Chidambaram talks about ‘rich poor’ India

At 60 years old, India is a young nation. It is also a country that is both rich and poor.

Rich? India has abundant natural resources — good alluvial soils for farming and a wealth of minerals ready to be mined. And it has a youthful population, ready to work to support a burgeoning economy. Half of its 1.5 billion people are under the age of 25.

But India is also poor. According to the World Bank, more than a third of its citizens live on less than a dollar a day. India also has a deficit of good roads, hospitals, sanitation facilities, drinkable water, and power.

This clash of realities makes India “a rich poor nation,” said its finance minister, Shri Palaniappan Chidambaram, who paid a visit to the Harvard Business School (HBS) Oct. 18.

Breaking into the ranks of the rich nations will require continuing India’s robust economic growth, which, he said, hit 9.4 percent of gross domestic product (GDP) in 2006-07. “We believe growth is the best antidote to poverty.”

Chidambaram predicted that his South Asian nation — with rapid economic growth and a workforce that will stay predominately young for decades — could eliminate abject poverty (“a shame and a stigma,” he called it) by as early as 2025.

In Spangler Auditorium — packed front to back with a standing-room-only crowd — the 1968 HBS graduate delivered the South Asia Initiative’s second annual Harish C. Mahindra Lecture: “Poor Rich Countries: The Challenges of Development.” The initiative is part of the University’s expanded engagement with South Asia.

The late Harish Mahindra ’46, one of the first students from India at Harvard College, went on to found what is today Mahindra & Mahindra, a global farm equipment and automotive giant.

Chidambaram’s 35-minute presentation was not for the faint-hearted, or for aspiring spin doctors.

“India should be presented as India, good and bad,” he said in response to a questioner who asked about “impression management.”

The good and bad are a set of warring realities, said the finance minister: Great natural resources, but policies and laws inadequate to exploit them efficiently. An abundance of native talent and young workers, but an education system too small to handle the task of turning out the managers, engineers, judges, and doctors for a country of 1.5 billion. A first-class medical system in urban areas, but weaknesses in delivering health care to the countryside. And well-conceived social programs, but a contentious and fractured political system.

“Undoubtedly,” said Chidambaram, “India is challenged.”

Part of being challenged is a legacy of “the lost decades,” he said — the 30 years after independence that saw the growth of the “monstrous and rapacious structure” of a socialist government.

“Socialist jargon pervaded all walks of life,” said Chidambaram, who confessed to being a “confirmed socialist” both when he arrived at Harvard and when he left. That changed because of “what I saw on the ground [from] the effects of socialism,” he said. State-run economies are unwieldy, said Chidambaram, and the socialism of the early decades “stilled entrepreneurs.”

In the 1970s, under the rule of Prime Minister Indira Gandhi, and later her son Rajiv, India began to embrace an open and competitive economy, said Chidambaram. That embrace widened after the country’s near-bankruptcy in 1991, which Chidambaram said “challenged the honor and the pride” of India.

The first six years of the new millennium have been the best since independence in 1947, said Chidambaram. From 2001 on, growth of GDP averaged 6.9 percent. After 2004, that figure went to 8.6 percent, and in the last fiscal year to 9.4 percent.

But the legacy of a socialist era — and the contentious tangle of democracy itself — leave challenges, said Chidambaram.

He gave two examples: a mining industry sitting on underground wealth — but crippled by outdated laws and “virtually captive in the hands of state governments.”

And land acquisition for airports and other big public projects. Getting it was once simply a matter of eminent domain and fair market value, he said. Now, acquiring land is a hornet’s nest of new environmental regulations, compensation for displaced landowners, and complex compensatory labor agreements.

A project as big as China’s Three Gorges Dam (which will displace millions) “would take me the rest of my life” in India, said Chidambaram. If he could take “one leaf out of China’s book,” he said, it would be the way the Chinese complete public projects with “single-minded purpose and ruthless efficiency.”

But as a democracy, “we pay a small price” in economic growth — 1 to 1.5 percent a year, said Chidambaram. To raucous cheers from the audience, he admitted it was better to pay the small price “and be a free man.”

A growing economy means paying an environmental price too, although “we are as concerned about the environment and climate change as any developing country,” said Chidambaram. “We need power; we need to mine our coal; we need to dam our rivers.”

He chided developed nations in the West for pressing India on its greenhouse gas emissions — offering to meet them halfway if they bring their own emissions down.

But overwhelmingly, India’s biggest remaining challenges are education and health care, said Chidambaram. There are too few professional schools. “We have to have more knowledge workers,” he said — adding that China produces 10 times more new Ph.D.s.

There are still too many dropouts, too much illiteracy — and a dearth of technical education, trapping the poor in agriculture, said Chidambaram. About two-thirds of agricultural workers are not landowners, and the average farm is only 2.2 acres anyway. The next generation of children, he said, “have to be weaned from agriculture.”

In health care, despite some progress, India still has high rates of infant mortality, 7 million blind children, and endemic rural problems with cholera, malaria, and other eradicable diseases.

A National Rural Health Mission is making a difference, said Chidambaram. So is a program with state governments to provide health and life insurance for the poor, and an increase in old age pensions.

But the engine of these and other reforms is economic growth. “Let’s not deride growth,” he said. “Growth is the starting point. [It is] our chance to wipe out abject poverty.”