Transcript INDIA - Casa Asia

INDIA
ECONOMIC DEVELOPMENT
AND
BUSINESS OPPORTUNITIES
Arun Maira
The Boston Consulting Group
Barcelona
November 22, 2004
INDIA: PAST, PRESENT, FUTURE
Phase 1:
The Past
US $ Mn
30000
17th
largest economy
CAGR = 3.9%
Phase 2:
The Present
Phase 3:
The Future
12th largest
economy
3rd largest economy
CAGR = 5.1%
Expected CAGR = ~ 9%
25000
15000
10000
5000
2000
1000
CAGR(1) = 8 %
400
0
1950
1960
1970
1980
1990
2000
2003
2010
2020
2030
2040
2050
(1)
Tenth five year plan (2002-2007)
Note: CAGR = Compounded Annual Growth Rate
Source: Industry estimates
-1-
INDIA HAS REGISTERED THE FASTEST GROWTH AMONG ALL
MAJOR DEMOCRACIES IN THE RECENT DECADE
Phase 2
India has the fastest growth among all democracies having GDP > $ 100 Billion
Annual GDP growth rate
11%
10.3%
10%
9%
8%
7%
6.0%
6%
5%
3.5%
4%
3.1%
3%
2.9%
2.8%
2.5%
1.7%
2%
1.6%
1.5%
1.3%
1%
0%
China
US
India
Brazil
Mexico
UK
Finland
Italy
France
Japan
Germany
Source: 2002 World Development Indicators Report (data for 1990-2000, average annual percentage growth)
-2-
BY 2050, INDIA IS PROJECTED TO BE
THE 3RD LARGEST ECONOMY IN THE WORLD
Largest economies in 2050
GDP in 2050
(US$ Bn)
50,000
45,000
~44,500
40,000
~35,200
35,000
Huge gap between
three largest
economies and the
next few
~27,800
30,000
25,000
20,000
15,000
10,000
~6,700
~6,100
~5,900
5,000
~3,800
~3,600
~3,100
0
China
US
India
Japan
Brazil
Russia
UK
Germany France
India to overtake France in 2018
Source: Goldman Sachs Economic Paper # 99, BCG Analysis
-3-
POPULATION IN SOME COUNTRIES IS RAPIDLY AGEING
Problem Most Pronounced in the Developed World
...this will have several socioeconomic implications (select
examples)
Shortage in workforce
Median age of population in the OECD
countries is rising ...
Median age (year)
(Average for OECD countries)
50
45
40
42.4
45.8
39.6
35
33.6
29.6
Potential decline in growth rates
Increase in wage rates for
workers
36.5
30
25
44.5
30.9
Pressure on social security and
pension systems
20
15
Increase in services to the older
population
10
5
0
1970
1980
1990
2000
2010
(E)
2020
(E)
2030
(E)
2040
(E)
Source: Scarpetia and Blöndal; United Nations Population Division, World Population Prospects, The 1998 Revision; BCG analysis
-4-
THE FUTURE DEMOGRAPHIC MAP
Potential surplus population in working age group (2020)
Germany -3 Mn
UK
-2 Mn
0Mn
-1
Mn
Iraq
Ireland
US
-17Mn
France
Spain
-3 Mn
Czech
Republic
2Mn
-3 Mn
-2 Mn
2Mn
Israel
Iran
0Mn
3Mn
4Mn
Egypt
Mexico
-6
Mn
Turkey
Italy
5Mn
Russia
China
Pakistan
19
Mn
47
Mn
-10
Mn
-9 Mn
Japan
5Mn
7
Mn
Bangladesh
Philippines
4Mn
India
Vietnam
1Mn
Malaysia
3Mn
5Mn
Indonesia
Brazil
-0.5
Mn
Australia
Note: Potential workforce surplus is calculated keeping the ratio of working population (age group 15 – 59) to total population constant and under the assumption
that this ratio needs to be broadly constant to support economic growth. Therefore, India will have 47 Million more people in the working age group/total
population by 2020 compared to today, while France will have a deficit of 3 Million people in the working age group compared to today.
Source: U.S. Census Bureau; BCG Analysis
-5-
INDIA WILL CONTINUE TO HAVE A GROWING
POPULATION TILL 2050 AND BEYOND
Projected population growth rates
Net population
Bn people
1.8
India: Continuing to grow upto 2050
1.5
China: Declining after 2032
1.2
0.9
Brazil: Declining after 2050
0.2
0.6
G6:Declining after 2050
Russia: Already declining
0.1
0.3
0.0
2001
2008
2015
2022
2029
2036
2043
2050
Source: Goldman Sachs Economic Paper # 99, BCG Analysis
-6-
IN 2010-2030, LARGEST SHARE OF INDIA`S POPULATION WILL BE
IN THE WORKING AGE GROUP
Resulting in a Favourable “Demographic Bulge”
India Demographic Profile
(2020)
Age group
80+
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
60
-60
China Demographic
Profile (2020)
Age group
80+
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
40
-40
20
-20
0
20
60
40
Mn people
60
-60
France Demographic Profile
(2025)
Age group
80+
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
40
-40
20
-20
0
20
60
40
Mn people
3
-3
2
-2
1
-1
0
1
2
3
Mn people
20 - 35 age group :
20 - 35 age group :
20 - 35 age group :
325 mn people (~25 %)
308 mn people (~21 %)
11 mn people (~17 %)
Female
Male
Source: CII Conference 2002; CSFB Report; UN Population Division; BCG Analysis
-7-
ECONOMIC GROWTH BECOMING MORE INCLUSIVE
Level of affluence steadily increasing in India
Distribution of people by income group (1995 vs 2002 vs 2007)
Number of
people
(million)
1200
1099
998
1000
886
272
800
163
600
248
446
Middle
to High
Additional 283 mn
people from
'95 to '07
433
Lower
Middle
Additional 185 mn
people from
'95 to '07
220
Low
399
400
200
475
327
0
1995
2002
2007
Note: Categorisation of households on the basis of income (Rs pa) at 1995 prices: Low : <=22,550; Lower middle : 22,501-45,000 ; Middle to high : >45,001
Source: Statistical Outline of India, 2002
-8-
DEMAND ALSO RISING IN RURAL INDIA
Rural India consuming a high share of many “non essential” consumer goods
% Share for 2000
100%
19%
32%
80%
44%
49%
63%
67%
37%
33%
TV Colour
Shampoo
60%
40%
81%
68%
56%
20%
51%
0%
B&W TV
Cassette
Recorder
Ceiling Fan Motor Cycle
Rural
Urban
Source: NCAER 1999-00; Literature review
-9-
INDIA TO BE 3RD LARGEST ECONOMY, BUT WITH RELATIVELY
LOW PER CAPITA INCOME
Pattern of Growth Not Witnessed By Any Other Country
GDP vs GDP per capita in 2002
GDP (US$ Bn)
14000
GDP vs GDP per capita in 2050
GDP (US$ Bn)
60000
China
12000
50000
US
10000
US
40000
India
8000
30000
6000
Japan
4000
2000
China
India
Brazil Italy
Russia
0
0
20000
Italy
Germany
France
Germany
Russia
10000
UK
Japan
Brazil
France
UK
0
10000 20000 30000 40000 50000
GDP per capita
(US$)
Source: Goldman Sachs Economic Paper # 99, BCG Analysis
0
20000
40000
60000
80000 100000
GDP per capita
(US$)
Bubble size corresponds to GDP size
- 10 -
TWO INDIAS: ONE COMPETING INTERNATIONALLY; THE OTHER
BEHIND
IMPLICATIONS
"COMPETITIVE INDIA"
PROVIDES OPPORTUNITIES
IN INTERNATIONAL TRADE
AND BUSINESS
POOL OF
LOW COST
RESOURCES
INDIA
SHINING
EXTENSION OF
BENEFITS OF
GLOBALISATION
THE
WORLD
LARGE POOL OF LOW COST
RESOURCES YET TO BE
TAPPED
THE CHALLENGE AND
BENEFITS OF 'INCLUSIVE
DEVELOPMENT'
- 11 -
INDIA OFFERS EXCEPTIONAL VALUE AT
SIGNIFICANT COST ADVANTAGES
Comparison of Manpower Costs
Comparative salaries of an IT
engineer
$ pa
Comparative salaries of an MBA
$ pa
125,000
100,000
80,000
100,000
75,000
75,000
50,000
50,000
50,000
25,000
25,000
7,500
5,000
0
0
India
US
India
US
Source: Literature Survey
- 12 -
INDEPENDENT SOURCES CONFIRM INDIA IS BEST IN QUALITY
AND QUANTITY OF PEOPLE FOR GLOBAL SERVICES
Surplus
India
Indonesia
Brazil
Projected
workforce
in 2020
Mexico
Malaysia
Israel
Ireland
Turkey
China
Philippines
Russia
Shortfall
High
Low
People strength
• Productivity/quality
• English language skills (1)
• Cost
Note: Pakistan, Bangladesh and Vietnam have not been represented for lack of reliable data on productivity and cost of service employees
(1)
Over 50% of shortages expected from English speaking countries
Source: World Competitiveness Yearbook 2001, Britannica yearbook, Literature search; BCG analysis
- 13 -
SOMEDAY REAPING WHAT YOU SOW
INDIA'S LEGACY
INDIA'S OPPORTUNITIES
• Vertical
integration
• Small
volumes, but
growing
• Logistics &
infrastructure
problems
MASS
MANUFACTURING

Small
volume,
high
variety,
low cost
mfg

REMOTELY
PROVIDED
SERVICES

INDIA'S
STRENGTHS
• Domain
knowledge
• Software
capabilities
• Remote
delivery
possible
- 14 -
INDIA EMERGING AS THE " SERVICE CAPITAL OF THE WORLD "
India already providing knowledge-based services in several sectors
Remotely delivered services
Industry
Transaction
processing
Design and
analysis
Information Tech


Research
and
developme
nt

Pharma/Healthcare



Education Services


Import of customers to
service in India
Value
added
tourism




Leisure
tourism

Auto/ engineering



Chemicals



Financial Services
Source: BCG Analysis



- 15 -