Transcript Indian Polity and Economy

INDIA as a Superpower?
1. Indian Polity and Economy
2. Energy & Climate Change
3. Reforms Needed
S L R AO
AT
U N I V E RS I T Y O F W I S CO N S I N,
MADISON
SEPTEMBER 2010
First Lecture
Indian Polity and Economy
Indian Polity: Features
 Democracy-15 Lok Sabha Elections since 1952; Electorate
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rose:670 mn in 2004;714 mn in 2009; using 1 mn electronic voting
machines;
Declared expenditure over $ 300 mn
Many peaceful changes of governments at Centre and states
Obedience to judiciary
Military under civil authority
Built on inherited British civil services
Diversity-Multi ethnic/linguistic/cultural
Vast variation in size of States
Right to Information
Vibrant free Media
Indian Polity- Threats
 Neighbors-China (1 War+Live Disputed Border)
 Nuclear Pakistan as surrogate of China
 Afghanistan could give China a South Asian arc of influence
 Nepal, Sri Lanka, Burma, Bangladesh
 Significant Cross-border Terrorism
 Caste and Community disharmonies; pressure for affirmative action;
also for women
 Demand for smaller states: 2001-U.P.166 mn; Goa >1 mn
 Tribals-8.2%=.84 mn; worst off economically; most resource rich
lands; neglect and exploitation; violent “maoist” movement led by
urban educated, controls “Red Corridor”-40% of land area, 92000 sq
km,
 Militant trade unionism not a threat since 1980’s
Overview-Economy
 Patchy growth till 1980’s, since then good, but setbacks every 3-4
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years.
Fundamentals-Inflation a frequent worry;
More FII than FDI though FDI has picked up; volatile foreign funds
High interest rates;
Real’ economy growing slower than services;
Poor infrastructure,
Subsidies,
Poor social security;
Administrative incapability to spend efficiently on programmes,
Red tape,
High deficits
Overview-Economy
 Resilient economy despite sanctions of 1990’s & global meltdown of
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2008. because :
Vast domestic market, Rising consumption gives buoyancy;
Huge potential market of the Poor,
Young and ambitious population,
Technological and managerial capability
Energy-Large part of population not served by commercial energy;
Major fuel is and will be Coal; running short and needs for imports
India’s exemplary energy efficiency and emissions record
Economy: Features
1999 00 01 02 03 04 05 06
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07
08
09
2010
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GDP growth:
6.5 6.1, 4.4, 5.8, 4.0: 8.5, 7.5, 9.5, 9.7; 7.2% 7.4% 8.5%?
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Industrial production negative growth in 2009, now in double digits.
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High and Rising Savings rate (almost 40%) but high government deficits
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Rise in Capital formation Public sector, also Private Sector
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Deepening Export, growing again; China replacing USA as largest trading partner
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Inflation at single digit for a decade; 7.7% last year, 4.2 in Dec 2005; despite fuel,
power, light & lubricants at 7.1; from 03-04-8.1, 03-04-9.8); Rising in 2007-08, Nov
2008- 7.8%; 2009-10 and now food products at around 20%, extended to
manufactures; Will lead to tighter liquidity and higher interest rates; Can affect
growth

Not an Export driven Economy; export growth; 01-02-22.1, 02-03-15.0, 03-04-21.4,
04-05-27.6, 08-09 and 09-10 drop of 20%; now double digit growth
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Foreign Exchange reserves over $280 billion; NRIs, ECBs, FIIs, less FDI, trade deficits
Rapid growth of I.T. and B.P.O. 200708 $52 billion (growth of 28%), $40.4 b from
exports, $11.6 domestic. Of exports, IT grew by 28% to 23.1 b and BPO exports went
up by 30% to $10.9 b; 2008-09 (est): $62-64 billion; 2010 (est) : 110 billion; shifting
to high value added
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Resilience: Survived face-off with USA and sanctions after nuclear explosions; 2008
recession and fall in exports
Trend Growth: Economic Growth by Decades
1980s
Agriculture, Forestry & Fishing
1. Agriculture investment to
resume after decades of
sparseness, could grow
faster than the expected
3.4%
1990s
Mining & Quarring
2000s
2010s
Manufacturing
Electricity, Gas & Water Supply
2. Manufacturing more
improvement due rapidly
growing domestic market,
exports Constraint-energy
and wage price inflation
Construction
Trade, Hotels & Restaurants
Transport, Storage&
Communication
3. Infrastructure investments
major drivers-Power,
Roads & Bridges,
telecommunications,
Ports, Airports.
Financing, Insurance, Real
Estate & Business Services
Community, Social & Personal
Services
GDP at Factor Cost
0
2
4
6
8
10
12
14
16
18
The trends of the 2000s will continue – but growth will be much faster
Sector-wise GDP Growth Rates
Item
2004-05
2005-06
2006-07
(in %)
2007-08
(QE)
2008-09
(RE)
2009-10*
(AE)
0.0
5.8
4.0
4.9
1.6
-0.2
2. Industry
10.3
10.2
11.0
8.1
3.9
8.2
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


8.2
8.7
7.9
16.1
4.9
9.1
5.1
16.2
8.8
11.8
5.3
11.8
3.3
8.2
5.3
10.1
3.6
2.4
3.4
7.2
8.7
8.9
8.2
6.5
9.1
10.6
11.2
10.6
9.7
8.7
10.7
8.7
6.8
12.1
11.4
7.1
12.8
13.8
5.1
12.4
11.7
6.8
9.0
7.8
13.1
8.3
9.9
8.2
7.5
9.5
9.7
9.0
6.7
7.2
1. Agriculture, Forestry & Fishing
Mining & Quarrying
Manufacturing
Electricity, Gas & Water Supply
Construction
3. Service



GDP
Trade, Hotels, Transport And Communication
Financing, Insurance, Real Estate & Business Services
Community, Social & Personal Services
Note: 1) QE- Quick Estimates, RE – Revised estimates, AE – Advance Estimates
2) * Growth rates based on 2004-05 base year constant prices, rest are at 1999-00 base year constant prices
Source: CSO
Annual Growth Rate of Industrial Production
Sectoral
Weight
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10*
Mining
10.5
4.38
1.01
5.35
5.13
2.58
2.76
Manufacturing
79.4
9.13
9.15
12.52
8.98
2.75
-0.59
Electricity
10.2
5.15
5.16
7.26
6.35
2.76
5.30
Basic Goods
35.6
5.52
6.70
10.27
6.96
2.61
2.46
Capital Goods
9.3
13.95
15.74
18.24
18.01
7.30
-21.27
Intermediate Goods
26.5
6.08
2.50
12.02
8.93
-1.92
8.34
Consumer Goods (a+b)
28.7
11.70
12.04
10.09
6.06
4.74
0.50
a) Consumer Durables
5.4
14.34
15.30
9.16
-1.05
4.51
7.97
b) Consumer Non-durables
23.3
10.82
10.94
10.43
8.54
4.79
-1.84
General
100
8.37
8.16
11.53
8.49
2.75
0.11
Use-Based
Source: CSO & Handbook of Statistics on Indian Economy, RBI online
40.00
35.00
-5.00
1950-51
1951-52
1952-53
1953-54
1954-55
1955-56
1956-57
1957-58
1958-59
1959-60
1960-61
1961-62
1962-63
1963-64
1964-65
1965-66
1966-67
1967-68
1968-69
1969-70
1970-71
1971-72
1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
Sector-Wise Gross Domestic Savings
Percentage Share of Gross Domestic Savings and its component to GDP of
India : 1950-51 to 2007-08
Gross Capital Formation
Household Sector
Private Corporate Sector
Public Sector
30.00
25.00
20.00
15.00
10.00
5.00
0.00
Source: Handbook of Statistics on Indian Economy, RBI
1950-51
1951-52
1952-53
1953-54
1954-55
1955-56
1956-57
1957-58
1958-59
1959-60
1960-61
1961-62
1962-63
1963-64
1964-65
1965-66
1966-67
1967-68
1968-69
1969-70
1970-71
1971-72
1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
Sector-wise Capital Formation
45.00
40.00
Percentage Share of Gross Capital Formation and its component to
GDP of India : 1950-51 to 2007-08
Gross Capital Formation
Household Sector
35.00
Private Corporate Sector
Public Sector
30.00
25.00
20.00
15.00
10.00
5.00
0.00
Source: Handbook of Statistics on Indian Economy, RBI
Source: RBI Online
2008-09
2007-08
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
1999-00
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
Exports
1991-92
1990-91
1989-90
1988-89
1987-88
1986-87
1985-86
Trade Intensity
1984-85
1983-84
1982-83
1981-82
1980-81
1979-80
1978-79
1977-78
1976-77
40.00
1975-76
1974-75
1973-74
1972-73
45.00
1971-72
1970-71
Deepening of External Sector
Trade Intensity and Percentage Share of Total Exports and Total Imports
to GDP of India : 1970-71 to 2008-09
Imports
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
Overall Performance of Indian Economy
Annual Growth Rate of Real GDP (At 1999-00 Prices) and Inflation in India
From 1990-91 to 2008-09
Annual Growth Rate of Real GDP
16.0
Rate of Inflation
13.9
9.3
8.0
6.0
5.4
5.3
7.3
5.7
6.9
6.4
9.5
8.6
8.0
6.7
9.7
8.5
9.0
7.5
6.4
5.8
4.4
4.3
5.9
7.5
6.7
4.5
5.4
5.3
2007-08
10.0
10.6
11.2
2006-07
Percentage
12.0
2005-06
14.0
3.8
4.0
4.1
3.7
1.4
2.0
Source: CSO
2008-09
2004-05
2003-04
2002-03
2001-02
2000-01
1999-00
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
1990-91
0.0
Annual and month-wise rate of Inflation for
major heads in India
Major Heads
200506
200607
200708
200809
April May
09
09
June
09
July
09
August Sept.
09
09
All Commodities
Primary Articles
Food Articles
Non-Food Articles
Fuel Power Lights & Lubricants
Manufactured Products
4.4
2.9
4.8
-4.5
9.5
3.1
5.4
7.8
7.8
5.1
5.6
4.4
4.6
7.5
5.5
12.6
1.0
4.9
7.5
10.2
8.0
11.3
7.5
8.1
1.3
6.6
8.6
1.9
-5.7
1.8
1.4
6.3
8.4
3.0
-6.1
2.2
-1.0 -0.5
6.5
7.6
10.9 14.2
0.1
-3.3
-12.5 -10.4
0.6
0.1
-0.2
8.0
14.1
-3.0
-9.3
0.1
0.5
8.4
14.2
-3.6
-8.2
0.5
1.3
8.7
13.3
-0.8
-6.6
1.4
4.8
11.8
16.7
1.9
-0.9
4.0
Food Articles
Food Grains
(Cereals + Pulses)
Cereals
Pulses
Fruits & Vegetables
Milk
Eggs, Meat & Fish
Condiments & Spices
4.8
7.8
5.5
8.0
8.6
8.4
10.9
14.2
14.1
14.2
13.3
16.7
5.4
10.2
4.6
8.6
11.9
14.1
14.4
13.9
14.2
16.1
13.3
16.5
4.4
11.8
7.2
0.4
12.1
-6.1
7.3
30.4
4.2
6.3
4.4
29.2
6.2
-4.4
3.5
8.4
5.2
5.0
8.9
6.9
8.2
7.5
4.7
11.7
11.6
13.7
10.5
5.8
2.3
12.0
13.7
17.0
7.7
6.3
-0.5
8.9
13.8
18.1
13.5
7.4
5.9
8.8
12.5
23.0
16.9
9.5
20.5
8.3
13.1
21.1
12.0
9.6
26.9
8.0
15.3
20.9
10.8
9.7
24.2
14.2
11.8
22.8
11.1
10.0
23.1
14.9
13.6
35.2
13.7
11.5
29.7
22.1
Source: Computed from data available at Office of Economic Advisor, Ministry of Commerce and Industry, Government of India.
Oct.
09
Nov.
09
Rapid growth of I.T. and B.P.O. (% to GDP)
Exports
Year / Item
A.1) Merchandise
A.2) Invisibles
a) Services
i) Travel
ii)Transportation
iii) Insurance
Iv) G.n.i.e.
v) Miscellaneous

Software Services

Business Services

Financial Services

Communication Services
b) Transfers
i) Official Transfers
Ii) Private Transfers
c) Income
i) Investment Income
ii) Compensation of Employees
Current Account
B.1) Foreign Investment
B.2) Loans
B.3) Banking Capital
B.4) Rupee Debt Service
B.5) Other Capital
Capital Account
Overall Balance (BOP)
Imports
2004-05 2005-06
2006-07
2007-08
2008-09
2004-05
2005-06
2006-07
2007-08
2008-09
12.12
12.99
14.12
14.14
15.01
16.94
19.39
20.90
21.94
25.20
9.89
11.09
12.52
12.64
14.02
5.46
5.90
6.82
6.29
6.32
6.15
7.13
8.07
7.66
8.75
3.97
4.27
4.84
4.46
4.45
0.95
0.97
1.00
0.96
0.94
0.75
0.82
0.73
0.79
0.81
0.67
0.78
0.87
0.85
0.96
0.65
1.03
0.88
0.98
1.10
0.12
0.13
0.13
0.14
0.12
0.10
0.14
0.07
0.09
0.10
0.06
0.04
0.03
0.03
0.03
0.06
0.07
0.04
0.03
0.07
4.35
5.20
6.04
5.68
6.70
2.41
2.21
3.11
2.58
2.37
2.52
2.92
3.42
3.43
4.05
0.11
0.17
0.25
0.26
0.24
0.73
1.15
1.59
1.43
1.40
1.04
0.96
1.73
1.42
1.33
0.07
0.15
0.34
0.27
0.34
0.12
0.12
0.33
0.27
0.26
0.20
0.20
0.25
0.21
0.19
0.10
0.04
0.09
0.07
0.09
3.09
3.17
3.44
3.76
4.04
0.13
0.12
0.15
0.20
0.24
0.09
0.08
0.07
0.06
0.06
0.05
0.06
0.04
0.04
0.04
3.00
3.08
3.37
3.70
3.98
0.08
0.06
0.11
0.15
0.20
0.66
0.79
1.02
1.21
1.23
1.37
1.52
1.82
1.63
1.63
0.59
0.77
0.98
1.17
1.16
1.17
1.43
1.72
1.54
1.51
0.07
0.02
0.04
0.04
0.07
0.19
0.10
0.10
0.09
0.11
22.01
6.67
4.31
2.07
0.00
0.97
14.02
36.13
24.07
9.56
4.87
2.68
0.00
0.74
17.84
41.91
26.64
14.55
5.97
4.06
0.00
0.89
25.47
52.22
26.78
23.14
7.11
4.74
0.00
1.77
36.76
63.64
29.03
13.97
5.20
5.53
0.00
1.11
25.81
54.90
22.40
4.83
2.77
1.53
0.06
0.86
10.04
32.44
25.29
7.64
3.91
2.51
0.07
0.58
14.72
40.08
27.71
12.94
3.30
3.85
0.02
0.44
20.54
48.25
28.23
19.31
3.54
3.74
0.01
0.97
27.57
55.81
31.52
13.75
4.84
5.91
0.01
0.70
25.20
56.72
Source: Handbook of Statistics on Indian Economy, RBI online
Billion US $
-20.00
-40.00
-60.00
-80.00
-100.00
-120.00
-140.00
Source: Handbook of Statistics on Indian Economy, RBI (http://www.rbi.org.in)
2008-09
2007-08
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
1999-00
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
1990-91
1989-90
1988-89
1987-88
1986-87
1985-86
1984-85
1983-84
1982-83
1981-82
1980-81
India’s Trade Scenario
Trade Deficits of India : 1980-81 to 2008-09
0.00
-1
-2
-3
-4
Source: RBI Online
2008-09
2007-08
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
1999-00
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
1990-91
1989-90
1988-89
1987-88
1986-87
1985-86
1984-85
1983-84
1982-83
1981-82
1980-81
1979-80
1978-79
1977-78
1976-77
1975-76
3
1974-75
1973-74
1972-73
1971-72
1970-71
Indian Trade Scenario (Goods & Services)
India's Current Account Deficit/Surplus as Percentage to GDP
: 1970-70 to 2008-09
2
1
0
Expectations
 GDP growth forecasts; 2009-10- 7.4%; 8.5% in 2010 and 8.5






thereafter
BOP current a/c deficit widening again; also Trade deficit doubled
despite fall in crude prices; 2009 due Oil imports bills, now export &
foreign investment on rise
Labour Force : 381.94 (1993); 406.05 (1999); 469.05(2004)
Employed:
302.75
397
457.82
&
529.87 (2009), of which - in 2004 and 2009 in mnsAgriculture, forestry & fishing 267.57 to 296.62;
Mining & quarrying 2.74 and 3.19; Construction 25.61 & 38.35;
Manufacturing 53.5 & 61.9;
hotels & restaurant, Tpt, storage &
comm 64.49 & 79.56;
Expectations
 Elect. Gas & water supply 1.37 &1.5; Community, social & personal services
35.67 &38.81
 Trade, Financing, insurance, real estate & business services 6.86 & 9.94;

Corporate performance under pressure but margins ok: FY 99 4.08%; Rising
from FY 03 5.32, then 7.48, 9,24, 8,73, 9.84, 10.01 (FY 08), 8.54;
 Rising crude and gas costs hurt economy; but falling prices coincided with
recession; India with large gas discoveries
 Energy Inputs: Emphasis on local and cheaper: local coal, local gas, hydro,
nuclear, renewables,
 Climate Change and New Coal Technologies, ownership and investment
issues
 Squeeze on India-imperative of economic growth imperative despite rising
energy costs and pressure to reduce emissions which will reduce growth
OPPORTUNITY: Expected Investments in
Infrastructure 1/3 private
(Rs billion)
Sector / Year
Power
Roads & Bridges
Telecommunications
Railways
Irrigation
Water & Sanitation
Ports
Airports
Storage
Oil & Gas Pipelines
Total
2002-07
340.2
127.1
101.9
102.1
106.7
60.1
23.0
6.9
5.6
32.4
906.1
2007-12
658.6
278.7
345.1
200.8
246.2
111.7
40.6
36.3
9.0
127.3
2054.2
Plus - Internal Security (primarily Equipments)
Total Infrastructure Investment as % GDP
Per year
2009-10
2010-11
2011-12
15-20 Billion
7.94%
8.37%
9.00%
Household Consumption - Growth
Growth Rate
2000s
2010s
Private Final Consumption
Exp. In Domestic Market
6
Multiple/Expected Growth Factor
Between 2009-10 & 2019-2020
8
Private Final Consumption
Exp. In Domestic Market
11.6
12.3
Mis. Goods & Services
Recreation, Education &
Cultural Services
11.2
12.4
Transport &
Communication
7.7
Medical Care & Health
Services
8.7
9.5
4.1
Food, Beverages & Tobacco
0
Recreation, Education &
Cultural Services
3.2
2.3
10.5
2.4
Furniture, Furnishings,
Appliances & Services
2.7
Gross Rent, Fuel & Power
4.7
Clothing & Footwear
3.2
Medical Care & Health
Services
3.2
3.3
Gross Rent, Fuel & Power
Mis. Goods & Services
Transport & Communication
8.8
8.9
Furniture, Furnishings,
Appliances & Services
2.2
5
6
6.4
10
1.4
Clothing & Footwear
1.8
Food, Beverages & Tobacco
1.8
15
0
Source: Expenditure Spectrum of India, 2009-10, Indicus Analytics
1
2
3
4
Household Consumption- Diversification
2000-01
4%
8%
2009-10
Food, Beverages & Tobacco
2019-20
Clothing & Footwear
Gross Rent, Fuel & Power
14%
49%
Furniture, Furnishings,
Appliances & Services
5%
Medical Care & Health
Services
3%
Transport &
Communication
11%
6%
5%
Recreation, Education &
Cultural Services
13%
41%
19%
35%
8%
17%
17%
4%
6%
6%
4%
9%
5%
5%
Mis. Goods & Services
1. Overall household budget-about 2 times higher than now in real terms.
2. Share of food and related products falls from 40% to 34% (absolute amounts about x1.8 times).
3. Transport, Education, Health and Recreation among most rapidly growing consumer spending
Per capita income growth 8% pa – households will earn about double that they do now
6%
Agriculture, Infrastructure
 Agriculture investment will finally resume after many decades of
relative sparseness, but this sector could well grow much faster than
the expected 3.4%
 Manufacturing opportunities would improve on account of rapidly
growing domestic market as well as international markets – however
energy and wage price inflation will play a role.
 Investments in Power, Roads & Bridges, communications will be the
driving force of growth in the country in the 2010s – Investments A
large road network is going to be operational, ports are rapidly
improving, air transport infrastructure is being overhauled, and a
strong ecosystem has been created for the telecom sector
The Indian Consumer:
What will Indians eat in 10 years?
Growth Rates
4.1
Food, Beverages & Tobacco
Multiple/Expected growth factor
Between 2009-10 and 2019-20
6.4
Coffee, Tea, Beverages, Packaged
Food, Spices, Intoxicants, etc
6.6
11.6
Hotel & Restaurants
2.8
Potato & Other Tubers
Oils & Oilseeds
2.5
-1.4
-2
3.4
1.6
Milk & Milk Products
1.5
Potato & Other Tubers
1.5
5.4
3.7
Fruits & Vegetables
2000s
1.7
Oils & Oilseeds
2010s
1.1
Pulses
1.6
1.8
2
1.3
Suger & Gur
3.3
3.2
0
1.4
Cereals & Bread
4
2.8
Meat, Egg & Fish
1
Pulses
Cereals & Bread
Coffee, Tea, Beverages,
Packaged Food, Spices,…
4.5
3.9
Fruits & Vegetables
1.8
Hotel & Restaurants
3.8
3.9
Milk & Milk Products
-4
13
4.6
5
Meat, Egg & Fish
Suger & Gur
Food, Beverages & Tobacco
11
6
8
10
12
1.2
14
0
Source: Expenditure Spectrum of India, 2009-10, Indicus Analytics
2
4
The Indian Consumer:
What will Indians eat in 10 years?
Cereals & Bread
2009-10
2000-01
2019-20
Pulses
2%
14%
Suger & Gur
Oils & Oilseeds
23%
4%
3%
7%
Meat, Egg & Fish
3%
4%
3%
Fruits & Vegetables
6%
15%
Milk & Milk Products
2%
28%
8%
Potato & Other Tubers
14%
21%
19%
5%
20%
17%
4%
9%
13%
18%
14%
8%
12%
1%
2%
1%
Hotel & Restaurants
Coffee, Tea, Beverages, Packaged
Food, Spices, Intoxicants, etc
Lifestyle changes will show up in a major way in our eating habits. That is the next tipping point – cooking at
home will continue, and we will not do away with kitchens as in Thailand
Processed foods & eating out will be a rapidly growing component of household budgets
How will they spend on services?
Source: Expenditure Spectrum of India, 2009-10, Indicus Analytics
Recreation and communication will drive household expenditures the most. The Indian
household will move more and more towards lifestyle enhancing expenditures - and
another tipping point will be reached in terms of the expenditures on tertiary education
and health
Health care expenditures will grow rapidly, and so will those for education
Poverty
60
54.4
1200
53.1
50
Population
45.6
1000
39.1
40
40.8
30
37.3
38.2
32.4
Rural
28.3
25.7
Urban
20
600
400
Rural + Urban
10
200
0
0
1974
1978
1983
1988
1994
890
800
In Million
Percent
49
45.2
1097
Poor
2005
789
726
641
585
321
1974
329
1978
323
1983
307
1988
320
1994
302
2005
Estimates using the India Labour Report 2008
300 million people are estimated to be living under extreme poverty (< $ 1 per day). And this figure has been
more or less stagnant over the last 4 decades. If the current trends continue as many as 260 million persons
would remain under extreme poverty even by the end of the decade.
Expect that social safety nets would remain critical for India
Urbanization
Urban Population (in Million)
Share of Urban Population (%)
469
500
450
31.8
30
350
286
300
20
160
200
150
62
25.7
23.3
25
218
250
100
35.4
35
374
400
40
17.3
18
1951
1961
27.8
15
10
79
5
50
0
0
1951
1961
1981
1991
2001
2009
2019
1981
1991
2001
2009
Source: Indicus estimates using Registrar General of India data
1. About 32% of India’s 1176.7 million people reside in Indian cities currently. This 2. Will
increase to about 35.4% of the population of 1326.2 million by 2019.
2. 3. Most of this new urban population will comprise of recent migrants
3. 4. Impact: Urban services, sanitation, water, transport, housing
An additional 100 million will move into cities
2019
Demographic Dividend
 2004-Population =1080 million of which
Age between 15 and 64=672 million
 Below 15 and over 64, non-working or dependent
population=408 million
 Plus 60 population in millions-2001-6.3%=65 mn;
2016-8.9%=113 mn
 Dependency ratio of 0.6; 2030-0.4
 2020 Average Age: India-29; China-37; Japan-48: youngest
working age population in world
 Less children=more women at work; more saving; greater growth

Demographic Dividend-Implications

The transition to low fertility leads to a period during which the population
of working age increases faster than the consuming population. This “first
demographic dividend” boosts per capita income. Transitory because, the
population of working age ceases to increase.

To realize it, need for investments in skills and education. Also,

income per consumer drops, a cause of concern.

Lower mortality produces longer lives. As people live longer, they need to
accumulate more wealth to defray consumption in old age. The higher the
proportion of older persons, the higher wealth per capita. With more
wealth per worker, productivity and asset income increase, leading to a
long-lasting “second demographic dividend.

To realize the second dividend, wealth must be accumulated as savings or
assets. To the extent that older persons depend on family transfers or
public pensions, the second dividend is reduced.
India’s Potential
1.
2.
3.
4.
5.
6.
7.
Fast growing market for all types of goods and services
Fast growing economy
English \s a third language
India Accounts for 10 % of World Trade
India as a Source of Global Innovations New
Businesses, New Forms of Organization, New
Technologies.
Well-developed software of industry: market research,
advertising, design, etc
Entrepreneurial society
India’s Potential
8.
Bottom of the Pyramid as a
 Source of Product Innovations for the World
 Potential for leadership in low cost Health care, Education,
renewable Energy, energy conservation, Transportation,
Sustainable Development for all)
 New Markets
9.
A Flowering of Art, Literature, Films and Science
(10 Nobel Prize Winners of Indian origin, apart from Booker, Pullitzer, etc)
10. A New Moral Voice for People Around the World India as a country
where Universality and Inclusiveness is widely practiced. India
becomes the most Benchmarked country for its capacity to accept
and benefit from its diversity
Education-Investment Opportunity
 India has 3rd rd largest education system globally
 Spends over $ 13 bn overseas on education
 Network of over 1 mn schools and 18000 higher education institutions
 Variety of institutions
 Plan to grow this by 3 to 5 times
 Spends are at 3.7% of GDP
 Not even 1% of the $30 bn that government spends on education is on
capex
 Sample studies show that 44% of students also enrolled in private
schools
 $ 80 bn investment opportunity. Laws are changing.
India- A Fast Growing Economy
with Greater Potential
 Mobile Users - 56.89 million (March 2005), 362.2 million (Jan 2009);








101.1 Million new mobile users in last 10 months; growth continues
Internet connectivity in 2010 -200 million; still growing
5.25 mn broadband connections (Dec 2008); growing
5.4 million PC’s sold in 2006; slowing down
Cars: expected rise was from1 million to 2 million by 2010; Now waiting
lists for cars and 2 wheelers despite rise in production; NANO and other
cheap cars will add to volume
2010-over 94 mn cable & satellite households
Advertising industry at Rs4000 crores=$800 million
Presently, Retailing slow down; Special Economic Zones, even Media
2006-220 malls; 2010-over 600 were expected
Indian Economy; Need for Reform
1. Rising deficits-Growth enables rising expenditures; Need for more
efficient spending; improve tax revenues
2. Balancing Growth with inflation control; need for liquidity and lower
interest rates; reduce volatile foreign fund inflows; production,
productivity, efficiency, will allow both growth and inflation
control
3. Relative decline in “Rich” economies makes India an attractive
investment target; India can tighten rules to reduce volatile
Foreign Exchange Flows and add to Reserves
4. Participatory Notes and round-tripping of Indian funds
- Exemption from short-term capital gains tax; Mauritius as largest
foreign investor; Very volatile FII funds-stock market like yo-yo as
funds ebbed and flowed
Indian Economy; Need for Reform
5.
6.
7.
Faster growth of commercial energy to combat power shortages; 500
million not connected; limitations on domestic fuel resources; need to
acquire overseas; requires more security expenditures
Need for Blue Water Navy, credible deterrents against predatory
neighbors
NOT AN ECONOMIC SUPERPOWER BUT A VERY IMPORTANT ECONOMY
8. Thank you