian Industry (CII), an industry lobby, launching an ‘India Everywhere’ campaign, but the push took an air of urgency this year due to the global financial turmoil triggered by the US subprime mortgage crisis.
“There was a time a few years ago when the global community used to ask: hey, what do the Americans think about this important issue? Today it’s pretty much what the Indians and Chinese think. The equations are changing,” said Lee Howell, head of Asia at the WEF.
The possible impact of a global downturn on India and China, naturally, was a hot topic. The key to answering that question lay in the issue of ‘decoupling’ — that is, how integrated was a particular economy to that of the US?
In other words, would India sneeze if the US caught a cold? Both Chidambaram and Kamal Nath thought not — and there was general agreement that China was much more vulnerable to the US downturn as its growth was export-oriented. Indian growth, on the other hand, was fuelled by investment and domestic consumption.
“Are we decoupled? India certainly is decoupled. Any impact will be a marginal impact,” said Kamath.