INDIA'S FINANCE MINISTER DELIVERS MAHINDRA LECTURE AT HARVARD BUSINESS SCHOOL

Address on challenges of development cosponsored by
Harvard South Asia Initiative

BOSTON - The Honorable Palaniappan Chidambaram, the finance minister of India and a member of the Harvard Business School MBA Class of 1968, returned to HBS on Oct. 18 to deliver the 2007 Harish C. Mahindra Lecture on "Poor Rich Countries: The Challenges of Development."

The event was cosponsored by Harvard University's South Asia Initiative and Harvard Business School and made possible by a generous gift from the family of the late Mr. Mahindra, a Harvard College alumnus and a pioneer in the firm of Mahindra & Mahindra Ltd., a maker of off-road vehicles and tractors and part of the Mahindra Group, one of India's largest and most prominent conglomerates.

Speaking in Harvard Business School's Spangler Auditorium before a filled-to-overflowing audience comprising students and faculty from across the University, including HBS, Harvard Law School, and the Kennedy School of Government, Chidambaram told a tale of two Indias - a country rich in natural and human resources but unable to take full advantage of them because of the prevalence of poverty (a third of the population of 1.1 billion people lives on an income of less than a dollar a day), inadequate schools and health care, and interest groups that favor the status quo rather than progress.

"The government of India faces the challenge of leveraging [our] huge natural and human resources to ensure rapid economic growth," Chidambaram said. "We believe that growth is the best antidote to poverty. With growth, we have a chance to wipe out the stigma of abject poverty, and our people can enjoy the advantages of being citizens of an increasingly prosperous country. Without growth, India will remain a poor rich nation."

Chidambaram called the three decades after India's independence from British rule in 1947 the "lost years." During that time, he pointed out, the Indian economy was directed by the government and closed to the outside world-with abysmal results. The country's GDP grew at an average rate of only 3.5 percent. But change began to take place in the 1980s under Prime Minister Indira Gandhi and her successor, Rajiv Gandhi. As prime minister, Chidambaram said, "Rajiv Gandhi, in particular, challenged the people to think of the opportunities that lay ahead in the fields of information technology, communications, aviation, urban development, medicine, and education."

But it wasn't until 1991, when India faced the possibility of defaulting on its payment obligations because of a balance of payments crisis, that the majority of people embraced the concept of an open and competitive economy as the means to a better future.

In 2006-2007, the Indian economy grew at the extraordinary rate of 9.4 percent, but even so, Chidambaram reminded his audience, "the institutions of democracy and the legacy of the socialist era have actually added to the challenge of development." Attempts to make quick and efficient use of resources such as coal, iron ore, bauxite, titanium ore, diamonds, natural gas, and petroleum are thwarted by local state governments and interest groups. In addition, he observed, "the laws in this [regard] are outdated, and Parliament has been able to tinker only at the margins. Our efforts to attract private investments in prospecting and mining have, by and large, failed." Similarly, the acquisition of the large amounts of land needed for industrial development, airports, seaports, dams, and power stations is hindered by stakeholder claims, disputes about appropriate compensation, and violent protests.

"After a long debate," Chidambaram noted, "we have just adopted a new policy on compensation, rehabilitation, and resettlement. The policy will be translated into law. Despite progress in this behalf, I have asked myself whether it would be possible in India to start and complete a project like the Three Gorges dam [in China]. And my conclusion is that it would not be possible."

Chidambaram also emphasized the need for drastic improvements in the Indian educational system, which doesn't adequately meet the needs of millions of children and completely neglects certain segments of society altogether such as women, certain castes and tribes, and "many socially backward communities that have remained at the bottom of the pyramid. We now have a policy that promises 'education for all,'" including vocational training that will enable both rural and urban youth to learn the skills they need to help them find employment.

Providing adequate health care for the masses will also require Herculean efforts, he said. "The infant mortality rate is 57 deaths per 1,000 live births; the maternal mortality rate is 301 per 100,000 live births; the number of blind is 7 million; and diseases such as cholera, dysentery, and malaria are still widely prevalent."

But though there is much to do on many fronts, Chidambaram believes India will rise to all these challenges and overcome them. He concluded his address with an optimistic look toward the future. "More and more Indians, especially young Indians, have discovered the virtues of an open polity and an open economy," he said. "I have faith that the next generation of Indians, and the generation after that, will eliminate the scourge of poverty and make India rich. Then, the poor country would have deserved its inheritance."

Commenting on the Finance Minister's appearance at Harvard, Anand Mahindra (AB 1977, MBA 1981), vice chairman and managing director of the Mahindra Group, said, "The Harish C. Mahindra Memorial Lecture series at Harvard is inspired by my father''s passion for education. I believe that this series will evolve as a significant event on the Harvard academic calendar as a forum for western academia and Indian thought leaders to dialog."

Mr. Chidambaram was introduced by Sugata Bose, the Gardiner Professor of Oceanic History and Affairs and Director of the University's South Asia Initiative. He was formally thanked by Krishna Palepu, a member of the Initiative's steering committee and the Ross Graham Walker Professor of Business Administration at Harvard Business School, where he is also Senior Associate Dean for International Development.

"Recognizing the region's historical importance and rapidly developing global role, Harvard University is undertaking an unprecedented expansion of its scholarly engagement with the people, cultures, institutions, and economies of South Asia," said Harvard University President Drew Gilpin Faust in a statement in conjunction with the official launch of the Initiative. "Ambitious in scope, the Initiative builds on an existing foundation of world-class scholars, teachers, and students; and it touches on each facet of Harvard's academic mission, encompassing the University's unrivalled intellectual capacity."

Harish Mahindra was born in Calcutta in 1923. A graduate of Harvard College and the Fletcher School of Law and Diplomacy, he was a director of Mahindra & Mahindra Ltd. and played a significant role in the early days of the firm, especially in marketing and in the establishment of a network of dealerships throughout India. He was also the driving force behind what is today the Mahindra Ugine Steel Company Ltd.

Mahindra was active in the Congress Party and headed the Federation of Indian Chambers of Commerce and Industry, the Indian Merchants Chamber, and the Maharashtra Chamber of Commerce. He also served as chairman of the Indian Society of Advertisers.

In addition, Mahindra spearheaded the establishment of the Mahindra United World College of India in Pune and was the founding president of the Indo-French Chamber of Commerce. In recognition of his services to the cause of Indo-French relations, the French government awarded him the Chevalier de Legion D'Honneur.

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