India in the WTO

Mr. P. Chidambaram, Indian Finance Minister in a long interview to Tehelka has commented on the Indian growth story and on what’s going well, what’s going badly and his vision on how the Country can develop. Here are a few extracts on trade and investment related issues:

On diversion of food crops to biofuels –

“We grow food to consume it as food. We don’t grow food to be converted into fuel. Twenty percent of US corn is being diverted to fuel. Sugarcane is being diverted to fuel. Palm oil is being diverted to fuel and because of the high prices of fuel linked to the crude oil crisis, people are diverting land which is meant to grow food grain to grow crops for bio-fuels. How is this justified in a world where millions of people are still going without food? We are serious about making poverty history. We are serious about eliminating hunger and malnutrition. I think the first point everybody should agree on is that food should not be converted to fuel. If you want to produce bio-fuels using non-food, do so. Find other land to grow crops for producing bio-fuels.”

On urbanization as India’s future:

“Urbanisation cannot be stopped. It is an inexorable process. All you can do is mitigate the harmful effects of mindless urbanisation by building new cities, by limiting the size of cities, by creating more green and open spaces in cities. I don’t think it’s within the power of any country or people to stop this natural progression. We must try to manage it rather than interfere with it. My vision of a poverty-free India will be an India where a vast majority, something like 85 percent, will eventually live in cities. Not megalopolises but cities. In an urban environment it is easier and more efficient to provide water, electricity, education, roads, entertainment and security rather than in 6,00,000 villages. I also believe a significant number of Indians would want to live in the countryside and continue farming. That should be welcome and we should encourage it, but it would be a much smaller number than people who have moved to cities. My vision again is that we must continue to emphasise the imperative need of growth over a long period of time. We get weary easily. We have three to four years of high growth and we sit back as though it is a given. Growth is not a given. You have to work hard for it. We have to ensure that the growth process continues for the next 20-30 years. When we have eliminated poverty, illiteracy, some of the most debilitating diseases, when we have immunised every child, when we have eliminated very basic deficiencies like lack of drinking water, electricity, rural road connectivity — at that point of time, the process will become automatic and people will themselves ensure that growth continues at a fairly sustained pace. But for that that moment to arrive, to get rid of poverty in our lifetime, we need to work very hard to sustain a growth rate of nine percent moving up to 10 percent. If you want to get rid of poverty over the next hundred years, you can have a different model or system. But if you want to get rid of it in the next 20 years, we have to work very hard for it.”

On fixing the agricultural sector in India:

“This year, the latest assessment of 2008 by ICRA will show a growth rate of 4.5 to 4.7 percent in agriculture. We are going to end up with 227 to 230 million tonnes of food grains. So agriculture in itself is doing well. Yet farmers are poor because of the vast numbers dependent on agriculture. If the numbers were much smaller, let’s say half, you would say agriculture is doing very well in India. So I don’t think we should confuse the issue between agriculture doing well and farmers doing poorly. The way to fix agriculture is to address the five key inputs required for agriculture:water, power, seeds, fertiliser and credit.

I think we have done well on credits. We are beginning to do well on water, thanks to the massive outlays and irrigation projects. It will take some time, but when these projects are completed, we will do well on water. We have neglected seeds, we have got a completely distorted fertiliser subsidy regime, and we have failed miserably on the power front. But Gujarat has shown us the way on how to fix power for agriculture. With seeds, we made a beginning last year. We are trying to increase the replacement rate of seeds and, with fertilisers, there is a clear way out provided we are willing to bite the bullet. If all these five things come together, agriculture will grow at a very rapid rate of more than four percent a year. But even if it grows at four percent, farmers will continue to remain poor because of the large numbers dependent on agriculture. So the answer is to wean farmers away from agriculture into industrial services — not urban slums, just non-farm related activity. Do away with the romantic idea that we can continue to sustain 60 percent of our population on agriculture.”

On opening up retail to FDI:

“This is a genuine fear. There is no empirical evidence to show that mom and pop stores will be wiped out if retail chains come. For example, Walmart. I met its chairman the other day and he said their 47th store has opened in China and there’s no evidence that mom and pop stores in China are being wiped out. But still, the fear is genuine, and it is the duty of the government to allay that fear. And until it is completely removed, we are moving slowly and cautiously. We are not saying the fear is unjustified. That is why we have opened only wholesale, cash-and-carry and single brand retail to foreign investments. We have not yet opened multi-brand retail.”