'Corruption, water crises and income disparity biggest risks for India'

Q&A/ W Lee Howell, Managing Director, WEF and Head of its Risk Response Network

Water supply crises, a growing gap between rich and poor, terrorism and cyber attacks are among the top global risks most troubling India’s experts, according to the World Economic Forum’s latest Global Risks Perception Survey. In an interaction with Rajiv Shirali, W Lee Howell, Managing Director, WEF and Head of its Risk Response Network, dwells on the Indian’s government’s effectiveness in dealing with risks.
 
What global risks are most problematic for India right now?
 
India faces a range of risks in a hyper-connected and flagging global economy, but those singled out as of greatest concern among India experts include pervasive entrenched corruption, water crises and severe income disparity. This is according to the World Economic Forum’s Global Risks Perception Survey of over 1,000 experts that was completed in October, and which measures how risks are perceived over the next decade. The result signals that this year’s “summer of discontent” demonstrations against corruption and the doubling of income inequality over the past two decades remain serious concerns for the foreseeable future.

Looking at India’s risk landscape, what impact do you think the government’s recent round of reforms is having?
 
Partially in response to these concerns, but more so to overcome a growing sense of policy drift, the government’s latest round of reforms has focused on reviving investor confidence. It is long overdue when considering that foreign direct investment fell 20 per cent in August compared to the same month in 2011.
 
But foreign investor confidence can be quickly lost and always takes time to rebuild. In a hyper-connected world, leaders should give greater attention to bolstering India’s risk resilience -- a topic leaders and experts will discuss at the World Economic Forum on India this week. Resilience is the capacity of an organisation, a community or a country to continually evolve and adapt to gradual changes and sudden shocks, while remaining able to fulfil its core function. It naturally flows from policy efforts of over 20 years ago, as it requires recognising that interconnectedness is a function of liberalisation. Interconnectedness, in turn, limits a country’s or organisation’s ability to effectively manage and mitigate global risks -- thus making resilience the first line of defence in a hyper-connected world.
 
A more resilient India will be better placed to seize the promise of its future demographics and rising middle class, improve trade relations with its closest neighbours and foster a culture of entrepreneurship among its youth.

Where does this leave India in what is currently a shaky global economy?
 
Although it leads as South Asia’s most competitive nation according to the World Economic Forum’s Global Competitiveness Report 2012-2013, India ranks only 59th worldwide, three places lower than it ranked in last year’s findings, and slipping 10 places over the past three years. With India expected to overtake Japan as the world’s third-largest economy by 2015 and to surpass China as the most populous nation by 2030, the country is reaching a critical inflection point. Future global growth appears fraught with uncertainty and volatility. Are the country’s institutions up to the task of navigating a hyper-connected world that is increasingly shocked by exogenous events?
 
If judging from the recent past, then the answer is an unqualified yes. In the 20 years since the liberalisation of the Indian economy, there has been an unparalleled period of sustained high growth. But, when looking into the near future, the challenges of rising inflation, a falling growth rate, delays in much-needed reforms and exposure to the wider malaise of a faltering global economy, then the answer is less certain.
 
What is your assessment of India’s current resilience capacity?
 
The best group to answer this question is Indian entrepreneurs themselves -- and Indian business leaders, it seems, are cautious about their government’s ability to respond to global risks. Defining global risks as external threats cutting across regions and industries, a World Economic Forum survey asked entrepreneurs to rate their national government’s overall global risk management effectiveness. The response from India ranked the country 22nd globally, ahead of their BRIC counterparts Brazil and Russia, but behind China and South Africa.
 
What kind of process leads up to the design and development of the Forum's Global Risks report?
 
The process builds on the unique strengths of the World Economic Forum to access the perceptions of over 1,000 global experts for our annual Global Risks Survey. We use the data to map the 50 most prevalent global risks and analyse their perceived likelihood and impact over a 10-year horizon, allowing for long-term, strategic responses. The risks are divided into five categories: economic, environmental, geopolitical, societal and technological, and significant interconnections between global risks are analysed in the report as well. Ultimately, the Global Risks report helps leaders make informed decisions to increase their risk resilience. Businesses can strengthen operational capabilities, while governments can ensure policy-making reflects the true challenges with which they are faced.