The Growth Story An Overview - India. .pptx

What is the Indian Growth Story, and can it catch up with the Global Leaders

1. India requires inclusive growth and sustainable development rather than increasing growth rate to compete with China.

2. Introduction Since independence, significant improvement in India’s economic and social development. In the post-reform (since 1991) period, India has done well in some indicators such as balance of payments, resilience to external shocks, service sector growth, significant accumulation of foreign exchange, Information technology (IT) and stock market, improvements in tele - communications etc. GDP growth was around 6.8 to 7.8% per annum in the period 2008-09 to 2010-11. India's saving and investment rates presently are at 32.3% and 35.1%.

3. GDP of India & China GDP - real growth rate China India 9.2% (2011) 7.8% (2011) 10.5% (2010) 10.10 (2010) 9.2% (2009) 6.8% (2009) India currently a 1.85 trillion economy with a population of 1.2 bn To sustain 9% growth and progress to a double digit rate inclusiveness of all members of society is required.

4. India Vs China   India   China   Inflation 6.87% 5.40% GDP $1.676 Trillion $7.29 Trillion Exports $299 Billion $1.9 Trillion Imports $461 Billion $1.7 Trillion Revenue $196 Billion $1.6 Trillion Expenses $308 Billion $1.7 Trillion Public Debt 68.5 % of GDP 25.8% of GDP Unemployment 9.80% 4.20% Forex Reserves $288 Billion $3 Trillion     GDP By Sector   Agriculture 17.2% 10.1% Industry 26.4% 46.8% Service 56.4% 43.1%   * 2012 Data      

5. Workforce & GDP contribution by Sector India Services : 57% Industry: 27% Agriculture: 17%

6. Inclusive Growth ‘Inclusive growth is growth that ensures meaningful and sustainable jobs for all, which includes the poorest of the poor. India’s growth has benefited its prospering middle class. Engaged largely in the fast growing services sector, they are both contributing to India’s success and also enjoying its benefits. But this growth story has an ominous side as it has left behind a large majority of Indians. According to a recent survey, one out of every five poor people in the world is an Indian. This skewed economic ratio must be addressed, as any growth that is not inclusive can never sustain itself on a long-term basis. In this context, one of the biggest sufferers is rural India as it lacks the basic social and infrastructure services in healthcare, roads, education and drinking water.

7. Why Inclusive growth in India ? Indian growth primarily driven by growth in services sector. Low agricultural growth rate Low-quality employment Poor education Inadequate healthcare services Rural-urban divide Social inequalities and Regional disparities.

8. The opportunity At macro level: Improving fiscal discipline Trade liberalization Openness to FDI Privatization Deregulation Tax reforms Providing social safety nets Re orientation of public expenditure & legal and political reforms At micro level: Reducing income inequality Improving public infrastructure, healthcare & education Access to markets Women’s empowerment Good governance can help accelerate poverty reduction

9. Governance Good governance is at the core of improving the delivery of essential publicly provided services. Govt Initiatives have failed to achieve their goals because of poor design, red tapism, insufficient accountability and corruption at various levels. As of Oct’ 2010, out of the 559 projects undertaken by the govt for infrastructure development, only14 were ahead of schedule, 117 - on schedule, 293 - delayed and 135 - no dates had been fixed for commissioning. Pvt sector expertise can be leveraged as has been done in the case of the Unique Identification Number (UID) project.

10. Education Better education is often an important means to better jobs, increased income, and a better quality of life. Japanese investments in education after the Second World War helped it transform from a defeated nation to an industrial nation that created innovative products, increased employment, and provided inclusive growth to its citizens. India’s increasing integration with the global economy and the growth of sectors such as IT, BPO, and financial services have led to an increased demand for knowledge workers. India currently has around 480 universities and 22,000 colleges, in the next 10 years, India will need 700 new universities and 35,000 new colleges. Govt has passed the RTE Act, which makes education a fundamental right for all children in the age group of 6-14.

11. Energy and Resources Accelerating demand for energy and natural resources in India but generation capacity and effective utilization is currently inadequate. Energy sector suffers due to very high distribution losses and theft. Rural electrification is an important tool to bring about inclusive growth by making electricity available to farmers and in rural areas.

12. Telecom and Technology India has a teledensity of 70% (urban teledensity exceeds 150%, whereas rural teledensity is ~33%) and the IT industry contributes to ~6% of the GDP. (a s of March’11 ) The outsourcing industry is expected to grow to USD 225 billion over the next decade. It is one of the largest job creators in the Indian economy. Rural communities can now access up-to-date information at affordable prices facilitated through initiatives such as ITC’s E- Choupal . Capabilities of 3G such as online video streaming, video calling, etc can be utilized to provide value-added services.

13. Infrastructure Investment in infrastructure drives the growth of a country’s economy. Systemic reforms needed to fix the institutions and the processes used to create infrastructure. Key components to physical infrastructure are transportation connectivity and warehousing storage. Successful completion of the Delhi metro on budget and almost three years ahead of schedule is a proof that India has the capability to execute large infrastructure projects efficiently.

14. Healthcare The healthcare industry in India promises to be one of the fast growing one. India gradually emerging as a preferred destination for medical tourism for citizens of the developed world but healthcare services is inadequate for a large section of the local population. Rural person seeking healthcare has to travel ~10kms which takes an entire day due to poor physical connectivity. All stakeholders are required to collectively work towards reducing the costs of healthcare for non urban areas.

15. Financial inclusion A society can be considered financially inclusive when all segments and strata of society have access to financial services and timely and adequate sources of formal credit. Banking penetration is estimated to be only about 5% among the lower income classes, and even among the middle- and high-income classes the penetration is about 45%. In July’11, RBI issued a circular mandating all scheduled banks to open at least 25% of their new branches in rural areas.

16. Poverty Reduction and increase in quantity and quality of employment The official poverty lines are anchored to a fixed commodity basket corresponding to the poverty line (Rs.26 per person per month at June 11 prices for rural areas and Rs.32 for urban areas). The suggested rural commodity basket by the Expert Group contained 2400 kcal per capita per day in rural areas and the urban food basket had 2100 kcal per capita per day in 2010-11. For subsequent years, poverty line is updated with consumer prices. The number of poor in India has declined to 34.47 crore in 2009-10 from 40.72 crore in 2004-05 estimated on the basis of controversial Tendulkar Committee methodology.

17. Poverty Reduction and increase in quantity and quality of employment World Bank Estimates: 42% below $1.25 poverty line. ADB 65% with $1.35 poverty line. 80% of the poor are from rural areas. Poverty concentrated in few states (Bihar, Uttar Pradesh and Madhya Pradesh and Orissa, Chattisgarh and Jharkhand) Concentrated among agricultural labourers , casual workers, Scheduled Castes and Scheduled Tribes

18. Determinants of Rural Poverty Agricultural Growth Relative food prices Rural non-farm sector Rural wages Governments’ development expenditure Infrastructure Human Development

19. Policies for Poverty Alleviation Growth approach: all three sectors contribute agriculture, industry and services Direct approach : Safety nets or anti-poverty programme. Self employment programme. (women’s groups), wage employment programme, food subsidies, nutrition programmes for children, old age and maternity benefits Public Distribution System – Subsidized food National Rural Employment Guarantee Scheme (NREGS) – Giving 100 days of wage employment to the poor

20. Problems in Employment Growth in employment more in unorganized sector. Agriculture: 14.6% in GDP, 52% in Employment Industry: 28.6% in GDP,14% in Employment Services: 57.2% in GDP, 34% in Employment Employment growth increased in recent years but quality is low. Poverty is much higher than unemployment

21. Inclusive Growth: Agriculture Concerns in Agriculture Land and water problems, vulnerability to world commodity prices, farmers’ suicides, 45% of farmers want to leave agriculture but no where to go. Disparities in growth across regions and crops: growth rate declined more in rainfed areas. Main problem is low labour productivity in agriculture. Gap between agri. and non-agri. is widening.

22. Three Goals of Agricultural Development Achieve 4% growth in agriculture and raise incomes. Increasing productivity (land, labor), diversification to high value agri. and rural non-farm by maintaining food security. Second goal is sharing growth (equity): focus on small and marginal farmers, lagging regions, women etc. On lagging regions, focus on Eastern India and other rainfed areas. Third is to maintain sustainability of agri. by focusing on environmental concerns.

23. Deficits in Agriculture Growth Six deficits in agriculture (a) land and water management deficit (b) investment, credit and Infrastructure deficit, (c) research and extension (technology) deficit, (d)market deficit, (e) institutions deficit, (f) education/skill deficit

24. Social Development In social sector, significant achievements in education and health However, Human development index rank is 127 out of 215 countries. Social indicators are much lower for Scheduled castes and Scheduled tribes Malnutrition among children is one major problem (36% of children suffer from malnutrition

25. Six problems in Social Sector There have been significant achievements but there are problems Low levels of social indicators Slow progress Significant regional, social and gender disparities Low level and slow growth in public expenditures particularly on health Poor quality delivery systems

26. India’s last quarter GDP growth rate stood at only 5.5% due to lower manufacturing sector growth and absence of any economic or financial reforms India is likely to miss Millennium Development Goals (MDG),except perhaps on poverty. Inflation has accelerated in the last two years. International Environment is very uncertain. Global Pressure on food ,oil and other commodity prices. 11 th Five Year Plan - Inclusive Growth

27. 11 th Five Year Plan - Inclusive Growth Increasing the literacy level among backward classes not achieved Agriculture growth is still in vulnerable conditions The employment schemes like MGNREGS are not upto the mark. The red-tapism and corruption are still out of control. Plans, Policies, Schemes made but their implementation is not according to their expected level.

28. Sustainability- Whose Responsibility Sustainable development (SD) is a pattern of economic growth in which resource use aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for generations to come. Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.’’ India has a long way to go to reach environmental quality similar to those enjoyed in developed economies. Pollution remains a major challenge and opportunity for India.

29. Two rising Giant’s in Asia Difference in infrastructure & other aspects of economic growth Compared to India, China has a much well developed: Infrastructure. Manpower and labor development Water management Health care facilities and services, Communication, civic amenities UNDP - Human Development Index (HDI) and so on. India is still plagued by problems such as: Poverty Unemployment, lack of civic amenities and so on. China is lagging behind India in: Tax incentives Capital market in terms of predictability and transparency.

30. Breakdown of this demography race Population goes to India: India has more children per mother – 2.65 versus China’s 1.54 mostly due to China’s one-child policy. Education goes to China: China has higher literacy rates. Health goes to China: China has better access to health care than India. Infrastructure goes to China: China has better infrastructure, and also more “openness of foreign trade and a sound financial system.” China R&D spending is the 2nd highest in the world, second only to USA. India R&D spending is not even the top 10 of the world China is now the top trading nation in the world (the largest exporter in the world beating Germany!). India is not even in the top 10 of the world. China unofficial Defence spending is estimated to be 100-130 billion, second to only the USA. India defence spending is barely 22 billion, lower than Saudi Arabia's 35 billion

31. To achieve sustainable development Limiting the human population to a level of within carrying capacity of environment Input efficient techniques should be used Rate of extraction of renewable resources should not exceed rate of regeneration Control over pollution Conservation of natural resources Encourage conservation of resources and necessary recycling Investment in renewable sources of energy such as solar, wind, etc Avoiding the imposition of added costs or risks on future generations, etc

32. Can we Catch Up ? Can India ever Catch up with China ??