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High Commission of India London. Presentation by High Commissioner Dr. J. Bhagwati Dialogue With India Series II India House, May 21 2013. Kamini Banga , Distinguished guests, my Lords, Ladies and Gentlemen,. - PowerPoint PPT Presentation
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High Commission of IndiaLondon
Presentation by High Commissioner Dr. J. BhagwatiDialogue With India Series II
India House, May 21 2013
2
Kamini Banga, Distinguished guests, my Lords, Ladies and Gentlemen,
• At the outset, I want to thank Kamini for taking the initiative to bring us all together today. Kamini and I were in the same Physics (Hons) class in Delhi University. She was in Miranda House an all-girls college and I was in St.Stephen’s an all-boys college. The University decided to put the Physics students of our two colleges together since at that time Honours students had their classes in the Physics Department in Delhi University. I cannot say how much physics the students learnt but there seemed to be a lot of chemistry between the boys and girls
• It is a cliché yet true that India lives in several centuries. It is also a cliché that whatever you say about India or Indians, the opposite is also usually true. For example, while 26% of our population is still illiterate, we have very sophisticated Space and Nuclear Power Programmes
• I would like to begin with a historical overview of the Indian economy. And, I will use both graphs and tables
3
• I want to emphasise that although I will go back 300 years in time this is not to make excuses for India or make a case for Indian exceptionalism
• I will also present projected growth rates for India, other emerging economies and developed countries. Again, this is not to divert attention from the many shortcomings and difficulties that we are currently facing
• Incidentally, to the extent possible, for the supporting data I have used multilateral sources such as the IMF
• Inter-country comparisons can be questioned on the grounds that the underlying data is not comparable. In that sense a better way to evaluate India’s progress is to compare and contrast its economic indicators across time and not across countries
4
India’s ranking in world population and GDP over the last three hundred years
• India plus China had about half the world’s population and produced over 40% global GDP in the early 1800s
• India’s GDP share steadily declined over the next 150 years
• The two economies have raised their share of global GDP in last four decades
5
• India is home to 1.2 billion people, which is about 17.4 % of the global population
• However, it accounts for only 5.4 % of world GDP
• Hence, India has some catching up to do
6
India is in Transition
• It is a relatively young country even though it has an ancient and continuous civilisation
• Historically there have been serious social and economic imbalances
• Employment guarantee law has given livelihood security to people at the bottom of economic pyramid
• Right to Information and our media has given voice and access to most citizens
• Current inconsistencies between intentions and outcomes are part of processes which will lead to enhanced transparency and hence improved governance
Share of World Population and GDP (PPP)
Year
India China Germany UK Japan USA
% Share of Pop
% Share of GDP
% Share of Pop % Share
of GDP
% Share of Pop
% Share of GDP % Share
of Pop
% Share of GDP
% Share of Pop
% Share of GDP
% Share of Pop
% Share of GDP
1700 27.3 24.4 22.9 22.3 2.5 3.6 1.4 2.9 4.5 4.1 0.2 0.1
1820 20.1 16 36.6 32.9 2.4 3.8 2 5.2 3.0 3.0 1 1.8
1870 19.9 12.2 28.2 17.2 3.1 6.5 2.5 9.1 2.7 2.3 3.2 8.9
1913 17 7.6 24.4 8.9 3.6 8.8 2.5 8.3 2.9 2.6 5.4 19.1
1950 14.2 4.2 21.7 4.5 2.7 5 2 6.5 3.3 3.0 6.0 27.3
B R E A K IN T R E N D
1973 14.8 3.1 22.5 4.6 2.0 5.9 1 4.2 2.8 7.7 5.4 22
1998 16.5 5.0 21 11.5 1.4 4.3 1 3.3 2.1 7.7 4.6 21.9
2010 17.1 5.4 19.1 13.6 1.1 3.9 0.8 2.9 1.8 5.8 4.4 19.7
7
Source: World Economy by Angus Maddison, OECD and IMF (2010 data)
Period India China Germany UK Japan USA
1820-1870 0.38 -0.37 2.01 2.05 0.41 4.20
1870-1913 0.97 0.56 2.83 1.90 2.44 3.94
1913-1950 0.23 -0.02 0.30 1.19 2.21 2.84
Break In Trend5.68 2.93 9.29 3.931950-1973 3.54 5.02
1973-1998 5.07 6.84
Break In Trend1.76 2.00 2.97 2.99
1998-2010 7.20 10.00 1.5 2.5 0.66 2.4
8A
Source: World Economy by Angus Maddison OECD and IMF (1998-2010 data)
Annual Average GDP Growth Rates (%)
Annual Average GDP Growth Rates (%)
1820-70 1870-13 1913-50 1950-73 1973-98 1998-2010
-2
0
2
4
6
8
10
12
India China GermanyJapan UK USA
India
China
UK
Japan
Germany
Source: World Economy by Angus Maddison, OECD and IMF
8B
Year Per capita GDPPer capita GDP at constant 2004-05
Prices US $
1950-51 142.28
1960-61 177.78
1970-71 200.32
1980-81 214.24
1990-91 286.60
2000-01 407.24
2010-11 719.86
9A
Source: Economic Survey 2012, Govt. of India
India per capita GDP growth
India Per Capita GDP
1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2010-110
100
200
300
400
500
600
700
800
Per capita GDP at Constant 2004-05 prices US$
Source: Economic Survey 2012, Govt. of India
9B
Period Population growth rate GDP growth rate Trend
1900-1947 0.46 % 0.23 % Getting poorer
1947-2010 2.08 % 4.74 % GrowingRicher
10A
Source:World Economy by Angus Maddison OECD (1900-1947) and Economic Survey 2012, Govt. of India (1947-2010)
India Average Annual Growth Rates
India Average Annual Growth Rates: Population and GDP%
Source: World Economy by Angus Maddison, OECD (1900-1947) and Economic Survey 2012, Govt. of India (1947-2010).
1900-47 1947-20100
0.005
0.01
0.015
0.02
0.025
0.03
0.035
0.04
0.045
0.05
Population
10B
GDP
Year Population(millions)
Life expectancy(Years)
Literacy rate(%)
1950-1951 359 32.5 18.3
1970-1971 541 45.6 34.4
1990-1991 839 58.7 52.2
2010-2011 1210 63.5 74.0
11A
Source: Economic Survey 2012, Govt. of India
India Social Indicators
India Social Indicators
1950-51 1970-71 1990-91 2010-20110
200
400
600
800
1000
1200
1400
0
10
20
30
40
50
60
70
80
Population
Life Expectancy yrs
Literacy Rate %
Source: Economic Survey 2012, Govt. of India
Popu
latio
n (m
illio
ns)
Life
Exp
ecta
ncy,
Lite
racy
Rat
e
11B
Economic Indicators India & Emerging Economies
India Brazil China Indonesia Mexico South Africa
Population 2012 Millions 1,223 198 1,354 244 114 51
GDP nominal $ bn, 2012 1,824 2395 8,227 878 1,177 384
GDP PPP $ bn 2012 4684.4 2355.6 12405.7 1216.7 1759 582.4
Annual average growth rate %, 2000-2012 7.23 3.57 10.06 5.31 2.31 3.48
Budget deficit % of GDP 2012 -5.6 +2.7 -1.6 -1.9 -2.8 -5.4
Current Account Balance % of GDP -5.1 -2.2 +2.5 -2.7 -0.7 -5.4
12
Source: IMF and US World Fact Book
Economic Indicators India & Emerging Economies
India Brazil China Indonesia Mexico South AfricaCumulative FDI Inflows$ Bn, 2000- 11*
201 705 1029 185 343 134
Portfolio Investment$ Bn, 2000-11*
256 493 283 112 209 141
Investment Rate % of GDP 2012 34 17 46 35 20 19
Savings rate % of GDP 2012 29 15 49 32 21 13
13
Source: IMF and US World Fact Book
*These numbers are not strictly comparable
Economic Indicators India & Developed Economies
India Australia Germany Japan UK USAPopulation 2012Millions 1,223 22 81 127 63 314
GDP, Nominal$ bn, 2012
1,824 1,541 3,400 5,963 2,440 15,684
GDP, PPP $bn, 2012 4,684.4 970.8 3,197.1 4,627.9 2,336.3 15,684.8
Annual average growth rate %2000-2012
7.23 2.99 1.25 0.86 1.76 1.82
Budget deficit % of GDP2012
-5.6 -0.8 +0.1 -9.1 -7.7 -7.6
Current Account Balance% of GDP
-5.1 -3.6 7.0 0.9 -3.5 -3.0
14
Source: IMF and US World Fact Book
Economic Indicators India & Developed Economies
India Australia Germany Japan UK USA
Cumulative FDI Inflows $Bn, 2000-11*
201 515 927 225 1063 2547
Portfolio Investment $Bn, 2000-11*
256 965 2835 1437 3469 8511
Investment Rate % of GDP 2012
34 28 17 35 14 16
Savings rate % of GDP 2012
29 25 24 32 10 10
15
Source: IMF and US World Fact Book
*These numbers are not strictly comparable
IndiaForex Reserves
Figures in US Dollars BillionsINDIA China Brazil South
AfricaYear Foreign
Exchange reserves
External debt(End March)
FII net inflows
FDI inflows
Year FDI inflows
FDI inflows
FDI inflows
2007-08 309.72 224.40 27.43 34.72 2008 175.1 45.1 9.02008-09 251.98 224.49 -14.03 41.70 2009 114.2 25.9 5.72009-10 279.05 260.93 32.39 33.10 2010 185.0 48.5 1.22010-11 304.81 305.93 30.29 27.82 2011 228.6 66.7 6.02011-12 294.39 345.81 17.17 32.95 2012 253.4 65.3 4.6
16Source: RBI & OECD
GDP Growth Projections next 5 Years(%)India & Emerging Economies
Year India Brazil China Indonesia Mexico South Africa
2013 5.68 3.02 8.04 6.3 3.39 2.85
2014 6.23 4.04 8.24 6.4 3.4 3.35
2015 6.63 4.13 8.51 6.44 3.35 3.43
2016 6.86 4.16 8.53 6.5 3.30 3.30
2017 6.92 4.16 8.50 6.5 3.30 3.11
17A
Source: IMF
GDP Growth Projections next 5 Years (%)India & Developed Economies
Year India Australia Germany Japan UK USA
2013 5.68 2.96 0.61 1.58 0.69 1.85
2014 6.23 3.31 1.46 1.41 1.54 2.95
2015 6.63 3.05 1.32 1.05 1.84 3.56
2016 6.86 3.06 1.32 1.22 1.94 3.44
2017 6.92 3.23 1.28 1.19 2.08 3.34
18A Contd.
Source: IMF
GDP Growth Projections Next 5 years
2011 2012 2013 2014 2015 2016 2017 2018
-2
0
2
4
6
8
10
India Brazil China Indonesia Mexico South Africa RussiaAustralia France Germany Japan UK USA
India
China
Indone-sia
Brazil
Rus-siaUSAUKFrance
JapanGer-many
Source: IMF
GDP
Grow
th R
ates
%
18B
Trade in Goods & Services
India China France Germany UK USA
GDP PPP $ Bn, 2012 4,684.4 12,405.7 2,254.1 3,197.1 2,336.3 15,684.8
Exports of Goods $ Bn 2012 309 2,500 567 1,492 481 1,612
Exports of Services $ Bn 2012 293 1900 208 254 278 613
Imports of Goods $ Bn 2012 500 1,817 659 1,276 646 2,357
Imports of Services $ Bn 2012 489 281 170 285 175 405
Total Trade Goods & Services $ Bn 2012
1591 6498 1604 3307 1580 4987
19
Source: IMF, IAEA & Space foundation
Defence and Technology Budgets
India China France Germany UK USA
Defence Budget 2011$ Bn 38 102 48 40 61 716
Nuclear Power generation capacity 2013 MW
4,391 17,834 63,130 12,068 9,246 101,465
Space Program Budgets 2009 $ Bn 1.06 1.79 1.06 0.77 0.1 64.42
20
Source: IMF, IAEA, Space foundation
Year Foodgrain production
(Million Tonnes)
Finished SteelProduction
(Million Tonnes)
Cement production
(Million Tonnes)
Coal production
(Million Tonnes)
Electricity Generated
(Billion KWH)
1950-1951 50.8 1 2.7 32.3 6.6
1970-1971 108.4 4.6 14.3 76.3 61.2
1990-1991 176.4 13.5 48.8 225.5 289.4
2010-2011 241.6 68.6 209.7 570.9 965.7
2011-12Estimates 257.4 73.4 223.5 583.1 1051.4
21
Source : RBI & Economic Survey 2012, Govt. of India
India’s Key Output Indicators
India – Opportunities Infrastructure
Envisaged investment of $ 1 trillion during 2012-17
World’s third largest road network 4.24 million kms
Road freight volumes increasing at CAGR 9.08 % p.a.
Vehicle population increasing at CAGR 10.76 % p.a.
22
Source: India Brand Equity Foundation
India Opportunities Infrastructure
Under NHDP-VI 1000 km of expressways envisaged with investment of $ 3 billion
Expansion of port traffic from current 800 MT to 2500 MT by 2020; investment of $ 13.58 billion during 2012-17
India’s urban population projected to reach 600 million by 2013
23
• Annual growth rate of 20%, expected to reach $ 280 billion by 2020
(The Indian healthcare sector is estimated to reach US$ 100 billion by 2015, growing at 20% year-on-year (y-o-y), as per rating agency Fitch)
• Central Government budget on healthcare to double to 5% of GDP during 2012-17
• Cost efficient medical tourism destinations expected to grow at Compound Annual Growth Rate of 27 % during 2011-15
24
Source: India Brand Equity Foundation
India OpportunitiesHealthcare
India OpportunitiesManufacturing
• The small and light commercial vehicle segment expected to grow at 18.5% Compound Annual Growth Rate (CAGR) over next 5 years
• Auto component industry expected to reach a turnover of $ 113 billion by 2020 from $ 43 billion currently
• Radial tyre market expected to reach $ 7.3 billion by 2015 growing at CAGR 21%
25
Source: India Brand Equity Foundation
India OpportunitiesRetail
Food industry currently at $ 13.79 billion growing at CAGR of 17 %
Retail sector currently at $ 350 billion growing at CAGR 20%
26
Source: India Brand Equity Foundation
India OpportunitiesMedia and Entertainment
TV sector revenue $ 6.8 billion in 2012 growing at 12.5%
Largest film industry in the world, revenue $ 2 billion in 2012
World’s third largest internet market with a user base of 120 million, set to increase to 370 million users by 2015
27
Source: India Brand Equity Foundation
India OpportunitiesBiotechnology & Pharma
• Biotech industry currently at $ 4.3 billion is expected to reach $ 11.6 billion by 2017
• Pharma sector expected to grow to $ 74 billion by 2020 from current level of $ 11 billion sales
28
Source: India Brand Equity Foundation
India OpportunitiesEducation, Research and Development(ER&D)
• Education market size expected to reach $ 112 billion by 2015
• Leading offshore destination in delivering engineering R&D services with a market global share of 22%
29
Source: India Brand Equity Foundation
Issues IndicationsInflation Chronic food inflation
Infrastructure bottlenecks increase cost of production
30
IndiaRisks ahead
31
Issues IndicationsInfrastructure Power shortages
Availability of coal linkages Road, Rail and Port congestion Delays in environmental clearances Rapid Disorderly Urbanisation
IndiaRisks Ahead
Issues IndicationsBalance of Payments Crude oil imports
Gold imports
32
IndiaRisks ahead
Issues IndicationsRegional Inequalities Low Human development indices in
highly population states Poor infrastructure in natural
resources rich states
33
IndiaRisks ahead
34
Issues IndicationsImparting of Skills to youth
Young population has high aspirations
Challenge to upskill 500 million youth Social consequences of unmet
aspirations
IndiaRisks ahead
35
Issues IndicationsProject Implementation Infrastructure unable to catch up with
growth Delays in legal processes Locking up of investments in incomplete
projects Adverse impact on investor confidence
IndiaRisks ahead
India Risks ahead
Issues IndicationsCorruption Public uprisings
Paralysis in decision making
36
• Several Indian corporates have commented in the last few years that the prospects for investment in India are not sufficiently attractive. Some major business houses has invested in emerging economies and developed countries. Several of these debt driven investments now face difficulties because growth in the countries concerned was less than what was projected at the time the investments were made. This is not to suggest that Indian firms made a mistake by investing outside India. Hindsight is always 20/20
• The bottom line in India as elsewhere is: No Risk No Gain.
• We should remind ourselves that when it comes to India it makes sense to take a longer term view, particularly with respect to investments in manufacturing and infrastructure
37
Thank You
38