INDIAN ECONOMY IN 2050

8/7/2019 INDIAN ECONOMY IN 2050

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INDIAN ECONOMY

IN 2050

PRESENTED BY :

NAVEEN

PARVESHPOOJA

RUBY

SHIPRA


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HIGHLIGHTS

In our latest annual update to our GrowthEnvironment Scores (GES), India scores belowthe other three BRIC nations, and is currently

ranked 110 out of a set of 181 countriesassigned GES scores. If India were able toundertake the necessary reforms, it could raiseits growth potential by as much as 2.8% perannum, placing it in a very strong position todeliver the impressive growth we outlined.

-Economictimes.com


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FEW FACTS AND PLANNING

According to PwC{ Price water house Coopers } India

will be the second largest economy till 2050 on

purchasing power parity basis.

Basically economic size in terms of purchasing power

parity measures the GDP of a nation based on thepurchasing power of a local currency.


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Contd..

China is expected to overtake the US as the worlds

largest economy before 2020.

According to report India was at 4th position in terms

of purchasing power parity in 2009 but till 2032 India

will move to 3rd

rank making Japan on 4th

spot.

And till 2050 India will move on 2nd position making

USA on the 3rd position.


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Advantages for India

India is having a significantly younger and

faster growing working age population than

china

India is having a bigger domestic market than

USA .

The level of education in India is continuously

increasing.


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Contd..

Over the coming decade , Indian economy is

likely to become less dependent on

outsourcing and more focused on

manufacturing , exports, engineering skills

Lower labour force growth due to one child

policy means Chinas growth will slow down

progressively while India will remain fairlystrong.


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10 CHALLENGES FOR INDIA

TO ACHIEVE TILL 2050


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Improve Governance

Indias governance problems overarch all its otherproblems. Without better governance, delivery systems and

effective implementation. However, India will find itdifficult to educate its citizens, build infrastructure, increaseagricultural productivity, and ensure that the fruits ofeconomic growth are well-distributed.

Governance problems stem from the increasing inability of

the government and public institutions to deliver publicservices in the face of rising expectations.

A large gap between physical access to services and thequality of services provided is leading to a citizensatisfaction gap.


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Raise Basic Educational Achievement

Many international observers tend to seeeducation as one of Indias biggest advantages.

It has a population of 1.1bn and probably thehighest absolute numbers anywhere globallyreceiving hardly any education.

There is evidence that the amount of time spentreceiving secondary education is important foreconomic growth and productivity.

India scores poorly relative to the other BRICs,and even below the average of all emergingmarket countries.

The actual amount spent on education is low,and its efficiency is weak. It is important thatIndia improves the amount and quantity ofmoney spent, and that the quality is improved.


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Increase Quality & Quantity of

Universities

There is also significant need for better higher education.The likely numbers seeking higher education can beexpected to grow by three of four times by 2020 from thecurrent number of around 10mn.

The National Knowledge Commission has proposed anincrease in the number of universities from 350 today to

1,500 by 2016. India plans to quadruple the number of its universities in

the next ten yearsan admirable goal and a hugechallenge. Its goal should also probably be that at least 20of these are the worlds best. Shanghai University hasbecome recognized as the authoritative voice on leadinguniversities.

Its latest ranking does not show a single Indian universityin the top 300. China itself has six. In order to achieve thiskind of ambition, just as in other spheres of life, Indiasleadership needs to have strong and imaginative goals.Perhaps India can share best practices with leadinguniversities from elsewhere around the world.


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Control Inflation

Although India has not suffered particularlyfrom dramatic inflation, it is currentlyexperiencing a rise in inflation similar to thatseen in a number of emerging economies.

Goldman Sachs thinks a formal adoption ofInflation Targeting (IT) would be a very sensible

move to help India persuade its hugepopulation of the (permanent) benefits of pricestability. It also recommends greaterindependence for the Reserve Bank of India andthe abolishment of all FX controls.

IT has given major benefits to a broad varietyof countries, ranging from developed countries

(such as New Zealand, Sweden and the UK) todeveloping ones (such as Brazil, Korea andSouth Africa). For India, there are probablybroader powerful benefits, it says.


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Introduce a Credible Fiscal Policy

Indias gross fiscal deficit remains one of the highestin the world and, recently, government liabilities havebeen increasing at an alarming rate.

Goldman Sachs estimates that the overallgovernment deficit stood at just under 6% in FY2008.In FY2009, this may accelerate to above 7%, due to a

large debt-waiver for farmers, a big wage hike for civilservants, increasing fertilizer and oil subsidies, andhigher exemptions on income tax.

At such high levels, government borrowing crowdsout private-sector credit, keeps interest rates high,adds to already high government debt, and becomesa key source of macro vulnerability.

Therefore, a medium-term strategy for fiscal policy,which reduces the overall deficit to a sustainablelevel, is critical for India.


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Liberalize Financial Markets

Indias financial sector remains small and underdeveloped.The state still dominates the sector, holding 70% of banking

assets, a majority of insurance funds and the entire pension

sector.

Additionally, markets are lacking in corporate debt,

currency and derivatives. This leads to a lack of credit and

low financial savings. Total credit, at 50% of GDP andespecially compared with China (111% of GDP).

Within this, consumer credit remains abysmally low (at 11%

of GDP) compared with an Asian average of over 40% of

GDP. Household savings tend to be in physical assets and

gold, and risk diversification channels are not available.

India needs to pursue financial reforms to channel savingseffectively into investment, meet funding requirements for

infrastructure and enhance financial stability.

Savers need to have access to a broad range of financial

instruments, while borrowers should be able to access local

debt and equity.


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Increase Trade With Neighbors Lower tariff barriers encouraged by Indian authorities

have been key, as has booming world trade. Thisimpressive development needs to be kept inperspective, however, as it has come from anexceptionally low base.

India currently accounts for no more than 1.5% of

global trade. On Goldman Sachs GES scoring system, India still

ranks below the average of all developing countries.Indias trade with China is rising sharply, and Chinanow ties with the US as Indias biggest tradingpartner.

India takes just 1.93% of Chinas exports and providesjust 1.46% of its imports. Total trade with the US in2007 was just $42bn. For comparison, total US tradewith China in 2007 was $405bn. Similarly, total Indiantrade with China was just $37bn.

Thus, in terms of international trade, India continuesto be much less open than many of its other large

emerging nation colleagues, especially China.


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Increase Agricultural Productivity

Increasing agricultural growth is critical not only for India to

sustain high growth rates, but also to move millions out of

poverty. Currently, 60% of the labour force is employed in

agriculture, which contributes less than 1% of overall

growth.

Indias agricultural yields are a fraction of those of its more

dynamic Asian neighbours. For instance, rice yields are a

third of Chinas and half of Vietnams.

Agriculture will have to contend with two other problems.

First, the loss of arable land for non-agricultural uses as

India industrializes and urbanizes.

Second, soil erosion due to intensive farming and

environmental degradation. Since there are limits to

enhancing area under cultivation, as forest cover is already

dwindling, raising agricultural productivity will be key.


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Improve Infrastructure

Indias constraints in infrastructure are obvious to first-timevisitors or long-term residents. The problems of cloggedairports, poor roads, inadequate power, delays in portshave been well-recognized as impeding growth. Indiancompanies on average lose 30 days in obtaining anelectricity connection, 15 days in clearing exports throughcustoms, and lose 7% of the value of their sales due to

power outages. Incremental demand for infrastructure will continue to

increase due to economic growth and urbanization. Thus,there is both a stock and a flow problem. If Indiaseconomic growth were to continue, it will fuel demand forenergy, transport, logistics and communication.

India has built more than 3,600 miles of highways for the

Golden Quadrilateral Highway project, whereas in theprevious 50 years it had built 300 miles; the New Delhimetro was completed earlier than envisaged; and theprivatization of the telecom sector, and its rapid growth andpenetration, are all success stories that demonstrate thatIndia can build infrastructure.

The ability to continue to do so will be critical for thegrowth of the economy.


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Improve Environmental Quality

Indias high population density, extreme climate and economic

dependence on its natural resource base make environmental

sustainability critical in maintaining its development path.

History is replete with instances of societies that have depleted their

natural resources in the course of their development, thereby

leading to severe loss of growth, and in some spectacular cases, a

complete collapse of the civilization. Although such dire

prognostications are premature, urbanisation, industrialisation andongoing global climate change will take a heavy toll on Indias

environment, if not managed better.

India is well-placed to deal with environmental issues. It has a strong

policy and institutional frameworkincluding a separate ministry for

environment and forests; state and local pollution control boards; a

vocal media; and of late a very active judiciary.

The political commitment to a sustainable environment is, however,still lukewarm, and significant segments of the population may

profess to have other, more pressing priorities. If not given the right

priority, environmental sustainability has the potential to become

Indias greatest challenge.


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THANK YOU

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INDIAN ECONOMY IN 2050