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India's Future - Gurcharan Das (Nov 2009)

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Chetan Shah

The document summarizes India's economic growth and future prospects over the past few decades. It notes that India has experienced high GDP growth averaging around 6-8% annually since the 1980s. This growth has been led by domestic factors rather than exports and has been fueled by services and consumption. The summary predicts India will continue growing at 7-8% annually and become a major global economic power by the middle of the century. However, challenges around governance, infrastructure, education, and other issues still need addressing for prosperity to spread more widely.

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INDIAS FUTURE Or prosperity will spread in India but happiness will not, until we fix governance by Gurcharan Das November 12, 2009 WIPRO Marbella
Where are we coming from? Where are we today? Where are we going in the future?
Even though the world has just discovered it, the India growth story is not new It has been going on for 25 years
What is the India story?
28 years of high growth 1.0 3.5 6.0 8.9 (%) Average annual GDP growth 0 2 4 6 8 10 1900-1950 1950-1980 1980-2002 2002-2007
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 (%) 0 0.5 1.0 1.5 2.0 2.5 1901-1950 1951-1980 1981-1990 1991-2000 2001-2010
Literacy is rising Source: Census of India (2001) 17 52 65 80 (%) 0 20 40 60 80 100 1950 1990 2000 2010 (proj)
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% 0 100 200 300 400 1980 2000 2010 (m)
Poverty is declining 46 26 16 1% of the people have been crossing poverty line each year for 25 years Equals ~ 200m (%) 0 10 20 30 40 50 1980 2000 2010
Per capita income gains Source: World Bank US$ ppp 2005 3,051 1980 1,178
India is now the 4th largest economy It will overtake Japan between 2012 and 2014 to become the 3rd largest
The India model is unique
Drivers of growth India Domestic East and S.E. Asia Exports
Drivers of growth India Domestic Services East and S.E. Asia Exports Manufacturing
Drivers of growth India Domestic Services Consumption East and S.E. Asia Exports Manufacturing Investment
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 Domestically led means: Insulation from global downturns Less volatility We will come out of the global crisis faster
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 SEZs be our tipping point?
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.? 41% 45% 59% U.S. China Brazil India 33% 58% 42% 64% Europe China India
Reasons for success Indias success is market-led whereas Chinas is state induced The entrepreneur is at the centre of the Indian model
Rise of globally competitive Indian companies
India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn
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 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 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 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 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 We have Dynamic democracy with honest elections Free, lively media and press But we also have Poor governance !
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 Delhis 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 Bureaucracy Judiciary Police
The economy grows at night when the government is asleep
油
Key reforms Opened economy to trade and investment Dismantled controls Lowered tariffs Dropped tax rates Broke public sector monopolies
Understanding Indias 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 worlds 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 Crystal Cambridge Encyclopedia of the English Language
Understanding Indias economic success Mental revolution among the young I want to be Bilgay Rajus secret of success Banianisation of society 180 TV channels; 65 news channels The rise of Hinglish
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? 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 Chinas
Per capita income 2,100 3,050 5,800 16,800 37,000 On a ppp basis 2000 2005 2020 2040 2066 0 10 20 30 40 ($000)
Convergence in the 21st century Why convergence is intuitive? Convergence didnt 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% 8% 22% 32% West of the Kanpur- Chennai line East of the Kanpur- Chennai line Chennai Kanpur- 1980 2000 2010 2020 2040
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 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 Origin of Indias caste system Classical four castes vs 3000 jatis Hostage to competitive politics Source of competitive advantage Affirmative action
Role of Religion Indias 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 85% Hindu 12% Muslim 2% Sikh 1% Christian
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
The Wise Elephant

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India's Future - Gurcharan Das (Nov 2009)

  • 1. INDIAS FUTURE Or prosperity will spread in India but happiness will not, until we fix governance by Gurcharan Das November 12, 2009 WIPRO Marbella
  • 2. Where are we coming from? Where are we today? Where are we going in the future?
  • 3. Even though the world has just discovered it, the India growth story is not new It has been going on for 25 years
  • 4. What is the India story?
  • 5. 28 years of high growth 1.0 3.5 6.0 8.9 (%) Average annual GDP growth 0 2 4 6 8 10 1900-1950 1950-1980 1980-2002 2002-2007
  • 6. 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 (%) 0 0.5 1.0 1.5 2.0 2.5 1901-1950 1951-1980 1981-1990 1991-2000 2001-2010
  • 7. Literacy is rising Source: Census of India (2001) 17 52 65 80 (%) 0 20 40 60 80 100 1950 1990 2000 2010 (proj)
  • 8. 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% 0 100 200 300 400 1980 2000 2010 (m)
  • 9. Poverty is declining 46 26 16 1% of the people have been crossing poverty line each year for 25 years Equals ~ 200m (%) 0 10 20 30 40 50 1980 2000 2010
  • 10. Per capita income gains Source: World Bank US$ ppp 2005 3,051 1980 1,178
  • 11. India is now the 4th largest economy It will overtake Japan between 2012 and 2014 to become the 3rd largest
  • 12. The India model is unique
  • 13. Drivers of growth India Domestic East and S.E. Asia Exports
  • 14. Drivers of growth India Domestic Services East and S.E. Asia Exports Manufacturing
  • 15. Drivers of growth India Domestic Services Consumption East and S.E. Asia Exports Manufacturing Investment
  • 16. 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
  • 17. Implications of India model Domestically led means: Insulation from global downturns Less volatility We will come out of the global crisis faster
  • 18. 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 SEZs be our tipping point?
  • 19. 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.? 41% 45% 59% U.S. China Brazil India 33% 58% 42% 64% Europe China India
  • 20. Reasons for success Indias success is market-led whereas Chinas is state induced The entrepreneur is at the centre of the Indian model
  • 21. Rise of globally competitive Indian companies
  • 22. India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn
  • 23. India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn 1,000 Indian Companies have received foreign institutional investment
  • 24. 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
  • 25. 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
  • 26. 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)
  • 27. 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)
  • 28. Public space is a problem We have Dynamic democracy with honest elections Free, lively media and press But we also have Poor governance !
  • 29. 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 Delhis water Land titles Etc
  • 30. 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
  • 31. The economy grows at night when the government is asleep
  • 32. 油
  • 33. Key reforms Opened economy to trade and investment Dismantled controls Lowered tariffs Dropped tax rates Broke public sector monopolies
  • 34. Understanding Indias 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
  • 35. By 2010 India will have worlds 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 Crystal Cambridge Encyclopedia of the English Language
  • 36. Understanding Indias economic success Mental revolution among the young I want to be Bilgay Rajus secret of success Banianisation of society 180 TV channels; 65 news channels The rise of Hinglish
  • 37. 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
  • 38. 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 Chinas
  • 39. Per capita income 2,100 3,050 5,800 16,800 37,000 On a ppp basis 2000 2005 2020 2040 2066 0 10 20 30 40 ($000)
  • 40. Convergence in the 21st century Why convergence is intuitive? Convergence didnt 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
  • 41. India will gradually turn middle-class 50% 50% 8% 22% 32% West of the Kanpur- Chennai line East of the Kanpur- Chennai line Chennai Kanpur- 1980 2000 2010 2020 2040
  • 42. 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?
  • 43. 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
  • 44. Caste system Origin of Indias caste system Classical four castes vs 3000 jatis Hostage to competitive politics Source of competitive advantage Affirmative action
  • 45. Role of Religion Indias 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 85% Hindu 12% Muslim 2% Sikh 1% Christian
  • 46. 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

Editor's Notes

  • #4: Please centre and cut the word old and put It has been onto a new line- could we make a consistent style for statements- maybe always in yellow, centred and growing? Please could we have some kind of outline of India in the background to make the slide prettier
  • #5: Could we use the script- does that fit with template?
  • #6: Could we have a line for the y axis as well as numbers Please animate all graphs so lines/bars and pie charts grow
  • #7: Again y axis
  • #8: Again line for y axis- is there a reason that the line is on green rather than orange?
  • #9: Line for y axis
  • #10: Y axis line Could we put text in white in a box of It put Equals ..on its own line in yellow to make it more impactful
  • #11: Could we centre up the chart?
  • #12: Cut the word and and centre up. Could we either make the statement grow and/or make it into a different colour to make it more impactful? Or could we add an image we have loads of India images
  • #13: Is it on brand to use script here?
  • #18: Could we add India image from file? Make yellow title bullet and white sub bullets
  • #19: Again could we add India image from file Same with bullets and sub bullets
  • #20: animate
  • #21: Centre up and change colour Grow as two separate statements
  • #22: Centre these up maybe make a little bigger?
  • #31: These should be bullet points- image search Indian Policeman?
  • #32: Image of Delhi at night from Google or istock?
  • #39: Make bullets consistent
  • #40: Y axis as a line Please cut This means
  • #41: Make bullets consistent
  • #42: Animate graph
  • #44: Pic of Indian school kids? Consistent bullet points
  • #46: Please make a pie chart out of religious percentages Make bullet points out of last 3 points
  • #48: Could we find an Indian Elephant image?