Indian Growth and Competitiveness
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These are slides from an economics revision webinar on aspects of the Indian economy. Population: 1.3 billion; Urbanization: 33% Life expectancy: 68 years (average) HDI ranking 131st/188 Per capita GNI (PPP) $5,663 % living on less than $1.90 a day (PPP) 21% % of population under-nourished: 15% Remittance inflow (net) +3.3% of GDP Gini coefficient: 0.35 Palma Ratio: 1.5 Successful diversification into manufacturing Globally competitive in many service industries
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Indian Growth and Competitiveness
- 1. Indian Growth and Competitiveness – Focus on Reforms to Sustain Inclusive Development
- 2. India – Key Overview • Population: 1.3 billion; Urbanization: 33% • Life expectancy: 68 years (average) • HDI ranking 131st/188 • Per capita GNI (PPP) $5,663 • % living on less than $1.90 a day (PPP) 21% • % of population under-nourished: 15% • Remittance inflow (net) +3.3% of GDP • Gini coefficient: 0.35 • Palma Ratio: 1.5 • Successful diversification into manufacturing • Globally competitive in many service industries
- 3. 17.65% 15.71% 7.31% 4.15% 3.33% 3.12% 2.62% 2.33% 2.29% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% China USA India Japan Germany Russia Brazil United Kingdom France ShareinglobalGDP Percentage share of the main industrialized and emerging countries in global gross domestic product (adjusted for purchasing power) in 2016, Source: IMF World Outlook Note: Adjusted for purchasing power means that the $ value of each country’s GDP has been altered to take account of differences in the cost of living in different nations.
- 4. High Profile Indian Businesses
- 5. High Profile Indian Businesses? • Tata • Bharti Airtel • Infosys • IPL • Reliance Industries • Wipro • Mahindra • Bollywood
- 6. Economic Growth 10.26% 6.64% 5.62% 6.64% 7.24% 7.56% 7.62% 7.61% 7.67% 7.83% 7.96% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 2010 2011 2012 2013 2014 2015 2016 2017* 2018* 2019* 2020* GDPgrowthratecomparedtopreviousyear
- 7. Changing Centre of Gravity
- 8. GDP per capita (PPP)
- 9. Catch up in living standards 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 GDP per head relative to the United States (% of US GDP per head) (at purchasing power parity) (Source: IMF, forecasts for 2016-19) Brazil China India Mexico Russia China achieved upper-middle-income status as a developing country in 2010
- 10. Median age of the population (2016) 46.9 46.8 41.2 40.5 39.3 37.9 37.1 31.6 27.6 0 5 10 15 20 25 30 35 40 45 50 Japan Germany France United Kingdom Russia United States China Brazil India Medianageinyears
- 13. Composition of Indian GDP 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 ShareofGDP Agriculture Industry Services
- 15. World’s Largest Car Manufacturers (2015) 21.08 7.83 5.71 4.16 4.14 3.38 2.22 2.02 1.97 1.59 1.55 1.3 1.21 1 0.89 0 5 10 15 20 25 China Japan Germany U.S. South Korea India Spain Brazil Mexico UK France Czech Republic Russia Slovakia Iran Production in million units
- 16. Size of the IT Industry in India 5.8% 6.1% 6.4% 7.5% 8% 8.1% 9.5% 9.3% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 ContributiontoGDP
- 17. Number of people employed by Infosys 113,796 130,820 149,994 156,688 160,405 176,187 194,044 0 50000 100000 150000 200000 250000 2010 2011 2012 2013 2014 2015 2016 Numberofemployees
- 18. India is 16th largest export economy in the world and the 49th most complex economy according to the Economic Complexity Index
- 19. Pattern of Indian Exports of Goods
- 20. Pattern of Indian Imports of Goods
- 22. Barriers to FDI 0 1 2 3 LUX PRT SVN CZE NLD EST FIN ESP DEU COL HUN GRC DNK ARG EU BEL LTU IRL LVA SVK CRI ITA JPN ZAF CHL SWE TUR GBR POL OECD CHE NOR USA FRA BRA AUT AUS KOR ISL ISR CAN MEX RUS IND NZL IDN CHN Index scale of 0-6 from least to most restrictive Source: OECD Going for Growth (2016) Data is for 2013
- 23. Gross Savings (% of GNI)
- 24. Trade to GDP Ratio India’s trade to GDP ratio has now surpassed that of China having lagged behind it for many years
- 26. Key Barriers to Growth in India • Infrastructure bottlenecks esp. in energy / transport • Relatively high inflation • High import tariffs / low trade to GDP ratio • Fragmented retail sector – few economies of scale • Fragile banking sector – high rate of bad loans • Weaknesses in human capital • Complex and restrictive labour laws • Under-developed financial sector / limited competition • Very low female labour market participation • Deep-rooted inequalities between caste and gender • High rates of malnutrition and poor sanitation • Huge informal economy – low tax yield for government
- 27. Inflation 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 2010 2011 2012 2013 2014 2015 2016 2017* 2018* 2019* 2020* Inflationratecomparedtopreviousyear • India adopted an inflation target of 4% for next five years • Target has an upper tolerance level of 6% and lower limit of 2%
- 28. Barriers to Trade Index scale of 0-6 from least to most restrictive Source: OECD Going for Growth (2016) Data is for 2013 0 1 2 3 4 0 1 2 3 4 AUS AUT BEL CAN CHL CZE DNK EST FIN FRA DEU GRC HUN ISL IRL ISR ITA JPN LUX NLD NZL NOR POL PRT SVK SVN ESP SWE CHE TUR GBR USA LVA EU LTU OECD COL CRI IDN MEX RUS ZAF CHN KOR ARG IND BRA Import Tariff Barriers India’s tariff rate (a simple average of MFN tariff rates) is 13.4 percent for all products, 32.7 percent for agricultural products, and 10.1 percent for non- agricultural products—in all three cases India’s rates are among the highest across emerging market economies.
- 29. Graduation Rates in Upper Secondary Education, per cent 2014 2005 India 23.0 12.5 South Africa 33.6 Russian Federation 50.4 Mexico 51.3 40.2 Brazil 64.3 Greece 70.0 95.2 Spain 74.4 69.0 United States 81.9 74.3 China 86.0 Chile 87.7 United Kingdom 89.7 87.4 Germany 90.7 78.4 Korea 94.6 92.1 Netherlands 94.8 Switzerland 95.1 87.4 New Zealand 95.5 93.5 Japan 96.7 Finland 96.9 93.7 Ireland 97.9 92.0
- 30. Students abroad
- 31. Sanitation The World Bank’s Water and Sanitation Program has estimated the economic cost of inadequate sanitation at around 6.4 per cent of India’s GDP in 2006.
- 32. Key Supply-Side Reforms in India • Liberalization of FDI e.g. in railways / construction / retailing – PPP for implementing highway projects / launch of new toll-roads • Pro-poor and pro-rural initiatives to stimulate inclusive growth – Comprehensive crop insurance scheme for farmers – Investment in irrigation – Electronic trading platform for National Agriculture Market – Aadhaar unique beneficiary identification for cash benefits / subsidies – Celebrate Girl Child, Enable her Education scheme (2015) – Introduction of maternity benefits • Introduction of bankruptcy code and Pan-Indian goods and services tax • Allowed Indian railways to use surge pricing for passenger fares • Phased withdrawal of subsidies to Indian agriculture sector through free or cheap water, electricity and fertilizers • Flexible inflation targeting and creation of the Indian MPC • De-monetization policy (Nov 2016)
- 33. Modi’s De-Monetization Policy • November 2016 – Government de-monetizes 500 and 1,000 rupee notes – Introduction of new Rs 500 and Rs 2000 notes • This made 86% of cash in circulation invalid • Aims: 1. Curb corruption, counterfeiting, funding for terrorism 2. Increase tax compliance and increase tax revenues 3. Stimulate digitalization of economy 4. Increase flow of savings into formal financial accounts • Will the potential long-term benefits outweigh the short-term hardships and inconvenience?
- 34. De-Monetization Gainers • E-commerce • Banking industries • Financial technology Losers • Agriculture • Luxury goods (SUVs, gems, jewelry) • Real estate • Traditional retail (roadside vendors, cab drivers)
- 35. Indian Growth and Competitiveness – Focus on Reforms to Sustain Inclusive Development
Editor's Notes
- Narendra Modi and his BJP party have launched a series of economic reforms
- World’s biggest democracy, operates federal system – therefore much less centralized than China Harder to push through structural economic reforms? Successful diversification into manufacturing (motor vehicles) and services (including call centres, IT and biotechnology)
- India maintains a medium-term (five-year) growth expectation of 8.0 percent, which requires strong growth in investment and rural income
- Emerging economies will dominate the list of the world’s 10 largest economies and increase their share of world GDP to almost 50% by 2050
- Between 1990 and 2015, India’s real GDP (gross domestic product) per capita grew from US$375 to US$1572, but its female labour force participation rate (LFPR) fell from 37% to 28% Remember the issue of accuracy in measuring GDP - India is still a primarily cash-based economy; the informal sector is still very large
- India’s HDI value for 2015 is 0.624— which put the country in the medium human development category— positioning it at 131 out of 188 countries and territories. It achieved its Millennium Development Goals of halving poverty, infant and child mortality, and maternal mortality rates. Students are now staying in school longer, as evidenced by an increase in secondary school completion rates.
- A very large share of Indian workers—more than 90 percent—remain employed in low-productivity informal sector jobs. Women’s participation in the labor force is also low at around 25%
- The agricultural sector contributes around 15 percent of India’s GDP, and provides employment for about half of the Indian labor force
- India is the 16th largest export economy in the world and the 49th most complex economy according to the Economic Complexity Index (ECI). In 2015, India exported $276B and imported $368B, resulting in a negative trade balance of $92.6B. In 2015 the GDP of India was $2.1T and its GDP per capita was $6.1k.
- Food inflation is hugely important – high ratio of food in household budgets India also a large net importer of oil – every $1 on a gallon of oil adds $2billion to India’s import bill India adopted an inflation target of 4% for next five years Target has an upper tolerance level of 6% and lower limit of 2%
- The number of international students attending American universities has been rising steadily. Just under 975,000 international students were enrolled in U.S. universities last year and that number has now increased to 1,043,839. That upward trend is important as foreign students contribute billions to the U.S. economy. China supplies the most international students to U.S. universities (328,547), followed by India (165,918)and Saudi Arabia (61,287).
- According to the Census 2011 survey, 53.1 percent (63.6 percent in 2001) of households in India do not have a toilet, with the percentage being as high as 69.3 percent (78.1 percent in 2001) in rural areas and 18.6 percent (26.3 percent in 2001) in urban areas
- India’s tax revenue-to-GDP ratio (at around 171⁄2 percent) remains considerably below its emerging market peers Crop insurance - insurance coverage to farmers for crop failure, stabilize farmers’ income, and encourage farmers to adopt modern agricultural practices.
- At end-2015, currency in circulation in India stood at about 12 percent of GDP