24 Kel Kar Lecture

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INDIA’s

FUTURE

17 March 2007Kelkar Alumni Lecture

IIT Kanur



E!en th"u#h the $"rl% has &ust

%isc"!ere% it' the In%ia #r"$th

st"r( is n"t ne$) It has *een#"in# "n +"r 2, (ears "l%



-hat is the In%ia st"r(.



1/ Risin# D #r"$th

a!era#e annual D #r"$th

1300 4 13,0 1)013,0 4 1350 6),

1350 4 2002 )0

2002 4 200 5)0

8"urces9 1300:13309 An#us Ma%%is"n ;133,/' Monitoring the World Economy, 1330:20009<ensus "+ In%ia ;2001/' 2000:200, Finance Ministr(

In%ia 8t"r(



2/ "ulati"n #r"$th is sl"$in#

a!era#e annual #r"$th

1301 4 13,0 1)0 13,1 4 1350 2)2

1351 4 1330 2)1

1331 4 2000 1)5

2001 4 2010 1),

8"urces9 1300:13309 An#us Ma%%is"n ;133,/' Monitoring the World Economy, 1330:20009<ensus "+ In%ia ;2001/

In%ia 8t"r(



13,0 17

1330 ,2

2000 ,

2010 ;r"&/ 50

8"urce9 <ensus "+ In%ia ;2001/

6) Literac( is risin#In%ia 8t"r(



Milli"n

e"le

1350 5 ,

2000 22 220

2010 ;r"&/ 62 65

=) Mi%%le class is e>l"%in#In%ia 8t"r(



1350 =

2000 2

2010 ;r"&/ 1

1 "+ the e"le ha!e *een cr"ssin# "!ert( line

each (ear +"r 20 (ears) E?uals @ 200 milli"n)

,) "!ert( is %eclinin#In%ia 8t"r(



) r"%ucti!it( is risin# In%ia 8t"r(

60 t" =0 "+ D #r"$th is %ue t"

risin# r"%ucti!it(



;U8 /

1350 1175

2000 60,1

8"urce9 -"rl% Bank

7) er caita inc"me #ains

In%ia 8t"r(



5) In%ia is n"$ the =th lar#est

ec"n"m(

In%ia 8t"r(

An% it $ill cr"ss Caan *et$een 2012

an% 201= t" *ec"me the 6r% lar#est



TE INDIA MDEL I8UNIUE



DRIGER8 F R-T

In%ia East an% 8)E) Asia

D"mestic E>"rts



DRIGER8 F R-T


D"mestic E>"rts

8er!ices Manu+acturin#



DRIGER8 F R-T


D"mestic E>"rts


<"nsumti"n In!estment



DRIGER8 F R-T


D"mestic E>"rts


<"nsumti"n In!estment

i#h tech' caital L"$ tech' la*"ur

intensi!e in%ustr( intensi!ein%ustr(



IMLI<ATIN8 F INDIA MDEL

D"mestic le%

H Insulati"n +r"m #l"*al %"$nturns

H Less !"latilit(



IMLI<ATIN F INDIA MDEL

8er!ices le%

H a!e $e skie% the in%ustrialre!"luti"n.

H "$ %" $e take e"le +r"m +armst" cities.



IMLI<ATIN F INDIA MDEL

<"nsumti"n le%

H e"le +rien%l(9 <"nsumti"n as "+ D

In%ia =

Eur"e ,5 <hina =2

H Less ine?ualit( 4 INI INDE

In%ia 66

U)8 =1

<hina =, BraJil ,3

H The $"rl% nee%s an"ther *i# c"nsumin# ec"n"m( a+ter the U)8)



Reas"ns +"r 8uccess

In%ia’s success is market le%

$hereas <hina’s is state in%uce%)The entrereneur is at centre "+

the In%ian m"%el



Rise "+ #l"*all( c"metiti!e

In%ian c"manies9

Reliance' Cet Air$a(s' In+"s(s' -ir"'

Ran*a>(' Bharat F"r#e' Tata M"t"rs' T<8' Bharati' I<I<I an% DF< Banks





In%ia has a !i*rant ri!ate sace

100 In%ian <"manies ha!e market

ca "+ U8 1 *illi"n 1000 In%ian <"manies ha!e

recei!e% +"rei#n instituti"nalin!estment







ca "+ U8 1 *illi"n

1000 In%ian <"manies ha!e

recei!e% +"rei#n instituti"nal

in!estment

12, F"rtune ,00 c"manies ha!e

RD *ases in In%ia

630 F"rtune ,00 c"manies ha!e

"uts"urce% s"+t$are %e!el"ment t" In%ia)




100 In%ian <"manies ha!e market ca "+ U8 1 *illi"n


recei!e% +"rei#n instituti"nalin!estment

12, F"rtune ,00 c"manies ha!e

RD *ases in In%ia



2 *a% l"ans in In%ian *anks ;!s @ 20 in <hina/





ca "+ U8 1 *illi"n


recei!e% +"rei#n instituti"nal

in!estment 12, F"rtune ,00 c"manies ha!e

RD *ases in In%ia



2 *a% l"ans in In%ian *anks ;!s @ 20 in <hina/

50 cre%it #"es t" ri!ate sect"r ;!s@10 in

<hina/



But u*lic sace is a r"*lem

Alth"u#h $e ha!e a9

D(namic %em"crac( $ith

h"nest electi"ns



u*lic sace is a r"*lem

Alth"u#h $e ha!e a9

D(namic %em"crac( Free' li!el( me%ia an% ress






D(namic %em"crac(

Free' li!el( me%ia an% ress

: ""r #"!ernance

: i#h "ulist su*si%ies' $hichresults in a hi#h +iscal %e+icit




D(namic %em"crac(

Free' li!el( me%ia an% ress : ""r #"!ernance

: i#h su*si%ies i#h +iscal %e+icit : N" m"ne( +"r in+rastructure




D(namic %em"crac(

Free' li!el( me%ia an% ress

: ""r #"!ernance

: i#h su*si%ies i#h +iscal %e+icit

: <reak( in+rastructure

: Ine++icient #"!ernment c"manies



Earlier $e ha% $"rl% class

instituti"ns' *ut the( are n"$ +ailin#

H Bureaucrac(

H Cu%iciar(H "lice



<"ntrast *et$een u*lic an% ri!atesace raises the ?uesti"n 9

Is In%ia risin# %esite the state .



Ec"n"m( #r"$s at ni#ht $hen

#"!ernment is aslee





-hat e>lains In%ia’s ec"n"mic

success.

1/ E!en sl"$ re+"rms a%% u: state #ettin# "ut "+ the $a(

: e!er( #"!ernment has re+"rme%

since 1331



Key Reforms

H ene% ec"n"m( t" tra%e an% in!estment

H Dismantle% c"ntr"ls

H L"$ere% tari++s

H Dr"e% ta> rates

H Br"ke u*lic sect"r m"n""lies




success.

1/ E!en sl"$ re+"rms a%% u:state

#ettin# "ut "+ the $a(

2/ O"un# min%s are li*erate%



Mental Re!"luti"n

: PI $ant t" *e Bil#a(’: Ra&u’s secret "+ success

: Banianisati"n "+ s"ciet( : 100 ca*le channels +"r 6

: in#lish




success.

1/ E!en sl"$ re+"rms a%% u:state

#ettin# "ut "+ the $a(

2/ O"un# min%s are li*erate%

6/ In%ia has +"un% its c"metiti!e

a%!anta#e in the kn"$le%#e ec"n"m(



Looking Forward

H 7 : 5 ec"n"mic #r"$th

H Dem"crac( $ill n"t ermit m"re than 5

H 1), "ulati"n #r"$th



;/

2000 2100

200, 60,0

2020 ,500

20=0 1'500

20 67'000

This means a er caita inc"me

r"u#hl( "+ ;"n a *asis/9



<"n!er#ence in the 21st centur(

H -h( c"n!er#ence is intuiti!e

H <"n!er#ence %i%n’t haen in the 20 th

centur( *ecause the $"rl% $as cl"se%

H Returnin# t" a $"rl% "+ e?ualit( ri"r t"

17,0

H -hen <hina an% In%ia acc"unte% +"r =,"+ $"rl% D



-h( $ill #r"$th c"ntinue.

Dem"#rahic %i!i%en%

D hi t d i t t h i i i t f t



Demographic trend points to sharp increases in input factors

54%

46%

2,

(rs

0:2,

(rs

Demographic Split

4!

"!!

!

!!

4!!

6!!

"!!

#$!!!

#$!!

#$4!!#$6!!

!!5 !5

#%5 &n

#%# &n

La*"rF"rce

La&or Force will dou&le in the ne't ! years

D hi t d i t t h i i i t f t



Demographic trend points to sharp increases in input factors(ge Dependency

)%

45%*5! %

6%

!%

!%

4!%

6!%

"!%

#+"!,s !! !5 -hina !!

#)%

4%

.5/%

4%

!%

#!%

!%

.!%

4!%

5!%

#+"!,s !! !5 -hina !!

Sa0ings Rate

1igher sa0ings and in0estment rate will translate into higher 2D3 growth



In%ia’s %em"#rahic a%!anta#emeans that its hi#h #r"$th $ill

c"ntinue l"n#er term $hile <hina$ill sl"$

INDIA -ILL RADUALLO TURN



1350 5

2000 22

2010 62 2020 ,0 -est "+ the

Kanur:<hennai line 20=0 ,0 East "+ the

Kanur:<hennai line

INDIA -ILL RADUALLO TURN

MIDDLE <LA88





-hat c"ul% st" the sh"$.

H Fiscal %e+icit

H In+rastructure

H Ba% #"!ernance

H Nuclear $ar





REFRM 8<L

La*"urA#riculture



8ec"n% reen Re!"luti"n

H techn"l"#icall( le%' *ase% "n

M see%sH la*"r intensi!e

H nee%s re+"rms



REFRM 8<L

La*"ur

A#riculture

"$er





REFRM 8<L

La*"r

A#riculture "$er

Re% tae "!ernance



<"r"rate "!ernance

: i#h in In%ia : L"$ in <hina



4ottom Line

H In%ian r"serit( is "n aut" il"t

H <an’t %" $ith"ut #"!ernment) But #"!ernancere+"rm $ill take time' till mi%%le class is

%"minant)

H uman caital $ill c"ntinue t" +l"$er *ase% "n

ri!ate initiati!e' an% %ri!e the nati"n

In%ia has la$ <hina has "r%er



In%ia has la$' <hina has "r%er

:In%ia #"t %em"crac( *e+"recaitalism an% this has ma%e all the

%i++erence

:It $ill *e sl"$er than <hina *ut its

ath $ill *e surer

:In%ia m"re likel( t" reser!e its$a( "+ li+e



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24 Kel Kar Lecture