india's economic potential is not overstated

8/9/2019 India's Economic potential is not overstated

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Indias Economic Potential is not

Overstated


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OverviewWe would take you through, Indias Economicperformance in 3 phases.

Phase 1: Before 1990-1991

Phase 2: After 1991-2009

Phase 3: Future forecasts

Our basis of projection on the economicpotential include economic indicators suchhas GDP, Per-capital income & Inflation.

We have also considered factors such has forexreserves, FII Inflow, FDI , PPP& otherInvestments in the country. We would also givean insight on the various sectors contributingtowards Indias growth in the economy.

We are united & governedWe have changed & regulated

We are now growing.

7/7/2010 2India's Economic potential is not overstated


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Believe it or not!!!

In the year 1700, India's share in theWorld production was 22.6%. The othersuper power at that time was china and its share was better than India at23.1%. The US had no prominent share in world trade.

In 1990, China account for 11%, India is less than 5% and USA 21% .

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1700

India's Economic potential is overstated

Source: Goldman sacs, IMF


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Believe it or not!!!

Note that we were at our best in the comity of nations when we were fullyglobalised and when we closed ourselves, where did we stand, when we had acrisis in 1991?

15% of the world population

7.5% of world's land

What was our share of contribution to the world trade? . less than halfa percent!!!

7/7/2010 4India's Economic potential is overstated


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Phase I

Overview

Positive Implications

Indicators:

GDP Growth

Forex reserves

FII FlowFDI

Per Capital Income

Inflation

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43 Years

One party system

10 Prime Ministers

One Direction

Over 3% GDP growth



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Overview:

During the last forty years we had adopted economic strategy ofplannedgrowth which was popularly known as "License Raj

Five-Year Plans of India resembled central planning in the Soviet Union.

Steel, mining, machine tools, water, telecommunications, insurance, andelectrical plants, among other industries, were effectively nationalized in themid-1950s.



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Positive Implications:

Industrial production base was widened.

We succeeded in developing a pool oftechnically trained manpower on ascale, which has no parallel in the world through Institutions like IITs , IISc and

IIMs.

In Banking system, we had a combination ofintervention plus free flow ofmarket forces and these measures have made our banking system morereliable today.

We saw PSUs owned by central & state government contributing to the growthof our economy. LIC alone contributed 5% of GDP. However, the growth of PSUwas not impressive.



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Phase I: Results

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GDP was around 4.9%

Forex reserves was less than USD1 billion

FII Flow stood around USD 1 million

FDI stood around USD 97 million

Per-Capital income was around USD 390 Inflation was around 9%



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Phase II

19 Years6 Governments

7 Prime Ministers

One Direction

Over 8% GDP growth

If August 15, 1947 marked theIndian Independence - frompolitical slavery to colonialpower,

I think the August of 1991 could

be marked as the beginning ofIndian Economic Freedom.

7/7/2010 9

GDPGrowth Forex FII Flow FDI Per Capita Inflation

1990 4.9 percent < USD 1 billion USD 1 million(1993)

USD 97 million USD 390 9 percent

2008* 8.7 percent USD 309 billion as on28/03/2008

USD 16.1 billion in2007-08

USD 12.7 billion in2007-08 tillDecember

USD 740 7.4 percent ason29/03/2008



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Phase II

19 Years6 Governments

7 Prime Ministers

One Direction

Over 8% GDP growth

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GDPGrowth Forex FII Flow FDI Per Capita Inflation

1990 4.9 percent < USD 1 billion USD 1 million(1993)

USD 97 million USD 390 9 percent

2008* 8.7 percent USD 309 billion as on28/03/2008

USD 16.1 billion in2007-08

USD 12.7 billion in2007-08 tillDecember

USD 740 7.4 percent ason29/03/2008

Economic Indicators:

GDP

Snapshot on Indian Economy

Forex reserves & FII

Foreign Trade

FDI & Capital market

Drivers of Growth:

Agriculture Industry - Services

Human Capital



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India gross domestic product (GDP) means the total value of all the servicesand goods that are manufactured within the territory of the nation within thespecified period of time.

The economy of India is the twelfth biggestin comparison to that of others inthe whole world, for it has approximately GDP of US$ 1.09 trillion in 2009.

The country has the second fastest major growing economy in the wholeworld with the GDP growing at the rate of over 6% in 2008 - 2009 next toChina.

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Indias GDP on an impressive growth



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Rise in GDP


Indias GDP rose from 495$ billion in 2002 to 1242$ billion in 2008.A massive 40% increase in the total valuation which indicates India is growing at afaster rate.

Source: Ministry of Finance, RBI


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Comparative analysis

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Before LPG After LPG initiation


Source: RBI, IMF


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India is the 4th largest country in termsof Purchasing power parity whereasChina stands 2nd in theWorld economy.

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Rank Country GDP (PPP -Billion $)

1 U.S.A. 13, 820

2 China 6,473

3 Japan 4,262

4 India 2,816

5 Germany 2, 816

Rank Country GDP (Realgrowth rate)

1 Bhutan 21.4%

2 Macau 15%

3 Qatar 13.4%

17 China 9%

28 India 7.4%

India ranks 28th , growing at a realgrowth rate of 7.4% whereas China

ranks 17th


Source: IMF, UN


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Snapshot on the Indian Economy

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India ranks 2nd in terms of total population next to China. However thepopulation growth rate is around 1.55% which is healthier.

India ranks 2nd in terms of productive labor force next to China.

India ranks 12th in terms ofIdeal Investment destination whereas Chinastands 4th .

India ranks 89

th

in terms ofpopulation below poverty line which was around25% which stood at 36% before 1991.

India ranks 92nd in terms ofInflation rate (consumer prices) which is around8% whereas China at 125th is around 6%.

India ranks 113th with regards to the unemployment rate at less than 7%whereas China is at 153rd at 5%.

India ranks 168th with the literacy rate around 65% which was under 40%before 1991.


Source: IMF


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India: Robust Economic Platform

Steadily increasingForex reserves offeradequate securityagainst any possiblecurrency crisis ormonetary instability

Increased confidenceof investors in Indiancompanies has led to asurge in cross borderborrowing bycorporate houses

Indias Forexreserves are in

excess ofexternal debt

In 2007-08 (till 28 March),Forex reserves witnesseda growth of approx. 55%over 2006-07.

the decreasing externaldebt to GDP ratioindicates that India has asound economic platform

External Debt-to-GDP Ratio

21.120.4

17.817.3

15.8 16.4

10

13

16

19

22

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Ratio

India's Forex Reserves: 2001-08 (Till 28 March 2008)

5475

112141 152

199

309

0

50

100

150

200

250

300

350

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

(Till 28March)

USD

Billion


Source: RBI


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7/7/2010 17

India: Glimpse on Forex reserves


Foreign Exchange Reserves (FER) is thesurplus money or capital that a countryparks or maintains in the foreign countryin form of currency, bond and other kindof securities.

India has witnessed a whopping 152%increase in its Foreign exchange reserve

Large reserves of foreign currency allow a government to manipulateexchange rates - usually to stabilize the foreign exchange rates to provide a

more favorable economic environment.

The greater a country's foreign reserves, the better position it is in to defenditself from speculative attacks on the domestic currency.

Source: RBI


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7/7/2010 18

India: Surging Exports

Services sector hasbeen a majorcontributor toincreased exportsfrom India

Acceptance of

Indian productsalong with the costadvantage hasprovided an edge toIndian companies

Product importsby India mainlyinclude petroleumproducts andminerals

Quality and cost advantageare the two importantparameters leveraged by theIndian producers toincreasingly market productsand services

P

etroleum products are themajor contributors towardsIndias growing imports

India's Exports: 2002-08

5364

84

103

126 124

0

20

40

60

80

100

120

140

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

(April-

December)*

USDB

illion

India's Imports: 2002-08

62 78

112

150

191 192

0

50

100

150

200

250

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

(April-

December)*

US

DB

illion


Source: RBI


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India: Attractive Investment Destination

With improved performance onPE ratio and ROE, Indianmarkets have attracted largeinvestments

FDI inflow for the period 2006-07 witnessed a growth of185 percentover the same period last year

India is ranked 2nd in ATKearneys FDI confidenceindex (2007)


Source: RBI


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India: Sectors attracting highest FDI

India: Regions attracting FDI


Source: RBI


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7/7/2010 22

India: Vibrant Capital Market

India is among themajor destinationsacross the globe forinflow of US Dollar

Sensex has risen

20 times in theperiod 1990-2007

Emergence ofindustry and

confidence of local

investors alongwith the FIIs has ledto upsurge of theSensex

FIIs have infusedlarge investments

into the Indianstock market

Encouragingindustry

performance

Increased localinvestorsconfidence

Sensex The Bombay Stock Exchange index rise 20 times from 1990s toreach 20,000 mark in November 2007.

0

5000

10000

15000

20000

25000

1-Jul-9

7

1-Jan-98

1-Jul-9

8

1-Jan-99

1-Jul-9

9

1-Jan-00

1-Jul-0

0

1-Jan-01

1-Jul-0

1

1-Jan-02

1-Jul-0

2

1-Jan-03

1-Jul-0

3

1-Jan-04

1-Jul-0

4

1-Jan-05

1-Jul-0

5

1-Jan-06

1-Jul-0

6

1-Jan-07

1-Jul-0

7

1-Jan-08

11 December

2007 Crossed

20,000 mark

07 February 2006

Crossed 10,000 mark30 December 1999

Crossed 5,000 mark


Source: RBI


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India: Company Overview

>India is one of only 3 countries thatmakes supercomputers (US and Japan are

the other two).

>India has the second largest communityof software developers, after the U.S.

>BSE lists more than 6000 companies.Only NYSE has more.

>100 of the Fortune 500 companieshave R & D facilities in India

>India is one of six countries thatlaunches satellites.


Source: RBI, IMF


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7/7/2010 24

India: Corporate perspective

We came to India for the costs, stayed for the quality and are nowinvesting for innovation.

- Dan Scheinman, Cisco System Inc.

India is a developed country as far as intellectual capital is

concerned.

- JackWelch, Ex CEO of General Electric

By 2032, India will be among the three largest economies in the

world. - BRIC Report, Goldman Sachs


Source: FORBES, Goldman Sacs


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India: Drivers of growth

India ranks 2nd world wide in farm output.

Two thirds of Indias workforce still earn their livelihood directly or indirectlythrough agriculture.

Despite improvements, average yield in India ranges from 30-50% of thehighest average yield in the world.

Despite recession, the countrys agri-exports have registered a 25 per centgrowth in 2008-09.

India has a share of 7% ($ 80 billion) in floriculture exports

Agriculture accounts for about 17% of GDP

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Agriculture>>>


Source: RBI


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India ranks 14th in the world in factory output.

Manufacturing growth rate 8.4%.

Economic reforms led to more private sector participation, an expansion in theproduction of consumer goods and both domestic and foreign competition.

Industry accounts for 28% of the GDP and employs 17% of the work force.

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Industry>>>


Source: RBI


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India is 15th in services output.

The growth rate which was 4.5% in 1951-80 increased to 7.5% in 1991-2000.Recent growth rate is around10.7%.

Fastest growing services are business services, information technology enabledservices, business process outsourcing contributing about one third of total outputof services in 2000.

Indias IT industry is an important contributor to BOP.

Its share in GDP was 15% in 1950 which is now about 55%.

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Services>>>


Source: RBI


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Phase III

Over the next41 Years

Multi-party System

One Direction

One of the Supreme Power in the

World Economy

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Drivers of growth

India opens upThe rise of the Financial sectorBack-office to the worldThe Golden QuadrilateralThe great migration

The land factor

10Things to be addressedFuture projections



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Drivers of growth

India began to unshackle its closed economy bygradually lowering its very high trade barriers andboosting exports.

Average tariffs fell to below 15% from as high as200% as the country began to re-integrate into theglobal economy.

The impact of opening up has been significant.Exports have risen 14 times as India has rapidlygained trade share.

This development has been most evident in the past

three years, when trade has grown, on average, 25%a year.

India opens up

The rise of the Financial sector

Back-office to the world

The Golden Quadrilateral

The great migration

The land factor

7/7/2010 India's Economic potential is overstated 29

Source: IMF, BRIC - GS


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Drivers of growth

Private sector has grown by an average of 32% overthe past two years.

Increased financial intermediation improvesresource allocation by effectively channeling savingsinto investment and raising productivity.

Assuming that policies to open up the financialsector remain on track, including the entry of foreignbanks starting from 2009, we expect financialdeepening to continue and to contribute to increasesin productivity in the medium term.


India opens up




The great migration

The land factor



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Drivers of growth The success of the IT industry in India has had amaterial impact on productivity.

It has provided powerful incentives for students toinvest in IT skills. This has created a pool oftechnology-skilled labor that firms in otherindustries can tap into.

The rapid spread of mobile phones from a very lowbase provided a fillip to communications, furtherboosting productivity.

Today, India is the fastest-growing market for mobilephones, with average growth rates of over 80%every year since 2000.

Indias technology spending is still low and thereremains substantial scope for catch-up andproductivity gains.

India opens up




The great migration

The land factor




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Drivers of growth In the last 50 years, the government has built just

334miles of four-lane roads.

The Golden Quadrilateral is of 3,625 miles of four-and six-lane highways. The highway connects thefour largest cities: Delhi in the north with Kolkata inthe east, Chennai in the south and Mumbai in thewest.

GQ runs through 13 states and 17 other cities with amillion or more inhabitants since 2007.

More importantly, the highways will open up and outthe closed worlds of India's villages. They will

facilitate increased rural-urban migration, and whenmigrants return to their villages, they bring backnew views and aspirations, encouraging others tofollow in their footsteps.

India opens up




The great migration

The land factor



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Drivers of growth The 21st century is set to become India's urban

century., with more people living in cities and towns

than in the countryside for the first time in itshistory. India has 10 of the 30 fastest growing citiesin the world and is witnessing rapid urbanization.

The growth is happening not in large cities, but insmall and mid-sized towns. In 1991, India had 23

cities with a million or more people. A decade later, ithad 35.

According to GS projections, another 140mn ruraldwellers will move to urban areas by 2020, while amassive 700mn people will have moved to urbanareas by 2050

India opens up




The great migration

The land factor




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Drivers of growth When land moves from low productivity agriculture

to urban use and higher productivity sectors, overallproductivity improves.

India will need investments in agriculture to boostproductivity, especially in rural connectivity, storage,etc., to improve the yield of remaining agriculturalland.

The creation of new Special Economic Zones (SEZs)has the potential to transform the productivity ofagricultural land. Ideally, India should developeconomy-wide infrastructure and the necessaryinvestment climate.

India opens up




The great migration

T

he land factor




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Ten things for India to focus

Improve governance

Raise educational achievement

Increase quality and quantity of universities

Control Inflation

Introduce a credible fiscal policy

Liberalize financial markets Increase trade with neighbours

Increase agricultural productivity

Improve infrastructure

Improve Environmental Quality



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Future projections

BRIC Estimates

Equity Indices

Policy rates

Inflation

Exchange rate performance

Future Forecast

GDP: Rapid growth potential

Real GDP growth rate

Largest economies

Projected population growth rate

Urbanization bonus



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G

S

&

UN

ESTIMATES

Among the BRICs, India ishaving a healthier growth

indices in the Equity Market.

Among the BRICs, India holds

the highest appreciation whichis favorable to Importers

Among the BRICs, Indias policyrate is moderate next to chinawhich is beneficial in the long

run.

Among the BRICs, India ishaving Inflation at a pretty

decent rate unlike the alarmingtrend like that of Russia.



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7/7/2010 38

F

UTURE

FORECA

ST


Among the BRICs, India isprojected to have a rapid

growth in terms of GDP and therapid potential would spreadfor a longer term.

India is stated to attain this level

due to the productive workforce itwould generate since 2015 andgoes on up to 2050. Thanks toproductive population!!!



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F

UTURE

FORECA

ST



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Thank you

ByGaurav

GokulNivenRageshVipin

india's economic potential is not overstated

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