1. INDIA’S FUTURE
Or prosperity will spread in India
p p y p
but happiness will not, until we fix governance
by
Gurcharan Das
WIPRO
November 12, 2009
Marbella
2. Where are we coming f
h from?
Where are we today?
Where are we going in the
future?
3. Even though the world has
E th h th ld h
just discovered it, the India
growth story is not new
It h been going on for 25 years
has b i f
5. 28 years of high growth
(%) Average annual GDP growth
10
8.9
8
6.0
6
3.5
4
2 1.0
0
1900-1950 1950-1980 1980-2002 2002-2007
6. Population growth is slowing
(%)
2.5 2.2
2.1
2.0 1.8
1.5
1.5
1.0
10
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)
7. Literacy is rising
(%)
100
80
80
65
60 52
40
17
20
0
1950 1990 2000 2010 (proj)
Source: Census of India (2001)
8. When middle class is 50% then the politics will also change
(m) 22% 32%
8%
400
368
300
200 220
100
65
0
1980 2000 2010
Source: The Consuming Class, National Council of Applied Economic Research, 2002
9. Poverty is declining
(%)
50 1% of the people have
p p
46 been crossing poverty
40
line each year for 25
30 years
26 Equals ~ 200m
20
16
10
0
1980 2000 2010
10. Per capita income gains
US$ ppp
1,178
1 178
1980
3,051 2005
Source: World Bank
11. India is now the 4th largest economy
It will overtake Japan
between 2012 and 2014
b t d
to become the 3rd largest
15. Drivers of growth
India East and S.E. Asia
■ Domestic ■ Exports
■ Services ■ Manufacturing
■ Consumption ■ Investment
16. Drivers of growth
India East and S.E. Asia
■ Domestic ■ Exports
■ Services ■ Manufacturing
■ Consumption ■ Investment
■ High tech, capital
g p ■ Low tech, labour
intensive industry intensive industry
17. Implications of India model
‘Domestically led’ means:
■ Insulation from global downturns
■ Less volatility
■ We will come out of the global crisis
faster
18. Implication of India model
‘Services led’ raises
uncomfortable questions:
f t bl ti
■ Have we skipped the industrial
revolution?
■ How do we take people from farms to
cities?
■ Will SEZ’s be our tipping point?
19. Implication of India model – Consumption led
People Friendly: People Friendly, Less inequality:
Consumption as % of GDP Gini Index
33%
42% 59%
64% India India
China China
41%
Europe U.S.
58%
%
45% Brazil
B il
Will India become the next big consuming economy after the U.S.?
20. Reasons for success
India s
India’s success is market led
market-led
whereas China’s is state induced
The entrepreneur is at the
centre of the Indian model
22. India has a vibrant private space
■ 100 Indian Companies have market cap of US$ 1bn
23. India has a vibrant private space
■ 100 Indian Companies have market cap of US$ 1bn
■ 1,000 Indian Companies have received foreign
institutional investment
24. 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 F t
Fortune 500 companies h
i have R&D b
bases i I di
in India
25. 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 F t
Fortune 500 companies h
i have R&D b
bases i I di
in India
■ 390 Fortune 500 companies have outsourced software
development to India
26. 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 F t
Fortune 500 companies h
i have R&D b
bases i I di
in India
■ 390 Fortune 500 companies have outsourced software
development to India
■ 2% bad loans in Indian banks (v~20% in China)
27. 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 F t
Fortune 500 companies h
i have R&D b
bases i I di
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)
28. Public space is a problem
We have
■ Dynamic democracy with
honest elections
■ Free, lively media and press
But we also have
Poor governance!
29. 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
30. Ironically, we used to have world class institutions from
1950-1980, but our problem was growth.
Now we h
N have growth, but our institutions are failing
th b t i tit ti f ili
■ Bureaucracy
■ Judiciary
y
■ Police
33. Key reforms
■ Opened economy to trade and investment
■ Dismantled controls
■ Lowered tariffs
■ Dropped tax rates
■ Broke public sector monopolies
34. Understanding India’s economic success
g
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
35. “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
36. 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
37. Where are we today?
Growth fell to 6.7% in 08-09; 7% in 09-10
Pain has been l
P i h b less th i Chi
than in China
Competitive companies have recovered faster.
Risk of protectionism has receded
Recovery has been ahead of the world
38. 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
39. Per capita income
($000) On a ppp basis
40 37,000
30
20 16,800
10 5,800
3,050
2,100
0
2000 2005 2020 2040 2066
40. Convergence in the 21st century
■ Why convergence is intuitive?
■ Convergence didn’t happen in the 20th century
because the world was closed
■ R t i t a world of equality prior t 1750
Returning to ld f lit i to
■ When China and India accounted for 45% of world GDP
41. India will gradually turn middle-class
West of the East of the
Kanpur- Kanpur-
Chennai line Chennai line
50% 50% Kanpur-
32%
22%
Chennai
8%
1980 2000 2010 2020 2040
42. What could stop the show?
- Infrastructure
- Improving via public private parterships
public-private
- Fiscal Deficit
- Governance
None of these stopped the show in the past 25 years
- Nuclear War?
43. Education System
Is reasonably good for the top 20%
But it is abysmal for the rest
■ 1 in 4 t
i teachers i absent i government
h is b t in t
primary schools
■ Hence, 54% of children in urban India are in
private schools
Solution: Education Vouchers
44. Caste system
■ Origin of India’s caste system
■ Classical four castes vs 3000 jatis
■ Hostage to competitive politics
■ Source of competitive advantage
■ Affirmative action
45. Role of Religion
India’s pluralism, diversity Hinduism
and tolerance
■ Spiritual entrepreneurialism: Gurus
2% 1%
■ No hierarchy:
12%
Every Brahmin thinks he is the Pope
■ 300 million gods:
Lack of theological narcissism
85% ■ Nasadiya Temper
Hindu Muslim Sikh Christian
46. 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 f
% formidable beast
■ We have waited 3000 years for this moment
■ India is more likely to preserve its way of life
