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Saturday, January 2, 2010

Is India shining?

I recommend all NRI s to read this. This interesting document was sent by my good friend Mr. Seshadri.
or prosperity will spread in India, but happiness will not, until we      fix  governance.
*Where are we coming from? 
* Where are we today?
* Where are we going in the future?
Even though the world has just discovered it, the India
growth story is not new.
It has been going on for 25 years.


India is now 4th largest economy

The India model is unique 

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. 

India has a vibrant private space
* 100 Indian companies have market cap of us$ 1 bn.
* 1000 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)
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 a minister caught with bribe 
* 1 out of 4 teachers absent in Government schools 
* 2 out of 5 doctors absent in primary health centres
* Delhi's water
* Land titles
* Etc

Key reforms 
* Opened economy for trade and Investments
* Dismantled controls
* Lowered tariffs
* Dropped tax rates
* Broke public sector monopolies
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 
"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

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 Thatcher
* 1.5 % population growth
* Demographic dividend - growth will continue beyond China's

Convergence in the 21st century 
*Why convergence is intuitive?
* Convergence did not happen in the20th century because the world was closed
* Returning to a world of equality prior to 1750
* When China and India accounted for 45% world GDP

 What could stop the show?
- Infra structure
- improving via public-private partnerships
- Fiscal deficit 
- Governance
None of these stopped the show in the past 25 years

 - Nuclear war

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

Elephant 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


1 comment:

Giri said...

Definitely, IS.
Thanks for sharing this.