1. India : Seizing the Opportunities of the 21 st Century by Gurcharan Das March 28, 2008 The India Club Singapore

2. Even though the world has just discovered it, the India growth story is not new It has been going on for 25 years

3. What is the India story?

4. Rising GDP growth 1.0 3.5 6.0 8.9 Average annual GDP growth 0 2 4 6 8 10 1900-19501950-19801980-20022002-2007 (%)

5. Population growth is slowing Sources: 1900-1990: Angus Maddison (1995), Monitoring the World Economy, 1990-2000:Census of India (2001) 1.0 2.2 2.1 1.8 1.5 0 0.5 1.0 1.5 2.0 2.5 1901-19501951-19801981-19901991-20002001-2010 (%)

6. Literacy is rising Source: Census of India (2001) 17 52 65 80 0 20 40 60 80 100 1950199020002010 (proj) (%)

7. Middle class is exploding Source: The Consuming Class, National Council of Applied Economic Research, 2002 65 220 368 8% 22% 32% 0 100 200 300 400 198020002010 (proj) (m)

8. Poverty is declining 46 26 16 1% of the people have been crossing poverty line each year for 25 years Equals ~ 200m 0 10 20 30 40 50 198020002010 (proj) (%)

9. Per capita income gains Source: World Bank US$ ppp 2005 3,051 1980 1,178

10. India is now the 4th largest economy It will overtake Japan between 2012 and 2014 to become the 3rd largest

11. The India model is unique

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

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

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

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

16. Implications of India model Domestic led ■Insulation from global downturns ■Less volatility

17. Implication of India model Services led ■Have we skipped the industrial revolution? ■How do we take people from farms to cities?

18. Implication of India model – Consumption led 41% 45% 59% U.S. China Brazil India 33% People Friendly: Consumption as % of GDP Less inequality: Gini Index The world needs another big consuming economy after the U.S. 58% 42% 64% Europe China India

19. 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

20. Rise of globally competitive Indian companies

21. 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)

22. Public space is a problem We have ■Dynamic democracy with honest elections ■Free, lively media and press ■Poor governance

23. Earlier we had world class institutions, but they are now failing ■Bureaucracy ■Judiciary ■Police

24. Economy grows at night when government is asleep

26. What explains India’s economic success? Even slow reforms add up ■State getting out of the way ■Every government has reformed since 1991

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

28. What explains India’s economic success? Even slow reforms add up ■State getting out of the way ■Young minds are liberated

29. Mental revolution ■‘I want to be Bilgay’ ■Raju’s secret of success ■Banianisation of society ■100 cable channels for $3 ■Hinglish

30. What explains India’s economic success? Even slow reforms add up ■State getting out of the way ■Young minds are liberated ■India has found its competitive advantage in the knowledge economy

31. Looking forward ■8% economic growth ■Democracy will not permit more than 8% unless you have a Thatcher ■1.5% population growth

32. Per capita income 2,100 3,050 5,800 16,800 37,000 On a ppp basis 20002005202020402066 0 10 20 30 40 ($000)

33. 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

34. Why will growth continue? Demographic dividend

35. India’s demographic advantage means that its high growth will continue longer term while China will slow

36. 50% India will gradually turn middle-class 8% 22% 32% 19802000201020202040 West of the Kanpur- Chennai line East of the Kanpur- Chennai line Chennai Kanpur-

37. “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

38. What could stop the show? Infrastructure ■Public private partnerships ■Bad governance

39. Education System Is reasonably good for the top 20% ■Highly competitive business and engineering institutions Is abysmal for the rest ■1 in 4 teachers is absent in government primary schools ■54% of children in urban India in private school

40. Caste system ■Origin of India’s caste system ■Classical four castes ■Today it is alive in the villages but dying in the cities ■Source of competitive advantage ■Affirmative action in public sector, but not in the private sector

41. 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 85% Hindu 12% Muslim 2% Sikh 1% Christian

42. Elephant and not Tiger ■India got democracy before capitalism and this has made all the difference ■It will be slower than China but its path will be surer ■Elephant at 8% is formidable ■India more likely to preserve its way of life

43. The Wise Elephant