shashank bhide ncaer 15 september 2010
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Sustaining India’s growth. Shashank Bhide NCAER 15 September 2010. The long-term story. Half full glass: - 20 year growth 7% (R-S) - 10 % Kelkar - 5.5 % (50 years) Goldman Sachs Half-empty glass: - Low Saving/Investment; Government Dis -saving - Inability to use labour productively - PowerPoint PPT PresentationTRANSCRIPT
Shashank BhideNCAER15 September 2010
Sustaining India’s growth
The long-term story
•Half full glass:
- 20 year growth 7% (R-S) - 10% Kelkar- 5.5% (50 years) Goldman Sachs
• Half-empty glass:
- Low Saving/Investment; Government Dis-saving- Inability to use labour productively- Services cannot outgrow manufacturing forever- Agriculture, infrastructure, regional disparities.
The makers and the breakers of growth
• The drivers– Demography
– Aspiring middle class
– Good institutions
– Low base of productivity
– High TFP growth
• The breakers– Fiscal pressures
– Rising inequality
– Rising regional disparity
– Slow reforms
– Poor governance
– Fragile environment
Sustainability frameworkThe triggers of unsustainability
The safety valves
The macro sceneFiscal imbalance The fiscal space/ reformsCurrent account imbalance Forex reservesPrivate debt Diversification of marketsCapital markets Good regulatorsInflation PDSThe oil price Forex reserves; fiscal spaceBad monsoon Food reservesInequality measuresPoverty HCR PDS/ employment guaranteeMedian income Productivity growthRegional disparity Finance CommissionProductivity measuresReal wage rates Investment; Social sector spendingCapital/ output ratio Infrastructure;Trade openness; competition
The crude price shocks: $/barrel
World output: % YOY
GDP growth patterns (%YOY)
-4
-2
0
2
4
6
8
10
12
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
World US India
Source: IMF WEOs
Non-agricultural GDP growth: % YOY
Accelerating GDP growth: %YOY (10 year moving average)
Threats to sustainability of high growth
• Fiscal sustainability
• Weak social safety nets
• Inadequate investments in human resources
• Environmental sustainability