Wal-Mart Urges India to End Poverty as Alcatel Sees ‘Fortune’

Wal-Mart Stores Inc., the world’s biggest retailer, and Alcatel-Lucent SA urged India’s government to pull 828 million people out of poverty to sustain consumer demand and boost economic growth.

India’s impoverished population is so vast that it should be seen as a “big opportunity” rather than a burden for companies, Ben Verwaayen, chief executive officer of Paris-based Alcatel-Lucent told the World Economic Forum’s India summit in New Delhi yesterday. Raj Jain, CEO of India operations at the Bentonville, Arkansas-based Wal-Mart, said inclusive growth will create more consumers in a nation where domestic spending accounts for about three-quarters of economic growth.

“If you talk about 700 million people in rural India, that is such a huge market to tap into,” said Verwaayen, the CEO of France’s largest telecommunications equipment maker. “There is a huge fortune to be made.”

China has lifted 300 million citizens out of poverty since introducing free-market policies in 1978, 13 years before India, according to the United Nations, driving annual average growth of 10 percent in the past three decades. If India doesn’t find jobs for the underprivileged, it could widen social disparities and foment unrest, said Rajat Nag, managing director at the Manila-based Asian Development Bank.

‘Sustainable Growth’

“We do not have inclusive growth in India, which means we do not have sustainable growth,” Om Prakash Bhatt, chairman of State Bank of India, the nation’s largest lender, said at the summit. “We have to look at the numbers and quality of life” of those living in poverty.

About 800 company executives and investors including Ellen Kullman, chief executive officer at DuPont Co., the third- biggest U.S. chemical maker, and Jon Fredrik Baksaas, CEO of Telenor ASA, the Nordic region’s largest phone company, are attending the annual event organized by the World Economic Forum in the nation’s capital.

The theme of the three-day conference, which ends today, was “Implementing India,” highlighting the need to include more people in the growth process.

Wilmington, Delaware-based DuPont expects annual revenue from India to increase more than 40 percent to about $1 billion by 2012, Kullman said in an interview on the sidelines of the event. Michel Lies, member of the group executive committee for client markets at Swiss Reinsurance Co., the world’s second- largest reinsurer, said it’s looking for a local partner to enter India’s life and health insurance market.

Poverty Challenge

Prime Minister Manmohan Singh wants to sustain more than 9 percent growth for at least three decades. The World Bank estimates 828 million Indians live on less than $2 a day.

At the other end of the spectrum, the wealth of India’s 100 billionaires is the equivalent to a quarter of the country’s gross domestic product, Forbes magazine estimates. The number of millionaires is expected to triple by 2018, according to a report by Merrill Lynch & Co. and Cap Gemini SA.

Singh made “inclusive growth” the centerpiece of his economic policy since coming to power in 2004, after the electorate ended the six-year rule of the opposition Bharatiya Janata Party, feeling alienated by India’s economic boom. The BJP fought the election on the slogan of “India Shining,” as the economy expanded.

In 2006, Singh implemented the National Rural Employment Guarantee Act to provide 100 days of work to 30 million families in 200 of the nation’s poorest districts.

Building India

He also announced a 1.76 trillion-rupee ($39 billion) plan, called Bharat Nirman, or Building India. The project aimed to ensure safe drinking water supply in some 55,000 villages, provide electricity to 100,000 villages, extend irrigation to an additional 10 million hectares (25 million acres) and build 6 million houses.

Still, India’s jobless rate was 9.4 percent in the financial year ended March 31, 2010, the government said last week in its first survey of the nation’s labor market, indicating more needs to be done to create jobs in an economy that has averaged an annual growth of 8.5 percent since 2005, the fastest after China among the world’s major economies.

“Despite impressive economic growth over the years, the situation on the employment front leaves much to be desired,” said B.N. Nanda, director general of the Labor Bureau, which conducted the unemployment survey.

India’s government estimates that 440 million of the total population of 1.2 billion is under the age of 18.

‘Demographic Dividend’

“The demographic dividend can easily become a demographic curse if you do not provide jobs,” Nag said. “It could lead to unrest if people coming into the workforce are not employed.”

Economic deprivation has prompted Maoists, numbering about 10,000, to fight the government while holding mineral-laden land in the eastern part of the country, roughly the size of Portugal. The rebels have some influence in more than a third of the nation’s 626 districts, the government estimates.

The Maoist activity in seven states is threatening at least $78 billion in natural-resource projects, brokerage CLSA Asia- Pacific Markets estimates. Prime Minister Singh called Maoists the “biggest single internal security challenge” and controlling it was crucial for the progress of the country.

“If we do not have inclusive growth it means that we will not be safe in our homes or our cars,” State Bank’s Bhatt said.

The government is relying on improving credit delivery to help reach out to those untouched by the nation’s economic progress. The Indian Banking Association estimates only 35 percent of India’s 1.2 billion people have access to banking services.

‘Financial Inclusion’

“Financial inclusion is a key determinant of sustainable and inclusive growth,” India’s Finance Minister Pranab Mukherjee said at the conference. “We are according high importance to financial inclusion to cover the entire gamut of financial services from savings to credit, insurance and transfers.”

This view was shared by Klaus Schwab, the World Economic Forum’s founder and executive chairman, who said that raising the living standards of the poor was not just an act of social responsibility but also an opportunity for businesses.

“Those are the people who will drive the economy in the future,” Schwab said of India’s poor. “This is the only way to achieve sustained growth.”

To contact the reporters on this story: Andrew Macaskill in New Delhi at amacaskill@bloomberg.net; Unni Krishnan in New Delhi at ukrishnan@bloomberg.net

To contact the editor responsible for this story: Bill Austin at billaustin@bloomberg.net Chris Anstey at canstey@bloomberg.net

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