PowerPoint-presentatie - FEB

Report
India’s Economic
Prospects
Prof. Gulshan Sachdeva
J Nehru U Delhi & ICCR Chair at CGG, KU
What’s on our plate?
• Introduction by Piet Sercu, FEB @ KU Leuven
o
o
Reforms since early nineties have faltered
Huge needs, e.g.
• Infrastucture (traffic, power, courts, etc)
• Administration
• Labour markets
o
New opportunities:
• BJP has a clear majority,
• PM has a promising track record
• Main Talk by Gulshan Sachdeva, J Nehru U & ICCR Chair
Economic Prospects of India
By
Prof Dr Gulshan Sachdeva
ICCR India Chair, KU Leuven
Chairperson, Centre for European Studies
School of International Studies,
Jawaharlal Nehru University, New Delhi
27 October 2014
29 States, 7 Union Territories
1.25 billion population (2013)
Equal to = EU + USA + Brazil + Japan + Russia
16 Indian States with a population of minimum 25
million ( 2011 census)
Another 20 states/UT range between 0.6 million to 16 million
250
200
199
150
112
100
104
91
85
72
50
0
68
61
60
42
33
32
31
28
25
25
India: Physical
Land borders, coastline
TOTAL LAND BORDER: 14,103 km
1. Bangladesh 4,053 km
2. Bhutan 605 km
3. Myanmar 1,463 km
4. China 3,380 km
5. Nepal 1,690 km
6. Pakistan 2,912 km
COASTLINE 7516 km
Climatic map
Truly Multi Cultural Society
• Multi Ethnic- All the five major racial types Australoid, Mongoloid, Europoid, Caucasian,
Negroid found in India
• Multi Religious- Hindus 80.5 %, Muslims 13.4%
Christians ,2.3%, Sikhs,1.9%, Buddhists 0.8%, Jains
0.4%, others 0.7% (2001 census)
• Multi Lingual - 22 languages have been recognized
by the Constitution of India, of which Hindi ( and
English) are the official national language +
hundreds of languages and dialects.
• Its diversity makes it unsuitable for any other form of
government but DEMOCRACY
Political System
•
•
•
•
•
Democratic
Federal – demarcation of roles and responsibilities
Secular
Republic
Union Government ( President- Prime Minister heads
Council of Ministers)- Supreme Court
Bicameral- Lok Sabha ( lower House), Rajya Sabha ( Upper House)
• State Government- (Governor- Chief Minister- High
Court)
Grassroots Democracy
•
•
•
•
•
•
•
73rd and 74th amendment of constition “
Panchayati Raj”
600,000 villages
About 240,000 village panchayats
6000 blocks, 500 districts
Towns/ municipalities ( 8000 towns)
2.8 million elected representatives (1/3 women)
From Indian National Congress-Coalition
governments- BJP
2014 Lok Sabha ( lower House) election results
272 seats needed to form government
National Democratic Alliance
336 / 543
282
18 16
6
4
3
2
1
1
1
1
1
BJP
SS TDP LJP SAD RLSP AD PMK SWP AINRC NPP NPF
Non-Allied
147 / 543
37
34
20
AIADMK
AITC
11
2
3
4
3
2
2
5
1
1
60 / 543
1
RSP KC(M)
3
1
9
BJD TRS INLD AIUDF AAP J&KPDP JD(S) JD(U) SP SDF AIMIM YSRCP Ind CPI CPI(M)
United Progressive Alliance
1
9
2
2
4
6
44
JMM
IUML
RJD
NCP
INC
• India is making a successful transition from an
excessively inward-oriented economy to a more
globally integrated economy.
• As a result of new policies, it has become one of
the fastest growing economies of the world
• Despite serious challenges ( global slowdown,
energy security, infrastructure, poverty, regional
disparities, internal security) indications are that
high growth may continue
Background
• After independence, the critique of colonialism
formed the basis for the policy of “self reliance’ in
India
• The policy emphasized a state directed, inwardoriented, import substituting industrialization as an
appropriate strategy for India
• Some reforms started in the 1980s
• Reforms triggered by macroeconomic crisis in
1991
Nature of Indian reforms
• Coincided with economic transformation in the former
Soviet bloc from a Centrally Planned Economy to Market
Economy
• In Transition economies- Stab, Lib, Priv
• In India- Removal of License/ Permit Raj ( removing
restrictions from the private sector/ opening to outside
world
Economic Reforms since 1991
• External Sector Reforms
Exchange rate, Tariffs, FDI, portfolio inv
• Internal Sector Reforms





Industrial reforms
removal of licensing regime, controls
deregulation of product prices
reduction in protection to SME
disinvestment ( privatisation)
labour reforms
Economic Reforms
• Fiscal reforms
•
•







tax structure, fiscal prudence
Banking sector reforms
Infrastructural reforms
roads
ports,
telecom,
airports,
power,
SEZs
Agriculture
Sector Breakdown, percentage
1960
1970
1980
1990
2012
Agriculture
53
47
40
33
14.1
Industry
18
21
23
26
27.5
Services
29
33
37
41
58.4
Sectoral contribution 1950-2013
Sectoral Growth Rates
1960s
1970s
1980s
1990s
20002005
Agriculture 2.3%
1.0%
4.3%
3.0%
1.9%
Industry
6.5%
3.5%
6.7%
5.7%
6.9%
Services
4.9%
4.4%
6.6%
7.6%
8.0%
Sectoral growth in the last few years
2008 2009 2010 2011 2012
Agriculture 0.1
0.8 7.9 3.6 1.8
Industry
4.4
9.2
9.2
3.5
3.1
Services
10.0
10.5
9.8
8.2
6.6
GDP
6.7
8.6
9.3
6.2
5.0
Growth Performance in Five Year Plans
Eleventh Plan ( 2007-12)
Average Growth 7.9% ( Target 9%)
Average 7.8% in the last ten years ending 2012
12 FYP ( 2012-17)
• The focus is on creating human, physical and institutional
capabilities to achieve targeted 8.2 per cent growth in the
next five years.
• Although rapid growth in the last ten years has raised
expectations, domestic and global circumstances are less
favourable today.
• Still, the overall aim is to bring 9 per cent growth back by
the end of 12th plan.
• As a result of these changes, India is adapting itself
simultaneously to the economic globalization and to the
emerging balance of power.
• Changes in India’s internal and external economic policies
also coincided with the end of the Cold War.
Foreign Trade
\Year
EXPORTS
%Growth
200820092009
2010
185,295 178,751
-3.53
201020112011
2012
251,136 305,963
40.49
21.83
20122013
300,400
-1.82
IMPORTS
%Growth
303,696 288,372
-5.05
369,769 489,319
28.23
32.33
490,736
0.29
TOTAL TRADE
%Growth
488,991 467,124
-4.47
620,905 795,283
32.92
28.08
791,137
-0.52
TRADE BALANCE
-118,400
-118,632
-190,335
-109,621
-183,355
Services Trade
(figures in brackets are software exports)
Year
2002-03
2003-04
Exports
Imports
Total
(USD bn) (USD bn) (USD bn)
20.8
17.1
37.9
26.9
16.7
43.6
2004-05
43.2
27.8
71.0
2005-06
57.7
(46.3)
73.8
(49.7)
90.1
(55.5)
142.3
(62.2)
145.7
(65.9)
34.7
92.1
44.3
118.1
52.5
142.6
78.2
220.5
80.8
226.5
2006-07
2007-08
2011-12
2012-13
Top Ten Trading Countries, 2013-14
1.
CHINA P RP
14,824.36
51,034.62
Trade
Balance
65,858.98 -36,210.26
2.
USA
39,142.10
22,505.08
61,647.19
16,637.02
3.
U ARAB EMTS
30,520.42
29,019.82
59,540.24
1,500.60
4.
SAUDI ARAB
12,218.95
36,403.65
48,622.60
-24,184.69
5.
6.
7.
8.
9.
10.
SWITZERLAND
GERMANY
HONG KONG
INDONESIA
IRAQ
SINGAPORE
1,796.95
7,515.81
12,731.74
4,850.20
918.03
12,510.54
19,311.01
12,932.41
7,322.20
14,748.30
18,520.86
6,762.49
21,107.96
20,448.22
20,053.93
19,598.50
19,438.89
19,273.03
-17,514.06
-5,416.59
5,409.54
-9,898.09
-17,602.83
5,748.05
Rank
Country
Export
Import
Total Trade
Top 20 Trading Countries, 2013-14
Rank
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Country
CHINA P RP
USA
U ARAB EMTS
SAUDI ARAB
SWITZERLAND
GERMANY
HONG KONG
INDONESIA
IRAQ
SINGAPORE
KUWAIT
BELGIUM
NIGERIA
KOREA RP
QATAR
JAPAN
UK
UNSPECIFIED
IRAN
VENEZUELA
Export
Import
Total Trade
14,824.36
39,142.10
30,520.42
12,218.95
1,796.95
7,515.81
12,731.74
4,850.20
918.03
12,510.54
1,061.14
6,377.32
2,667.75
4,208.69
969.06
6,814.07
9,779.07
11,544.49
4,971.35
196.96
51,034.62
22,505.08
29,019.82
36,403.65
19,311.01
12,932.41
7,322.20
14,748.30
18,520.86
6,762.49
17,153.55
10,752.04
14,097.84
12,470.60
15,707.99
9,480.75
6,045.10
4,097.07
10,307.16
13,940.13
65,858.98
61,647.19
59,540.24
48,622.60
21,107.96
20,448.22
20,053.93
19,598.50
19,438.89
19,273.03
18,214.69
17,129.35
16,765.59
16,679.28
16,677.04
16,294.82
15,824.17
15,641.57
15,278.51
14,137.09
Trade
Balance
-36,210.26
16,637.02
1,500.60
-24,184.69
-17,514.06
-5,416.59
5,409.54
-9,898.09
-17,602.83
5,748.05
-16,092.41
-4,374.72
-11,430.10
-8,261.91
-14,738.93
-2,666.68
3,733.98
7,447.42
-5,335.81
-13,743.17
Export Diversification
(Share of India’s Exports)
FDI- $340 billion
(between 2000 and August 2014)
Foreign Exchange Reserves
Year
2002-03
2003-04
(USD bn)
76
113
2004-05
141
2005-06
151
2006-07
199
2007-08
2010-11
2012-13
309
304
295
• The strategic consequences of Indian economic
performance in the last two decades are clearly
evident.
• Growth and outward orientation has helped India
to forge new relationships with its neigbours in
Asia and with major powers
• India has also moved towards regional integration
(SAFTA, India- ASEAN; India-Japan, Singapore;
AUS, NZ, bilateral deals, negotiations are on with
many partners)
India and Regionalism
• Compared to its earlier faith in global trade deals,
India has also taken an aggressive approach
towards regionalism.
• The collapse of Doha development round of WTO
negotiations pushed many countries including
India to look for alternatives to multilateral
negotiations to improve their trade positions.
• Since 2005 India has put its proposed regional
trade agreements on fast track.
Indian Exports Region wise
• In the past, India had adopted a cautious approach to
regionalism, and was engaged in only a few
bilateral/regional initiatives, mainly through Preferential
Trade Agreements (PTAs) or through open regionalism.
• In recent years, it has started concluding Comprehensive
Economic Cooperation Agreements (CECAs) with many
countries.
• The CECAs cover Free Trade Agreements (with
limited negative lists) in goods, services, investment
and other identified areas of economic cooperation.
• Some important signed agreements include South
Asian Free Trade Area (SAFTA), and agreements with
ASEAN, Japan, Singapore, Afghanistan, Singapore,
Bhutan, Sri Lanka, Nepal, MERCOSUR etc. Serious
negotiations are on with the EU, GCC, IBSA, South
Korea, Australia, Malaysia etc
SAARC
• SAFTA
• Recent Focus: , connectivity, trade, economic cooperation,
agriculture, social development, environment and security
• India continues to drive major projects within SAARC such
as South Asian University, SAARC Development Fund,
SAARC Food Bank
India-ASEAN
• One significant aspect of this phase of economic
•
•
•
•
growth is India’s increasing economic cooperation
with Southeast Asia through regional, sub-regional
and bilateral engagements.
After years of difficult negotiations, India finally signed
a free trade agreement with ASEAN in 2009.
BIMSTEC
Mekong-Ganga Cooperation initiative
Bilateral trade agreements with Thailand (2003)
Singapore (2005),Malaysia (2011).
India ASEAN Connectivity
• India’s economic exposure to ASEAN is still limited.
One of the major reasons for this is physical
connectivity with the region.
• Although FTAs in trade, services and investment is
central to India’s strategy, it is realized that
infrastructure challenges could hamper growth in
linkages.
• Emerging nodes of India-ASEAN connectivityMyanmar and Northeast India -are both weak in
infrastructure.
• At the same time, this is also an area which has
difficult
landscapes
and
infested
with
insurgencies.
• The new opening in Myanmar will definitely help
building connectivity further.
• Economic
development
strategies
within
Myanmar as well as Indian Northeast could have
significant impact on India-ASEAN connectivity
India –EU Broad based Trade & Investment
Agreement ( negotiations since 2007)
•
•
•
•
•
Trade in Goods:
Trade in Services:.
Investment:
Public Procurement:
Technical Regulations: cooperation on technical
barriers to trade (TBT) and sanitary and phytosanitary measures (SPS).
• Intellectual Property
• Competition Policy:
• Dispute settlement
58
BRICS
• Major issues covered in recent meetings
• reform of global political and economic governance,
• global economic situation,
• the contemporary political situation (including developments in West
•
•
•
•
Asia),
WTO and the international trading regime,
reform of international institutions of global governance,
sustainable development, terrorism,
food and energy security and consolidation of intra-BRICS
cooperation
• Setting up of BRICS Development Bank
• India-China-Russia/ India Brazil South Africa (IBSA)
Eurasian Region
• Traditionally very close economic and political relations
with the Soviet bloc
• After disintegration trade and economic linkages with
Russia and other CIS countries has declined considerably
• India is looking for closer linkages with the emerging
Eurasian economic Union ( Rus, Belarus, Kaz)
• Membership in SCO
GCC
• India has a vital stake in the stability, security and
economic well-being of the Gulf ( trade, energy,
remittances, 6 millions Indian workers in the region, $ 145
billion trade in 2011-12)
• In 2004, India and GCC signed framework agreement for
the enhancement of trade and other economic linkages
• Working towards India-GCC FTA
Indian Strategy for Linking South & Central
Asia
•
•
•
•
Provided $ 2 billion assistance to Afghanistan
Active Participant in the RECCA process
Supported The New Silk Road Strategy
Hosted Delhi Investment Conference on AFG (
June 2012)
• In the Istanbul process, India leads in two CBMs
viz. Commercial Opportunities CBM and
Chambers of Commerce CBM.
• Announced 12 points Connect Central Asia Policy
( 2012)
Challenges
Energy Security
• The era of high economic growth in the western
world between 1945 and the first oil crisis of 1973,
coincided with a period of cheap oil prices.
• Recent years of high economic growth in
countries like India and China have coincided with
periods of increased oil price uncertainty.
• India’s oil requirements for its 8-9 per cent growth
every year since 2003 have been financed at
increasing global oil prices.
Import dependence
• India imports 76% of its oil, 23% of its gas and 20% of its
coal.
• Its energy imports last year exceeded $130 billion or 26%
of its import bill of $ 490 billion.
• By the end of the 12th Plan(2017) India's energy imports
could be $150-$160 billion.
Indian Energy Security
• Despite fairly low per capita consumption, India is the
•



.
fourth largest consumer of energy in the world after USA,
China and Russia
It is believed that India’s energy security can be increased by
diversifying both energy mix and sources of energy imports; (
2/3 oil comes from Middle-East/ Coal is likely to continue as a
major source)
seriously perusing overseas acquisitions of energy assets;
and
initiating domestic policy reforms to attract foreign investment
as well as improving domestic production, distribution and
consumption.
• Coal remains the dominant source of primary
energy.
• Domestic production of coal and lignite account
for two-third of total production of commercial
energy in 2000–01 and is projected to be about
the same in 2021–22.
• The combined share of oil and natural gas in
energy consumption was about 25% in 2011–12
and is expected to be about the same in 2021–22.
Import dependence will increase
• Even though domestic production of energy
resources is projected to increase, import
dependence will continue at a high level.
• The main area of import will be crude oil, where
nearly 78 per cent of the demand will have to be
met from imports by 2017
• Import dependence for coal is also estimated to
increase from 19% in 2011–12 to 22.4 per cent in
2017 and 26 % 2022.
Energy Diplomacy
• In the last few years, energy diplomacy has also become
one of the main agendas of country’s foreign and security
policy.
• India is seriously perusing nuclear energy option as well
as import sources beyond the Middle-East.
• Indo-US nuclear agreement as well as consistent
engagements with the countries of Eurasia, Africa and
Latin America could be seen from this perspective
• Overall, at this stage of economic modernization, India is
vulnerable due to insufficient energy resources.
• Regional Disparities
Average 11th Plan 7.9%
Average 10th Plan 7.7%
Infrastructure:
Telephone subscribers
Poverty
Internal Security Challenges
South Asian conflicts
•Drivers of Growth
Demographic dividend
• Half of India’s 1.2-billion population is under the
age of 25.
• By 2020, India will have the world’s youngest
population, with a median age of 29 years,
compared with a median age of 37 in China.
• This demographic dividend could potentially give
India the biggest labor force and make it the
largest consumer market in the world.
Demographic divident
Growing middle class
( already 250 million strong)
Strong IT Sector
Focus on Infrastructure
100 smart cities/ high speed rail network
($1 trillion investment in next 5 years)
A New National Programme
BRICS ( Goldman Sachs)
India’s Soft Power
•
•
•
•
•
•
From Buddha to Bollywood to BPO
Democracy
Films/Music ( 1602 films made in 2012)
Development Cooperation
Education
Trade/Commerce

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