india's economic potential is not overstated
TRANSCRIPT
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8/9/2019 India's Economic potential is not overstated
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Indias Economic Potential is not
Overstated
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OverviewWe would take you through, Indias Economicperformance in 3 phases.
Phase 1: Before 1990-1991
Phase 2: After 1991-2009
Phase 3: Future forecasts
Our basis of projection on the economicpotential include economic indicators suchhas GDP, Per-capital income & Inflation.
We have also considered factors such has forexreserves, FII Inflow, FDI , PPP& otherInvestments in the country. We would also givean insight on the various sectors contributingtowards Indias growth in the economy.
We are united & governedWe have changed & regulated
We are now growing.
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Believe it or not!!!
In the year 1700, India's share in theWorld production was 22.6%. The othersuper power at that time was china and its share was better than India at23.1%. The US had no prominent share in world trade.
In 1990, China account for 11%, India is less than 5% and USA 21% .
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1700
India's Economic potential is overstated
Source: Goldman sacs, IMF
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Believe it or not!!!
Note that we were at our best in the comity of nations when we were fullyglobalised and when we closed ourselves, where did we stand, when we had acrisis in 1991?
15% of the world population
7.5% of world's land
What was our share of contribution to the world trade? . less than halfa percent!!!
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Phase I
Overview
Positive Implications
Indicators:
GDP Growth
Forex reserves
FII FlowFDI
Per Capital Income
Inflation
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43 Years
One party system
10 Prime Ministers
One Direction
Over 3% GDP growth
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Overview:
During the last forty years we had adopted economic strategy ofplannedgrowth which was popularly known as "License Raj
Five-Year Plans of India resembled central planning in the Soviet Union.
Steel, mining, machine tools, water, telecommunications, insurance, andelectrical plants, among other industries, were effectively nationalized in themid-1950s.
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Positive Implications:
Industrial production base was widened.
We succeeded in developing a pool oftechnically trained manpower on ascale, which has no parallel in the world through Institutions like IITs , IISc and
IIMs.
In Banking system, we had a combination ofintervention plus free flow ofmarket forces and these measures have made our banking system morereliable today.
We saw PSUs owned by central & state government contributing to the growthof our economy. LIC alone contributed 5% of GDP. However, the growth of PSUwas not impressive.
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Phase I: Results
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GDP was around 4.9%
Forex reserves was less than USD1 billion
FII Flow stood around USD 1 million
FDI stood around USD 97 million
Per-Capital income was around USD 390 Inflation was around 9%
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Phase II
19 Years6 Governments
7 Prime Ministers
One Direction
Over 8% GDP growth
If August 15, 1947 marked theIndian Independence - frompolitical slavery to colonialpower,
I think the August of 1991 could
be marked as the beginning ofIndian Economic Freedom.
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GDPGrowth Forex FII Flow FDI Per Capita Inflation
1990 4.9 percent < USD 1 billion USD 1 million(1993)
USD 97 million USD 390 9 percent
2008* 8.7 percent USD 309 billion as on28/03/2008
USD 16.1 billion in2007-08
USD 12.7 billion in2007-08 tillDecember
USD 740 7.4 percent ason29/03/2008
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Phase II
19 Years6 Governments
7 Prime Ministers
One Direction
Over 8% GDP growth
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GDPGrowth Forex FII Flow FDI Per Capita Inflation
1990 4.9 percent < USD 1 billion USD 1 million(1993)
USD 97 million USD 390 9 percent
2008* 8.7 percent USD 309 billion as on28/03/2008
USD 16.1 billion in2007-08
USD 12.7 billion in2007-08 tillDecember
USD 740 7.4 percent ason29/03/2008
Economic Indicators:
GDP
Snapshot on Indian Economy
Forex reserves & FII
Foreign Trade
FDI & Capital market
Drivers of Growth:
Agriculture Industry - Services
Human Capital
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India gross domestic product (GDP) means the total value of all the servicesand goods that are manufactured within the territory of the nation within thespecified period of time.
The economy of India is the twelfth biggestin comparison to that of others inthe whole world, for it has approximately GDP of US$ 1.09 trillion in 2009.
The country has the second fastest major growing economy in the wholeworld with the GDP growing at the rate of over 6% in 2008 - 2009 next toChina.
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Indias GDP on an impressive growth
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Rise in GDP
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Indias GDP rose from 495$ billion in 2002 to 1242$ billion in 2008.A massive 40% increase in the total valuation which indicates India is growing at afaster rate.
Source: Ministry of Finance, RBI
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Comparative analysis
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Before LPG After LPG initiation
India's Economic potential is overstated
Source: RBI, IMF
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India is the 4th largest country in termsof Purchasing power parity whereasChina stands 2nd in theWorld economy.
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Rank Country GDP (PPP -Billion $)
1 U.S.A. 13, 820
2 China 6,473
3 Japan 4,262
4 India 2,816
5 Germany 2, 816
Rank Country GDP (Realgrowth rate)
1 Bhutan 21.4%
2 Macau 15%
3 Qatar 13.4%
17 China 9%
28 India 7.4%
India ranks 28th , growing at a realgrowth rate of 7.4% whereas China
ranks 17th
India's Economic potential is overstated
Source: IMF, UN
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Snapshot on the Indian Economy
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India ranks 2nd in terms of total population next to China. However thepopulation growth rate is around 1.55% which is healthier.
India ranks 2nd in terms of productive labor force next to China.
India ranks 12th in terms ofIdeal Investment destination whereas Chinastands 4th .
India ranks 89
th
in terms ofpopulation below poverty line which was around25% which stood at 36% before 1991.
India ranks 92nd in terms ofInflation rate (consumer prices) which is around8% whereas China at 125th is around 6%.
India ranks 113th with regards to the unemployment rate at less than 7%whereas China is at 153rd at 5%.
India ranks 168th with the literacy rate around 65% which was under 40%before 1991.
India's Economic potential is overstated
Source: IMF
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India: Robust Economic Platform
Steadily increasingForex reserves offeradequate securityagainst any possiblecurrency crisis ormonetary instability
Increased confidenceof investors in Indiancompanies has led to asurge in cross borderborrowing bycorporate houses
Indias Forexreserves are in
excess ofexternal debt
In 2007-08 (till 28 March),Forex reserves witnesseda growth of approx. 55%over 2006-07.
the decreasing externaldebt to GDP ratioindicates that India has asound economic platform
External Debt-to-GDP Ratio
21.120.4
17.817.3
15.8 16.4
10
13
16
19
22
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
Ratio
India's Forex Reserves: 2001-08 (Till 28 March 2008)
5475
112141 152
199
309
0
50
100
150
200
250
300
350
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
(Till 28March)
USD
Billion
India's Economic potential is overstated
Source: RBI
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India: Glimpse on Forex reserves
India's Economic potential is overstated
Foreign Exchange Reserves (FER) is thesurplus money or capital that a countryparks or maintains in the foreign countryin form of currency, bond and other kindof securities.
India has witnessed a whopping 152%increase in its Foreign exchange reserve
Large reserves of foreign currency allow a government to manipulateexchange rates - usually to stabilize the foreign exchange rates to provide a
more favorable economic environment.
The greater a country's foreign reserves, the better position it is in to defenditself from speculative attacks on the domestic currency.
Source: RBI
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India: Surging Exports
Services sector hasbeen a majorcontributor toincreased exportsfrom India
Acceptance of
Indian productsalong with the costadvantage hasprovided an edge toIndian companies
Product importsby India mainlyinclude petroleumproducts andminerals
Quality and cost advantageare the two importantparameters leveraged by theIndian producers toincreasingly market productsand services
P
etroleum products are themajor contributors towardsIndias growing imports
India's Exports: 2002-08
5364
84
103
126 124
0
20
40
60
80
100
120
140
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
(April-
December)*
USDB
illion
India's Imports: 2002-08
62 78
112
150
191 192
0
50
100
150
200
250
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
(April-
December)*
US
DB
illion
India's Economic potential is overstated
Source: RBI
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India: Attractive Investment Destination
With improved performance onPE ratio and ROE, Indianmarkets have attracted largeinvestments
FDI inflow for the period 2006-07 witnessed a growth of185 percentover the same period last year
India is ranked 2nd in ATKearneys FDI confidenceindex (2007)
India's Economic potential is overstated
Source: RBI
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India: Sectors attracting highest FDI
India: Regions attracting FDI
India's Economic potential is overstated
Source: RBI
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India: Vibrant Capital Market
India is among themajor destinationsacross the globe forinflow of US Dollar
Sensex has risen
20 times in theperiod 1990-2007
Emergence ofindustry and
confidence of local
investors alongwith the FIIs has ledto upsurge of theSensex
FIIs have infusedlarge investments
into the Indianstock market
Encouragingindustry
performance
Increased localinvestorsconfidence
Sensex The Bombay Stock Exchange index rise 20 times from 1990s toreach 20,000 mark in November 2007.
0
5000
10000
15000
20000
25000
1-Jul-9
7
1-Jan-98
1-Jul-9
8
1-Jan-99
1-Jul-9
9
1-Jan-00
1-Jul-0
0
1-Jan-01
1-Jul-0
1
1-Jan-02
1-Jul-0
2
1-Jan-03
1-Jul-0
3
1-Jan-04
1-Jul-0
4
1-Jan-05
1-Jul-0
5
1-Jan-06
1-Jul-0
6
1-Jan-07
1-Jul-0
7
1-Jan-08
11 December
2007 Crossed
20,000 mark
07 February 2006
Crossed 10,000 mark30 December 1999
Crossed 5,000 mark
India's Economic potential is overstated
Source: RBI
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India: Company Overview
>India is one of only 3 countries thatmakes supercomputers (US and Japan are
the other two).
>India has the second largest communityof software developers, after the U.S.
>BSE lists more than 6000 companies.Only NYSE has more.
>100 of the Fortune 500 companieshave R & D facilities in India
>India is one of six countries thatlaunches satellites.
India's Economic potential is overstated
Source: RBI, IMF
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India: Corporate perspective
We came to India for the costs, stayed for the quality and are nowinvesting for innovation.
- Dan Scheinman, Cisco System Inc.
India is a developed country as far as intellectual capital is
concerned.
- JackWelch, Ex CEO of General Electric
By 2032, India will be among the three largest economies in the
world. - BRIC Report, Goldman Sachs
India's Economic potential is overstated
Source: FORBES, Goldman Sacs
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India: Drivers of growth
India ranks 2nd world wide in farm output.
Two thirds of Indias workforce still earn their livelihood directly or indirectlythrough agriculture.
Despite improvements, average yield in India ranges from 30-50% of thehighest average yield in the world.
Despite recession, the countrys agri-exports have registered a 25 per centgrowth in 2008-09.
India has a share of 7% ($ 80 billion) in floriculture exports
Agriculture accounts for about 17% of GDP
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Agriculture>>>
India's Economic potential is overstated
Source: RBI
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India: Drivers of growth
India ranks 14th in the world in factory output.
Manufacturing growth rate 8.4%.
Economic reforms led to more private sector participation, an expansion in theproduction of consumer goods and both domestic and foreign competition.
Industry accounts for 28% of the GDP and employs 17% of the work force.
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Industry>>>
India's Economic potential is overstated
Source: RBI
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India: Drivers of growth
India is 15th in services output.
The growth rate which was 4.5% in 1951-80 increased to 7.5% in 1991-2000.Recent growth rate is around10.7%.
Fastest growing services are business services, information technology enabledservices, business process outsourcing contributing about one third of total outputof services in 2000.
Indias IT industry is an important contributor to BOP.
Its share in GDP was 15% in 1950 which is now about 55%.
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Services>>>
India's Economic potential is overstated
Source: RBI
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Phase III
Over the next41 Years
Multi-party System
One Direction
One of the Supreme Power in the
World Economy
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Drivers of growth
India opens upThe rise of the Financial sectorBack-office to the worldThe Golden QuadrilateralThe great migration
The land factor
10Things to be addressedFuture projections
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Drivers of growth
India began to unshackle its closed economy bygradually lowering its very high trade barriers andboosting exports.
Average tariffs fell to below 15% from as high as200% as the country began to re-integrate into theglobal economy.
The impact of opening up has been significant.Exports have risen 14 times as India has rapidlygained trade share.
This development has been most evident in the past
three years, when trade has grown, on average, 25%a year.
India opens up
The rise of the Financial sector
Back-office to the world
The Golden Quadrilateral
The great migration
The land factor
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Source: IMF, BRIC - GS
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Drivers of growth
Private sector has grown by an average of 32% overthe past two years.
Increased financial intermediation improvesresource allocation by effectively channeling savingsinto investment and raising productivity.
Assuming that policies to open up the financialsector remain on track, including the entry of foreignbanks starting from 2009, we expect financialdeepening to continue and to contribute to increasesin productivity in the medium term.
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India opens up
The rise of the Financial sector
Back-office to the world
The Golden Quadrilateral
The great migration
The land factor
Source: IMF, BRIC - GS
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Drivers of growth The success of the IT industry in India has had amaterial impact on productivity.
It has provided powerful incentives for students toinvest in IT skills. This has created a pool oftechnology-skilled labor that firms in otherindustries can tap into.
The rapid spread of mobile phones from a very lowbase provided a fillip to communications, furtherboosting productivity.
Today, India is the fastest-growing market for mobilephones, with average growth rates of over 80%every year since 2000.
Indias technology spending is still low and thereremains substantial scope for catch-up andproductivity gains.
India opens up
The rise of the Financial sector
Back-office to the world
The Golden Quadrilateral
The great migration
The land factor
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Source: IMF, BRIC - GS
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Drivers of growth In the last 50 years, the government has built just
334miles of four-lane roads.
The Golden Quadrilateral is of 3,625 miles of four-and six-lane highways. The highway connects thefour largest cities: Delhi in the north with Kolkata inthe east, Chennai in the south and Mumbai in thewest.
GQ runs through 13 states and 17 other cities with amillion or more inhabitants since 2007.
More importantly, the highways will open up and outthe closed worlds of India's villages. They will
facilitate increased rural-urban migration, and whenmigrants return to their villages, they bring backnew views and aspirations, encouraging others tofollow in their footsteps.
India opens up
The rise of the Financial sector
Back-office to the world
The Golden Quadrilateral
The great migration
The land factor
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Drivers of growth The 21st century is set to become India's urban
century., with more people living in cities and towns
than in the countryside for the first time in itshistory. India has 10 of the 30 fastest growing citiesin the world and is witnessing rapid urbanization.
The growth is happening not in large cities, but insmall and mid-sized towns. In 1991, India had 23
cities with a million or more people. A decade later, ithad 35.
According to GS projections, another 140mn ruraldwellers will move to urban areas by 2020, while amassive 700mn people will have moved to urbanareas by 2050
India opens up
The rise of the Financial sector
Back-office to the world
The Golden Quadrilateral
The great migration
The land factor
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Source: IMF, BRIC - GS
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Drivers of growth When land moves from low productivity agriculture
to urban use and higher productivity sectors, overallproductivity improves.
India will need investments in agriculture to boostproductivity, especially in rural connectivity, storage,etc., to improve the yield of remaining agriculturalland.
The creation of new Special Economic Zones (SEZs)has the potential to transform the productivity ofagricultural land. Ideally, India should developeconomy-wide infrastructure and the necessaryinvestment climate.
India opens up
The rise of the Financial sector
Back-office to the world
The Golden Quadrilateral
The great migration
T
he land factor
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Source: IMF, BRIC - GS
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Ten things for India to focus
Improve governance
Raise educational achievement
Increase quality and quantity of universities
Control Inflation
Introduce a credible fiscal policy
Liberalize financial markets Increase trade with neighbours
Increase agricultural productivity
Improve infrastructure
Improve Environmental Quality
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Future projections
BRIC Estimates
Equity Indices
Policy rates
Inflation
Exchange rate performance
Future Forecast
GDP: Rapid growth potential
Real GDP growth rate
Largest economies
Projected population growth rate
Urbanization bonus
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G
S
&
UN
ESTIMATES
Among the BRICs, India ishaving a healthier growth
indices in the Equity Market.
Among the BRICs, India holds
the highest appreciation whichis favorable to Importers
Among the BRICs, Indias policyrate is moderate next to chinawhich is beneficial in the long
run.
Among the BRICs, India ishaving Inflation at a pretty
decent rate unlike the alarmingtrend like that of Russia.
Source: IMF, BRIC - GS
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F
UTURE
FORECA
ST
India's Economic potential is overstated
Among the BRICs, India isprojected to have a rapid
growth in terms of GDP and therapid potential would spreadfor a longer term.
India is stated to attain this level
due to the productive workforce itwould generate since 2015 andgoes on up to 2050. Thanks toproductive population!!!
Source: IMF, BRIC - GS
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F
UTURE
FORECA
ST
Source: IMF, BRIC - GS
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Thank you
ByGaurav
GokulNivenRageshVipin