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Indias Future   Gurcharan Das
 

Indias Future Gurcharan Das

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Indias Future Gurcharan Das

Indias Future Gurcharan Das
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Indias Future   Gurcharan Das Indias Future Gurcharan Das 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 has just discovered it, the India growth story is not new It has been going on for 25 years
  • What is the India story?
  • 28 years of high growth 1.0 3.5 6.0 8.9 (%) Average annual GDP growth 0 2 4 6 8 10 1900-1950 1950-1980 1980-2002 2002-2007
  • Population growth is slowing Sources: 1900-1990: Angus Maddison (1995), Monitoring the World Economy, 1990-2000:Census of India (2001) 1.0 2.2 2.1 1.8 1.5 (%) 0 0.5 1.0 1.5 2.0 2.5 1901-1950 1951-1980 1981-1990 1991-2000 2001-2010
  • Literacy is rising Source: Census of India (2001) 17 52 65 80 (%) 0 20 40 60 80 100 1950 1990 2000 2010 (proj)
  • When middle class is 50% then the politics will also change Source: The Consuming Class, National Council of Applied Economic Research, 2002 65 220 368 8% 22% 32% 0 100 200 300 400 1980 2000 2010 (m)
  • Poverty is declining 46 26 16 1% of the people have been crossing poverty line each year for 25 years Equals ~ 200m (%) 0 10 20 30 40 50 1980 2000 2010
  • Per capita income gains Source: World Bank US$ ppp 2005 3,051 1980 1,178
  • 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 People Friendly: Consumption as % of GDP People Friendly, Less inequality: Gini Index Will India become the next big consuming economy after the U.S.? 41% 45% 59% U.S. China Brazil India 33% 58% 42% 64% Europe China India
  • Reasons for success India’s success is market-led whereas China’s is state induced The entrepreneur is at the centre 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 Crystal Cambridge 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 2,100 3,050 5,800 16,800 37,000 On a ppp basis 2000 2005 2020 2040 2066 0 10 20 30 40 ($000)
  • 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
  • India will gradually turn middle-class 50% 50% 8% 22% 32% West of the Kanpur- Chennai line East of the Kanpur- Chennai line Chennai Kanpur- 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
    • Hinduism
      • Spiritual entrepreneurialism: Gurus
      • No hierarchy: Every Brahmin thinks he is the Pope
      • 300 million gods: Lack of theological narcissism
      • Nasadiya Temper
    85% Hindu 12% Muslim 2% Sikh 1% Christian
  • 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