‘Given the nature of competitive politics and fractured mandates… difficult for us to do what is manifestly obvious’

Secondly, our growth process is largely based on growing domestic consumption. Ours is not an export-led growth model. Nor are we a mercantilist economy pursuing beggar-thy-neighbour trade policies. India’s growth process is based not only on an expansion of the home market, but also largely on the rise of domestic enterprise. The economic reforms of 1991 unleashed a new era of entrepreneurial growth in India.

However, I do believe that we have a long road to travel before we can claim to have fulfilled Mahatma Gandhi’s prayer to wipe the last tear from the poorest of the poor. Our government has been committed to making the growth process more socially inclusive.

We have launched a number of initiatives to step up investment in agriculture and rural development, in education and health care, in urban renewal and poverty removal, in rural infrastructure and in rural employment generation. We remain concerned about inter-regional disparities in development. The 9 per cent growth rate is an average of over 10 per cent in some parts of India and under 3 per cent in others. Large continental economies are bound to have inter-regional disparities. However, we cannot afford to see this gap between our developed and backward regions persist.

This is where the role of state governments comes into focus. The implementation of many of our social and human development programmes is in the hands of state governments. The capacity of state governments to effectively plan and implement these programmes varies from state to state.

I believe this is an area for further action. If we can improve the administrative capacity of state governments, we can do much more in making the growth process more socially inclusive. Therefore, while there is still an unfinished agenda of economic reforms awaiting our attention at the Centre, the real action will have to be at the level of states.

In this context, I must compliment McKinsey for the initiatives it has taken in India to work with state governments. I don’t think there is any lack of thinking on what needs to be done to sustain and further accelerate growth. There is also fairly wide recognition of the importance of this agenda. However, given the nature of competitive politics and the very fractured mandates given to governments, it has become difficult sometimes for us to do what is manifestly obvious.

The successful implementation of our social and human development initiatives requires greater public-private partnership. This is yet another important initiative of our government. Both in infrastructure development and in social and human development, we have encouraged such partnerships.

I have been deeply concerned about the efficiency of utilisation of public funds, especially in infrastructure development, education and health care. I have been looking for ways to combine our concern for equitable outcomes with our concern for efficient utilisation of outlays. I find PPPs as an effective means of combining these two considerations. This is not yet a fully evolved paradigm of governance. We have bravely, yet cautiously, sailed forth into uncharted waters.

I think organisations like McKinsey can help us in this effort. You have wide ranging exposure to best practices in infrastructure and social development across the world. You have the analytical ability to combine the best that markets can do with the best that public organisations can do. You can help harness this vast cross-country experience for addressing the specific needs of governments and public institutions in our country to achieve our equity and efficiency objectives. You can help in crafting specific solutions tailor made to the needs and conditions of our diverse country.

Today, firms operate in far more competitive markets. Of course, the big ones always try to reduce the element of competition and secure an oligopolistic or monopolistic environment for themselves. However, external liberalisation has created more competitive markets and limited the scope for such strategies.

In order to operate in open and competitive markets, with all the contingent uncertainties and risks, firms need long term planning, strategic thinking and organisational flexibility. I find our private sector companies have done well in this regard. I think our public sector too needs to learn more. Organisations like yours can help foster a culture of strategic and long-term thinking. You can help mould the thinking of our political class and opinion-making sections on these lines.

Edited extracts from the PM’s address at the McKinsey Meet, October 23