INDIA’S FUTUREOr prosperity will spread in Indiabut happiness will not, until we fix governance
 Where are we coming from? Where are we today? Where are we going in thefuture?
Even though the world hasjust discovered it, the Indiagrowth story is not newIt has been going on for 25 years
What is the Indiastory?
28 years of high growth1.03.56.08.9Average annual GDP growth02468101900-1950 1950-1980 1980-2002 2002-2007(%)
Population growth is slowingSources: 1900-1990: Angus Maddison (1995), Monitoring the World Economy, 1990-2000:Census of I...
Literacy is risingSource: Census of India (2001)175265800204060801001950 1990 2000 2010 (proj)(%)
When middle class is 50% then the politics will also changeSource: The Consuming Class, National Council of Applied Econom...
Poverty is declining4626161% of the people havebeen crossing povertyline each year for 25yearsEquals ~ 200m010203040501980...
Per capita income gainsSource: World BankUS$ ppp20053,05119801,178
India is now the 4th largest economyIt will overtake Japanbetween 2012 and 2014to become the 3rd largest
The India model isunique
Drivers of growthIndia■ DomesticEast and S.E. Asia■ Exports
Drivers of growthIndia■ Domestic■ ServicesEast and S.E. Asia■ Exports■ Manufacturing
Drivers of growthIndia■ Domestic■ Services■ ConsumptionEast and S.E. Asia■ Exports■ Manufacturing■ Investment
Drivers of growthIndia■ Domestic■ Services■ Consumption■ High tech, capitalintensive industryEast and S.E. Asia■ Exports■ ...
Implications of India model„Domestically led‟ means:■ Insulation from global downturns■ Less volatility■ We will come out ...
Implication of India model„Services led‟ raisesuncomfortable questions:■ Have we skipped the industrialrevolution?■ How do...
Implication of India model – Consumption led41%45%59%U.S.ChinaBrazilIndia33%People Friendly:Consumption as % of GDPPeople ...
Reasons for successIndia‟s success is market-ledwhereas China‟s is state inducedThe entrepreneur is at thecentre of the In...
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 f...
India has a vibrant private space■ 100 Indian Companies have market cap of US$ 1bn■ 1,000 Indian Companies have received f...
India has a vibrant private space■ 100 Indian Companies have market cap of US$ 1bn■ 1,000 Indian Companies have received f...
India has a vibrant private space■ 100 Indian Companies have market cap of US$ 1bn■ 1,000 Indian Companies have received f...
India has a vibrant private space■ 100 Indian Companies have market cap of US$ 1bn■ 1,000 Indian Companies have received f...
Public space is a problemWe have■ Dynamic democracy withhonest elections■ Free, lively media and pressBut we also havePoor...
Governance Failures Corrupt system 1 out of 4 school teachers absent ingovernment schools 2 out of 5 doctors absent in ...
Ironically, we used to have world class institutions from1950-1980, but our problem was growth.Now we have growth, but our...
The economygrows at nightwhen thegovernment isasleep
Key reforms■ Opened economy to trade and investment■ Dismantled controls■ Lowered tariffs■ Dropped tax rates■ Broke public...
Understanding India‟s economic success Remarkable --every government has reformed (slowly)since 1991 Even slow reforms a...
“By 2015 India will have world‟s largestnumber of English speakers”“When 300 million Indians speak a word in acertain way,...
Understanding India‟s economic success■ Mental revolution among the young■ ‘I want to be Bilgay’■ Raju’s secret of success...
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 ha...
Where are we going?■ Base case post recovery is 7.5 % – 8.5 % GDP growth■ Democracy will not permit more than 8% unless yo...
Per capita income2,1003,0505,80016,80037,000On a ppp basis2000 2005 2020 2040 2066010203040($000)
Convergence in the 21st century■ Why convergence is intuitive?■ Convergence didn’t happen in the 20th centurybecause the w...
50% 50%India will gradually turn middle-class8%22%32%1980 2000 2010 2020 2040West of theKanpur-Chennai lineEast of theKanp...
What could stop the show?- Infrastructure- Improving via public-private parterships- Fiscal Deficit- GovernanceNone of the...
Education SystemIs reasonably good for the top 20%But it is abysmal for the rest■ 1 in 4 teachers is absent in governmentp...
Caste system■ Origin of India’s caste system■ Classical four castes vs 3000 jatis■ Hostage to competitive politics■ Source...
Role of ReligionIndia‟s pluralism, diversityand toleranceHinduism■ Spiritual entrepreneurialism: Gurus■ No hierarchy:Every...
Elephant and not Tiger■ India got democracy before capitalism and this has madeall the difference■ It is slower than China...
ThanksChandan Singh
 INDIA’S FUTURE Or Prosperity will Spread in India  But Happiness will not, until we fix Governance
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INDIA’S FUTURE Or Prosperity will Spread in India But Happiness will not, until we fix Governance

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INDIA’S FUTURE
Or prosperity will spread in India
but happiness will not, until we fix governance.

Published in: Economy & Finance, Business
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INDIA’S FUTURE Or Prosperity will Spread in India But Happiness will not, until we fix Governance

  1. 1. INDIA’S FUTUREOr prosperity will spread in Indiabut happiness will not, until we fix governance
  2. 2.  Where are we coming from? Where are we today? Where are we going in thefuture?
  3. 3. Even though the world hasjust discovered it, the Indiagrowth story is not newIt has been going on for 25 years
  4. 4. What is the Indiastory?
  5. 5. 28 years of high growth1.03.56.08.9Average annual GDP growth02468101900-1950 1950-1980 1980-2002 2002-2007(%)
  6. 6. Population growth is slowingSources: 1900-1990: Angus Maddison (1995), Monitoring the World Economy, 1990-2000:Census of India (2001)1.02.22.11.81.500.51.01.52.02.51901-1950 1951-1980 1981-1990 1991-2000 2001-2010(%)
  7. 7. Literacy is risingSource: Census of India (2001)175265800204060801001950 1990 2000 2010 (proj)(%)
  8. 8. When middle class is 50% then the politics will also changeSource: The Consuming Class, National Council of Applied Economic Research, 2002652203688%22% 32%01002003004001980 2000 2010(m)
  9. 9. Poverty is declining4626161% of the people havebeen crossing povertyline each year for 25yearsEquals ~ 200m010203040501980 2000 2010(%)
  10. 10. Per capita income gainsSource: World BankUS$ ppp20053,05119801,178
  11. 11. India is now the 4th largest economyIt will overtake Japanbetween 2012 and 2014to become the 3rd largest
  12. 12. The India model isunique
  13. 13. Drivers of growthIndia■ DomesticEast and S.E. Asia■ Exports
  14. 14. Drivers of growthIndia■ Domestic■ ServicesEast and S.E. Asia■ Exports■ Manufacturing
  15. 15. Drivers of growthIndia■ Domestic■ Services■ ConsumptionEast and S.E. Asia■ Exports■ Manufacturing■ Investment
  16. 16. Drivers of growthIndia■ Domestic■ Services■ Consumption■ High tech, capitalintensive industryEast and S.E. Asia■ Exports■ Manufacturing■ Investment■ Low tech, labourintensive industry
  17. 17. Implications of India model„Domestically led‟ means:■ Insulation from global downturns■ Less volatility■ We will come out of the global crisisfaster
  18. 18. Implication of India model„Services led‟ raisesuncomfortable questions:■ Have we skipped the industrialrevolution?■ How do we take people from farms tocities?■ Will SEZ’s be our tipping point?
  19. 19. Implication of India model – Consumption led41%45%59%U.S.ChinaBrazilIndia33%People Friendly:Consumption as % of GDPPeople Friendly, Less inequality:Gini Index58%42%64%EuropeChinaIndiaWill India become the next big consuming economy after the U.S.?
  20. 20. Reasons for successIndia‟s success is market-ledwhereas China‟s is state inducedThe entrepreneur is at thecentre of the Indian model
  21. 21. Rise of globally competitive Indian companies
  22. 22. India has a vibrant private space■ 100 Indian Companies have market cap of US$ 1bn
  23. 23. India has a vibrant private space■ 100 Indian Companies have market cap of US$ 1bn■ 1,000 Indian Companies have received foreigninstitutional investment
  24. 24. India has a vibrant private space■ 100 Indian Companies have market cap of US$ 1bn■ 1,000 Indian Companies have received foreigninstitutional investment■ 125 Fortune 500 companies have R&D bases in India
  25. 25. India has a vibrant private space■ 100 Indian Companies have market cap of US$ 1bn■ 1,000 Indian Companies have received foreigninstitutional investment■ 125 Fortune 500 companies have R&D bases in India■ 390 Fortune 500 companies have outsourced softwaredevelopment to India
  26. 26. India has a vibrant private space■ 100 Indian Companies have market cap of US$ 1bn■ 1,000 Indian Companies have received foreigninstitutional investment■ 125 Fortune 500 companies have R&D bases in India■ 390 Fortune 500 companies have outsourced softwaredevelopment to India■ 2% bad loans in Indian banks (v~20% in China)
  27. 27. India has a vibrant private space■ 100 Indian Companies have market cap of US$ 1bn■ 1,000 Indian Companies have received foreigninstitutional investment■ 125 Fortune 500 companies have R&D bases in India■ 390 Fortune 500 companies have outsourced softwaredevelopment to India■ 2% bad loans in Indian banks (v~20% in China)■ 80% credit goes to private sector (v~10% in China)
  28. 28. Public space is a problemWe have■ Dynamic democracy withhonest elections■ Free, lively media and pressBut we also havePoor governance!
  29. 29. Governance Failures Corrupt system 1 out of 4 school teachers absent ingovernment schools 2 out of 5 doctors absent in primary healthcenters Delhi’s water Land titles Etc
  30. 30. Ironically, we used to have world class institutions from1950-1980, but our problem was growth.Now we have growth, but our institutions are failing■ Bureaucracy■ Judiciary■ Police
  31. 31. The economygrows at nightwhen thegovernment isasleep
  32. 32. Key reforms■ Opened economy to trade and investment■ Dismantled controls■ Lowered tariffs■ Dropped tax rates■ Broke public sector monopolies
  33. 33. 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 Indiabecome the second fastest in the world? Unappreciated fact – rule of law
  34. 34. “By 2015 India will have world‟s largestnumber of English speakers”“When 300 million Indians speak a word in acertain way, that will be the way to speak it.”Professor David CrystalCambridge Encyclopedia of the English Language
  35. 35. 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
  36. 36. 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
  37. 37. 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
  38. 38. Per capita income2,1003,0505,80016,80037,000On a ppp basis2000 2005 2020 2040 2066010203040($000)
  39. 39. Convergence in the 21st century■ Why convergence is intuitive?■ Convergence didn’t happen in the 20th centurybecause the world was closed■ Returning to a world of equality prior to 1750■ When China and India accounted for 45% of world GDP
  40. 40. 50% 50%India will gradually turn middle-class8%22%32%1980 2000 2010 2020 2040West of theKanpur-Chennai lineEast of theKanpur-Chennai lineChennaiKanpur-
  41. 41. What could stop the show?- Infrastructure- Improving via public-private parterships- Fiscal Deficit- GovernanceNone of these stopped the show in the past 25 years- Nuclear War?
  42. 42. Education SystemIs reasonably good for the top 20%But it is abysmal for the rest■ 1 in 4 teachers is absent in governmentprimary schools■ Hence, 54% of children in urban India are inprivate schoolsSolution: Education Vouchers
  43. 43. Caste system■ Origin of India’s caste system■ Classical four castes vs 3000 jatis■ Hostage to competitive politics■ Source of competitive advantage■ Affirmative action
  44. 44. Role of ReligionIndia‟s pluralism, diversityand toleranceHinduism■ Spiritual entrepreneurialism: Gurus■ No hierarchy:Every Brahmin thinks he is the Pope■ 300 million gods:Lack of theological narcissism■ Nasadiya Temper85%Hindu12%Muslim2%Sikh1%Christian
  45. 45. Elephant and not Tiger■ India got democracy before capitalism and this has madeall 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
  46. 46. ThanksChandan Singh

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