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7
10
Q1-2014
Q2-2014
Q3-2014
OECD-Europe
Q4-2014
Q1-2015
US
Temporary Decoupling
Q2-2015
Q3-2015
India
Q4-2015
Q1-2016
Q2-2016
Q3-2016
China (People's Republic of)
Q4-2016
Q1-2017
Q2-2017
OECD-EME
Q3-2017
Demonetization and GST: Impact on competitiveness
Growth of Manufacturing Export Value Growth of Manufacturing Import Value
(Year-on-year, 3 month moving average) (Year-on-year, 3 month moving average)
25% 30%
India
15% India
20%
China
15%
10% China Other Asian Economies
10%
5%
5%
0%
0%
-5%
-5%
-10%
-10%
-15%
-15%
Aug/16
Aug/17
Jun/16
Oct/16
Apr/17
Jun/17
Oct/17
Feb/16
Apr/16
Feb/17
Dec/15
Dec/16
Dec/17
May/16
May/17
Sep/16
Jan/17
Sep/17
Feb/16
Apr/16
Oct/16
Nov/16
Feb/17
Apr/17
Oct/17
Nov/17
Jan/16
Mar/16
Mar/17
Jul/16
Jul/17
Dec/15
Jun/16
Dec/16
Jun/17
Dec/17
Aug/16
Aug/17
-2.0
-1.0
1.0
2.0
3.0
4.0
5.0
0.0
Apr/14
Jul/14
Oct/14
Jan/15
Apr/15
Jul/15
Oct/15
India
Jan/16
Apr/16
Jul/16
USA
Oct/16
Jan/17
Apr/17
Jul/17
India’s monetary conditions became tight
Oct/17
100
104
108
112
116
120
2014-15:Q2
2014-15:Q3
2014-15:Q4
2015-16:Q1
2015-16:Q2
2015-16:Q3
High real interest rate, strong exchange rate
2015-16:Q4
2016-17:Q1
2016-17:Q2
2016-17:Q3
2016-17:Q4
2017-18:Q1
2017-18:Q2
Rupee appreciated overall by 9% since mid-2016
Robust and broad-based revival
Services Export Growth (%)
IIP Manufacturing Growth** 18
14 Net Private Transfers (RHS)
GVA Manufacturing growth
70 16
GFCF growth (real)
12
14
10 50
12
8 10
30
6 8
10
6
4
4
2 -10
2
0
-30 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 H2
2009-10:Q2
2001-02:Q2
2002-03:Q2
2003-04:Q2
2004-05:Q2
2005-06:Q2
2006-07:Q2
2007-08:Q2
2008-09:Q2
2010-11:Q2
2011-12:Q2
2012-13:Q2
2013-14:Q2
2014-15:Q2
2015-16:Q2
2016-17:Q2
2017-18:Q2
-2 2013-14 2014-15 2015-16 2016-17 2017-18
-4
** GVA and GFCF is based on H2 data. IIP is for Q3 estimated from Oct-Nov
2017 data.
Short-term outlook
►Temporary factors receding, government providing demand
19/Sep/16
19/Oct/16
19/Nov/16
19/Dec/16
19/Jan/17
19/Feb/17
19/Mar/17
BSE Sensex (RHS)
19/Apr/17
19/May/17
19/Jun/17
19/Jul/17
19/Aug/17
19/Sep/17
19/Oct/17
19/Nov/17
Revival and risks: Rising stocks, rising interest rates
19/Dec/17
19/Jan/18
20,000
22,000
24,000
26,000
28,000
30,000
32,000
34,000
36,000
Policy Agenda for Year Ahead
► Support agriculture
► Stabilize GST
► Privatize Air-India
► GST revenues doing well: Growth of about 12 percent and buoyancy above
historical experience (Box 7)
► India’s stock market boom is different from other economies but warrants
heightened vigilance (Box 9)
New Analysis and Research
New Insights from GST data
►Reforms have increased tax rolls
►50 percent increase in unique indirect taxpayers, after GST
►1.8 million additional individual income tax filers since November 2016.
►Formal sector much bigger than believed
►75 million (30 percent) more if formality defined as firms providing social security
►127 million (50 percent) more when defined as firms being in the GST net.
►Firm structure of exports highly diversified
►Top 1 percent of Indian exporters account for 38 percent of exports
►72, 68, 67, and 55 percent in Brazil, Germany, Mexico, & USA, respectively
►States are big traders
►inter-state trade is about 60 % of GDP, more than the 54% estimated in last Survey.
►States that export more internationally are more prosperous
India’s investment and saving slowdown is unusual, long and
ongoing: Re-igniting investment is more important than raising
saving
Late Convergence Stall? 4 Headwinds (“Horsemen”)
1 2
Thwarted
Globalization
X Backlash
Structural
Transformation
3 4
Climate-change
Human Capital
induced
Regression
agricultural stress
Change in weather (last decade over 1950-80): Hotter, drier, more extreme
Some Evidence of a Son “Meta-Preference”
Sex Ratio by Birth when Child is not the Last Sex Ratio by Birth when Child is the Last
1.07
1.05 1.05
0.86 0.88
0.85 0.84
0.80 0.80
2nd Child
1st Child
3rd Child
4th Child
5th Child
2nd Child
1st Child
3rd Child
4th Child
5th Child
1.80 Indonesia Indonesia 1.80
1.30 1.30
1.11
1.02 1.02
1.05 1.13 1.09 1.05
1.07 1.08 1.07
1.01 1.03
0.80 0.80
3rd Child
3rd Child
1st Child
2nd Child
1st Child
2nd Child
4th Child
5th Child
4th Child
5th Child
Science and Technology needs a Big Push
5
4
R&D as Percentage of GDP
3.5
2.5
1.5
0.5
0
7 8 9 10 11
Log GDP Per Capita PPP 2011 Dollars
Source: UNESCO, World Economic Outlook (WEO), National Science Foundation (NSF).
From Vertical Cooperative Federalism to Horizontal Cooperative
Separation of Powers? Ease of Doing Business
Pendency of economic cases--in the major economic tribunals, tax department, High Courts, Supreme
Court--high and rising
10 250
Telecom Electricity Green Tribunal
9
Consumer Disputes Indirect Tax (RHS) Income Tax (RHS)
8 200
7
6 150
5
4 100
3
2 50
1
0 0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Lessons for Future
►Key challenges: education, employment, agriculture