In a Q&A with Critical Resource, Anil Agarwal, Chairman of the major resources company Vedanta, enthuses about opportunities for resource investment in India, and discusses the challenges of sustainable development.
India is creating a unique blueprint for economic growth
“I am optimistic about Prime Minister Modi’s vision to drive India’s growth and attract major foreign investment, and am a great supporter of the ‘Make in India’ initiative. The country will benefit from Mr. Modi’s long term vision; we are now waiting to see his reforms implemented.
Mr. Modi has used the term ‘New Age India’, to explain that the country is in a period of transition. India has scale, and the new government is looking to create an environment where doing business is easier. So there is a great deal of anticipation and investor interest both in the domestic market and globally.
India is rich in human and natural resources. Until now, the country’s growth has been based on strong domestic consumption, the rise of the services sector and huge remittances from abroad. Two major drivers – manufacturing and infrastructure development – have not yet gained the kind of traction we have seen in China. But the new government is pushing for projects to restart and is sorting out the regulatory framework. I am sure there will be progress, it’s just a matter of time. India’s mood is upbeat.
The country will create its own economic blueprint, which will make it an economic superpower. Mr. Modi has said that he wants to take the economy from $2 trillion to $20 trillion. Those efforts have already begun. In the new government’s first year, we have seen meaningful reforms and a robust 7.5% GDP growth rate which attracted new investments worth INR 4 trillion by the end of 2014.”
There could be many Indian resource giants…but government has to ‘walk the talk’
“For a developing nation like India, it makes sense to capitalize on its natural resources – in a sustainable manner – by simplifying policies and procedures and bringing in large investments. The resources sector has the potential to make India an economic powerhouse, but we would need ten companies like Vedanta to realize this potential.
Improved regulations are key. The government has made a start in reducing the compliance burden, but more needs to be done, and quickly. Tax and other regulatory structures have to be better aligned; predictability and stability are the biggest incentives for global investments. The government has to walk the talk if it wants to deliver on its promise of drawing in investment.”
Foreign investment will create new opportunities in Indian mining
“Major institutions like the World Bank, IMF and Goldman Sachs predict that India’s growth will surpass China’s by 2016. That means India will be the world’s fastest growing major economy within the next year. That sort of growth will no doubt attract the attention of global companies.
India is rich in natural resources. As the country grows by leaps and bounds its appetite for metals and minerals for infrastructure and power will increase rapidly. From urban development and nuclear power generation, to health supplements which need zinc as a basic ingredient and the use of aluminum for lightweight materials used in airplanes – I can see so many opportunities where India could become a hub for research and development in the natural resources sector.
As the nation develops, we will only be able to increase our resource exports and meet domestic demand through large scale mining. Today there are a limited number of big players in Indian mining. But with the right policies and more foreign investments, new giants can be created.
India’s extractive sector has the capacity to generate new avenues for job creation. Producing our own metals and energy, rather than relying on imports, will promote prosperity and drive employment. Mining is a core sector of the economy and offers infrastructure benefits and strong linkages to other industries. Furthermore, mining firms make substantial contributions to local and regional development.”
Putting sustainable development into practice is an important challenge
“Vedanta has always committed itself to the wellbeing of communities in our operational areas. There has also been a lot of debate about our past social and environmental performance. We have listened to this and continuously incorporate constructive feedback into our processes. As one of the largest investors in community initiatives in India we have always included and heard the voice of our community. Every year we invest on average INR 200 crore ($31.2 million) in community development. We work closely with communities on the ground to create projects of long term value, be it health, education or livelihoods. We are enabling access to sanitation, childcare and vocational skills, increasing farm productivity and empowering women. Our objective is to engage effectively with communities and work towards their wellbeing.
Equally important is how we are making our operations responsive to environmental challenges. We install supercritical power generation systems, employ high tech machines that reduce environmental degradation and take up reforestation programmes if any mine is closed. These are some of the things that we have been doing as a norm.
‘Free prior and informed consent’ (FPIC) is a key principle for Vedanta, because it gives communities the right to decide whether they agree to a project once they have a full understanding of its implications. On a practical level, implementing FPIC can be challenging. It may, for example, not always be clear who should verify that the right to FPIC has been respected. It is important to ensure decision making is undertaken in a way that is genuinely representative of the wider community. FPIC is an important concept, and one that Vedanta is committed to.”
Companies adhering to ethical norms will be the future
“Everything we do, whether as individuals, communities, corporations or governments, must aim to improve social well-being. Increasing scrutiny from the international community and the speed and reach of global communications means the influence of stakeholders over how companies operate is growing. Public awareness and conscience will mean that companies not adhering to ethical norms will slowly disappear.
What is important for India, in my belief, is to try and eradicate poverty, create jobs and empower women to be economically independent. As a nation, we have taken important steps towards implementing CSR guidelines that help to ensure mining drives economic development, advances social and environmental performance and ultimately creates prosperity. Last year, the Indian government began requiring companies to spend 2% of their net profit on social development. This made India the first country in the world to mandate CSR.
China has also taken important steps towards getting its investors to act responsibly, for example through the China Banking Regulatory Commission’s green credit guidelines and the Ministry of Commerce’s guidelines for environmental protection in foreign investment. While some may say countries like ours have to catch up with our Western colleagues, we would stress that we are making important strides, each and every year, to do this.”