India's Future

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Information about India's Future
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Published on August 27, 2010

Author: gokulstrikes

Source: authorstream.com

Slide 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 Slide 2: Where are we coming from? Where are we today? Where are we going in the future? Slide 3: 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? : What is the India story? 28 years of high growth : 28 years of high growth 1.0 3.5 6.0 8.9 (%) Population growth is slowing : Population growth is slowing Sources: 1900-1990: Angus Maddison (1995), Monitoring the World Economy, 1990-2000:Census of India (2001) 1.0 2.2 2.1 1.8 1.5 (%) Literacy is rising : Literacy is rising Source: Census of India (2001) 17 52 65 80 (%) When middle class is 50% then the politics will also change : When middle class is 50% then the politics will also change Source: The Consuming Class, National Council of Applied Economic Research, 2002 65 220 368 8% 22% 32% Poverty is declining : Poverty is declining 46 26 16 1% of the people have been crossing poverty line each year for 25 years Equals ~ 200m (%) Per capita income gains : Per capita income gains Source: World Bank US$ ppp India is now the 4th largest economy : India is now the 4th largest economy It will overtake Japan between 2012 and 2014 to become the 3rd largest Slide 12: The India model is unique Drivers of growth : Drivers of growth India Domestic East and S.E. Asia Exports Drivers of growth : Drivers of growth India Domestic Services East and S.E. Asia Exports Manufacturing Drivers of growth : Drivers of growth India Domestic Services Consumption East and S.E. Asia Exports Manufacturing Investment Drivers of growth : 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 : 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 : Implication of India model ‘Services led’ raises uncomfortable questions: Have we skipped the industrial revolution? How do we take people from farms to cities? Will SEZ’s be our tipping point? Implication of India model – Consumption led : Implication of India model – Consumption led People Friendly:Consumption as % of GDP People Friendly, Less inequality: Gini Index Will India become the next big consuming economy after the U.S.? Reasons for success : 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 : Rise of globally competitive Indian companies India has a vibrant private space : India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn India has a vibrant private space : 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 : 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 : 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 : 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 : 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 : 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 : 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 Ironically, we used to have world class institutions from 1950-1980, but our problem was growth.Now we have growth, but our institutions are failing : Ironically, we used to have world class institutions from 1950-1980, but our problem was growth.Now we have growth, but our institutions are failing Bureaucracy Judiciary Police Slide 31:  The economy grows at night when the government is asleep Key reforms : Key reforms Opened economy to trade and investment Dismantled controls Lowered tariffs Dropped tax rates Broke public sector monopolies Understanding India’s economic success : 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 India become the second fastest in the world? Unappreciated fact – rule of law “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.” : “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 CrystalCambridge Encyclopedia of the English Language Understanding India’s economic success : 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? : 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 Where are we going? : 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 Per capita income : Per capita income 2,100 3,050 5,800 16,800 37,000 Convergence in the 21st century : 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 India will gradually turn middle-class : 50% 50% India will gradually turn middle-class 8% 22% 32% West of theKanpur-Chennai line East of theKanpur-Chennai line Chennai Kanpur- What could stop the show? : What could stop the show? Infrastructure - Improving via public-private parterships Fiscal Deficit Governance None of these stopped the show in the past 25 years - Nuclear War? Education System : 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 Caste system : Caste system Origin of India’s caste system Classical four castes vs 3000 jatis Hostage to competitive politics Source of competitive advantage Affirmative action Role of Religion : Role of Religion India’s pluralism, diversity and tolerance Hinduism Spiritual entrepreneurialism: Gurus No hierarchy: Every Brahmin thinks he is the Pope 300 million gods: Lack of theological narcissism Nasadiya Temper Elephant and not Tiger : 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 formidable beast We have waited 3000 years for this moment India is more likely to preserve its way of life Slide 47: The Wise Elephant

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