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Indian Economy - Presentation Transcript

  1. The Indian Economy Economic Section -- Embassy New Delhi Prepared by Economic Affairs
  2. Key Social Indicators 1980s 1990s latest Population 685 845 1090 (millions) Poverty Incidence 44.5 36 25 (% pop.) Teledensity 0.37 0.8 12 (per 100 pop.) Literacy 44 52 66 Infant Mortality 115 79 60 (per 1000 births) prevalance of HIV n.a 3.5 6 (millions) Sources: CMIE, RBI
  3. India Economic Facts GDP is $752 billion; world's 10th largest economy in terms of GDP. Economic liberalization began in 1991; continues at a slow pace. India is slowly integrating with global markets. Since the 1990s, the middle class has grown and poverty levels have fallen. GDP growth has fallen only slightly to 6.4% (2000-2005) from 6.7% (1994- 1999). Tariffs are still among the world's highest (average 22%). Challenges ahead: reduce poverty, accelerate pace of reform, reduce fiscal deficit, upgrade infrastructure. India's successes: IT, pharma & biotech, telcom, science and technology skills, manufacturing gaining competitiveness. Two-way U.S.-India trade tops $25 billion a year, was $10 billion in 1997. India's GDP grew at an impressive 7.8% during 2005-2006.
  4. English and education versus higher income Read Speak Read Speak English Hindi Hindi English NO YES YES YES NO NO NO Read Read Class Hindi English Poor 4% 2% Middle Class 37% 23% Upper Class 11.5% 10% Total 51.5% 35% Source: New Delhi, B.K. Sharma
  5. Sectors of the Indian Economy 1990 2004 3.0% 30.8% 26.2% 39.5% 54.1% 16.7% 29.1% 0.6% Services Agriculture Manufacturing IT/Software Source: CMIE, RBI, World bank
  6. Nominal and Per Capita GDP Fiscal year end March 600 400 200 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Nominal GDP USD billions Per Capita GDP US $ Source: Central Statistical Office
  7. Real GDP Growth Rates Fiscal year end March 10 8 6 4 2 0 20 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 07 91 94 92 93 95 96 97 98 99 00 01 02 03 04 05 06 (e st ) factor cost % Source: Reserve Bank of India, Economic Survey, 2005-2006
  8. GDP at Factor Cost by Sector (1999-2000 Bare Year Prices) % Agriculture, forestry, fishing Mining and quarrying Manufacturing Electricity, gas & water supply Construction Trade, hotels, transport, and communication Financing, insurance, real estate, & services GDP 0 2 4 6 8 10 12 14 Source: The Economic Times, CMIE, CSO
  9. Comparative Growth Rate of GDP % per annum China Korea 2002 Indonesia 2003 Malaysia 2004 Philippines 2005 Thailand 2006 Bangaladesh India Pakistan 0 2 4 6 8 10 Source: Asian Development Outlook, World Economic Outlook
  10. Sources of Government Revenue Fiscal year 2006 excise duty 27.0% corporate tax 30.0% other sources 0.3% income tax 17.5% service tax 7.8% customs collections 17.4% Source: India Ministry of Finance, India Budget 2006-2007
  11. Expenditure of General Government Combined Center and State -- 2005 interest 26.5% defense 16.4% other 25.4% subsidies 9.4% other social services education health 6.8% 10.5% 4.9% Source: IMF
  12. Tax Revenues as Percent of GDP Fiscal Year end March 30 25 Fiscal gap 20 15 10 5 0 20 19 20 20 20 20 20 20 0 9 0 0 0 0 0 0 0 9 1 2 3 4 5 6 Tax revenues Total revenue and grants Total expenditure and net lending Source: IMF
  13. Government Expenditure % total expenditure 35 30 25 20 15 10 5 0 20 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 06 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 (p r oj ) subsidies interest on debt defense Source: IMF
  14. Gross Domestic Savings and Investment % GDP 2002 China Korea Indonesia Malaysia Philippines Thailand Bangaladesh India Pakistan Sri lanka 0 10 20 30 40 50 Investment Savings Source: Asian Development Outlook 2002
  15. General Government Debt Fiscal year end March 100 80 60 40 20 0 19 20 19 19 20 20 20 20 20 98 03 05 97 99 00 01 02 04 (p roj .) Debt Stock/ GDP ratio External Debt/GDP Source: IMF
  16. GOI Fiscal Deficit: States vs. Center % GDP 14 12 10 8 6 4 2 0 19 19 19 20 20 20 19 19 19 19 19 19 20 20 91 93 98 00 02 04 92 94 95 96 97 99 01 03 Center States Source: Indian Ministry of Finance
  17. Government Debt/GDP Ratio 2003-2007 120 115 110 105 100 95 90 85 2003 2004 2005 2006 2007 Base Case Reform Case Source: IMF
  18. Composition of India's 2004 Sovereign Debt IMF IDA 1.0% 19.6 Bilateral % 19.2% IBRD 7.0% Other Multilateral 4.6% Short-term 3.0% Private 45.5% Source: IBRD
  19. India’s External Debt Fiscal year end March US $ billions 140 120 Multilateral 100 Bilateral IMF 80 Trade Credit Commercial Borrowing 60 NRI & FC Deposits Russian Rupee Debt 40 Short-term debt 20 0 19 19 19 20 20 19 19 19 19 19 19 19 20 20 20 20 92 95 96 03 04 90 91 93 94 97 98 99 00 01 02 05 Source: Reserve Bank of India; Finance Ministry
  20. Gross Nonperforming Loans % of Total Loans 20 15 10 5 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Public sector banks Private sector banks Foreign banks Source: IMF
  21. Indian Saving and Investment % of GDP 30 25 20 15 10 5 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 Private Domestic Savings Private Domestic Investment Source: IMF, Ministry of Finance
  22. Bet You Didn't Know (Part One) India is one of only three countries that makes supercomputers (the US and Japan are the other two). India is one of six countries that launches satellites. The Bombay stock exchange lists more than 6,000 companies. Only the NYSE has more. Eight Indian companies are listed on the NYSE; three on the NASDAQ. By volume of pills produced, the Indian pharmaceutical industry is the world's second largest after China. India has the second largest community of software developers, after the U.S. India has the second largest network of paved highways, after the U.S. India is the world's largest producer of milk, and among the top five producers of sugar, cotton, tea, coffee, spices, rubber, silk, and fish. 100 of the Fortune 500 companies have R&D facilities in India.
  23. Current Account Goods and Services-- Fiscal year end March US $ billions 100 80 60 40 20 0 1982 1992 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 imports exports Source: IBRD
  24. Current Account balance Fiscal year end March US $ billions 10 8 6 4 2 0 -2 -4 -6 -8 19 19 19 19 19 19 19 19 20 20 20 20 20 92 92 94 95 96 97 98 99 00 01 02 03 04 Source: IBRD, CMIE
  25. Sources of Real GDP Growth Fiscal Year End March 14 12 10 8 6 4 2 0 -2 -4 19 20 19 19 19 20 20 20 20 20 96 02 97 98 99 00 01 03 04 05 Agriculture Industry Source: CSO, RBI, CMIE Services
  26. Foreign Institutional Investment 2004 FII $ Sensex Thousands 2,000 millions 7 1,500 6 1,000 500 5 0 4 -500 -1,000 3 May Apr Jul Oct Feb Jan Jun Aug Dec Sep Nov Mar FII Investments Sensex average Source: Reserve Bank of India; SFBI; ABN-AMRO
  27. U.S. Investment in India Calendar Year US $ billions 5 4 3 2 1 0 19 19 20 20 20 19 19 19 20 20 20 95 99 00 04 05 96 97 98 01 02 03 FDI Portfolio Source: SIA, Ministry of Commerce and Industry
  28. Market Capitalization of Listed Companies 2002 % GDP India Brazil China Egypt Kenya Malaysia Mexico Poland Turkey USA 0 20 40 60 80 100 120 140 160 Source: World bank, IMF
  29. Domestic Listed Companies 2003 India Brazil China Egypt Kenya Malaysia Mexico Poland Turkey USA 0 1 2 3 4 5 6 Thousands Source: World Bank. IMF
  30. Bet You Didn't Know (Part Two) Two million people of Indian origin live in the U.S. Indian-born Americans are among the most affluent and best educated of the recent immigrant groups in the U.S. Thirty percent of the R&D researchers in American pharmaceutical companies are Indian Americans. Nearly 49% of the high-tech startups in silicon Valley and Washington, D.C. are owned by Indians or Indian-Americans. There are over 700 companies in Silicon Valley owned by Indian-Americans. India sends more students to U.S. colleges than any country in the world. In 2004-2005, over 80,000 Indian students entered the U.S. China sent only 65,000 students during the same time. In a case decided by the U.S. Supreme Court, an Indian-American woman scientist, Dr. Ananda Chakrabaty, won the argument that persons may be granted patents for useful manufacture of living organisms. She defeated the U.S. Patent Office, that argued that living things may not be patented, thus establishing the legal foundation for the biotech industry, (Diamond vs. Chakrabaty, 1980). Dr. Chakrabaty invented a microbe that eats oil spills.
  31. Indian Rupees to 1 USD Monthly Average - December 50 40 30 20 10 0 19 20 19 19 19 19 19 20 20 20 20 20 94 00 95 96 97 98 99 01 02 03 04 05 Source: Reserve Bank of India
  32. Indian Rupees to 1 USD Monthly average 50 40 30 20 10 0 A Fe M M Fe A Se N A O M Ja Ju Ju D Ja pr ug ov pr ec ct ar ay ar n n b b ne ly p Source: Reserve Bank of India, CMIE
  33. World's Ten Wealthiest Countries GDP USA Japan Germany Britain France Italy China Spain Canada India 0 1 2 3 4 5 6 7 8 9 10 11 12 $US (In Trillions) Source: World Bank
  34. Forex Reserves Increase and Import Cover US$bn Mnths 18 200 16 180 160 14 140 12 120 10 100 8 80 6 60 4 40 2 20 0 0 FY00 FY06 FY93 FY94 FY97 FY98 FY99 FY01 FY02 FY04 FY95 FY05 FY91 FY92 FY96 FY03 FY07E Reserves Months of Import Cover Source: DGCI&S; RBI; Citigroup
  35. Foreign Exchange Reserves Fiscal Year end March US $ billions 160 140 120 100 80 60 40 20 0 19 19 19 19 19 19 19 19 19 19 20 20 20 19 19 19 20 20 M 19 19 20 ar 85 86 87 88 92 93 94 96 97 98 02 03 04 90 91 95 00 05 89 99 01 20 06 SDRs Gold Source: Reserve Bank of India Foreign Currency Assets
  36. Exports by Commodity A China-India Comparison China India Agricultural products 22.2 7.9 Fuels and mining products 18.1 6.4 Manufactures 397.0 48.0 Of which Iron and steel 4.8 2.9 Chemicals 19.6 7.3 Machinery and transport equipment 187.8 6.1 Textiles and clothing 79.0 13.5 Others 105.8 18.2 Total 437 62 (2003, US$bn) Source: WTO
  37. Share of World Output Select Asian Developing Countries -- 2004 % China India South Korea Indonesia Taiwan Thailand Philippines Malaysia Hong Kong Vietnam Singapore 0 2 4 6 8 10 12 14 1982 1992 2004 Source: IMF
  38. Total pop. of India Rural India 248 91 Total female workers Total female non-workers Female non-workers Female Urban India 36 121 Main workers Total female workers Total female non-workers Marginal workers Source: 2001 Census of India (millions) Total female workers
  39. Comparative Export of High-Technology Manufactured Goods India Brazil China Egypt Kenya Malaysia Mexico Poland Turkey USA 0 10 20 30 40 50 60 % of High-technology Manufactured Goods Source: Dun & Bradstreet
  40. Comparative Annual Wages in Manufacturing India Brazil China Egypt Malaysia Mexico Poland Thailand Turkey USA 0 10 20 30 40 Thousands Source: Dun & Bradstreet
  41. India’s Share of World Exports % of Global Trade 1 0.8 0.6 0.4 0.2 0 19 19 19 19 20 20 20 20 19 19 19 19 20 75 80 95 98 00 01 02 04 70 85 90 99 03 Source: IBRD; WTO
  42. Comparative Customs Duty Rates India and other Developing Countries % India Pakistan Brazil China Indonesia Thailand South Korea 0 10 20 30 40 50 All goods Agriculture Manufacturing Source: IMF
  43. India’s Top Trade Partners - Exports 2004-2005 France 2.1% Other 44.2% Singapore 5.0% Italy 2.9% Belgium 3.2% Japan 2.6% Germany 3.5% UK 4.7% Hong Kong 4.8% UAE 9.4% USA 17.5% Source: India Trade promotion Organization
  44. India’s Top Trade Partners - Imports 2004-2005 Other 60.7% Malaysia 2.1% Japan 2.8% Belgium 4.3% Singapore 2.4% Switzerland 5.4% Australia 3.3% Germany 3.6% China 6.3% UK 3.2% USA 5.9% Source: India Trade promotion Organization
  45. Commodity Composition of Trade Others 25.0% EU 21.0% Japan 3.0% ASEAN 5.0% China 5.0% NE 10.0% USA 18.0% Composition of Exports, FY04 Agricultural Middle East 13.0% Ores Leather 12.0% 4.0% Direction of Exports, FY04 Commodities 3.0% 4.0% Chemicals Oil 10.0% 6.0 % Other goods 6.0% Engineering 18.0% Gems, jewelry 17.0% Textiles Readymades Source: DGCI&S 10.0% 10.0%
  46. U.S. Business Complaints Excessive government interference. High tariffs and excessive indirect taxes Differential tax rates for foreign companies. Restrictions on foreign investment. Substandard infrastructure. Questions about ‘sanctity of contract.’ Weak enforcement of intellectual property rights.
  47. Estimated Trade Losses Due To Copyright Piracy And Piracy Levels In-Country Motion Pictures Records & Music Business Software Entertainment Books Total Software Losses Losses Piracy Losses Piracy Losses Piracy Losses Piracy Losses Levels Levels Levels Levels Pakistan 12.0 NA 70.0 100% 14.0 82% NA NA 52.0 148.0 Indonesia 32.0 92% 27.6 80% 100.0 87% NA NA 32.0 191.6 India 360.0 55% 102 50% 520.0 73% 59.5 86% 90.0 483.8 Russia 275.0 80% 411.9 66% 800.0 87% 255.8 73% 42.0 1784.7 China 280.0 95% 202.9 85% 1488.0 90% 510.0 90% 50.0 2530.0 (Cost in millions of U.S. dollars) Source: International Intellectual Property Alliance
  48. Principal Products of U.S.-India Merchandise Trade Top ten products in 2005 -- US $ millions U.S. Imports from India Amount U.S. Exports to India Amount Gems and jewelry 4,730 Airplanes/aircraft machinery 467 Womens/girls blouses 336 Fertilizers 413 Mens/boys shirts 294 Ferrous waste/scrap 126 Petroleum oils 303 Bituminous coal 150 Shrimps/prawns 290 Transmission apps 107 Sweaters/pullovers 271 Industrial oils 99 Cashew nuts 261 Almonds 94 Womens/girls skirts 281 Jewelry and parts 101 Industrial oils 249 Digital data processors 87 Toilet/kitchen linen 247 Parts for boring machinery 86 All other 11,447 All other 5,235 Total 18,709 Total 6,965 Source: US International Trade Commission
  49. U.S.-India Trade in Services: 2003 US $ millions Service Type U.S. exports U.S. imports Education 1,457 3 Travel 1,180 723 Business/prof/technical 353 420 Freight 170 81 Telcom 129 428 Royalties and license fees 115 8 Intra-company services 110 262 Port services 83 66 Financial services 56 19 Passenger fares 26 167 Film/TV/tape rentals 14 0 Insurance 5 5 Other 14 2 Total Services 3,728 2,184 Sources: US International Trade Commission
  50. U.S. - India Trade in Goods 20 15 10 5 0 19 20 19 20 19 19 19 19 19 19 20 20 20 20 99 03 97 05 92 93 94 95 96 98 00 01 02 04 Exports to India Imports from India Source: International Trade Commission
  51. U.S. - India Trade in Services 5 4 3 2 1 0 19 20 19 20 19 19 19 19 19 19 20 20 20 20 94 00 96 03 92 93 95 97 98 99 01 02 04 05 Exports to India Imports from India Source: International Trade Commission
  52. Total U.S. Trade with India US$ billions 20 15 10 5 0 19 19 19 19 19 20 20 20 20 20 20 19 19 19 93 94 96 97 99 00 01 02 03 04 05 92 95 98 Total exports to India Total imports from India Source: International Trade Commission
  53. Top Ten Reasons Favoring FDI in Retailing Experience of other countries shows that retailing has attracted significant FDI. • FDI would bring technical know-how and skill. • It would speed up the growth of organized retailing, set up supply chaings and lead to • implementation of Information Technology. Joint ventures would ease capital constraints of existing organized retailers. • Domestic retailers would get access to global best management practices. • Sourcing from India would increase. • There will be more investment in upstream activities and allied sectors. • Competition would drive down prices. • Protection leads to inefficiency. • FDI would lead to development of different retail formats and modernization of the • sector. Source: FDI in Retail Sector, India 2005
  54. States Attracting Highest FDI Flows in India (2000-2003) 2000 2001 2002 2003 Amount % Share Amount % Share Amount % Share Amount % Share Delhi 24576 30.6 69183 18.9 29943 18.5 21047 22 Maharashtra 35789 44.5 29917 43.7 48657 30.1 10228 10.7 Karnataka 5826 7.2 13104 8.3 8929 5.5 9991 10.5 Tamil Nadu 5519 6.87 7427 4.7 13412 8.3 8055 8.4 Chandigarh 8426 5.2 Gujurat 10426 10.9 Andra Pradesh 2517 3.13 3398 2.1 (Amount in INR millions) Source: World Bank
  55. Sectoral FDI Equity Caps Sector FDI cap in % Retailing (single-brand only) 51 Real Estate 0 Small Scale Industries 24 New print media 26 Insurance 26 Defense Industry Sector 26 Refining with Public Cos 26 Private Sector Banking 74* Domestic Airlines 49 Telecommunications 74 Trading 51 Internet service provider 74 Mining 74 Oil marketing 100 *Includes FDI and FII Source: Ministry of Commerce and Industry
  56. More Economic Data and Forecasts A 36% surge in imports at US$106bn resulted in India's trade deficit touching a record high of US$26.5bn in FY05 compared to US$14.3bn in FY04. The predicted trade deficit for FY06 is US$30.9bn. Citigroup estimates that the value of Indian currency is expected to decline by 15% over the next 4 years. India's savings rate has risen to 28.1%, while investments have risen by 26.3%. Non-agricultural sector growth may trend to 9% in the coming years. In FY04, India committed more revenue to subsidies (nearly US$1bn) than it did to non-capital defense expenditures. Almost 55% of India's tax revenue in FY04 was collected from excise duties and customs collections. India's FY06 budget targets a fiscal deficit of 4.3% of GDP. In India, services account for nearly 50% of GDP.
  57. Bottlenecks to Growth (Survey responses by country for each perceived ‘bottleneck’ category) % 100 80 60 40 20 0 Business Regulation Tax and Customs Corruption Brazil China Source: World Bank Investment Climate Surveys India
  58. Economic Freedom? Political Days taken to Competitiveness Corruption Freedom start a business ranking ranking Brazil Free 152 57 59 China Not Free 41 46 77 Egypt Not Free 43 62 102 India Free 89 55 90 Indonesia Partly Free 151 69 133 Malaysia Not Free 30 31 64 Mexico Free 58 48 64 Pakistan Not Free 24 91 39 Philippines Free 50 76 102 Russia Not Free 36 70 71 South Korea Free 22 29 47 Thailand Free 33 34 90 Source: Economic Times
  59. Time Taken to Register Property Norway China Pakistan S.A. Average Sri Lanka India Malaysia 0 20 40 60 80 100 120 140 160 No. of Days Source: World Bank
  60. Land Cost Relative to Income Level (Ratio of land cost/sq.m to GDP per capita in 1999, indexed to New Delhi - 100) 120 100 80 60 40 20 0 To Si B N K Sy B M Ta Se Ja an ew ua an um ng ka ip ky dn ou ga la gk ei ap rt o ba D ey l a Lu lo el ok or i hi re m e pu r Land Cost Source: World Bank
  61. Start-up Times for New Businesses Australia USA England Nepal Pakistan Malaysia Belgium Bangladesh China Sri Lanka India 0 20 40 60 80 100 Days to Set Up Source: World Bank
  62. Time to Enforce a Contract Tunisia China Malaysia Nepal Bangladesh S.A. Average Pakistan India Sri Lanka 0 100 200 300 400 500 No. of Days Source: World Bank
  63. Bankruptcy Recovery Rate (Cents on the Dollar, Recovered From Insolvent Firm) Best Recovery Japan Pakistan Malaysia China Sri Lanka Nepal Bangladesh S.A. Average India 0 20 40 60 80 100 Recovery Rate Source: World Bank
  64. Real Interest Rate Prime Lending Rate minus WPI % 14 12 10 8 6 4 2 0 19 19 19 20 20 20 19 19 19 19 19 19 20 20 20 20 91 92 93 00 01 05 94 95 96 97 98 99 02 03 04 06 Source: Reserve Bank of India
  65. Time To Go Through Insolvency Shortest Time Ireland Sri Lanka Malaysia China Pakistan Bangladesh S.A. Average Nepal India 0 2 4 6 8 10 12 Years Source: World Bank
  66. Rigidity of Employment Index Least Rigid Hong Kong Malaysia Bangladesh China Sri Lanka S.A. Average Nepal India Pakistan 0 20 40 60 80 100 Rigidity Index Source: World Bank
  67. Problem: The Transformed Relationship is incomplete. Solution: Grow the economic and commercial relationship. Economic Commercial CEO Forum Strategy Private Sector Involvement Energy Dialogue Strategic Economic Dialogue Trade High Tech Trade Finance Dialogue Trade Policy Dialogue Commerce: High Tech Cooperation Financial Intel Unit WTO and Standards and Trade USTR Facilitation

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