western vs. bharatiya economic model

1. Western Vs. Bharatiya
Economic Thoughts
Dr. Varadraj Bapat
Indian Institute of Technology, Mumbai
varadraj@som.iitb.ac.in
9892413119

2. Dr. Varadraj Bapat
CA., CWA., M.Com., DISA, PhD.
School of Management
Indian Institute of Technology, Mumbai
अखिल भारतीय विद्यार्थी पररषद प्रदेश अध्यक्ष
भारतीय अर्थथव्यिस्र्था, भारतीय संस्कृ ती, शशक्षण, संस्कृ त,
योग, ब्रह्मविद्या या विषयाची आिड

3. 3
• Capitalism भाांडवलशाही
• Vs. Communism मार्क्सवाद
• Consumerism

4. 4
Capitalism भाांडवलशाही
• १७७०

5. 5
Capitalism भाांडवलशाही
• १७७०

6. 6
Capitalism भाांडवलशाही
• १७७०

7. 7
• Communism मार्क्सवाद
• शोषण मुक्ती
• समानता

8. Marxism
• Marx and Engels
studied the
history of the
world’s
economies
Basic
Communism
Feudalism
Capitalism
Communism
!!!!
Socialism
•They
believed they
discovered
an inevitable
pattern

9. 9
• Communism

10. USSR
• USSR stands for:
Union of Soviet
Socialist Republics.
• The USSR was
formed in December
1922.
• USSR a.k.a. Russia.
• The USSR is a
Communist party.

11. Communist control of the USSR by 1924
• Moscow
• Leningrad

12. Communist control of the World
• Moscow

13. माक्सथ िाद
शोषण मुक्ती / समानता
•धमथ / परंपरा नष्ट करा
•मानिी मुल्य पायदळी

14. माक्सथ िाद
•हुकु मशाही
•हत्या
•िून
•गररबी

15. माक्सथ िाद १० कोटी हत्या

16. माक्सथ िाद
•हुकु मशाही
•हत्या
•िून
•गररबी

17. माक्सथ िाद
•हुकु मशाही
•हत्या
•िून
•गररबी

18. 18
• Capitalism भाांडवलशाही
• Vs. Communism मार्क्सवाद
•
• १९९०
• Consumerism

19. 19
• Capitalism भाांडवलशाही
• Consumerism अनिर्बंध उपभोग

20. 20
• Capitalism भाांडवलशाही
• Consumerism अनिर्बंध उपभोग
• Bush urged the U.S. public to go shopping
and take vacations (2001 -9/11)
• (http://consortiumnews.com/2011/09/11/chronicling-americas-911-descent/)

21. 21
• Capitalism भाांडवलशाही
• Consumerism अनिर्बंध उपभोग

22. 22
ववषमता

23. 23
ववषमता

24. 24
• Capitalism भाांडवलशाही
• Consumerism अनिर्बंध उपभोग
• Market Economy
• Market Society
• Market Family

25. 25
• Capitalism भाांडवलशाही
• Consumerism अनिर्बंध उपभोग
• Market Economy
• Market Society
• Market Family

26. 26
Family Destroyed - Marriage
In US, More than 50 % of children born to under 30
women are out of wedlock
- Marriage is Luxury Good
http://parenting.blogs.nytimes.com/2012/02/19/for-younger-
mothers-out-of-wedlock-births-are-the-new-normal/
http://www.nytimes.com/2012/02/18/us/for-women-under-30-
most-births-occur-outside-marriage.html?pagewanted=all

27. 27
Family Destroyed - Marriage
In US, More than 50 % of children born to under 30
women are out of wedlock
- Marriage is Luxury Good
http://parenting.blogs.nytimes.com/2012/02/19/for-younger-
mothers-out-of-wedlock-births-are-the-new-normal/
http://www.nytimes.com/2012/02/18/us/for-women-under-30-
most-births-occur-outside-marriage.html?pagewanted=all

28. 28
Family Destroyed - Marriage
In US, More than 50 % of children born to under 30
women are out of wedlock
- Marriage is Luxury Good
http://parenting.blogs.nytimes.com/2012/02/19/for-younger-
mothers-out-of-wedlock-births-are-the-new-normal/
http://www.nytimes.com/2012/02/18/us/for-women-under-30-
most-births-occur-outside-marriage.html?pagewanted=all

29. 29
Family Destroyed - Marriage
A million children growing up without fathers in UK
In UK there are more households with TV’s than
fathers
http://www.bbc.co.uk/news/education-22820829 (9 June
2013)

30. Marriage or divorce in US or
Europe
Year Marriages per 1000 unmarried women
1970 63.4
2008 37.4
Year Households with children less than 18
1960 49 percent
2008 31 percent
‘;k Children living with single parents
1960 9 percent
2008 26 percent

31. Society and Family
• Warnings came true sooner than later
• This cost 88 million additional houses, valued
at $16 trillion at current prices.
Year Average persons per house
1930 4.5
1950 3.5
2010 2.6

32. Avg persons per house in us
• Pic

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34. 34
High rate of crime
प्रचंड गुन्हेगारी.
भ्रष्टाचार
िून
मारामारी
बलात्कार

35. 35
High rate of crime
The dataset includes figures for 126
countries. India a rate of Murders
reported per 100,000 population

36. 36
High rate of crime
The dataset includes figures for 126
countries. No of prisoners

37. 37
High rate of crime
The dataset includes figures for 126
countries. India is 79th on that list with
a rate of 1.8 rapes reported per
100,000 population

38. 38
्ृष्टीचे शोषण
नैसर्गथक संपत्ती चा विध्िंस
प्रचंड प्रदूषण

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44. 44

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45
Impact ?
• Saving Rates ?

46. US on a binge

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47
US personal savings
U.S. personal savings rate has been on its
way down. In other words, consumers
have been spending more than they have
been earning. Some economists warn
that this is troubling and
unsustainable.
http://www.businessinsider.in/CHART-OF-THE-DAY-Why-The-Personal-Savings-
Rate-Is-Tumbling/articleshow/21189234.cms 9 Apr 2013

48. 48
US
• Foreign investments made in the US total
almost $2.4 trillion, which is more than
twice that of any other country. (2012)
• Wiki CIA World jgf

49. 49
US
• What made USA to borrow so much and
reduce savings ?
• Alan Greenspan -

50. Greenspan
• Alan Greenspan served as Chairman of
the Federal Reserve of the United States
from 1987 to 2006.
• Directed the very course of US economy
and of the globe for two decades.
• God of Money
• Sparing the Americans from the need to
save. Enticing them to spend.

51. Beginning of Economic crisis
• the decline of families first.
• Later, such decline in turn led to more and
more social welfare spend to support the
weakening families, thus feeding each
other.
• US families reels under debt.

52. Current situation
• Home loans of households top $10 trillion.
• More than 1/3rd weren’t incurred to buy
houses.
• According to Greenspan himself,
household borrowed $3.2 trillion against
security of appreciation in their home
values (called ‘home equity cashed out’)
during 2002-2007, and splurged into
consumption.

53. Current situation
• 111 million US households use 1.2 billion
credit cards, on which they owe $2.5 trillion.
• Not just families, their finances too are
broken, thanks to the financial networks of
the US praised by Greenspan, having
‘enticed’ and made the US families profligate.
• The state-provided social security that has
replaced the families and made them state-
dependent is stressed and potentially
bankrupt.

54. 54
Overall Debt % of GDP
CANADA= 276 %
RUSSIA= 72%
UNITED STATES=280%
CHINA= 184 %
BRAZIL = 148%
INDIA= 122 %
BRITAIN = 507 %
JAPAN= 512 %
GERMANY= 278 %
SOUTH KOREA=314%
FRANCE= 346 %
SWITZ= 314 %
SPAIN= 363 %
ITALY = 314 %
@Prof R.Vaidyanathan,IIMB,2012
http://www.economist.com/blogs/graphicdetail/2012/01/daily-chart-8

55. 55
• VERY HIGH level of Debt
• Govt
• Household

56. 56
Debt in USA
• Fannie Mae
http://grandfather-economic-report.com/debt-nat.htm
81% ($46 trillion) of all debt was created since 1990,
a period primarily driven by debt instead of by productive activity.

57. 57
Household Debt % of GDP

58. 58
Household Debt in US

59. A sign in a US bank:
“We can loan you enough
money to get you
completely out of debt.”
US Debt

60. 60
What is Driving US ?
U.S. household consumer debt profile:
Average credit card debt: $15,112
Average mortgage debt: $146,215
Average student loan debt: $31,240 (Rs. 18 Lakhs)
In total, American consumers owe:
$11.08 trillion in debt
$846.9 billion in credit card debt
$7.75 trillion in mortgages
$1,002.0 billion in student loans
(As of November 2013)
• http://www.nerdwallet.com/blog/credit-card-
data/average-credit-card-debt-household/ accessed on
8.11.2013

61. Saving Rates
• India
• US
10/13/2016 Dr. Varadraj Bapat, IIT Mumbai 61

62. Saving Rates in Bharat
GDS as % of GDP
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0
5
10
15
20
25
30
35
1990
[YR1990]
2000 2006 2009 2012 2014

63. US personal saving
-2
0
2
4
6
8
1992 1997 2002 2007
as % of disposable income
US on a binge

64. 64
Share in % of world GDP based on
PPP--

65. Strengths
of India
The magic mantra of ‘Demographic Dividend’

66. Concept of Demographic Dividend
Rapid and sustainable economic growth
as consequence of a demographic
transition from high fertility and high
mortality to low fertility and low mortality
equilibrium; reducing the dependency ratio
and increasing the size of the working age
population;

67. Concept of Demographic Dividend
This large cohort of working age
population presents the opportunity to
stimulate economic growth – demographic
dividend;

68. Changes in the child dependency ratio
Once fertility
begins to
decline, the
child
dependency
ratio falls.
Child
dependency
ratio (<15/15-64)
Increasing
survival of
children
initially
raises the
ratio
Then
declining
fertility
reduces the
ratio.

69. Changes in the old-age dependency ratio
• Serious population
aging begins more
than a century
after the transition
starts.
• The old-age
dependency ratio
rises rapidly, by a
factor of five or six.
Old-age
dependency
ratio (65+/15-
64)
Onset of serious
population aging is
late in the transition

70. Rising
dependency as
mortality falls
Population aging
Rising
dependency as
mortality falls
The “first dividend”:
Dependency falls
Dependency ends where it
began. Transitory effect.
Variation in the total dependency ratio

71. Population aging
Rising
dependency as
mortality falls
The “first dividend”:
dependency falls
At start: Many children
and few elderly.
At end: Many elderly and
few children.
This generates the
“second dividend”.
Variation in the total dependency ratio

72. How Dependency Ratios Change Over A Classic Demographic Transition:
Actual and Projected for India and Simulated, 1900-2100
USA
Least
develope
d
countries
Chin
a
Europe
There is great variation in projected old
age dependency ratios for 2050
Southern
Europe
 Ratio in Southern
Europe projected to
be 6 times as high
as in the least
developed
countries.
 Differences are due
to position in
transition, baby
booms and busts,
and fertility below
replacement.
Japan

73. LABOUR INCOME AND
CONSUMPTION

74. How labour income and
consumption vary by age
• To understand the economic implications
of age structures, we need to know how
labour income and consumption vary with
age.

75. Asian Country: Thailand, 1998
Thailand's Economic Lifecycle, 1998
Per capita labor income and consumption per year (baht)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
0 10 20 30 40 50 60 70 80 90+
Consumption
Labor income
Source: Chawla 2005.

76. Western countries have high consumption in
old age (USA, 2003)
0
10000
20000
30000
40000
50000
60000
0 20 40 60 80
Dollars(US,2000)
Labor Income
Consumption
40000
50000
)
Source: National Transfer Account data.

77. 77
Strengths
Saving Mindset
Family Values
Social Capital
Integral approach
Sustainable thinking
Democratic Values
Diversity
Language skills
Long history of Higher Education
Entrepreneurship
Bharatiya Sanskruti

78. 78
Strength: Bharatiya Sanskruti

79. 79
Strengths
Saving Mindset
Bharatiya Sanskruti

80. 80
Gold
• Investment: beneficial or harmful ?
• Gold accumulation by Indian families

81. 81
Gold: Consumer Demand 1995-2011
Countries 1995 2000 2005 2008 2010 2011 2014
India 477 855 722 713 1006 933 843
China 427 329 293 432 667 811 813
Middle East 365 498 388 346 234 200 212
USA 315 396 377 267 235 195 179
Total
Incl.others
2864 3288 3092 3048 3217 3450 3923
Gold price
($/oz)
384.1 279.1 444.5 872 1224.
5
1571.
5
1571.
5
Note: 1 Tonne=32,151 troy oz of fine gold; * Jewellary only
Source: World Gold Council—Gold Demand Trends various issues

82. 82
Strengths
Family Values
Social Capital
Bharatiya Sanskruti

83. 83
Family Values
Social Capital
• Strong family ties
• Low rate of crimes
• Rapes are 30 times more in US
than in Bharat

84. 84
• REMITTANCES from abroad ?

85. 10/13/2016 Dr. Varadraj Bapat, IIT Mumbai 85
85
REMITTANCES
Top recipient countries of remittances
(in billions of US Dollar) (update)
Country 2008 2009 2010 2011
India 50 49 53 64
China 23 23 33 40
Mexico 26 22 22 24
Philippines 19 20 21 23
Nigeria 19 18 20 21
http://en.wikipedia.org/wiki/Remittance

86. 86
Strengths
Integral approach
Sustainable thinking
Bharatiya Sanskruti

87. 87
• What is world economic history ?

88. 88
Share of World GDP from 0 to 1998
Year 0 100
0
150
0
160
0
170
0
182
0
187
0
191
3
195
0
197
3
199
8
W.
Eur
10.8 8.7 17.9 19.9 22.5 23.6 33.6 33.5 26.3 25.7 20.6
USA 0 0 0.3 0.2 0.1 1.8 8.9 19.1 27.3 22.0 21.9
Chin
a
26.2 22.7 25.0 29.2 22.3 32.9 17.2 8.9 4.5 4.6 11.5
Indi
a
32.9 28.9 24.5 22.6 24.4 16.0 12.2 7.6 4.2 3.1 5.0
Worl
d
100 100 100 100 100 100 100 100 100 100 100
Source: Table-B-20 Appendix B; pp263; The World Economy: A millennial Perspective—Angus Maddison OECD Development Centre Studies --2007

89. GDP during 2,000 years
Source: Angus Maddison. 2001. The World Economy: A Millennial Perspective. OECD, Paris
Share of Global GDP (%): Year 0-1998
0
5
10
15
20
25
30
35
40
0
1000
1500
1600
1700
1820
1870
1913
1950
1973
1998
Western Europe
United States
Japan
China
India

90. 90
• India is not a story from Rags to
Riches.
• It’s an economic empire re-establishing
itself
• Western economies have to loot others to
sustain

91. 91
• Bharatiya approach is integral and
sustainable

93. 93
The Integral Approach
0 Individual
1 Family
2 Society
3 Nation
4 Nature
5 Parameshti

96. 96
Strengths
Entrepreneurship
Bharatiya Sanskruti

97. @Prof R.Vaidyanathan,IIMB,2012
• Global entrepreneurship monitor shows that
…………. % of India Population is engaged
in various entrepreneurial activities.
• Also Guess for US, Eurpoe and China

98. @Prof R.Vaidyanathan,IIMB,2012
• Global entrepreneurship monitor shows that
…………. % of India Population is engaged
in various entrepreneurial activities.
• 18 %
• US 11 %
• Europe 5 %
• China 3 %

99. @Prof R.Vaidyanathan,IIMB,2012
• Rise of Bharat, is unique – without high
FDI, high export and mostly domestic
forces-led, unlike that of China. Also the
Global Entrepreneur Monitor [GEM]
study 2003 showed that Indian
economy was entrepreneur-led, unlike
China which is investment and state-
led.

100. The performing India
• UNIDO study in 1997 identified 370 clusters in India
• 2600 rural and artisan clusters.
• Of these only 13 Govt.sponsored
• Contribute 70% of Industrial out-put and 66% of direct
exports
• Panipat – 75% of blankets produced in the country
• Tirupur – 80% of cotton knitwear
• Agra – 75% of leather exports
• Ludhiana – 95% of woollen knitwear,85% of sewing
machines,60% of Bi-cycles and spares
• Surat – 85% of diamond polishing and 60% of synthetic
textiles
• High technology easily absorbed and improvised

101. Domestic Consumption drives growth
• The economist Stephen Roach of Morgan
Stanley puts it, "India's domestic
consumption-led approach to growth is better
balanced than resource-mobilization & export
driven model of China."

102. 102
Strengths
Democratic Values
Diversity
Bharatiya Sanskruti

103. 103
Strengths
Language skills –
multiple language capacity of
Indians
Sanskrit
Long history of Higher Education
“Beautiful Tree” Dharma Pal ji
Bharatiya Sanskruti

104. Despair …?
• We continue to look to at West for our own
solution.

105. India on the move…?
• Towards Superpower ?
or
• Towards Jagat Guru ?

106. From Davos to DevGiri !
• Reasons to rejoice:
– Transition from Exploited Subdued India to
Enlightened Self-confident Bharat

107. Economics that hurt the moral
well-being of an individual or a
nation are immoral and therefore
sinful.
MM-263
That economics is untrue which
ignores or disregards moral
values.
XXV-475

108. Our object in framing the
Constitution is rally two-fold: (1) To
lay down the form of political
democracy, and (2) To lay down that
our ideal is economic democracy
and also to prescribe that every
Government whatever is in power
shall strive to bring about economic
democracy. The directive principles
have a great value, for they lay
down that our ideal is economic
democracy.

109. Deendayal Upadhyay “I visualize for
India a decentralized polity and self-reliant
economy with the village as the base. We
cannot rely upon superficial Western
concepts like individualism, socialism,
communism, capitalism and need to be
rooted in the timeless traditions of our
ancient culture. He was of the view that
the Indian intellect was getting suffocated
by Western theories and ideologies and
consequently there was a big roadblock
on the growth and expansion of original
Bharatiya thought.

110. • Maharishi Aurobindo said:
“India shall arise upon the ruins
of the west” He said by the
year 2011 the western
countries will fall and India will
rise.

111. India has to get into act
•The Question is are we
getting ready to create a
new world order?

112. Bharat has to get into act

113. References
1 Indian Models of Economy, Business and
Management Models- K Kanagasabapathi
2 India Unincoporated- L Vaidyanathan
3 Indian Business and Financial Models
course by S Gurumurthy conducted at
IITB.

114. Further readings
1 Too big to fail- Andrew Ross Sorkin
2 The Inside Job- A Documentary on how
the global economic crisis happened.

115. 115