INDIAs FUTURE

Kelkar Alumni Lecture IIT Kan ur 17 March 2007

E!en th"u#h the $"rl% has &ust %isc"!ere% it' the In%ia #r"$th st"r( is n"t ne$) It has *een #"in# "n +"r 2, (ears "l%

-hat is the In%ia st"r(.

In%ia 8t"r(

1/ Risin# 0D1 #r"$th

2 a!era#e annual 0D1 #r"$th

1300 4 13,0 13,0 4 1350 1350 4 2002 2002 4 2007

1)0 6), 7)0 5)0

8"urces9 1300:13309 An#us Ma%%is"n ;133,/' Monitoring the World Economy, 1330:20009<ensus "+ In%ia ;2001/' 2000: 200, Finance Ministr(

In%ia 8t"r(

2/ 1" ulati"n #r"$th is sl"$in#

2 a!era#e annual #r"$th

1301 4 13,0 13,1 4 1350 1351 4 1330 1331 4 2000 2001 4 2010

1)0 2)2 2)1 1)5 1),

8"urces9 1300:13309 An#us Ma%%is"n ;133,/' Monitoring the World Economy, 1330:20009<ensus "+ In%ia ;2001/

In%ia 8t"r(

6) Literac( is risin#
13,0 1330 2000 2010 ; r"&/ 2 17 ,2 7, 50

8"urce9 <ensus "+ In%ia ;2001/

In%ia 8t"r(

=) Mi%%le class is e> l"%in#

2 Milli"n 1e" le

1350 2000 2010 ; r"&/

5 22 62

7, 220 675

In%ia 8t"r(

,) 1"!ert( is %eclinin#
1350 2000 2010 ; r"&/ =72 272 172

12 "+ the e" le ha!e *een cr"ssin# "!ert( line each (ear +"r 20 (ears) E?uals @ 200 milli"n)

In%ia 8t"r(

7) 1r"%ucti!it( is risin#

602 t" =02 "+ 0D1 #r"$th is %ue t" risin# r"%ucti!it(

In%ia 8t"r(

7) 1er ca ita inc"me #ains

;U8A 1350 2000 1175 60,1 /

8"urce9 -"rl% Bank

In%ia 8t"r(

5) In%ia is n"$ the =th lar#est ec"n"m(

An% it $ill cr"ss Ca an *et$een 2012 an% 201= t" *ec"me the 6r% lar#est

TDE INDIA MEDEL I8 UNIFUE

DRIGER8 EF 0RE-TD In%ia

D"mestic

East an% 8)E) Asia

E> "rts

DRIGER8 EF 0RE-TD In%ia

D"mestic 8er!ices

East an% 8)E) Asia

E> "rts Manu+acturin#

DRIGER8 EF 0RE-TD In%ia

D"mestic 8er!ices <"nsum ti"n

East an% 8)E) Asia

E> "rts Manu+acturin# In!estment

DRIGER8 EF 0RE-TD In%ia

D"mestic 8er!ices <"nsum ti"n Di#h tech' ca ital intensi!e in%ustr( in%ustr(

East an% 8)E) Asia

E> "rts Manu+acturin# In!estment L"$ tech' la*"ur intensi!e

IM1LI<ATIEN8 EF INDIA MEDEL

D"mestic le%
H Insulati"n +r"m #l"*al %"$nturns H Less !"latilit(

IM1LI<ATIEN EF INDIA MEDEL

8er!ices le%
H Da!e $e ski e% the in%ustrial re!"luti"n. H D"$ %" $e take e" le +r"m +arms t" cities.

IM1LI<ATIEN EF INDIA MEDEL

<"nsum ti"n le%
H 1e" le +rien%l(9 <"nsum ti"n as 2 "+ 0D1

In%ia Eur" e <hina

H

7= ,5 =2 66 =1 =, ,3

Less ine?ualit( 4 0INI INDEI

In%ia U)8 <hina BraJil

H

The $"rl% nee%s an"ther *i# c"nsumin# ec"n"m( a+ter the U)8)

Reas"ns +"r 8uccess

In%ias success is market le% $hereas <hinas is state in%uce%) The entre reneur is at centre "+ the In%ian m"%el

Rise "+ #l"*all( c"m etiti!e In%ian c"m anies9

Reliance' Cet Air$a(s' In+"s(s' -i r"' Ran*a>(' Bharat F"r#e' Tata M"t"rs' T<8' Bharati' I<I<I an% DDF< Banks

In%ia has a !i*rant ri!ate s ace

K 100 In%ian <"m anies ha!e market

ca "+ U8A 1 *illi"n

In%ia has a !i*rant ri!ate s ace

K 100 In%ian <"m anies ha!e market
ca "+ U8A 1 *illi"n K 1000 In%ian <"m anies ha!e recei!e% +"rei#n instituti"nal in!estment

In%ia has a !i*rant ri!ate s ace

K 100 In%ian <"m anies ha!e market
ca "+ U8A 1 *illi"n K 1000 In%ian <"m anies ha!e recei!e% +"rei#n instituti"nal in!estment K 12, F"rtune ,00 c"m anies ha!e RLD *ases in In%ia

In%ia has a !i*rant ri!ate s ace

K 100 In%ian <"m anies ha!e market
ca "+ U8A 1 *illi"n K 1000 In%ian <"m anies ha!e recei!e% +"rei#n instituti"nal in!estment K 12, F"rtune ,00 c"m anies ha!e RLD *ases in In%ia K 630 F"rtune ,00 c"m anies ha!e "uts"urce% s"+t$are %e!el" ment t" In%ia)

In%ia has a !i*rant ri!ate s ace

K 100 In%ian <"m anies ha!e market
K ca "+ U8A 1 *illi"n 1000 In%ian <"m anies ha!e recei!e% +"rei#n instituti"nal in!estment 12, F"rtune ,00 c"m anies ha!e RLD *ases in In%ia 630 F"rtune ,00 c"m anies ha!e "uts"urce% s"+t$are %e!el" ment t" In%ia) 22 *a% l"ans in In%ian *anks ;!s @ 202 in <hina/

K K M

In%ia has a !i*rant ri!ate s ace

K 100 In%ian <"m anies ha!e market
K ca "+ U8A 1 *illi"n 1000 In%ian <"m anies ha!e recei!e% +"rei#n instituti"nal in!estment 12, F"rtune ,00 c"m anies ha!e RLD *ases in In%ia 630 F"rtune ,00 c"m anies ha!e "uts"urce% s"+t$are %e!el" ment t" In%ia) 22 *a% l"ans in In%ian *anks ;!s @ 202 in <hina/ 502 cre%it #"es t" ri!ate sect"r ;!s@102 in <hina/

K K M K

But u*lic s ace is a r"*lem

Alth"u#h $e ha!e a9

N D(namic %em"crac( $ith h"nest electi"ns

1u*lic s ace is a r"*lem

Alth"u#h $e ha!e a9

N D(namic %em"crac( N Free' li!el( me%ia an% ress

1u*lic s ace is a r"*lem

N D(namic %em"crac( $ith N Free' li!el( me%ia an% ress But there is9 : 1""r #"!ernance

1u*lic s ace is a r"*lem

N D(namic %em"crac( N Free' li!el( me%ia an% ress : 1""r #"!ernance : Di#h " ulist su*si%ies' $hich results in a hi#h +iscal %e+icit

1u*lic s ace is a r"*lem

N N : : : D(namic %em"crac( Free' li!el( me%ia an% ress 1""r #"!ernance Di#h su*si%ies Di#h +iscal %e+icit N" m"ne( +"r in+rastructure

1u*lic s ace is a r"*lem

N N : : : : D(namic %em"crac( Free' li!el( me%ia an% ress 1""r #"!ernance Di#h su*si%ies Di#h +iscal %e+icit <reak( in+rastructure Ine++icient #"!ernment c"m anies

Earlier $e ha% $"rl% class instituti"ns' *ut the( are n"$ +ailin#
H Bureaucrac( H Cu%iciar( H 1"lice

<"ntrast *et$een u*lic an% ri!ate s ace raises the ?uesti"n 9

Is In%ia risin# %es ite the state .

Ec"n"m( #r"$s at ni#ht $hen #"!ernment is aslee

-hat e> lains In%ias ec"n"mic success.

1/ E!en sl"$ re+"rms a%% u : state #ettin# "ut "+ the $a( : e!er( #"!ernment has re+"rme% since 1331

Key Reforms
H E ene% ec"n"m( t" tra%e an% in!estment H Dismantle% c"ntr"ls H L"$ere% tari++s H Dr" e% ta> rates

H Br"ke u*lic sect"r m"n" "lies

-hat e> lains In%ias ec"n"mic success.

1/ E!en sl"$ re+"rms a%% u :state #ettin# "ut "+ the $a(

2/ O"un# min%s are li*erate%

Mental Re!"luti"n
: PI $ant t" *e Bil#a( : Ra&us secret "+ success : Banianisati"n "+ s"ciet( : 100 ca*le channels +"r A6 : Din#lish

-hat e> lains In%ias ec"n"mic success.

1/ E!en sl"$ re+"rms a%% u :state #ettin# "ut "+ the $a(

2/ O"un# min%s are li*erate%

6/ In%ia has +"un% its c"m etiti!e a%!anta#e in the kn"$le%#e ec"n"m(

Looking Forward
H 72 : 52 ec"n"mic #r"$th H Dem"crac( $ill n"t ermit m"re than 52 H 1),2 1" ulati"n #r"$th

This means a er ca ita inc"me r"u#hl( "+ ;"n a *asis/9

;A/
2000 200, 2020 20=0 2077 2100 60,0 ,500 17'500 67'000

<"n!er#ence in the 21st centur(

H -h( c"n!er#ence is intuiti!e H <"n!er#ence %i%nt ha en in the 20 th centur( *ecause the $"rl% $as cl"se% H Returnin# t" a $"rl% "+ e?ualit( ri"r t" 17,0 H -hen <hina an% In%ia acc"unte% +"r =,2 "+ $"rl% 0D1

-h( $ill #r"$th c"ntinue.

Dem"#ra hic %i!i%en%

Demographic trend points to sharp increases in input factors

Demographic Split #$6!! #$4!! #$ !! #$!!! "!! 6!! 4!! !! !
#%5 &n #%# &n

54%

0:2, (rs

46%

2,N (rs

"!! 4 ! !!5 ! 5

La*"r F"rce

La&or Force will dou&le in the ne't ! years

Demographic trend points to sharp increases in input factors

(ge Dependency
"!% 6!% 4!% !% !% #+"!,s !! ! 5 -hina !! ) % 6 % *5! % 45%

Sa0ings Rate
5!% 4!% .!% !% #!% !% #+"!,s !! ! 5 -hina !! #)% 4% .5/% 4 %

1igher sa0ings and in0estment rate will translate into higher 2D3 growth

In%ias %em"#ra hic a%!anta#e means that its hi#h #r"$th $ill c"ntinue l"n#er term $hile <hina $ill sl"$

INDIA -ILL 0RADUALLO TURN MIDDLE <LA88

1350 2000 2010 2020 2 5 22 62 ,0 -est "+ the Kan ur:<hennai line ,0 East "+ the Kan ur:<hennai line

20=0

QB( 2010 In%ia $ill ha!e $"rl%s lar#est num*er "+ En#lish s eakersR Q-hen 600 milli"n In%ians s eak a $"r% in a certain $a(' that $ill *e the $a( t" s eak it)R
:1r"+) Da!i% <r(stal' <am*ri%#e Enc(cl" e%ia "+ the En#lish Lan#ua#e

-hat c"ul% st" the sh"$.

H H H H Fiscal %e+icit In+rastructure Ba% #"!ernance Nuclear $ar

REFERM 8<DEEL La*"ur

REFERM 8<DEEL La*"ur A#riculture

8ec"n% 0reen Re!"luti"n H techn"l"#icall( le%' *ase% "n 0M see%s H la*"r intensi!e H nee%s re+"rms

REFERM 8<DEEL La*"ur A#riculture 1"$er

REFERM 8<DEEL La*"ur A#riculture 1"$er Re% ta e

REFERM 8<DEEL La*"r A#riculture 1"$er Re% ta e 0"!ernance

<"r "rate 0"!ernance : Di#h in In%ia

: L"$ in <hina

4ottom Line
H In%ian r"s erit( is "n aut" il"t H <ant %" $ith"ut #"!ernment) But #"!ernance re+"rm $ill take time' till mi%%le class is %"minant) H Duman ca ital $ill c"ntinue t" +l"$er *ase% "n ri!ate initiati!e' an% %ri!e the nati"n

In%ia has la$' <hina has "r%er

:In%ia #"t %em"crac( *e+"re
ca italism an% this has ma%e all the %i++erence :It $ill *e sl"$er than <hina *ut its ath $ill *e surer :In%ia m"re likel( t" reser!e its $a( "+ li+e

The -ise Ele hant