India Opp and Resp Gujarat Mukul
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Transcript of India Opp and Resp Gujarat Mukul
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The Future of IndianEconomy: Opportunities andResponsibilities
Mukul G Asher
Professor of Public Policy,National University of Singapore
Presented at Opportunities and challenges for Future Generations inLeadership in Ahmedabad (26-27 December 2008)
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India: An Introduction Population: 1.13 billion(2007)
Federal State with 28States and 7 UnionTerritories
GDP USD1.2 trillion(2007)
External Trade USD528 billion (2007)
Forex Reserves USD247 billion (end Nov2008)
Market capitalisation (asend Nov 2008): USD 560
billion (50% of GDP).
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Indias Geography
India has one-third the land mass of the United
States; and nearly four times its population. India therefore must develop strategies for
sustainable growth and livelihood which suits itsrequirements, while continuing to integrate with the
world economy and moving towards a knowledge-based society
Economic efficiency in the use of scarce resources,growth and social cohesion promoting institutions,socio-political norms are therefore imperatives.
Country Population Land mass
India 1.13 b 3.2 m sq km
USA 0.30 b 9.6 m sq km
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India constitutes nearly 17 percent of the worldspopulation, but even in PPP terms its GDP share is only5 percent.
In all good things (eg, agricultural production, GDP,patents, tourists, FDI) Indias share is at least one-sixthof the worlds total.
Indias Share in World GDP
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Indias Share in World GDP
Conversely, in bad things, India has a much smallershare, India, can not feel a sense of accomplishment.There is therefore no room for complacency.
India must continue to be outward oriented, and cultivatea mindset that absorbs ideas and good practices from allparts of the globe an apply them to meet Indiaschallenges.
Yashend Huang (2008) has argues that if India cangrow, then no other poor country must face a Faustianchoice between growth and democracy
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25% 23% 24%16%
13%
9%
4%
3%
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Evolution of Global and Per Capita GDP
in the Last 2,000 Years
Source: Commission on Growth and Development (2008)
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Key Demographic Indicators in Asia
Sources: Population Division of the Department of Economic and Social Affairs of the United NationsSecretariat, World Population Prospects: The 2006 Revision, http://esa.un.org/unpp, 23 November 2007;
3:48:26 PM; UN Statistics Division, http://unstats.un.org/unsd/demographic, 28 November 2007; 6:29 PM.
Country Total
Population
(millions)
Average
annual rate
of change of
population
Total
Fertility Rate
(TFR)
Median Age Life Expectancy
at Birth
Medium Variant
2007 2050 2005-
2010
2045-
2050
2005-
2010
2045-
2050
2005 2050 2005-2010 2045-2050
World 6671.2 9191.3 1.17 0.36 2.6 2.0 28.0 38.1 67.2 75.4
China 1328.6 1408.8 0.58 -0.32 1.7 1.8 32.5 45.0 73.0 79.3
India 1103.4 1592.7 1.55 0.30 3.0 1.8 24.3 38.7 63.1 75.9
Indonesia 231.6 296.9 1.16 0.10 2.2 1.8 26.5 41.1 70.7 78.6
Korea 48.2 42.3 0.33 -0.89 1.2 1.5 35.0 54.9 78.6 83.5
Malaysia 26.6 39.6 1.69 0.41 2.6 1.8 24.7 39.3 74.2 80.1
Philippines 87.9 140.5 1.90 0.50 3.2 1.8 21.8 36.3 71.7 78.7
Singapore
4.4 5.0 1.19 -0.38 1.2 1.6 37.5 53.7 80.0 84.6
Sri Lanka 19.7 18.7 0.47 -0.55 1.9 1.8 29.5 43.4 72.4 77.6
Thailand 63.9 67.4 0.66 -0.27 1.8 1.8 32.6 44.3 70.6 78.1
Vietnam 87.4 120.0 1.32 0.21 2.1 1.8 24.9 41.6 74.2 80.3
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Country Life Expectancy at
age 60, 2000-2005
Percentage of
total populationaged 60 and
above
Medium Variant
Population aged 60
and above (millions)Medium Variant
Men Women 2005 2050 2005 2050
World N.A. N.A. 10.3 21.8 672.8 2005.7
China 20 17 11.0 31.1 144.0 437.9
India 16 18 8.0 21.0 89.9 329.6
Indonesia 18 16 8.3 24.8 18.9 73.6
Korea 23 18 13.7 42.2 6.6 17.8
Malaysia 19 17 6.7 22.2 1.7 8.8
Philippines 19 17 6.0 18.2 5.1 25.5
Singapore 23 20 12.3 39.8 0.5 2.0
Sri Lanka 17 21 9.7 29.0 1.9 5.4
Thailand 20 17 11.3 29.8 7.1 20.1
Vietnam 20 18 7.6 26.1 6.5 31.3
Key Demographic Indicators in Asia
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Demographic Trends
Asia is set to experience rapid ageing in the 21stcentury. China, Indonesia, Korea, Malaysia, Philippines,Singapore and Thailand will have nearly as many elderlyby 2050 as in the world in 2005.
Asia in 2050 will account for nearly three-fifths of theworlds population.
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Demographic Trends
The rapid ageing of Asia is a result of reduction in fertilityrates and increased life expectancy at birth and at age65. By 2045-50, the above countries will have TotalFertility Rate (TFR) below the replacement rate as
compared to only four in 2005-10.
As is well known, increased longevity raises socialsecurity costs disproportionately. Uncertainty aboutlongevity trends (example, due to uncertain impact ofmedical technology) is increasing the complexity ofdesigning pension programs.
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Demographic Trends
The median age in Asia (with the exception ofPhilippines) will be well above average for the world in2050. In Korea and Singapore the median age will benearly 55 years.
Sharply increasing median age and reduction in theworking-age population can be seen across Asia. As thetiming and pace of this reduction will vary among theAsian countries, there may be opportunities to leveragedemographic complementarities for greater economic
integration.
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Source: United Nations, 2002, World Population Ageing 1950-2050 Sales No E02XIII.3,Department of Economic and Social Affairs, Population Division, New York: United NationsPublications.
Population Aged 15-59 for Asia-Pacific Economies 1950-
2050
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New jobs in the
developing world
In millions % of world increase
Developing Asia 315.5 67
China 65 13.8
India 142.4 30.2
Latin America 45 9.5
United States 12.5 2.6
EU 25 8.4 1.8
Total 471.3 100
New Jobs in the World Economy 2005-2020
Source: Economist Intelligence Unit
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The Four Phases
Panagariya (2008) identifies four distinct phases inIndias growth and economic reforms sinceindependence.
1. Phase I (1951-65): Takeoff under a liberal regime
2. Phase II (1965-81): Socialism Strikes with aVengeance
3. Phase III (1981-88): Liberalization by Stealth4. Phase IV (1988-06): Triumph of Liberalization
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The Four Phases
Phase Time Period Growth Rate
Phase I 1951-65 4.1 %
Phase II 1965-81 3.2 %
Phase III 1981-88 4.8%
Phase IV 1988-06 6.3%
Indias real GDP grew at 6.9% pa during 2000-2007 (RBI Handbook2008)
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Four Phases of Growth (percent)
0
1
2
3
4
5
6
7
1951-65 1965-81 1981-88 1988-06
AnnualGDPGrowth
Rate(%)
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India: Changing Composition of
GDP
YearAgriculture &
Allied Industry Manufacturing Service
1950-51 57 15 9 281964-65 49 21 14 31
1980-81 40 24 14 36
1987-88 33 26 16 41
2004-05 21 27 17 52
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Composition of GDP
2004-05
Agricultureand AlliedIndustry
Manufacturing
Service
1950-51
Agricultureand Allied
Industry
Manufacturing
Service
Declining share of agriculture; increasing share ofindustry and services
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Food grain production
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The governments wheatstocks on August 1 were
up 102% y-o-y, rice wasdown 6%
Rice procurement is stillon and the government
will be able to buy about1.2 mt in the last twoquarters of 2008
The governments rice
stocks have fallendespite higherprocurement, as severalstates have kept stocksfor their own use.
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Merchandise Exports and Importsas Proportion of GDP
Year Exports/GDP Imports/GDP
1965-66 2.9 5.1
1975-76 4.8 6.31985-86 3.9 7.1
2005-06 20.5 22.6
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Merchandise Exports and Importsas Proportions of GDP
Merchandise Exports and Imports as Proportions of
GDP
0
5
10
15
20
25
1965-66 1975-76 1985-86 2005-06
%ofGDP
Exports/GDP
Imports/GDP
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External Sector Data
In 2007, Indias total external trade in goods andservices was USD 528 billion (47.9% of GDP)
This is one of the important indicators of Indias rapidly
integration with the world economy. India plans to achieve a target of USD 1000 billion
before 2015 in its external trade. This will be a hugechallenge in view of the current global crisis.
The others are inward Foreign Direct Investment ( $32.3billion in 2007-08), and remittances (~$ 30 billion in2007)
Indias outward investment is also growing.
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Official Poverty Estimates
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Poverty Decline underLiberalization Reforms
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Growth in
Per-CapitaNet State
DomesticProduct
Widevariationamongstates
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Major Challenges Ensuring that good economics is good politics (this will
require a shift from ruling to governing mindset, andadministrative and civil service reforms).
Environmental challenges.
Energy and Food Security. Managing Urbanization.
Accelerating physical and social infrastructureinvestments.
Developing human capital for sustainable livelihoodsthrough application of knowledge economy .
Coping with demographic challenges.
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