envisioning india 2030

Envisioning

India 2030India 2030

THE HORIZONS WE COVER

• Demographic

• Infrastructure &

technologytechnology

• Economic policies

DEMOGRAPHIC1.2 billion and counting..

World Population

India’s population-

1.21 Bn

China’s population-China’s population-

1.35 Bn

THE FUTURE

• India most educated country in the world by 2030

• In 2020,average Indian age-29 yrs

China & US-37 yrs

West Europe- 45 yrs

Japan-48 yrs.

THE GREAT INDIAN MIDDLE CLASSMIDDLE CLASS

5-10% to 90% of population by 2039

India’s Middle Class Consumption

INDIA & CHINA

a comparison..a comparison..

India’s working age population

Working age

population

• China in just 15 years, between 1995 and 2010,

leveraged its “demographic dividend” to build the

world’s second-largest economy after the U.S.

• Both countries have momentum but China’s

structural factors are far superior to India’s so India

will probably not get the same leverage.

Demographic Transitions

MAJOR CHALLENGES

•Literacy

•Urbanization•Urbanization

•Food requirements

•Inequality

LiteracyLiteracy

The Indian literacy rate grew to 74.04% in 2011 from

12% at the end of British rule in 1947.

• World average literacy rate – 84%

• Sluggish growth in the literacy rate

• According to a 1990 report, India will achieve 100%

literacy by 2060

Public spending on education

Public spending on education – currently at 3% of

GDP, versus the 4.5% average for middle-income

countries – needs to rise to 6%.

• Capacity for an additional 40 million people required

to increase the enrolment rate from 14% to the global

average of 26% in higher education.

• Govt. sponsored national scholarship program.

• Another 1,000 universities & 40,000 new colleges to

double the enrolment in higher education by 2020.

• Need of PPP to educate an additional 166mn people in

the next two decades.

UrbanizationUrbanization

India’s scale of urbanization will be immense.

India will have 68 cities with population more than 1

million.

13 cities with more than 4 million people13 cities with more than 4 million people

and

6 megacities having population more than 10 million

residents !

Food RequirementsFood Requirements

India’s requirement by 2030 - 345 mn tons

Current production - 241 mn tons

Deficit - 104 tons

• Poor land management

• Excessive dependence on rain water or ground

water

Problems

water

• Poor supply chain

Declining Food Grain Production

What can be done?

• Improvement in the yield per hectare

• Implementing a better food distribution mechanism

-Development of all weather storage facilities

• Increasing the share of private investment in

agriculture, which is currently only 15% of agriculture

GDP

INEQUALITYINEQUALITY

• India still has 37.2% of its population, living below

the poverty line

• According to Forbes recent list of billionaires, India

is home to the 3rd largest number of billionaires in

the world – 69 in 2010

• Top 10% of wage earners make 12 times more than

bottom 10%, up from a ratio of 6 in the 1990s.

• SCs & STs have gained little from India’s new

prosperity because they have lacked access to prosperity because they have lacked access to

assets, skills and higher education.

• The 5 Bimarou states are home to large proportions

of India’s poor (64%) & socially disadvantaged (40%)

Inequalities across states

• It is believed that the situation can improve with

the rise of middle income group.

• The govt. must step up efforts to strengthen the • The govt. must step up efforts to strengthen the

education & employment industry – especially in

the Bimarou states, where both social inequalities

& the demographic boom are concentrated.

Health Care

Year 2012

US$ 75 Billion

Year 2020

US$ 280 Billion

Year 2030 (ESTIMATED)

US$ 726 Billion

EDUCATION

• National education budget 2011-12 ,52027 crore

i.e. Usd$10.56 billion

• 25% Population Is Still Illiterate

• 15% of Indian students reach High school

•20 CENTRAL UNIVERSITIES

•215 STATE UNIVERSITIES

•100 DEEMED UNIVERSITIES•100 DEEMED UNIVERSITIES

•5 INSTITUTES UNDER STATE ACT

•33 INSTITUTES OF NATIONAL IMPORTANCE

“INDIA WILL BE THE MOST

EDUCATED COUNTRY IN THE

WORLD BY 2030”

-KAPIL SIBAL, MINISTER OF HRD

POPULATION IN 2030

Year 2012

0.7% OF GDP

INVESTMENT IN INFRASTRUCTURE

0.7% OF GDP

Year 2030

1.1% OF GDP

• Electricity: US$167 billion

• Railways: US$65 billion

• Road and highways: US$92 billion

• Ports: US$22 billion

• Airports: US$8 billion

POPULATION OF 1 MILLION AND ABOVE

• 35 cities in 2001

• 50 cities in 2011• 50 cities in 2011

• 87 cities by 2030

(Estimated)

INVESTMENT FROM 2012-

2030

Rs 39.2 LAKH CRORE

AIRPORTS

Number of airports in 2011

92 airports

Number of airports in 2030

150 airports

Source: V.P. Agarwal, chairman of airports authority of India

ENERGY SECTOR

Coal

Coal share in total energy sector in 2005

65.5%65.5%

Coal share in total energy sector in 2030

61.2%

NUCLEAR POWER

Power generation in 2005

2.4%2.4%

Power generation in 2030

8.5%

NATURAL GAS

Share of natural gas fired generation

IN 2005-

11.1%11.1%

IN 2030-

13.8%

Source: Mckinsey global report on India's urban awakening

HIGHWAYS AND ROADS

• India’s highway network 0.66 km of

highway per square kilometer of land

• United states highway network 0.65 km of

highway per square kilometer of land

PORTS

• 12 major and 187 minor ports

along 7500 km coastline

• Inland water transportation undeveloped

ELECTRICITY

• 5th largest electricity supplier

• Existing supply 130000 MW

• Demand of electricity in India in 2030

400,000 MW

RAILWAYS

• Indian Railways has 114,500 kilometers

• World's fourth largest railway network

SOURCE: MCKINLEY REPORT

SOURCE: MCKINLEY REPORT

Monetary policy

• A tool used by the central bank to manage money

supply in the economy in order to achieve a

desirable growth.desirable growth.

• It’s a policy regarding cost, supply and availability

of money in the economy.

Reforms since 1990

What has been done till now

• Reduced reserve requirements.

• Changed interest rate structure.

• Increased micro finance.

• Fiscal monetary separation.

PROJECTED GDP

Source - IMF

Analysis of Projected GDP

• Chinese economy- largest in the world by 2016.

• India 3rd largest economy by 2030.

• Among the ten richest countries, four will be

Asian, three will be American and three will be

European.

COMPARATIVE ANALYSIS

COUNTRIES CURRENT GDP

(In Billion USD)

PROJRCTED GDP

GROWTH

RATE(REAL)

ESTIMATED GDP IN

2030 (In Billion

USD)

CHINA 10050 11% 83778

US 14256 4.40% 33785

INDIA 4001 9.80% 25942

JAPAN 4308 3.30% 8266

RUSSIA 2218 5.80% 6878

SOURCE - IMF

Monetary policy and India’s futurefuture

What should be done

Capital Account Convertibility

Is the freedom to convert local financial assets into

foreign financial assets at market determined exchange

rates.

•India - Current account convertibility.

•Partial capital account convertibility.

CAC;The Good

• Risk diversification.

• Access to new technology.

• Increase in foreign investment.

FDI

To be or not to be..

THE PRESENT

• Hotel and tourism: 100%

• Insurance sector: 26%

• Power : 100%

• Roads, highways, ports and harbours: 100%.

• Drugs and pharmaceuticals: 100% where compulsory licensing is not required.

FDI; DO WE REALLY NEED IT?

• Domestic investment

– New markets

– Demand for inputs

• Technology• Technology

• Export competitiveness.

• Increased competition.

• Employment opportunities

And why we don’t

• Crowds out domestic investors.

• Emissions of effluent.

• Political influence to prevent the imposition of rules.

Capital Account Convertibility;THE BAD

• Destabilize the economy.

• Worsening of the balance of trade.

• Adversely affecting due to world imbalance.

(US DEBT CRISIS)

• Fueling inflationary pressures.(Rising oil prices)

So what’s stopping us?

• Macro-economic Policy Concerns

– Fiscal deficit to be reduced to 3-4% of GDP.

– Inflation to be reduced to 3-5%.

– Foreign exchange reserves sufficient to – Foreign exchange reserves sufficient to

meet six months requirement

• Sound Financial Sector

“RBI is free. I can say that because the government has allowed me to say so”; YV allowed me to say so”; YV

Reddy

Is RBI Really Independent ?

• Management including personnel matters

• Financial aspects• Financial aspects

• Conduct of policy

Sectorial Distribution to GDP

Fiscal policy

Fiscal policy is the means by which a government

adjusts its levels of spending in order to monitor

and influence a nation's economy.and influence a nation's economy.

Drawback of current taxation policy

• Multiple taxation system.

• Dependence of tax structure on very few selected items.

Direct taxes :Corporate and income tax,Direct taxes :Corporate and income tax,

Indirect taxes: Excise duty , custom duty and service tax.

• Less coverage. Less than 1% of population pays income

tax.

• Tax evasion:

• Interstate inequalities

• Sectorial inequality.

Is GST a Solution??

GST

Benefits of GST

• More revenue for Govt.

• Leads to equitable distribution of income.

• More transparency in the system.

• Eliminates duplication of tax on producers at different

stages.

Drawbacks of GST

• Inflation

• Tax revenue short fall

Features:

• Exemption of Income Tax on savings upto INR 3 lac under

section 80(c).

• Slabs for Income Tax:

Income Tax rateIncome

( in INR)

Tax rate

Up to 1.60 lac Nil

1.60 lac – 10 lac 10%

10 lac – 25 lac 20%

25 lac and above 30%

• All perks and allowances will be added to Income of

people for calculating tax.

• Corporate tax reduced from 30% to 25%.• Corporate tax reduced from 30% to 25%.

• Wealth tax limit raised to 50 lakhs from 30 lakhs.

• Encourages long term savings in the economy.

• Will bring down the requirement for FDI in the economy.

• More coverage.

ADVANTAGES OF DTC

• More coverage.

• Less tax evasion.

• Control on black money.

• India topping the list with almost $1500 Billion black

money in Swiss banks.

• Followed by Russia $470 Billion, UK $390 Billion, Ukraine

PARALLEL ECONOMY (BLACK MONEY)

• Followed by Russia $470 Billion, UK $390 Billion, Ukraine

$100 Billion and China with $96 Billion.

• Makes monetary policy ineffective.

• Black money constitutes 40% of GDP.

• India will be able to clear all their foreign debts in 24Hrs.

• Even if all the taxes are abolished, the government can

maintain the country easily for 30 years.

BY BRINGING BLACK MONEY BACK

• NO FDI’s will be required.

• Infrastructure requirements could be easily met.

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