India in the Global Economy in 2020: Opportunities and Challenges Siddhartha Mitra Director (Research), CUTS International

The Liberalisation Story 1980s: Deregulation, Delicensing, Freeing Capital Good Imports 1991: Balance of payments difficulties, pressure by multilateral institutions lead to full scale liberalisation: reduction in tariffs, encouragement to exporters, better conditions for FDI Late Nineties: Agricultural liberalisation and the beginning of RTAs

Objectives Quantify the extent of Indian liberalisation –Trade as a proportion of GDP –Exports as a proportion of GDP –Imports as a proportion of GDP –FDI as a proportion of GDP Depict changes in affluence –GDP per capita –Growth rates of GDP per capita Depict changes in inequality and poverty –Gini coefficient –Head count ratio Capture Changes in Human Development Indicators Primary indicators –Life expectancy –Literacy Secondary indicators –Infant Mortality –Percentage of population with access to clean drinking water –Physicians per 1000 population –Hospital beds per 100 population

Objectives (Continued) Depict Transaction Costs Depict Changes in Quality of Life –Phone Subscribers per 100 population –Percentage of households with television –Power consumption per capita –Passenger cars per 1000 population –Personal computers per 1000 population Identify Strengths –A large pool of cheap human capital –A large English speaking population –Service Sector Orientation –A dynamic private entrepreneur class Limitations and Challenges –Large and increasing crude oil imports –Deficit in the current account emerging again –Slow progress in social sector –High levels of corruption –Inflation ?

Databases Used World Development Indicators (Online Version) Transparency International for Corruption Perception Index Mitra S. (2008)“The Nature of Indian Inequality Increase after Liberalization, ” Indian Journal of Economics and Business: Inequality Measures Virmani, Arvind ( 2006): “Poverty and Hunger: What is needed to eliminate them”, Planning Commission Working Paper No.1/2006

What is the extent of liberalisation? Trade (% of GDP) Exports of goods and services (% of GDP) Imports of goods and services (% of GDP) Foreign direct investment, net inflows (% of GDP)

GDP per capita – Levels and growth

Poverty and Equality Headcount Ratio of Poverty YearIncidence of Poverty

Human Development: Primary Indicators

Human Development: Other Indicators YEAR Infant Mortality ( per 1000) USA (2006)5 Percentage of population with access to clean drinking water source

Continued TimeHospital Beds per 1000 people U.S. (2003)3.3

Quality of life Indicators TimePercentage of households with television U.S.(2007)99

Quality of life Indicators (Continued) TimePower consumption per capita (KWH) U.S.(2004)13,351 Passenger cars per 1000 people rose from 6 in 2000 to 8 in 2003; U.S. had 482 In 2001 TimePersonal computers per 1000 people U.S.(2000)585.18

Awareness YearNewspaper circulation per 1000 population USA (present)250

Transaction Costs

Strengths Cheap human capital: around 10 million scientists, engineers and technicians – same as the US Knowledge of English – 100 million English speakers – second after the US Service sector orientation – lower chance of environmental barriers to growth Dynamic private entrepreneur class

Limitations and Challenges Large and increasing crude oil imports: Imports 2/3rds of its needs Deficit in the current account again emerging: Surplus emerged briefly after the turn of the century but is back to negative levels again Slow progress in social sector: Literacy and life expectancy increase not keeping up with growth Power generation not keeping up with growth and power demand High levels of corruption: India at CPI of 3.5 is 72 nd in clean governance out of 179 countries compared to Denmark (9.4) ranked No. 1 and US (7.2) at 20 th place Inflation – A problem? ( See next slide)

Inflation – A Problem? 0 – – 2011 High inflation: a very recent phenomenon