INDIA’S FUTURE Or prosperity will spread in India but happiness will not, until we fix governance by Gurcharan Das WIPRO Marbella November 12, 2009

Where are we going in the future? Where are we coming from? Where are we today? Where are we going in the future?

It has been going on for 25 years Even though the world has just discovered it, the India growth story is not new It has been going on for 25 years Please centre and cut the word old and put It has been onto a new line- could we make a consistent style for statements- maybe always in yellow, centred and growing? Please could we have some kind of outline of India in the background to make the slide prettier

What is the India story? Could we use the script- does that fit with template?

28 years of high growth Average annual GDP growth (%) 2 4 6 8 10 2 4 6 8 10 1900-1950 1950-1980 1980-2002 2002-2007 8.9 6.0 3.5 1.0 Could we have a line for the y axis as well as numbers Please animate all graphs so lines/bars and pie charts grow

Population growth is slowing (%) 0.5 1.0 1.5 2.0 2.5 1901-1950 1951-1980 1981-1990 1991-2000 2001-2010 2.2 2.1 1.8 1.5 1.0 Again y axis Sources: 1900-1990: Angus Maddison (1995), Monitoring the World Economy, 1990-2000:Census of India (2001)

Literacy is rising (%) 20 40 60 80 100 1950 1990 2000 2010 (proj) 80 20 40 60 80 100 1950 1990 2000 2010 (proj) 80 65 52 17 Again line for y axis- is there a reason that the line is on green rather than orange? Source: Census of India (2001)

When middle class is 50% then the politics will also change 100 200 300 400 1980 2000 2010 (m) 22% 32% 8% 368 220 Line for y axis 65 Source: The Consuming Class, National Council of Applied Economic Research, 2002

Poverty is declining (%) 10 20 30 40 50 1980 2000 2010 1% of the people have been crossing poverty line each year for 25 years Equals ~ 200m 46 26 Y axis line Could we put text in white in a box of It– put Equals …..on its own line in yellow to make it more impactful 16

Per capita income gains US$ ppp 2005 3,051 1980 1,178 Could we centre up the chart? Source: World Bank

India is now the 4th largest economy It will overtake Japan between 2012 and 2014 to become the 3rd largest Cut the word and and centre up. Could we either make the statement grow and/or make it into a different colour to make it more impactful? Or could we add an image – we have loads of India images

The India model is unique Is it on brand to use script here?

Drivers of growth India Domestic East and S.E. Asia Exports

Drivers of growth India East and S.E. Asia Domestic Services Exports Manufacturing

Drivers of growth India East and S.E. Asia Domestic Services Consumption East and S.E. Asia Exports Manufacturing Investment

Drivers of growth India East and S.E. Asia Domestic Services Consumption High tech, capital intensive industry East and S.E. Asia Exports Manufacturing Investment Low tech, labour intensive industry

Implications of India model ‘Domestically led’ means: Insulation from global downturns Less volatility We will come out of the global crisis faster Could we add India image from file? Make yellow title bullet and white sub bullets

Implication of India model ‘Services led’ raises uncomfortable questions: Have we skipped the industrial revolution? How do we take people from farms to cities? Will SEZ’s be our tipping point? Again could we add India image from file Same with bullets and sub bullets

Implication of India model – Consumption led People Friendly: Consumption as % of GDP People Friendly, Less inequality: Gini Index 42% 64% 59% 33% 41% Europe China India U.S. China Brazil India 58% 45% animate Will India become the next big consuming economy after the U.S.?

India’s success is market-led whereas China’s is state induced Reasons for success India’s success is market-led whereas China’s is state induced The entrepreneur is at the centre of the Indian model Centre up and change colour Grow as two separate statements

Rise of globally competitive Indian companies Centre these up – maybe make a little bigger?

India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn

India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn 1,000 Indian Companies have received foreign institutional investment 23

India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn 1,000 Indian Companies have received foreign institutional investment 125 Fortune 500 companies have R&D bases in India 24

India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn 1,000 Indian Companies have received foreign institutional investment 125 Fortune 500 companies have R&D bases in India 390 Fortune 500 companies have outsourced software development to India 25

India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn 1,000 Indian Companies have received foreign institutional investment 125 Fortune 500 companies have R&D bases in India 390 Fortune 500 companies have outsourced software development to India 2% bad loans in Indian banks (v~20% in China) 26

India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn 1,000 Indian Companies have received foreign institutional investment 125 Fortune 500 companies have R&D bases in India 390 Fortune 500 companies have outsourced software development to India 2% bad loans in Indian banks (v~20% in China) 80% credit goes to private sector (v~10% in China) 27

Public space is a problem We have Dynamic democracy with honest elections Free, lively media and press But we also have Poor governance!

Governance Failures Not the minister caught with a bribe 1 out of 4 school teachers absent in government schools 2 out of 5 doctors absent in primary health centers Delhi’s water Land titles Etc

Ironically, we used to have world class institutions from 1950-1980, but our problem was growth. Now we have growth, but our institutions are failing Bureaucracy Judiciary Police These should be bullet points- image search Indian Policeman?

The economy grows at night when the government is asleep Image of Delhi at night from Google or istock?

Key reforms Opened economy to trade and investment Dismantled controls Lowered tariffs Dropped tax rates Broke public sector monopolies 33

Understanding India’s economic success Remarkable --every government has reformed (slowly) since 1991 Even slow reforms add up 65 countries have done the same reforms – why did India become the second fastest in the world? Unappreciated fact – rule of law 34

“By 2010 India will have world’s largest number of English speakers” “When 300 million Indians speak a word in a certain way, that will be the way to speak it.” Professor David Crystal Cambridge Encyclopedia of the English Language 35

Understanding India’s economic success Mental revolution among the young ‘I want to be Bilgay’ Raju’s secret of success Banianisation of society 180 TV channels; 65 news channels The rise of Hinglish 36

Where are we today? Growth fell to 6.7% in 08-09; 7% in 09-10 Pain has been less than in China Competitive companies have recovered faster. Risk of protectionism has receded Recovery has been ahead of the world

Where are we going? Base case post recovery is 7.5 % – 8.5 % GDP growth Democracy will not permit more than 8% unless you have a Thatcher 1.5% population growth Demographic dividend – growth will continue beyond China’s Make bullets consistent 38

Per capita income On a ppp basis 2000 2005 2020 2040 2066 10 20 30 40 10 20 30 40 ($000) 37,000 16,800 Y axis as a line Please cut This means 5,800 3,050 2,100

Convergence in the 21st century Why convergence is intuitive? Convergence didn’t happen in the 20th century because the world was closed Returning to a world of equality prior to 1750 When China and India accounted for 45% of world GDP Make bullets consistent

India will gradually turn middle-class West of the Kanpur- Chennai line East of the Kanpur- Chennai line 50% 50% Kanpur- 32% 22% Animate graph Chennai 8% 1980 2000 2010 2020 2040

What could stop the show? Infrastructure - Improving via public-private parterships Fiscal Deficit Governance None of these stopped the show in the past 25 years - Nuclear War?

Is reasonably good for the top 20% But it is abysmal for the rest Education System Is reasonably good for the top 20% But it is abysmal for the rest 1 in 4 teachers is absent in government primary schools Hence, 54% of children in urban India are in private schools Solution: Education Vouchers Pic of Indian school kids? Consistent bullet points

Caste system Origin of India’s caste system Classical four castes vs 3000 jatis Hostage to competitive politics Source of competitive advantage Affirmative action

Role of Religion India’s pluralism, diversity and tolerance Hinduism Spiritual entrepreneurialism: Gurus No hierarchy: Every Brahmin thinks he is the Pope 300 million gods: Lack of theological narcissism Nasadiya Temper 2% Sikh 1% Christian 85% Hindu 12% Muslim Please make a pie chart out of religious percentages Make bullet points out of last 3 points

Elephant and not Tiger India got democracy before capitalism and this has made all the difference It is slower than China but its path is surer However, an elephant at 8% growth is a formidable beast We have waited 3000 years for this moment India is more likely to preserve its way of life 46

The Wise Elephant Could we find an Indian Elephant image? 47