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8/7/2019 pkt sir india superpower
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WILL INDIA BECOME AN
ECONOMIC SUPERPOWER
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A. WILL INDIA BECOME
AN ECONOMICSUPERPOWER?
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India currently has the 11th largest GDP
in the world
WDI: Constant 1995 US$ billion, 2002
230
248
268282
347
411
414
452
477
515
637
650
716
1181
1237
1410
1552
1976
3979
10417
Sweden
Belgium
Sw itzerlandTaiw an
Russia
Australia
Netherlands
Brazil
South Korea
India
Mexico
Spain
Canada
Italy
China
France
United Kingdom
Germany
Japan
United States
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accounting for 1. % of the global
GDP in 2002
1.1%
1. %
1. %
1. %
1. %
1. %2.0%
2.1%
2. %
. %
. %
. %
. %
. %
12. %
.0%
Russia
Australia
Netherlands
Brazil
Korea, Rep.
IndiaMexico
Spain
Canada
Italy
China
FranceUnited Kingdom
Germany
Japan
United States
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and ranks 2 th in the world by total trade in
goods and services (US$ billion, 2002)
115119
131133
151155
165
172193202
204
209215
226
289293
363374
377478481
558
574
615706
815850
9251356
2374
Poland
aud ab aNorwa
ra l
Ind aDen ark
Tha landu tralia
wedenRu ian
ala ia
Irelandwitzerland
u triaingapore
Taipei, Chine ee ico
Spainorea, Republicof
Ho ng ong, Chinaelgiu
Canada
NetherlandItaly
ChinaFrance
United ingdom
Japanermany
United State
WTO: US$ billion, 2002
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India has been one of the fastest growing
economies in the world over the last 20 years
Annual average growth rates of 10 fastest growing economies over
19 0-2002 excl. small countries (pop < 10 million)
Source: WDI
5.3
5.4
5.6
6.0
6.3
6.5
6.6
6.8
9.5
5.2Pakistan
Cambodia
Indonesia
India
Thailand
Malaysia
Vietnam
Taiwan
South Korea
China
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What does the Goldman Sachs BRIC Report say?
(BRIC=Brazil, Russia, India, China)
2.5%
1.9% 1.8%2.1% 2.2%
2.9%2.4%
-0.1%
9.5%
5.6%
0.9%1.3% 1.3%
1.8%2.0%
2.6%
4.2%
5.6%
7.7%
8.5%
-1%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Japan
Italy
G
ermany
Fr
ance
UK
US
Brazil
Russia
China
India
Historical (1980-2002) Goldman Sachs (2000-2050)
Goldman Sachs in their BRIC report have higher than historical projections for
Brazil and Russia and lower predictions for China
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leading India to emerge as the rd largest economy
in 2050 (1995 US$ billion)
2185
3297
3816
3919
5367
5596
6092
30209
35067
43926
Ital
ran e
er an
u ia
ra il
apan
India
hina
Goldman Sachs: Constant 1995 US$ billion
Note the big gap between the first three and the rest
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Projecting GDP using historical growth rates,
India would be the th largest economy in
2050
339
2598
3111
3960
4974
6458
7307
8662
16706
19233
37781
96178
Ru ia
razil
Ital
United ingdom
rance
erman
India
ai an
outh orea
Japan
United tate
hina
WDI: Constant 1995 US$ billion
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Under GS assumptions, India would be the
worlds rd largest trader in 2050
948
1013
1238
1421
2021
2054
3018
5575
6969
13842
0 2000 4000 6000 8000 10000 12000 14000 16000
Italy
Brazil
Japan
France
Ger any
K
ia
India
US
ina
Goldman Sachs & WDI: Constant 1995 US$ billion, projected at
historical Trade-to-GDP ratios
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Using historical growth rates, India would be
the 10th largest trader in 2050
0.4%
0.9%
2.6%
2.6%
4.1%
4.2%
6.7%
7.6%
14.7%
15.5%
21.1%
59.1%
Ru ia
Bra il
India
Ital
nitedKingdo
ran e
er an
apan
nited tate
Tai an
outhKorea
hina
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Will India Become an Economic Superpower?
India is already a large player.
It will become larger.
But it may not become one of three giants
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B. DOES IT MATTER IF
AND WHEN INDIA
BECOMES AN ECONOMICSUPERPOWER?
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India is already a population superpower
58 59 60 82127 146
176
282
1262
1002
50 61 64 74100 118
228
420
1418
1601
0
200
400
600
800
1000
1200
1400
1600
Ital
ran
e U
K
German
apan
Ru
ia
Bra
il
U
China
India
Population(millions
)
2000 2050
Goldman Sachs
India will be the worlds most populated country
by 2050; its population is expected to stabilize by
the year 2100 at 1.8 billion
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With a PC GDP of $ 9 , India today ranks 12 th in
the world
0 10000 20000 30000 40000 50000 60000
INDIA
U
G
ANY
ANC
UK
I
A
Y
JAPAN
CHINA
AZI
U
IA
WDI: Constant 1995 U $, 2002
The fundamental challenge facingIndia is not
to become an economic superpower but to
become rich and eliminate poverty.
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Alternative Scenarios
If India grew at GS rates it would be the poorest of the BRIC and G countriesIf India grew at GS rates it would be the poorest of the BRIC and G countries
in 2050, but equivalent to a lowin 2050, but equivalent to a low--end high income country like Spain todayend high income country like Spain today
If India grows at historical growth rates ( .5%) for the next 50 years, IndiaIf India grows at historical growth rates ( .5%) for the next 50 years, India
would have in 2050 a GDP PC of US $ 5 (constant 1995 US$) equivalentwould have in 2050 a GDP PC of US $ 5 (constant 1995 US$) equivalentto a lowerto a lower--middlemiddle--income country like Brazil today.income country like Brazil today.
If India reverts to the Hindu growth rate ( .5%), its 2050 GDP p.c. will beIf India reverts to the Hindu growth rate ( .5%), its 2050 GDP p.c. will be
US$ 1 2 , equivalent to Iran today.US$ 1 2 , equivalent to Iran today.
Summary of scenariosSummary of scenarios
tr t ri 8% 6.50% 3.50%
P I ( D) 494 18731 4564 1723
ki f i 2050 11t 3r 6t t 12
ki f P i t 128t 23r 44t 77t
2050
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C. WHAT MIGHT PREVENT
INDIA FROM BECOMING
AN ECONOMICSUPERPOWER?
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RISKS TO GROWTH
So far, just doing trend analysis. But economic growth can
slow down as well as speed up. Countries can catch up, but
also be left behind.
Argentina:
1 9 GDP pc = 91% of US GDP pc
1999 GDP pc = % of US GDP pc
What are the factors which might slow down growth in
India?
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1. MACRO SHOCKS
Has the economy been shock-proofed?
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2. SECTORAL CHALLENGES
Sectoral growth rates since Independence
(P rc nt50s 60s 70s 80s 90s
1 ricultur nd lli d 3.1 2.5 1.8 3.6 2.8
2 Industr * 6.3 5.5 4.1 7.1 5.7
3 S rvic s 4.3 4.8 4.4 6.7 7.8
4 GDP f c r c st) 3.9 3.7 3.2 5.6 5.8
* Includ s nstructi n
Source: Central Statistical Organisation
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2. SECTORAL CHALLENGES: Industry
35.7
24.917.3 15.6 15.9
22.1
26.6
29.6
47..9
42.248.
69.
3.1
37.433.3
1.9
28.6
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
LDCs Indi OECD -
r n
Afri
E stAsi &
a ifi
C ina
Agri lture Indus trervi es WDI
Indias low share of industry in GDPcompared to East Asia.
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3. GROWING UNEMPLOYMENT:
jobless growth?
Elast ty Employment to GD
1977-78 1983 1993-94
to to to
1983 1993-94 1999-00
1 Agrculture 0.45 0.50 0.00
2 ning & Quarrying 0.80 0.69 0.00
3 Manufacturing 0.67 0.33 0.26
4 Electricity 0.73 0.52 0.00
5 Construction 1.00 1.00 1.00
6
Wholesale & Retail
Trade 0.78 0.63 0.55
7
Transport torage &
Construction 1.00 0.49 0.69
8
Finance RealEstateInsurance & Business
er ices 1.00 0.92 0.73
9
Community, ocial and
ersonal er ices 0.83 0.50 0.07
All Sectors 0.53 0.41 0.15
Source: Planning Commission Reports on Labour and Employment
Sector
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3. GROWING UNEMPLOYMENT (cont):
Will moderate growth be enough?
Millions Employed % Unemployed)
GDP Growth (%) 1999-00 2007 2012
6.5 397 436 467
(2.23) (5.61) (7.41)
8.0 397 442 482
(2.23) (4.27) (4.55)Source: Planning Commission Reports on Labour and Employment
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4. GROWING REGIONAL INEQUALITY
Central Statistical Organization
189
282
309
351
383
465
474
494
514
577
582
603
659
715
738
0 100 200 300 400 500 600 700 800
Bi
i
P d h
M dh P d h
Rajasthan
Andh a P ad sh
W st B ngal
All India
Karnataka
Kerala
Tamil Nadu
ujarat
Haryana
Maharashtra
Punjab
State GDP p.c. USD, 1999-00
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4. GROWING REGIONAL INEQUALITY
(cont).
Central Statistical Organization
165
466
573
729903
1301
1737
1924
2205
2258
2352
2352
2771
3460
3765
0 500 1000 1500 2000 2500 3000 3500 4000
Bihar
Orissa
Uttar Pradesh
Madhya PradeshWest Bengal
Rajasthan
All India
Haryana
Gujarat
Karnataka
Andhra PradeshPunjab
Kerala
Maharashtra
Tamil Nadu
GDP PC in constant US$, projected for the year 2050using historical growth rates
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5. POPULATION GROWTH
1991
"BIMAR "
41%
Nort
5%
E st
15%
West
15%
Sout24%
2051
Sout
19%
West
14%
E st
14%
Nort
5%
"BIMAR "
48%
Economic & Political Weekly, Vol. XXXVIII No. 45, November -14, 2003
Indias Regional Distribution of Population will
Change Over Time
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6. URBANI ATION
24.3
28.1
37.6 38.2
76.279.3
0
10
20
30
40
50
60
70
80
90
LDCs I i Chi uth st
si
Lati meri a OECD
Source: WDI
Indias urbanization has only just begun
Urbanization as a proportion of total population, year 2002
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6. URBANI ATION (cont.)
If India does grow rapidly, one would expectIf India does grow rapidly, one would expectabout 5% of Indias population would beabout 5% of Indias population would beurbanized by 2050urbanized by 2050
Urban population in 2050 = 5% of 1.6 billion =Urban population in 2050 = 5% of 1.6 billion =1.2 billion1.2 billion
Urban population today = 2 % of 1.002 billion =Urban population today = 2 % of 1.002 billion =2 0 million2 0 million
Urban population would increase by 920 millionUrban population would increase by 920 millionby 2050 (almost 20 million new urban residents aby 2050 (almost 20 million new urban residents ayear)year)
Can India cope with such rapid urbanization,Can India cope with such rapid urbanization,
or will it stymie Indias growth?or will it stymie Indias growth?
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7. ENVIRONMENTAL DETERIORATION
A lot of environmental problems diminishA lot of environmental problems diminish
with growthwith growth
But not all: e.g. water.But not all: e.g. water.
Source: www.cnie.org
India - Per Capita Water Availability
(in cubic meters)
0
1000
2000
3000
4000
5000
6000
1950 1990 2025
Water stress
Water scarce
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8. HEALTH THREATS: AIDS
Water stress
Water scarce
Prevalence of HIV as a proportion of working population in 2001:
India next only to, but well below, Sub-Saharan Africa,
0.10 0.100.19 0.23 0.45
0.64 0.67 0.80
8.36
01
2
3
4
5
6
7
89
China
MEN
A
SouthE
astA
sia OEC
D
Centr
alAs
ia
SouthA
sia
Latin
America In
dia
Sub-Sa
haranA
frica
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8. HEALTH THREATS (cont.): AIDS
Water stress
Water scarce
HIV Prevalence: STD Patients in South Africa, Major Urban Areas, 1990-2000
Compared to Selected States of India in 2002
(Median Prevalence in percent)
. . .. .
. . .8. .8
0.
..
. ..
.
Bihar
SA19
90
Gujarat
SA19
91 Goa
Karnata
ka
TamilN
adu
SA19
92
SA19
93
SA19
94
Andh
raPradesh
SA19
95
SA19
96
SA19
97
SA19
98
SA19
99
SA20
00
But are parts of India only a decade or less behind parts of Africa?
Sour e UNAIDS/NA O
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8. HEALTH THREATS (cont.):
AIDS IMPACT
Water stress
Water scarce
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9. WEAKENING GOVERNANCE
Water stress
Water scarce
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10. POLITICAL RISKS
Water stress
Water scarce
India is a stable democracy (cf. ChinaIndia is a stable democracy (cf. China yetyet
to make the democratic traditions)to make the democratic traditions)
But democracies can be unstable:But democracies can be unstable:
Unstable governmentsUnstable governments
Short tenuresShort tenures
Rickety coalitionsRickety coalitions
Civil violence (cf. Sri Lanka, Nepal)Civil violence (cf. Sri Lanka, Nepal)
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11. SECURITY RISKS
Water stress
Water scarce
Regional conflictRegional conflict
TerrorismTerrorism
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12. GLOBAL RISKS
Water stress
Water scarce
Global recessionGlobal recession
Spread of global terrorism or other forms ofSpread of global terrorism or other forms of
conflictconflict Global warming or other environmentalGlobal warming or other environmental
threats to growththreats to growth
Any slowing down of global growth willAny slowing down of global growth willtend to perpetuate the current economictend to perpetuate the current economicconfiguration.configuration.
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WHAT SHOULD INDIA WORRY ABOUT?
Water stress
Water scarce
India should worry most about those risks orIndia should worry most about those risks or
challenges which:challenges which:
Will tip India from base to low case growthWill tip India from base to low case growth(rather than high to base)(rather than high to base)
Have a reasonable probability of occurringHave a reasonable probability of occurring
Are at least partially within Indias controlAre at least partially within Indias control
2 leading candidates: AIDS, conflict2 leading candidates: AIDS, conflict
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IN SUMMARY: THE ANSWERS
Water stress
Water scarce
Will India become an economic superpower?Will India become an economic superpower?
On current trends, yes.On current trends, yes.
Does it matter?Does it matter?
Yes, but primarily as an indicator of prosperity.Yes, but primarily as an indicator of prosperity. What might prevent it?What might prevent it?
12 risk areas identified, some very serious and12 risk areas identified, some very serious anddaunting. Lots of unknowns. Plenty ofdaunting. Lots of unknowns. Plenty of
challenges to confront.challenges to confront.
India is certainly heading in the right direction,India is certainly heading in the right direction,but into unchartered territory. Its voyage will bebut into unchartered territory. Its voyage will beone of the great voyages of the 21one of the great voyages of the 21ststCentury.Century.