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High Commission of IndiaLondon

Presentation by High Commissioner Dr. J. BhagwatiDialogue With India Series II

India House, May 21 2013

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

2

• 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

3

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

4

• 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

5

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

6

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 Trend

5.68 2.93 9.29 3.931950-1973 3.54 5.02

1973-1998 5.07 6.84

Break In Trend

1.76 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 (%)

-2

0

2

4

6

8

10

12

1820-70 1870-13 1913-50 1950-73 1973-98 1998-2010

India China Germany Japan UK USA

India

China

UK

Japan

Germany

Source: World Economy by Angus Maddison, OECD and IMF

8B

Year Per capita GDP

Per 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

0

100

200

300

400

500

600

700

800

1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2010-11

Per capita GDP at Constant 2004-05 prices US$


9B

PeriodPopulation growth

rate GDP growth rate Trend

1900-1947 0.46 % 0.23 % Getting poorer

1947-2010 2.08 % 4.74 %Growing

Richer

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).

0

0.005

0.01

0.015

0.02

0.025

0.03

0.035

0.04

0.045

0.05

1900-47 1947-2010

10B

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


IndiaSocial Indicators

India Social Indicators

0

10

20

30

40

50

60

70

80

0

200

400

600

800

1000

1200

1400

1950-51 1970-71 1990-91 2010-2011


Pop

ula

tio

n (

mill

ion

s)

Life

Exp

ecta

ncy

, Li

tera

cy R

ate

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 %,

2000-20127.23 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 Africa

Cumulative 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 201234 17 46 35 20 19

Savings rate % of

GDP 201229 15 49 32 21 13

13


*These numbers are not strictly comparable

Economic IndicatorsIndia & Developed Economies

India Australia Germany Japan UK USA

Population 2012

Millions1,223 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

GDP

2012

-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


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


*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

-2

0

2

4

6

8

10

2011 2012 2013 2014 2015 2016 2017 2018

India Brazil China Indonesia Mexico South Africa Russia

Australia France Germany Japan UK USA

India

China

Indonesia

Brazi

Russia

USAUKFrance

Germany

Source: IMF

GD

P G

row

th R

ate

s %

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 2012309 2,500 567 1,492 481 1,612

Exports of Services $

Bn 2012293 1900 208 254 278 613

Imports of Goods $

Bn 2012500 1,817 659 1,276 646 2,357

Imports of Services

$ Bn 2012 489 281 170 285 175 405

Total Trade Goods &

Services $ Bn 20121591 6498 1604 3307 1580 4987

19

Source: IMF, IAEA & Space foundation

Defence and Technology Budgets

India China France Germany UK USA

Defence Budget 2011

$ Bn38 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 Steel

Production

(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

2011-12

Estimates257.4 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


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


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


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


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


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


Issues Indications

Inflation Chronic food inflation

Infrastructure bottlenecks increase cost of

production

30

IndiaRisks ahead

31

Issues Indications

Infrastructure Power shortages

Availability of coal linkages

Road, Rail and Port congestion

Delays in environmental clearances

Rapid Disorderly Urbanisation

IndiaRisks Ahead

Issues Indications

Balance of Payments Crude oil imports

Gold imports

32

IndiaRisks ahead

Issues Indications

Regional Inequalities Low Human development indices in

highly population states

Poor infrastructure in natural

resources rich states

33

IndiaRisks ahead

34

Issues Indications

Imparting of Skills to

youth

Young population has high

aspirations

Challenge to upskill 500 million youth

Social consequences of unmet

aspirations

IndiaRisks ahead

35

Issues Indications

Project 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

IndiaRisks ahead

Issues Indications

Corruption 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

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