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India's future
 

India's future

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Ultimate slide by Gurcharan Das

Ultimate slide by Gurcharan Das

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    India's future India's future Presentation Transcript

    • INDIA’S FUTURE
      Or prosperity will spread in India
      but happiness will not, until we fix governance
      by
      Gurcharan Das
      November 12, 2009
      WIPRO
      Marbella
      • Where are we coming from?
      • Where are we today?
      • Where are we going in the
      future?
    • Even though the world hasjust discovered it, the Indiagrowth story is not new
      It has been going on for 25 years
    • What is the India story?
    • 28 years of high growth
      Average annual GDP growth
      (%)
      10
      8.9
      8
      6.0
      6
      3.5
      4
      1.0
      2
      0
      1900-1950
      1950-1980
      1980-2002
      2002-2007
    • Population growth is slowing
      (%)
      2.5
      2.2
      2.1
      2.0
      1.8
      1.5
      1.5
      1.0
      1.0
      0.5
      0
      1901-1950
      1951-1980
      1981-1990
      1991-2000
      2001-2010
      Sources: 1900-1990: Angus Maddison (1995), Monitoring the World Economy, 1990-2000:Census of India (2001)
    • Literacy is rising
      (%)
      100
      80
      80
      65
      52
      60
      40
      17
      20
      0
      1950
      1990
      2000
      2010 (proj)
      Source: Census of India (2001)
    • When middle class is 50% then the politics will also change
      (m)
      0
      32%
      22%
      8%
      400
      368
      300
      200
      220
      100
      65
      1980
      2000
      2010
      Source: The Consuming Class, National Council of Applied Economic Research, 2002
    • Poverty is declining
      (%)
      50
      1% of the people have been crossing poverty line each year for 25 years
      Equals ~ 200m
      46
      40
      30
      26
      20
      16
      10
      0
      1980
      2000
      2010
    • Per capita income gains
      1,178
      1980
      2005
      3,051
      US$ ppp
      Source: World Bank
    • India is now the 4th largest economy
      It will overtake Japan between 2012 and 2014 to become the 3rd largest
    • The India model is unique
    • Drivers of growth
      India
      Domestic
      East and S.E. Asia
      Exports
    • Drivers of growth
      India
      Domestic
      Services
      East and S.E. Asia
      Exports
      Manufacturing
    • Drivers of growth
      India
      Domestic
      Services
      Consumption
      East and S.E. Asia
      Exports
      Manufacturing
      Investment
    • Drivers of growth
      India
      Domestic
      Services
      Consumption
      High tech, capital intensive industry
      East and S.E. Asia
      Exports
      Manufacturing
      Investment
      Low tech, labour intensive industry
    • Implications of India model
      ‘Domestically led’ means:
      Insulation from global downturns
      Less volatility
      We will come out of the global crisis
      faster
    • Implication of India model
      ‘Services led’ raises uncomfortable questions:
      • Have we skipped the industrial revolution?
      • How do we take people from farms to cities?
      • Will SEZ’s be our tipping point?
    • Implication of India model – Consumption led
      33%
      59%
      42%
      64%
      India
      India
      China
      China
      41%
      U.S.
      Europe
      58%
      45%
      Brazil
      People Friendly:Consumption as % of GDP
      People Friendly, Less inequality: Gini Index
      Will India become the next big consuming economy after the U.S.?
    • Reasons for success
      India’s success is market-led whereas China’s is state induced
      The entrepreneur is at thecentre of the Indian model
    • Rise of globally competitive Indian companies
    • India has a vibrant private space
      100 Indian Companies have market cap of US$ 1bn
    • India has a vibrant private space
      100 Indian Companies have market cap of US$ 1bn
      1,000 Indian Companies have received foreign institutional investment
    • India has a vibrant private space
      100 Indian Companies have market cap of US$ 1bn
      1,000 Indian Companies have received foreign institutional investment
      125 Fortune 500 companies have R&D bases in India
    • India has a vibrant private space
      100 Indian Companies have market cap of US$ 1bn
      1,000 Indian Companies have received foreign institutional investment
      125 Fortune 500 companies have R&D bases in India
      390 Fortune 500 companies have outsourced software development to India
    • India has a vibrant private space
      100 Indian Companies have market cap of US$ 1bn
      1,000 Indian Companies have received foreign institutional investment
      125 Fortune 500 companies have R&D bases in India
      390 Fortune 500 companies have outsourced software development to India
      2% bad loans in Indian banks (v~20% in China)
    • India has a vibrant private space
      100 Indian Companies have market cap of US$ 1bn
      1,000 Indian Companies have received foreign institutional investment
      125 Fortune 500 companies have R&D bases in India
      390 Fortune 500 companies have outsourced software development to India
      2% bad loans in Indian banks (v~20% in China)
      80% credit goes to private sector (v~10% in China)
    • Public space is a problem
      We have
      Dynamic democracy with honest elections
      Free, lively media and press
      But we also have
      Poor governance!
    • Governance Failures
      • Not the minister caught with a bribe
      • 1 out of 4 school teachers absent in
      government schools
      • 2 out of 5 doctors absent in primary health
      centers
      • Delhi’s water
      • Land titles
      • Etc
    • Ironically, we used to have world class institutions from 1950-1980, but our problem was growth.Now we have growth, but our institutions are failing
      Bureaucracy
      Judiciary
      Police
    • The economy grows at night when the government is asleep
    • Key reforms
      Opened economy to trade and investment
      Dismantled controls
      Lowered tariffs
      Dropped tax rates
      Broke public sector monopolies
    • Understanding India’s economic success
      • Remarkable --every government has reformed (slowly)
      since 1991
      • Even slow reforms add up
      • 65 countries have done the same reforms – why did India
      become the second fastest in the world?
      • Unappreciated fact – rule of law
    • “By 2010 India will have world’s largest number of English speakers”“When 300 million Indians speak a word in a certain way, that will be the way to speak it.”
      Professor David CrystalCambridge Encyclopedia of the English Language
    • Understanding India’s economic success
      Mental revolution among the young
      ‘I want to be Bilgay’
      Raju’s secret of success
      Banianisation of society
      180 TV channels; 65 news channels
      The rise of Hinglish
    • Where are we today?
      • Growth fell to 6.7% in 08-09; 7% in 09-10
      • Pain has been less than in China
      • Competitive companies have recovered faster.
      • Risk of protectionism has receded
      • Recovery has been ahead of the world
    • Where are we going?
      Base case post recovery is 7.5 % – 8.5 % GDP growth
      Democracy will not permit more than 8% unless you have a Thatcher
      1.5% population growth
      Demographic dividend – growth will continue beyond China’s
    • Per capita income
      On a ppp basis
      ($000)
      40
      30
      20
      10
      0
      2000
      2005
      2020
      2040
      2066
      37,000
      16,800
      5,800
      3,050
      2,100
    • Convergence in the 21st century
      Why convergence is intuitive?
      Convergence didn’t happen in the 20th century because the world was closed
      Returning to a world of equality prior to 1750
      When China and India accounted for 45% of world GDP
    • 50%
      50%
      India will gradually turn middle-class
      West of theKanpur-Chennai line
      East of theKanpur-Chennai line
      Kanpur-
      32%
      22%
      Chennai
      8%
      1980
      2000
      2010
      2020
      2040
    • What could stop the show?
      • Infrastructure
      - Improving via public-private parterships
      • Fiscal Deficit
      • Governance
      None of these stopped the show in the past 25 years
      - Nuclear War?
    • Education System
      Is reasonably good for the top 20%
      But it is abysmal for the rest
      1 in 4 teachers is absent in government primary schools
      Hence, 54% of children in urban India are in
      private schools
      Solution: Education Vouchers
    • Caste system
      Origin of India’s caste system
      Classical four castes vs 3000 jatis
      Hostage to competitive politics
      Source of competitive advantage
      Affirmative action
    • Role of Religion
      India’s pluralism, diversity and tolerance
      1%
      2%
      12%
      85%
      Hindu
      Muslim
      Sikh
      Christian
      Hinduism
      Spiritual entrepreneurialism: Gurus
      No hierarchy: Every Brahmin thinks he is the Pope
      300 million gods: Lack of theological narcissism
      Nasadiya Temper
    • Elephant and not Tiger
      • India got democracy before capitalism and this has made all the difference
      • It is slower than China but its path is surer
      • However, an elephant at 8% growth is a formidable beast
      • We have waited 3000 years for this moment
      • India is more likely to preserve its way of life
    • The Wise Elephant