pkt sir india superpower

8/7/2019 pkt sir india superpower

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WILL INDIA BECOME AN

ECONOMIC SUPERPOWER


2/38

A. WILL INDIA BECOME

AN ECONOMICSUPERPOWER?


3/38

India currently has the 11th largest GDP

in the world

WDI: Constant 1995 US$ billion, 2002

230

248

268282

347

411

414

452

477

515

637

650

716

1181

1237

1410

1552

1976

3979

10417

Sweden

Belgium

Sw itzerlandTaiw an

Russia

Australia

Netherlands

Brazil

South Korea

India

Mexico

Spain

Canada

Italy

China

France

United Kingdom

Germany

Japan

United States


4/38

accounting for 1. % of the global

GDP in 2002

1.1%

1. %

1. %

1. %

1. %

1. %2.0%

2.1%

2. %

. %

. %

. %

. %

. %

12. %

.0%

Russia

Australia

Netherlands

Brazil

Korea, Rep.

IndiaMexico

Spain

Canada

Italy

China

FranceUnited Kingdom

Germany

Japan

United States


5/38

and ranks 2 th in the world by total trade in

goods and services (US$ billion, 2002)

115119

131133

151155

165

172193202

204

209215

226

289293

363374

377478481

558

574

615706

815850

9251356

2374

Poland

aud ab aNorwa

ra l

Ind aDen ark

Tha landu tralia

wedenRu ian

ala ia

Irelandwitzerland

u triaingapore

Taipei, Chine ee ico

Spainorea, Republicof

Ho ng ong, Chinaelgiu

Canada

NetherlandItaly

ChinaFrance

United ingdom

Japanermany

United State

WTO: US$ billion, 2002


6/38

India has been one of the fastest growing

economies in the world over the last 20 years

Annual average growth rates of 10 fastest growing economies over

19 0-2002 excl. small countries (pop < 10 million)

Source: WDI

5.3

5.4

5.6

6.0

6.3

6.5

6.6

6.8

9.5

5.2Pakistan

Cambodia

Indonesia

India

Thailand

Malaysia

Vietnam

Taiwan

South Korea

China


7/38

What does the Goldman Sachs BRIC Report say?

(BRIC=Brazil, Russia, India, China)

2.5%

1.9% 1.8%2.1% 2.2%

2.9%2.4%

-0.1%

9.5%

5.6%

0.9%1.3% 1.3%

1.8%2.0%

2.6%

4.2%

5.6%

7.7%

8.5%

-1%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Japan

Italy

G

ermany

Fr

ance

UK

US

Brazil

Russia

China

India

Historical (1980-2002) Goldman Sachs (2000-2050)

Goldman Sachs in their BRIC report have higher than historical projections for

Brazil and Russia and lower predictions for China


8/38

leading India to emerge as the rd largest economy

in 2050 (1995 US$ billion)

2185

3297

3816

3919

5367

5596

6092

30209

35067

43926

Ital

ran e

er an

u ia

ra il

apan

India

hina

Goldman Sachs: Constant 1995 US$ billion

Note the big gap between the first three and the rest


9/38

Projecting GDP using historical growth rates,

India would be the th largest economy in

2050

339

2598

3111

3960

4974

6458

7307

8662

16706

19233

37781

96178

Ru ia

razil

Ital

United ingdom

rance

erman

India

ai an

outh orea

Japan

United tate

hina

WDI: Constant 1995 US$ billion


10/38

Under GS assumptions, India would be the

worlds rd largest trader in 2050

948

1013

1238

1421

2021

2054

3018

5575

6969

13842

0 2000 4000 6000 8000 10000 12000 14000 16000

Italy

Brazil

Japan

France

Ger any

K

ia

India

US

ina

Goldman Sachs & WDI: Constant 1995 US$ billion, projected at

historical Trade-to-GDP ratios


11/38

Using historical growth rates, India would be

the 10th largest trader in 2050

0.4%

0.9%

2.6%

2.6%

4.1%

4.2%

6.7%

7.6%

14.7%

15.5%

21.1%

59.1%

Ru ia

Bra il

India

Ital

nitedKingdo

ran e

er an

apan

nited tate

Tai an

outhKorea

hina


12/38

Will India Become an Economic Superpower?

India is already a large player.

It will become larger.

But it may not become one of three giants


13/38

B. DOES IT MATTER IF

AND WHEN INDIA

BECOMES AN ECONOMICSUPERPOWER?


14/38

India is already a population superpower

58 59 60 82127 146

176

282

1262

1002

50 61 64 74100 118

228

420

1418

1601

0

200

400

600

800

1000

1200

1400

1600

Ital

ran

e U

K

German

apan

Ru

ia

Bra

il

U

China

India

Population(millions

)

2000 2050

Goldman Sachs

India will be the worlds most populated country

by 2050; its population is expected to stabilize by

the year 2100 at 1.8 billion


15/38

With a PC GDP of $ 9 , India today ranks 12 th in

the world

0 10000 20000 30000 40000 50000 60000

INDIA

U

G

ANY

ANC

UK

I

A

Y

JAPAN

CHINA

AZI

U

IA

WDI: Constant 1995 U $, 2002

The fundamental challenge facingIndia is not

to become an economic superpower but to

become rich and eliminate poverty.


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Alternative Scenarios

If India grew at GS rates it would be the poorest of the BRIC and G countriesIf India grew at GS rates it would be the poorest of the BRIC and G countries

in 2050, but equivalent to a lowin 2050, but equivalent to a low--end high income country like Spain todayend high income country like Spain today

If India grows at historical growth rates ( .5%) for the next 50 years, IndiaIf India grows at historical growth rates ( .5%) for the next 50 years, India

would have in 2050 a GDP PC of US $ 5 (constant 1995 US$) equivalentwould have in 2050 a GDP PC of US $ 5 (constant 1995 US$) equivalentto a lowerto a lower--middlemiddle--income country like Brazil today.income country like Brazil today.

If India reverts to the Hindu growth rate ( .5%), its 2050 GDP p.c. will beIf India reverts to the Hindu growth rate ( .5%), its 2050 GDP p.c. will be

US$ 1 2 , equivalent to Iran today.US$ 1 2 , equivalent to Iran today.

Summary of scenariosSummary of scenarios

tr t ri 8% 6.50% 3.50%

P I ( D) 494 18731 4564 1723

ki f i 2050 11t 3r 6t t 12

ki f P i t 128t 23r 44t 77t

2050


17/38

C. WHAT MIGHT PREVENT

INDIA FROM BECOMING

AN ECONOMICSUPERPOWER?


18/38

RISKS TO GROWTH

So far, just doing trend analysis. But economic growth can

slow down as well as speed up. Countries can catch up, but

also be left behind.

Argentina:

1 9 GDP pc = 91% of US GDP pc

1999 GDP pc = % of US GDP pc

What are the factors which might slow down growth in

India?


19/38

1. MACRO SHOCKS

Has the economy been shock-proofed?


20/38

2. SECTORAL CHALLENGES

Sectoral growth rates since Independence

(P rc nt50s 60s 70s 80s 90s

1 ricultur nd lli d 3.1 2.5 1.8 3.6 2.8

2 Industr * 6.3 5.5 4.1 7.1 5.7

3 S rvic s 4.3 4.8 4.4 6.7 7.8

4 GDP f c r c st) 3.9 3.7 3.2 5.6 5.8

* Includ s nstructi n

Source: Central Statistical Organisation


21/38

2. SECTORAL CHALLENGES: Industry

35.7

24.917.3 15.6 15.9

22.1

26.6

29.6

47..9

42.248.

69.

3.1

37.433.3

1.9

28.6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

LDCs Indi OECD -

r n

Afri

E stAsi &

a ifi

C ina

Agri lture Indus trervi es WDI

Indias low share of industry in GDPcompared to East Asia.


22/38

3. GROWING UNEMPLOYMENT:

jobless growth?

Elast ty Employment to GD

1977-78 1983 1993-94

to to to

1983 1993-94 1999-00

1 Agrculture 0.45 0.50 0.00

2 ning & Quarrying 0.80 0.69 0.00

3 Manufacturing 0.67 0.33 0.26

4 Electricity 0.73 0.52 0.00

5 Construction 1.00 1.00 1.00

6

Wholesale & Retail

Trade 0.78 0.63 0.55

7

Transport torage &

Construction 1.00 0.49 0.69

8

Finance RealEstateInsurance & Business

er ices 1.00 0.92 0.73

9

Community, ocial and

ersonal er ices 0.83 0.50 0.07

All Sectors 0.53 0.41 0.15

Source: Planning Commission Reports on Labour and Employment

Sector


23/38

3. GROWING UNEMPLOYMENT (cont):

Will moderate growth be enough?

Millions Employed % Unemployed)

GDP Growth (%) 1999-00 2007 2012

6.5 397 436 467

(2.23) (5.61) (7.41)

8.0 397 442 482

(2.23) (4.27) (4.55)Source: Planning Commission Reports on Labour and Employment


24/38

4. GROWING REGIONAL INEQUALITY

Central Statistical Organization

189

282

309

351

383

465

474

494

514

577

582

603

659

715

738

0 100 200 300 400 500 600 700 800

Bi

i

P d h

M dh P d h

Rajasthan

Andh a P ad sh

W st B ngal

All India

Karnataka

Kerala

Tamil Nadu

ujarat

Haryana

Maharashtra

Punjab

State GDP p.c. USD, 1999-00


25/38

4. GROWING REGIONAL INEQUALITY

(cont).

Central Statistical Organization

165

466

573

729903

1301

1737

1924

2205

2258

2352

2352

2771

3460

3765

0 500 1000 1500 2000 2500 3000 3500 4000

Bihar

Orissa

Uttar Pradesh

Madhya PradeshWest Bengal

Rajasthan

All India

Haryana

Gujarat

Karnataka

Andhra PradeshPunjab

Kerala

Maharashtra

Tamil Nadu

GDP PC in constant US$, projected for the year 2050using historical growth rates


26/38

5. POPULATION GROWTH

1991

"BIMAR "

41%

Nort

5%

E st

15%

West

15%

Sout24%

2051

Sout

19%

West

14%

E st

14%

Nort

5%

"BIMAR "

48%

Economic & Political Weekly, Vol. XXXVIII No. 45, November -14, 2003

Indias Regional Distribution of Population will

Change Over Time


27/38

6. URBANI ATION

24.3

28.1

37.6 38.2

76.279.3

0

10

20

30

40

50

60

70

80

90

LDCs I i Chi uth st

si

Lati meri a OECD

Source: WDI

Indias urbanization has only just begun

Urbanization as a proportion of total population, year 2002


28/38

6. URBANI ATION (cont.)

If India does grow rapidly, one would expectIf India does grow rapidly, one would expectabout 5% of Indias population would beabout 5% of Indias population would beurbanized by 2050urbanized by 2050

Urban population in 2050 = 5% of 1.6 billion =Urban population in 2050 = 5% of 1.6 billion =1.2 billion1.2 billion

Urban population today = 2 % of 1.002 billion =Urban population today = 2 % of 1.002 billion =2 0 million2 0 million

Urban population would increase by 920 millionUrban population would increase by 920 millionby 2050 (almost 20 million new urban residents aby 2050 (almost 20 million new urban residents ayear)year)

Can India cope with such rapid urbanization,Can India cope with such rapid urbanization,

or will it stymie Indias growth?or will it stymie Indias growth?


29/38

7. ENVIRONMENTAL DETERIORATION

A lot of environmental problems diminishA lot of environmental problems diminish

with growthwith growth

But not all: e.g. water.But not all: e.g. water.

Source: www.cnie.org

India - Per Capita Water Availability

(in cubic meters)

0

1000

2000

3000

4000

5000

6000

1950 1990 2025

Water stress

Water scarce


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8. HEALTH THREATS: AIDS

Water stress

Water scarce

Prevalence of HIV as a proportion of working population in 2001:

India next only to, but well below, Sub-Saharan Africa,

0.10 0.100.19 0.23 0.45

0.64 0.67 0.80

8.36

01

2

3

4

5

6

7

89

China

MEN

A

SouthE

astA

sia OEC

D

Centr

alAs

ia

SouthA

sia

Latin

America In

dia

Sub-Sa

haranA

frica


31/38

8. HEALTH THREATS (cont.): AIDS

Water stress

Water scarce

HIV Prevalence: STD Patients in South Africa, Major Urban Areas, 1990-2000

Compared to Selected States of India in 2002

(Median Prevalence in percent)

. . .. .

. . .8. .8

0.

..

. ..

.

Bihar

SA19

90

Gujarat

SA19

91 Goa

Karnata

ka

TamilN

adu

SA19

92

SA19

93

SA19

94

Andh

raPradesh

SA19

95

SA19

96

SA19

97

SA19

98

SA19

99

SA20

00

But are parts of India only a decade or less behind parts of Africa?

Sour e UNAIDS/NA O


32/38

8. HEALTH THREATS (cont.):

AIDS IMPACT

Water stress

Water scarce


33/38

9. WEAKENING GOVERNANCE

Water stress

Water scarce


34/38

10. POLITICAL RISKS

Water stress

Water scarce

India is a stable democracy (cf. ChinaIndia is a stable democracy (cf. China yetyet

to make the democratic traditions)to make the democratic traditions)

But democracies can be unstable:But democracies can be unstable:

Unstable governmentsUnstable governments

Short tenuresShort tenures

Rickety coalitionsRickety coalitions

Civil violence (cf. Sri Lanka, Nepal)Civil violence (cf. Sri Lanka, Nepal)


35/38

11. SECURITY RISKS

Water stress

Water scarce

Regional conflictRegional conflict

TerrorismTerrorism


36/38

12. GLOBAL RISKS

Water stress

Water scarce

Global recessionGlobal recession

Spread of global terrorism or other forms ofSpread of global terrorism or other forms of

conflictconflict Global warming or other environmentalGlobal warming or other environmental

threats to growththreats to growth

Any slowing down of global growth willAny slowing down of global growth willtend to perpetuate the current economictend to perpetuate the current economicconfiguration.configuration.


37/38

WHAT SHOULD INDIA WORRY ABOUT?

Water stress

Water scarce

India should worry most about those risks orIndia should worry most about those risks or

challenges which:challenges which:

Will tip India from base to low case growthWill tip India from base to low case growth(rather than high to base)(rather than high to base)

Have a reasonable probability of occurringHave a reasonable probability of occurring

Are at least partially within Indias controlAre at least partially within Indias control

2 leading candidates: AIDS, conflict2 leading candidates: AIDS, conflict


38/38

IN SUMMARY: THE ANSWERS

Water stress

Water scarce

Will India become an economic superpower?Will India become an economic superpower?

On current trends, yes.On current trends, yes.

Does it matter?Does it matter?

Yes, but primarily as an indicator of prosperity.Yes, but primarily as an indicator of prosperity. What might prevent it?What might prevent it?

12 risk areas identified, some very serious and12 risk areas identified, some very serious anddaunting. Lots of unknowns. Plenty ofdaunting. Lots of unknowns. Plenty of

challenges to confront.challenges to confront.

India is certainly heading in the right direction,India is certainly heading in the right direction,but into unchartered territory. Its voyage will bebut into unchartered territory. Its voyage will beone of the great voyages of the 21one of the great voyages of the 21ststCentury.Century.

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pkt sir india superpower