Transcript Presentation

India in the Global Economy in
2020:
Opportunities and Challenges
Siddhartha Mitra
Director (Research), CUTS International
The Liberalisation Story
1980s: Deregulation, Delicensing,
Freeing Capital Good Imports
1991: Balance of payments difficulties, pressure by
multilateral institutions lead to full scale liberalisation:
reduction in tariffs, encouragement to exporters, better
conditions for FDI
Late Nineties: Agricultural liberalisation and the beginning
of RTAs
Objectives
• Quantify the extent of Indian liberalisation
–
–
–
–
Trade as a proportion of GDP
Exports as a proportion of GDP
Imports as a proportion of GDP
FDI as a proportion of GDP
• Depict changes in affluence
– GDP per capita
– Growth rates of GDP per capita
• Depict changes in inequality and poverty
– Gini coefficient
– Head count ratio
• Capture Changes in Human Development Indicators
• Primary indicators
– Life expectancy
– Literacy
• Secondary indicators
– Infant Mortality
– Percentage of population with access to clean drinking water
– Physicians per 1000 population
– Hospital beds per 100 population
Objectives (Continued)
•
•
Depict Transaction Costs
Depict Changes in Quality of Life
–
–
–
–
–
•
Identify Strengths
–
–
–
–
•
Phone Subscribers per 100 population
Percentage of households with television
Power consumption per capita
Passenger cars per 1000 population
Personal computers per 1000 population
A large pool of cheap human capital
A large English speaking population
Service Sector Orientation
A dynamic private entrepreneur class
Limitations and Challenges
–
–
–
–
–
Large and increasing crude oil imports
Deficit in the current account emerging again
Slow progress in social sector
High levels of corruption
Inflation ?
Databases Used
• World Development Indicators (Online Version)
• www.indiastat.com
• Transparency International for Corruption Perception Index
• Mitra S. (2008)“The Nature of Indian Inequality Increase after
Liberalization, ” Indian Journal of Economics and Business:
Inequality Measures
• Virmani, Arvind ( 2006): “Poverty and Hunger: What is
needed to eliminate them”, Planning Commission Working
Paper No.1/2006
What is the extent of liberalisation?
1985
1991
1997
2003
2006
Trade (% of GDP)
14.17
18.05
25.49
31.55
48.77
Exports of goods and services (% of
GDP)
8.55
9.32
14.48
15.48
-
Imports of goods and services (% of
GDP)
5.62
8.73
11.01
16.07
-
Foreign direct investment, net inflows (%
of GDP)
0.05
0.03
0.87
0.76
-
GDP per capita – Levels and growth
GDP per capita
3000
2500
2000
1500
GDP per capita
1000
500
0
1980
1991
Period
1980-1991
1991-1998
1998-2006
1998
2006
Growth in per capita
GDP
2.94
4.96
4.59
Poverty and Equality
TABLE 2: GINI COEFFICIENTS
1987-88
1993-94
Rural
0.298
Urban
0.354
0.341
0.369
0.32 (1983
0.315
.325
Overall
0.282
1999-00
0.290
2004-05
.297
.373
figure)
Headcount Ratio of Poverty
Year
1972-73
1983
1993-94
1999-00
Incidence of Poverty
54.9
44.7
36.2
26.2
Human Development: Primary
Indicators
Life expectancy (years)
70
60
50
40
Life expectancy (years)
30
20
10
0
1960
1970
1980
1997
2006
Literacy Rate
80
70
60
50
40
Literacy Rate
30
20
10
0
1961
1981
1991
2004-2005*
Human Development: Other Indicators
YEAR
Infant Mortality ( per 1000)
1960
1975
1990
157.7
118
80
2006
USA (2006)
57.4
5
Percentage of population with access to clean
drinking water source
1990
1995
2004
70
76
86
Continued
Physicians per 1000 people
3
2.5
2
Physicians per 1000
people
1.5
1
0.5
)
U
.S
.(
20
00
04
20
98
19
88
19
75
19
19
60
0
Time
Hospital Beds per 1000 people
1960
0.46
1970
0.6
1991
0.79
2003
0.9
U.S. (2003)
3.3
Quality of life Indicators
Phone subscribers per 100 people
140
120
100
80
60
40
20
0
)
U
.S
.(
20
04
06
20
00
20
91
19
19
75
Phone subscribers per
100 people
Time
Percentage of households with television
1975
0.42
1985
2.67
1995
23
2005
32
U.S.(2007)
99
Quality of life Indicators (Continued)
Time
Power consumption per capita (KWH)
1971
99.9
1991
295
2005
480
U.S.(2004)
13,351
Passenger cars per 1000 people rose from 6 in 2000 to 8 in 2003;
U.S. had 482 In 2001
Time
Personal computers per 1000 people
1995
1.3
2000
4.5
2005
15.5
U.S.(2000)
585.18
Awareness
Year
Newspaper circulation per
1000 population
1997
48.09
2004
72.89
USA (present)
250
Contraceptive Prevalence (% of women aged 15-49)
90
80
70
60
50
40
30
20
10
0
Contraceptive
Prevalence (% of
women aged 15-49)
1985
1993
2006
U.S. (2004)
Transaction Costs
Procedures to build a
warehouse (2006)
Procedures to enforce a
contract (2007)
Procedures to register
property (2007)
Time in hours required
to prepare returns and
pay taxes (2007)
India
20
United States
18
46
32
6
4
271
325
Strengths
• Cheap human capital: around 10 million scientists, engineers
and technicians – same as the US
• Knowledge of English – 100 million English speakers –
second after the US
• Service sector orientation – lower chance of environmental
barriers to growth
• Dynamic private entrepreneur class
Limitations and Challenges
• Large and increasing crude oil imports: Imports 2/3rds of
its needs
• Deficit in the current account again emerging: Surplus
emerged briefly after the turn of the century but is back to
negative levels again
• Slow progress in social sector: Literacy and life expectancy
increase not keeping up with growth
• Power generation not keeping up with growth and power
demand
• High levels of corruption: India at CPI of 3.5 is 72nd in
clean governance out of 179 countries compared to
Denmark (9.4) ranked No. 1 and US (7.2) at 20th place
• Inflation – A problem? ( See next slide)
Inflation – A Problem?
Inflation over time
35
30
25
20
15
Inflation over time
10
5
0
-5 0
10
20
30
40
-10
0 – 1961
50 – 2011
High inflation: a very recent phenomenon
50