indian economy.pptx

8/14/2019 Indian economy.pptx

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Measures to Strengthen theIndian Economy

&its

Interface with National Security


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Faster, Sustainable and More

Inclusive Growth

- the slogan of the 12 th Plan, approved in Sep 11


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15 Mar 12, the FMs speech

focus on domestic driven growth

for recovery


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A Perfect Concept!


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But

The Indian economy is on the edge of a precipice.

According to the Kelkar Committee report, Indianeconomy is headed for a "perfect storm" worsethan 1991 because government's cash flow byMarch 2013 is threatening to be Rs 110,000crore (Rs 1,100 billion), more in the red than theexpected Rs 500,000 crore (Rs 5,000 billion).


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Purview

Current macro economic scenario.

The causes structural deformities. The measures. Interface with national security.


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CurrentMacro-Economic

Scenario


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Background

A major economy till the 17 th century. Left out of the industrial revolution.

The Hindu growth rate. Liberalisation of the 1990s. Resurgence leading to 9.5 % growth in 2005-06. Survived the Asian crisis of 1997 and the world

recession of 2008.


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Current Macroeconomics

Growth rate fell from 9.5 % in 2005-06 to 6.9 % in 2011-12; expected to fall further.

IIP continuously falling; worst being the capital goodssector @ - 15 %; power, telecom, airlines in similarsituation.

Fiscal deficit : 5.9 % in 2011-12 as against budgeted 4.5 %.

Current Account Deficit (imports exeeding exports andremissions)

3 % in 1990-91. 0.6 % in 2000-01. 3.6 % in 2011-12.


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Current Macroeconomics Rupee devalued by 13 % since Jul 11.

Tax revenue as a percentage of expendituredropped from 60 % in 2006-07 to 46 % in 2001-12.

Gross domestic savings dropped from 37 % of GDPin 2007-08 to 32 % in 2011-12.

Unproductive public expenditure, especially

subsidies at 2.6 % of the GDP, is at an all-time high.


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Finance and Industry, themainstays of an economy, arein dire straits!

It could lead to a different FDI !


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Fiscal Disaster in India


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Where have we gone wrong?

Implementation, delivery, governance, policyparalysis?


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Where have we gone wrong?

Implementation, delivery, governance, policyparalysis?

More important are certain fundamental andstructural concerns!

are our finances sound? a domestic driven economy? inclusive growth where our masses participate?


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Structural Deformities


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The Financial Sector

Require finance for investment anddevelopment.

Finance per se has little meaning unless it isfruitfully utilised to generate assets.

Are we frittering away our meagre finances onpopulist measures instead of on real growth?


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The Countrys Finances

Tax revenue a mere 10 % of GDP as against 20-30 % in other countries.

External borrowings to the tune of $ 320b - huge interest on govt debt.

FDI turned negative ie more Indian companies have invested abroadthan foreign investments coming in capital generated in India is de factobeing utilised to give jobs elsewhere.

High volatility of FII.

Doles in the name of welfare.

Bank NPAs skyrocketed necessitating bailouts 35,000 cr per annum.Largeborrowers like Kingfisher have defaulted approx 47,000 cr and the bankshave not even bothered to pursue them.


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The Nature of Our Economy As a nation progress the main focus of its

economys activity shifts from the primary,through the secondary and finally to the

tertiary sector agriculture/industry/services.

In developed countries like the U.S., more

than 80% of the population is in the tertiarysector and also contributes proportionately totheir economy.


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The Nature of Our Economy

In India,

Agriculture contributes to 14 % of GDP butsupports 60 % of the population.

Services sector contributes to 60 % of GDP butsupports only 5 % of the population.

A great imbalance indeed.


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Lack of Inclusiveness

77 % of our population (80 cr) lives merely onRs 20/- per day, and 10 % are just marginallyabove that.

What can this bottom of the pyramidconsume, let alone create?


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Increasing Dependence onInternational Trade

Foreign trade increased from 37 % of the GDP in2004-05 to 53 % in 2011-12.

Fetches foreign exchange but

cripples domestic market. creates jobs outside. Portends the danger of turning

the demographic dividend into a demographic

disaster.


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Black Economy

50 % of GDP.

Restricts revenue collection.

Prevents capital accumulation within thecountry.


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Policy Paralysis Fragmentation of voters allegiances Indias

parliamentary arithmetic excruciatingly tight.

Limited ambition and play safe strategy administrative improvisations being taken forgenuine reforms.

Decontrol of petrol prices, but permissions for pricechanges.

FDI. National policy issues not the priority for

politicians.


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The measures


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What Needs to be Done

The financial sector. The Agriculture/Industry/Services

dilemma. Necessities for all-round growth. Governance.


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Rationalisation of the CountrysFinances

Effective mobilisation of funds from those who can affordto give them shore up tax administration and cut blackmoney.

Focus on scientific utilisation of available funds.

Utilisation of funds on asset formation.

Eschew the temptations of a prematurev welfare state andcut wasteful expenditure, stop bailouts, makesubsidies/welfare-oriented rather than dole-oriented.

Promote indigenous industry to retain capital.


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Rationalisation of the CountrysFinances

Eschew the temptations of a prematurev welfare stateand cut wasteful expenditure, stop bailouts, make

subsidies/welfare-oriented rather than dole-oriented.


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The Agriculture/Industry/ServicesDilemma

Depends on the state of progress of a nation.

The bulk of our population currently cannotparticipate in the tertiary sector.

Agriculture becoming increasingly unviable. Industry stagnant.

We need to have a healthy mix of agricultural,manufacturing and services sectors.


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People-Centric Growth

Bring bulk of the Indian people into the growthprocess sustainable agriculture and industry.

People should get the value of their produce reduce the role of middlemen.

Industrialisation in the backward regions.


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Control Inflation

Inflation, especially food inflation. A supply side problem.

Address the supply chain rather than short-term monetary issues.


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Other Measures

Implement Goods and Services Tax (GST). An appropriate Land Acquisition Bill.


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Interface with national security


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Interface with National Security

Politicians should treat economic growth as anational security issue.

Prime Minister Manmohan Singh, 15 Aug 122


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Conclusion

indian economy.pptx

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