Transcript India will be the world`s most populated country by 2050

WILL INDIA BECOME AN
ECONOMIC SUPERPOWER,
DOES IT MATTER & WHAT
MIGHT PREVENT IT?
Stephen Howes, Lead Economist (India), World Bank
March 2005
[email protected]
Disclaimer: This represents my views, not those of the World Bank
A. WILL INDIA BECOME
AN ECONOMIC
SUPERPOWER?
India currently has the 11th largest GDP
in the world…
United States
Japan
Germany
United Kingdom
France
China
Italy
Canada
Spain
Mexico
India
South Korea
Brazil
Netherlands
Australia
Russia
Taiw an
Sw itzerland
Belgium
Sw eden
10417
3979
1976
1552
1410
1237
1181
716
650
637
515
477
452
414
411
347
282
268
248
230
WDI: Constant 1995 US$ billion, 2002
…accounting for 1.6% of the global
GDP in 2002…
33.0%
United States
Japan
12.6%
Germany
6.3%
4.9%
United Kingdom
France
4.5%
China
3.9%
Italy
3.7%
Canada
2.3%
Spain
2.1%
Mexico
2.0%
India
1.6%
Korea, Rep.
1.5%
Brazil
1.4%
Netherlands
1.3%
Australia
1.3%
Russia
1.1%
…and ranks 26th in the world by total trade in
goods and services (US$ billion, 2002)…
United States
Germany
Japan
United Kingdo m
France
China
Italy
Netherlands
Canada
B elgium
Ho ng Ko ng, China
Ko rea, Republic o f
Spain
M exico
Taipei, Chinese
Singapo re
A ustria
Switzerland
Ireland
M alaysia
Russian
Sweden
A ustralia
Thailand
Denmark
India
B razil
No rway
Saudi A rabia
P o land
2374
1356
925
850
815
706
615
574
558
481
478
377
374
363
293
289
226
215
209
204
202
193
172
165
155
151
133
131
119
115
WTO: US$ billion, 2002
India has been one of the fastest growing
economies in the world over the last 20 years
Annual average growth rates of 10 fastest growing economies over
1980-2002 excl. small countries (pop < 10 million)
China
9.5
South Korea
6.8
Taiwan
6.6
Vietnam
6.5
Malaysia
6.3
Thailand
6.0
India
Indonesia
5.6
5.4
Cambodia
5.3
Pakistan
5.2
Source: WDI
What does the Goldman Sachs BRIC Report say?
(BRIC=Brazil, Russia, India, China)
Goldman Sachs in their BRIC report have higher than historical projections for
Brazil and Russia and lower predictions for China…
9.5%
10%
Historical (1980-2002)
9%
8.5%
Goldman Sachs (2000-2050)
7.7%
8%
7%
5.6%
5.6%
6%
4.2%
5%
4%
2.9%
2.6%
2.5%
3%
2%
1.9%
1.3%
1.8%
1.3%
2.1%
1.8%
2.2%
2.0%
2.4%
0.9%
1%
-1%
India
China
Russia
Brazil
US
UK
France
Germany
Italy
Japan
-0.1%
…leading India to emerge as the 3rd largest economy
in 2050 (1995 US$ billion)…
China
43926
US
35067
India
30209
Japan
6092
Brazil
5596
Russia
5367
UK
3919
Germany
3816
France
Italy
Note the big gap between the first three and the rest
3297
2185
Goldman Sachs: Constant 1995 US$ billion
Projecting GDP using historical growth rates,
India would be the 6th largest economy in
2050
China
96178
United States
37781
Japan
19233
South Korea
16706
Taiw an
8662
India
7307
Germany
6458
France
4974
United Kingdom
3960
Italy
3111
Brazil
2598
Russia
339
WDI: Constant 1995 US$ billion
Under GS assumptions, India would be the
world’s 3rd largest trader in 2050
China
13842
US
6969
India
5575
Russia
3018
UK
2054
Germany
2021
France
1421
Japan
1238
Brazil
1013
Italy
948
0
2000
4000
6000
8000
10000
12000
14000
16000
Goldman Sachs & WDI: Constant 1995 US$ billion, projected at
historical Trade-to-GDP ratios
Using historical growth rates, India would be
the 10th largest trader in 2050
China
59.1%
South Korea
21.1%
Taiw an
15.5%
United States
14.7%
Japan
7.6%
6.7%
Germany
France
4.2%
United Kingdom
4.1%
Italy
2.6%
India
2.6%
Brazil
Russia
0.9%
0.4%
Will India Become an Economic Superpower?
India is already a large player.
It will become larger.
But it may not become one of three giants
B. DOES IT MATTER IF
AND WHEN INDIA
BECOMES AN ECONOMIC
SUPERPOWER?
India is already a population superpower
1601
1600
1418
1400
1262
2050
1200
1002
India will be the world’s most populated country
by 2050; it’s population is expected to stabilize by
the year 2100 at 1.8 billion
1000
800
600
420
400
60 64
82 74
127 100
146 118
Russia
59 61
Germany
58 50
UK
200
Japan
282
228
176
India
China
US
Brazil
France
0
Italy
Population (millions)
2000
Goldman Sachs
With a PC GDP of $ 494, India today ranks 128th in
the world
GERM ANY
US
UK
FRANCE
J APAN
BRAZIL
ITALY
RUSSIA
The fundamental challenge facing India is not
to become an economic superpower but to
become rich and eliminate poverty.
CHINA
WDI: Constant 1995 US$, 2002
INDIA
0
10000
20000
30000
40000
50000
60000
Alternative Scenarios



If India grew at GS rates it would be the poorest of the BRIC and G6 countries
in 2050, but equivalent to a low-end high income country like Spain today
If India grows at historical growth rates (6.5%) for the next 50 years, India
would have in 2050 a GDP PC of US $ 4564 (constant 1995 US$) equivalent
to a lower-middle-income country like Brazil today.
If India reverts to the “Hindu growth rate” (3.5%), its 2050 GDP p.c. will be
US$ 1723, equivalent to Iran today.
Summary of scenarios
today
Growth scenario
PC Income (USD)
Ranking of economy in 2050
Ranking of PC income today
494
11th
128th
8%
18731
3rd
23rd
2050
6.50%
4564
6th
44th
3.50%
1723
top 12
77th
C. WHAT MIGHT PREVENT
INDIA FROM BECOMING
AN ECONOMIC
SUPERPOWER?
RISKS TO GROWTH
• So far, just doing trend analysis. But economic growth can
slow down as well as speed up. Countries can catch up, but
also be left behind.
• Argentina:
 1889 GDP pc = 91% of US GDP pc
 1999 GDP pc = 33% of US GDP pc
• What are the factors which might slow down growth in
India?
1. MACRO SHOCKS
Has the economy been shock-proofed?
2. SECTORAL CHALLENGES
Sectoral growth rates since Independence
1
2
3
4
50s
3.1
6.3
4.3
3.9
60s
2.5
5.5
4.8
3.7
Agriculture and Allied
Industry*
Services
GDP (factor cost)
* Includes Construction
Source: Central Statistical Organisation
70s
1.8
4.1
4.4
3.2
80s
3.6
7.1
6.7
5.6
(Percent)
90s
2.8
5.7
7.8
5.8
2. SECTORAL CHALLENGES: Industry
India’s low share of industry in GDP
compared to East Asia.
100%
90%
80%
42.2
37.4
48.5
33.3
53.1
70%
69.5
60%
50%
22.1
40%
47.0
26.6
29.6
30%
20%
50.9
28.6
35.7
24.9
10%
17.3
15.6
15.9
SubSaharan
Africa
East Asia &
Pacific
China
1.9
0%
LDCs
Agriculture
Services
Industry
India
OECD
WDI
3. GROWING UNEMPLOYMENT:
jobless growth?
Elasticity of Employment to GDP
Sector
1
2
3
4
5
1977-78
to
1983
Agriculture
Mining & Quarrying
Manufacturing
Electricity
Construction
Wholesale & Retail
6
Trade
Transport Storage &
7
Construction
Finance, Real Estate,
Insurance & Business
8
Services
Community, Social and
9
Personal Services
All Sectors
Source: Planning Commission Reports
1983
to
1993-94
1993-94
to
1999-00
0.45
0.80
0.67
0.73
1.00
0.50
0.69
0.33
0.52
1.00
0.00
0.00
0.26
0.00
1.00
0.78
0.63
0.55
1.00
0.49
0.69
1.00
0.92
0.73
0.83
0.50
0.07
0.53
0.41
0.15
on Labour and Employment
3. GROWING UNEMPLOYMENT (cont):
Will moderate growth be enough?
Millions Employed (% Unemployed)
GDP Growth (%)
6.5
1999-00
397
(2.23)
2007
436
(5.61)
2012
467
(7.41)
8.0
397
(2.23)
442
(4.27)
482
(4.55)
Source: Planning Commission Reports on Labour and Employment
4. GROWING REGIONAL INEQUALITY
State GDP p.c. USD, 1999-00
Punjab
738
Maharashtra
715
Haryana
659
Gujarat
603
Tamil Nadu
582
Kerala
577
Karnataka
514
All India
494
West Bengal
474
Andhra Pradesh
465
Rajasthan
383
Madhya Pradesh
351
Uttar Pradesh
309
Orissa
282
Bihar
189
0
100
200
300
400
500
600
700
Central Statistical Organization
800
4. GROWING REGIONAL INEQUALITY
(cont).
GDP PC in constant US$, projected for the year 2050
using historical growth rates
Tamil Nadu
3765
3460
Maharashtra
Kerala
2771
Punjab
2352
Andhra Pradesh
2352
2258
Karnataka
Gujarat
2205
Haryana
1924
All India
1737
Rajasthan
1301
West Bengal
903
Madhya Pradesh
729
Uttar Pradesh
573
Orissa
466
Bihar
165
0
500
1000
1500
2000
2500
3000
3500
4000
Central Statistical Organization
5. POPULATION GROWTH
India’s Regional Distribution of Population will
Change Over Time
1991
2051
North
5%
North
5%
East
14%
East
15%
"BIMARU"
41%
West
15%
South
24%
"BIMARU"
48%
West
14%
South
19%
Economic & Political Weekly, Vol. XXXVIII No. 45, November 8-14, 2003
6. URBANIZATION
India’s urbanization has only just begun
90
Urbanization as a proportion of total population, year 2002
80
76.2
79.3
70
60
50
40
30
37.6
38.2
China
South East
Asia
28.1
24.3
20
10
0
LDCs
India
Latin America
OECD
Source: WDI
6. URBANIZATION (cont.)
If India does grow rapidly, one would expect
about 75% of India’s population would be
urbanized by 2050
 Urban population in 2050 = 75% of 1.6 billion =
1.2 billion
 Urban population today = 28% of 1.002 billion =
280 million
 Urban population would increase by 920 million
by 2050 (almost 20 million new urban residents a
year)
 Can India cope with such rapid urbanization,
or will it stymie India’s growth?

7. ENVIRONMENTAL DETERIORATION
A lot of environmental problems diminish
with growth
 But not all: e.g. water.

India - Per Capita Water Availability
(in cubic meters)
6000
Water stress
5000
Water scarce
4000
3000
2000
1000
0
1950
Source: www.cnie.org
1990
2025
8. HEALTH THREATS: AIDS
Prevalence of HIV as a proportion of w orking population in 2001:
India next only to, but w ell below , Sub-Saharan Africa,
8.36
Water stress
0.64
0.67
0.80
Water scarce
Su
In
bdi
Sa
a
ha
ra
n
Af
ric
a
0.45
Ce
nt
ra
lA
si a
So
ut
h
As
ia
La
ti n
Am
er
i ca
EC
D
O
As
ia
Ea
st
So
ut
h
0.23
0.19
0.10
M
EN
A
0.10
Ch
in
a
9
8
7
6
5
4
3
2
1
0
8. HEALTH THREATS (cont.): AIDS
But are parts of India only a decade or less behind parts of Africa?
HIV Prevalence: STD Patients in South Africa, Major Urban Areas, 1990-2000
Com pared to Selected States of India in 2002
(Median Prevalence in percent)
52.3 49.2 53.7
47.1
57.2
39.9
30.4
6.2
18.7 21.8
Water stress
Water scarce
G
oa
Ka
rn
at
Ta a ka
m
il N
ad
u
SA
19
9
SA 2
19
93
S
An
A
19
dh
94
ra
Pr
ad
es
SA h
19
9
SA 5
19
9
SA 6
19
9
SA 7
19
9
SA 8
19
9
SA 9
20
00
5.6
Bi
ha
r
SA
19
90
G
uja
r
SA at
19
91
1.6
9.5
14.7 15.3
11.3 13.6
Source: UNAIDS/NACO
8. HEALTH THREATS (cont.):
AIDS IMPACT
Water stress
Water scarce
9. WEAKENING GOVERNANCE
Water stress
Water scarce
10. POLITICAL RISKS
India is a stable democracy (cf. China – yet
to make the democratic traditions)
 But democracies can be unstable:
 Unstable governments
 Short tenures
 Rickety coalitions
 Civil violence (cf. Sri Lanka, Nepal)

Water stress
Water scarce
11. SECURITY RISKS
Regional conflict
 Terrorism

Water stress
Water scarce
12. GLOBAL RISKS
Global recession
 Spread of global terrorism or other forms of
conflict
 Global warming or other environmental
threats to growth
 Any slowing down of global growth will
tend to perpetuate the current economic
configuration.

Water stress
Water scarce
WHAT SHOULD INDIA WORRY ABOUT?


India should worry most about those risks or
challenges which:
 Will tip India from base to low case growth
(rather than high to base)
 Have a reasonable probability of occurring
Water stress
 Are at least partially within India’s control
Water scarce
2 leading candidates: AIDS, conflict
IN SUMMARY: THE ANSWERS




Will India become an economic superpower?
 On current trends, yes.
Does it matter?
 Yes, but primarily as an indicator of prosperity.
What might prevent it?
 12 risk areas identified, some very serious and
Water stress
daunting. Lots of unknowns.
Plenty Water
of scarce
challenges to confront.
India is certainly heading in the right direction,
but into unchartered territory. Its voyage will be
one of the great voyages of the 21st Century.