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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
[object Object]
 Where are we today?
 Where are we going in the     future?
Even though the world hasjust discovered it, the Indiagrowth story is not new It has been going on for 25 years
What is the India story?
28 years of  high growth Average annual GDP growth (%) 10 8.9 8 6.0 6 3.5 4 1.0 2 0 1900-1950 1950-1980 1980-2002 2002-2007
Population growth is slowing  (%) 2.5 2.2 2.1 2.0 1.8 1.5 1.5 1.0 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)
Literacy is rising (%) 100 80 80 65 52 60 40 17 20 0 1950 1990 2000 2010 (proj) Source: Census of India (2001)
When middle class is 50% then the politics will also change (m) 0 32% 22% 8% 400 368 300 200 220 100 65 1980 2000 2010  Source: The Consuming Class, National Council of Applied Economic Research, 2002
Poverty is declining (%) 50 1% of the people have been crossing poverty line each year for 25 years  Equals ~ 200m 46 40 30 26 20 16 10 0 1980 2000 2010
Per capita income gains 1,178 1980 2005 3,051 US$ ppp Source: World Bank
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: ,[object Object]
How do we take people from farms to cities?
Will SEZ’s be our tipping point?,[object Object]
Reasons for success India’s success is market-led whereas China’s is state induced The entrepreneur is at thecentre 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 ,[object Object]
 1 out of 4 school teachers absent in    government schools ,[object Object],   centers ,[object Object]
 Land titles
 Etc,[object Object]
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 ,[object Object],    since 1991 ,[object Object]
65 countries have done the same reforms – why did India    become the second fastest in the world?  ,[object Object],[object Object]
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? ,[object Object]
 Pain has been less than in China
 Competitive companies have recovered faster.
 Risk of protectionism has receded
 Recovery has been ahead of the world,[object Object]
Per capita income On a ppp basis  ($000) 40 30 20 10 0 2000 2005 2020 2040 2066 37,000 16,800 5,800 3,050 2,100

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Indias Future (Nov 2009)

  • 1. 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
  • 2.
  • 3. Where are we today?
  • 4. Where are we going in the future?
  • 5. Even though the world hasjust discovered it, the Indiagrowth story is not new It has been going on for 25 years
  • 6. What is the India story?
  • 7. 28 years of high growth Average annual GDP growth (%) 10 8.9 8 6.0 6 3.5 4 1.0 2 0 1900-1950 1950-1980 1980-2002 2002-2007
  • 8. Population growth is slowing (%) 2.5 2.2 2.1 2.0 1.8 1.5 1.5 1.0 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)
  • 9. Literacy is rising (%) 100 80 80 65 52 60 40 17 20 0 1950 1990 2000 2010 (proj) Source: Census of India (2001)
  • 10. When middle class is 50% then the politics will also change (m) 0 32% 22% 8% 400 368 300 200 220 100 65 1980 2000 2010 Source: The Consuming Class, National Council of Applied Economic Research, 2002
  • 11. Poverty is declining (%) 50 1% of the people have been crossing poverty line each year for 25 years Equals ~ 200m 46 40 30 26 20 16 10 0 1980 2000 2010
  • 12. Per capita income gains 1,178 1980 2005 3,051 US$ ppp Source: World Bank
  • 13. India is now the 4th largest economy It will overtake Japan between 2012 and 2014 to become the 3rd largest
  • 14. The India model is unique
  • 15. Drivers of growth India Domestic East and S.E. Asia Exports
  • 16. Drivers of growth India Domestic Services East and S.E. Asia Exports Manufacturing
  • 17. Drivers of growth India Domestic Services Consumption East and S.E. Asia Exports Manufacturing Investment
  • 18. 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
  • 19. Implications of India model ‘Domestically led’ means: Insulation from global downturns Less volatility We will come out of the global crisis faster
  • 20.
  • 21. How do we take people from farms to cities?
  • 22.
  • 23. Reasons for success India’s success is market-led whereas China’s is state induced The entrepreneur is at thecentre of the Indian model
  • 24. Rise of globally competitive Indian companies
  • 25. India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn
  • 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
  • 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 Fortune 500 companies have R&D bases in India
  • 28. 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
  • 29. 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)
  • 30. 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)
  • 31. Public space is a problem We have Dynamic democracy with honest elections Free, lively media and press But we also have Poor governance!
  • 32.
  • 33.
  • 35.
  • 36. The economy grows at night when the government is asleep
  • 37.
  • 38. Key reforms Opened economy to trade and investment Dismantled controls Lowered tariffs Dropped tax rates Broke public sector monopolies
  • 39.
  • 40.
  • 41. 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
  • 42.
  • 43. Pain has been less than in China
  • 44. Competitive companies have recovered faster.
  • 45. Risk of protectionism has receded
  • 46.
  • 47. Per capita income On a ppp basis ($000) 40 30 20 10 0 2000 2005 2020 2040 2066 37,000 16,800 5,800 3,050 2,100
  • 48. 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
  • 49. 50% 50% India will gradually turn middle-class West of theKanpur-Chennai line East of theKanpur-Chennai line Kanpur- 32% 22% Chennai 8% 1980 2000 2010 2020 2040
  • 50.
  • 51. GovernanceNone of these stopped the show in the past 25 years - Nuclear War?
  • 52. 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
  • 53. Caste system Origin of India’s caste system Classical four castes vs 3000 jatis Hostage to competitive politics Source of competitive advantage Affirmative action
  • 54. Role of Religion India’s pluralism, diversity and tolerance 1% 2% 12% 85% Hindu Muslim Sikh Christian Hinduism Spiritual entrepreneurialism: Gurus No hierarchy: Every Brahmin thinks he is the Pope 300 million gods: Lack of theological narcissism Nasadiya Temper
  • 55.
  • 56. It is slower than China but its path is surer
  • 57. However, an elephant at 8% growth is a formidable beast
  • 58. We have waited 3000 years for this moment
  • 59.