1
India’s Growth Prospects
China and India : What’s in it for Africa?OECD Development Centre
Salle des Nations, Tour EuropeLa Defense, France16–17 March 2006
Saumitra Chaudhuri
Member, Economic Advisory Council to Prime Minister
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Background – 1950s onwards
Perception of the Problem and the Experience
Saumitra Chaudhuri
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Saumitra Chaudhuri
The Beginning – State & Plans (I)
• Fact Sheet– Low levels of income – population mostly rural (83%)
and an agrarian economy (57% share in GDP)– Growth rate of GDP of about 2%– Savings rate: 8.9% of GDP (1950/51)– Investment rate: 8.7% of GDP (1950/51)– Trade – balanced, exports 2.1% of world trade– Low education rates – 18% literate 1951 (8% in 1931)– Nearly 60% of population below (nutritionally defined)
poverty line
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Saumitra Chaudhuri
The Beginning – State & Plans (II)
• Option chosen – State control and Planning– First Plan – targets modest increase in the growth rate
to about 3.9%; – By pushing the investment rate to 11% by 1961 and
20% by 1968 – and no more thereafter– Second Plan was more aggressive and eventually the
Investment rate was pushed up to 15% by mid-60s, and crossed 20% only in the end of 70s
– S–I gap met through multilateral and bilateral assistance = current account deficit
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Saumitra Chaudhuri
The Beginning – State & Plans (III)
• Unexpected consequences– Rate of growth however fails to exceed 3.5% on average up to the
end of the 1970s– Better health care and food supply resulted in population growth
rising from 1.25% to 2.30%– Food scarcity becomes acute – famine in 1966 and 1967– Trade surpluses vanish; foreign exchange becomes extremely
serious constraint– First currency devaluation in mid-1960s bring little relief because
it is not accompanied by other necessary steps– India missed the bus during the first phase of rapid world trade
expansion that began in the 1960s and her share of rising world exports experienced serious decline
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Saumitra Chaudhuri
India’s export presence withered..
With a closed economy, the share of India in world exports fell dramatically from 2.1% in 1950 to 0.5% by 1990. Even today, India’s share is just short of 1%
India's Share of World Exports Declined Rapidly
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
1950 1973 1990 1998 2004 2005
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Saumitra Chaudhuri
Stylized constraints – circa 1965
• The early approach as partially modified through the experience of the first decade developed into posing the agenda of development in terms of dealing with:– Food (wage good) bottleneck – inflation and political unrest– Investible resources limitations– Foreign exchange constraints
• Absence of focus on trade and private enterprise continues to persist; while
• Nature of State control moves into a different level focused increasingly on using financial intermediation as a point of leveraging domestic savings into growth with cross-sectional equity
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Saumitra Chaudhuri
Institutional fallout is severe ….
• Thus our policy was crafted to operate on each of the following separately and individually– Food – pricing, procurement & distribution– Savings and Investment – pre-emption of the first and
licensing on the second– Foreign exchange – strict control & severe penalties
• Created an intrusive policy architecture• And a large number of diverse control regimes
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Saumitra Chaudhuri
Reforms gradually address them …
• Beginning in the 1980s, slowly some of the unintended excesses sought to be addressed– Relaxation introduced in industrial licensing– So also in external trade policy– Some liberalization of the capital market
• However, the core of the institutional architecture remained relatively untouched, which diluted the impact of the early initiatives at reform
• The greatest achievement of the 1980s was perhaps in opening up the policy makers’ mind to the economic potential of moving to reform mode
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Saumitra Chaudhuri
Watershed year – 1991
• During the 1980s, attempt to ramp up economic growth through higher public spending, abandoning previous caution on fiscal excess
• Part of the fiscal deficit financed from overseas –also finances larger trade deficits
• Currency remains over-valued, which combined with the all of the other misalignments is catalyzed by high oil prices due to first Gulf War + domestic political crisis – metamorphoses into an external payments problem in 1990-91
• Economic reforms launched from 1991 onwards
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Saumitra Chaudhuri
Returning to stylized constraints …
• Wage good bottleneck and food security – sorted out by mid-1980s thanks to the Green Revolution and the consequential increase in agricultural productivity – creates better political climate
• Foreign exchange scarcity eases as the benefits of reform impact external trade in goods and services and encourages private capital inflows
• The investible resources constraint breached by the late 1990s on the back of rising incomes and higher private savings rate; reinforced through fiscal consolidation since 2002/03
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Saumitra Chaudhuri
Food constraint relaxed – mid-1980s
Basket of food intake has also diversified considerably and away from a pre-dominance of grain
Availability numbers ignore private stocks
300
350
400
450
500
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
1950s 1960-1983
1984-2005 3 MVA
All Log. (All)
grams per capita per day
Availability of food grain - cereals plus pulses
1951 to 2005
Availability numbers ignore changes in private stocks
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Saumitra Chaudhuri
Improved external payment position
Current A/c deficit has risen in 2004/05 and in 2005/06, partly due to higher oil & other imports and partly due to defence & private gold purchases
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
% G
DP
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Current A/c Capital A/c Aid
1960-75 1975-91 1991-2006
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Saumitra Chaudhuri
Savings rate touches 25% in 1995
5%
10%
15%
20%
25%
30%
35%
1951
1956
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
5%
10%
15%
20%
25%
30%
35%
Savings Investment
per cent GDP
Savings stabilizes >20% in 1980s & touches 25% in 1995; then falls due to ↑gov’t dis-savings; improves 2003 on …
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Saumitra Chaudhuri
Household saving cross 20% in 2000
0%
5%
10%
15%
20%
25%
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Physical Gross Fin Savings
Net Fin Savings Household Savings
% o
f GD
P a
t cur
rent
, m
arke
t pri
ces As h/holds
borrow for homes etc, their net financial savings flatten out, despite higher gross savings
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Saumitra Chaudhuri
Investible Resources & Growth
5%
10%
15%
20%
25%
30%
35%
1951
1956
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Savings Investment Growth 3yr-mva
India's Economic Growth: 1950/51 to 2005/06
Growth tracks the increase in domestic savings & investment –while the degree of volatility reduces
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Saumitra Chaudhuri
Fiscal – bumps, but consolidation …
Consolidated fiscal deficit down to <8% of GDP in 2005/06. Revenue deficit drops by 3.5 pptsof GDP between 2001/02 & 2005/06
2002, 10.6%
2006
, 7.9
%
2002, 7.0%
2006
, 3.4
%0%
2%
4%
6%
8%
10%
12%
1985
1988
1991
1994
1997
2000
2003
2006
50%
55%
60%
65%
70%
75%
80%
85%Govt Debt
Fisc Def
Rev Def
Deficit / GDP Debt / GDP
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Outcomes of Growth
Growth, structural change, social indicators and
the new operating constraints
Saumitra Chaudhuri
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Saumitra Chaudhuri
India’s growth outcome
• In the period 1951-81 growth averaged >3%• Some increase in the 1980s, partly due to fiscal expansion• Volatility high – mostly because of the cycle of good and
bad harvests• Growth rate in agriculture lifts somewhat in the process of
the Green Revolution, but does not show sustained acceleration
• Non-agriculture – industry & services– Growth much more steady and increasingly de-linked from
fortunes of agriculture; and – Driving the present phase of acceleration in economic growth
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Saumitra Chaudhuri
Growth outcome 1950-91 (1)
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
GDP /cap Aggregate GDP
Linear (Aggregate GDP) Linear (GDP /cap)
Volatile; average growth rate up from <3% to <5%; per capita GDP up from <2% to close to 3%
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Saumitra Chaudhuri
Growth outcome 1950-91 (2)
Growth volatility due to +/–in harvests. Non-agri. GDP growth rises from >4% in ’50s to 6% by end of ‘80s
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
Aggregate GDP Non-Agri GDP
Linear (Aggregate GDP) Linear (Non-Agri GDP)
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Saumitra Chaudhuri
Agri. GDP growth stuck at ~2%
-15%
-10%
-5%
0%
5%
10%
15%
20%
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
Aggregate GDP Agri GDP
Linear (Aggregate GDP) Linear (Agri GDP)The average rate of growth of GDP arising in agriculture remains stuck at 2.3% to 2.5%, which given large agrarian population is a problem
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Saumitra Chaudhuri
Change in economic structure
Share of agriculture drops from 57% to < 20% by 2005/06, while that of the service sector rises to 54%. Share of industry is still at <30%
0%
10%
20%
30%
40%
50%
60%
1951 1971 1981 2006
Agriculture Industry Services
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Saumitra Chaudhuri
Compared to China – lag in industry
Similar experience in China, except that there was a greater increase in the share of industry to 46%
0%
10%
20%
30%
40%
50%
60%
India China India China India China India China
1951 1971 1981 2005
Agriculture Industry Services
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Saumitra Chaudhuri
Post-1991 growth accelerates …
• Following on the reforms of 1991 – There was an initial acceleration of growth as
investment and trade restrictions were removed, which phase lasted up to the mid-1990s
– Indian companies and financial institutions were however not fully equipped to cope with the consequences of opportunity attendant on liberalization
– There was a slowdown – conventional periodization1998 to 2003 – due to the combination of a variety of factors
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Saumitra Chaudhuri
Post 1991 – 3 phases are evident
Phase II – there was a view that our economic growth had stalled – it was actually more localized –anyway trend since 2003 is strongly positive
2006, 9.6%
1996, 10.9%
1999
, 6.4
%
0%
2%
4%
6%
8%
10%
12%
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Total GDP Non-Agricultural GDP
Year ending 31 March
2001/02: 5.8%2002/03: 5.6%
Phase I Phase II Phase III
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Saumitra Chaudhuri
Major factors behind the slowdown
• Corporates had evolved in an environment protected from both import & domestic competition
• Inadequate appreciation of risk of balance sheet expansion – both business & financial risk – also true of some financial institutions, especially project financiers
• Falling world commodity prices – metals, chemicals etc.• Break in political continuity and suspension of fiscal
consolidation• Continuing weakening of growth in the agricultural sector
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Saumitra Chaudhuri
Changes effected:1998-2003
• Far-reaching process of corporate restructuring, including crash course in learning both business and financial risk
• Unprecedented M&A activity – many old business houses fade away and new ones arise
• Structural reform of the banking sector begun in 1993 mostly completed by 1998, restricts the problem to development finance institutions
• Stronger credit management practices in banks enable the boom in retail finance which mark the initiation of recovery in non-agricultural growth rates
• Brake on fiscal expansion successfully applied in 2002 and begins to yield positive results
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Saumitra Chaudhuri
The old constraints are gone, but…
• The traditional economic constraints are behind us– Food, financial resources and foreign exchange
• Corporates & the financial system have matured– They are in a position to successfully work in a globally
competitive environment• But in the path of maintaining sustained economic
growth there are new constraints relating to:– Physical & institutional limitations– Reducing distributional inequalities (how is this a
constraint, rather than a desired outcome? – because it is necessary to create the political space for ongoing reforms)
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Saumitra Chaudhuri
Operative constraints today are
• In terms of aggregates– Physical infrastructure deficits – electricity, water etc – Government deficits – further fiscal consolidation
• Structural issues– 57% of working pop (~400 million) still in agriculture– Lower education / skill levels amongst +30 years– Majority of workers in non-agriculture are in the
“unorganized” sector• Institutional problems
– Rigid labor & other counter-productive legislation– Governance quality not satisfactory
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Saumitra Chaudhuri
Incomes vary widely across States
The extent of variation has remained largely unchanged across both the post-reform and pre-reform periods
0
50
100
150
200
250
300
Goa Del
Pnjb
Hry
Mah Guj
HP
TN
Ker
Kar
n
AP
WB
Tri
p
Raj
J&K
Cha
tt
MP
Asm O
r Jh UP Bh
Index in 2001-02
Index in 1980-81
Index in 1990-91
States that have improved their relative position in the period during the decade of the Nineties States that have seen their
relative position deteroriate during the decade of the Nineties
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Saumitra Chaudhuri
By how much has poverty fallen?
• Chen & Ravallion estimate that there were 390 million fewer poor in 2001 compared to 1981 – How have the world’s poorest fared since the 1980s,
World Bank, 2004• Acute poverty, i.e. <$1.08/day
– Fallen mostly sharply in China from 64% to 17% and by less so in India from 54% to 35%; increase in sub-Saharan Africa
• Relative poverty measured at <$2.15/day – While incidence has fallen, but still remains high – in
China (47%) and India (80%); increase in sub-Saharan Africa
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Saumitra Chaudhuri
Decline in poverty – last 20 years
0%
20%
40%
60%
80%
100%
$1.08 $2.15 $1.08 $2.15 $1.08 $2.15
1981 1993 2001
India China Sub-Sah. Africa Total
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Saumitra Chaudhuri
Number of poor still is too large
-
500
1,000
1,500
2,000
2,500
3,000
$1.08 $2.15 $1.08 $2.15 $1.08 $2.15
1981 1993 2001
India China Sub-Sah. Africa Total
Mil
lion
s
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Saumitra Chaudhuri
And remains in the billions ..
• Below $1/day– 1981: 1.48 bn; of which in India 0.38 bn– 2001: 1.09 bn; of which in India 0.36 bn
• Below $2/day– 1981: 2.45 bn; of which in India 0.63 bn– 2001: 2.74 bn; of which in India 0.83 bn
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Saumitra Chaudhuri
Poverty Gap Index moves differently
0%
10%
20%
30%
40%
50%
60%
$1.08 $2.15 $1.08 $2.15 $1.08 $2.15
1981 1993 2001
India China Sub-Sah. Africa Total
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Saumitra Chaudhuri
Focus on poverty has to shift
• Acute poverty gap index closing– India down to 7%, and 4% in China. Still high at 20%
in Sub-Saharan Africa
• Relative poverty index remains substantial– India at 34%; less so in China at 18%. It is 40% in Sub-
Saharan Africa
• The main near term challenge– For both India and China is to lift those at <$2/day up
and somewhat less so about acute poverty (<$1/day)
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Saumitra Chaudhuri
Education & literacy (1)
• Literacy – slow improvement – variation across States (provinces) – great variation in degree of improvement– 1951: 18.2% lowest (9%); highest (47%)– 1961: 28.3% lowest (18%); highest (55%)– 1971: 34.5% lowest (23%); highest (70%)– 1981: 43.6% lowest (30%); highest (79%)– 1991: 52.2% lowest (37%); highest (90%)– 2001: 64.9% lowest (47%); highest (91%)
• National Literacy Mission objective to attain 75% literacy rate by 2007
• Still quite a way behind China (86%) and Sri Lanka (92%)
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Saumitra Chaudhuri
Education & literacy (2)
• School enrolment has improved considerably– 2003/04– Class I-V: Boys (100%); Girls (96%)– Class VI-VIII: Boys (67%); Girls (58%)
• Largest free Mid Day Meal Scheme (hot meal)– Program covers 120 million children studying in nearly
1 million primary schools – Central government Budget provision at Rs 35 billion (US$ 800 million)
• Educational standards of the young entering the work force already increasing and will be more so over the coming decade
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Implications for this Century
The certainty of continuing economic growth, and
its implications on the demand for energy
Saumitra Chaudhuri
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Saumitra Chaudhuri
Stable macro-economics is vital
• Ensuring stable monetary conditions is vital to sustain economic growth; for that fiscal consolidation is critical.– It is a challenge to stick to the fiscal consolidation
targets, given the pressure of electoral politics– Incorporating rural employment guarantee & other
social programs, while balancing the book is a hard task– Potential exists in weeding out ineffective social
programs and conducting public business in a more efficient manner
– In the Indian context, there exists a large deficit in the social and economic infrastructures, which has to be dealt with imaginatively and effectively
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Saumitra Chaudhuri
From the poverty story …
• The coming decades will have to be about creating conditions where the poor can cross over the threshold of $1,000 (PPP) per annum [$2.15/day (1993) PPP]
• For this economic growth will have to be sustained and coupled with policies that help the poorer sections benefit from the process of growth
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Saumitra Chaudhuri
The reality of growth (1)
• Foreseeable future – Under most conceivable conditions economic
growth expected to continue at a brisk pace in both India and China
• Temporary set-backs – Always possible; could be due to global or local
factors. But over a time period measured in decades, unlikely to be a significant departure from expectations
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Saumitra Chaudhuri
The reality of growth (2)
• After a point, growth will slow – India’s current GDP is $800 billion at market exchange
rates (MeR). Thus, 12% (nominal) growth = $96 billion in incremental demand
– China’s current GDP is $2.1 trillion (MeR) and 11% (nominal) growth = $230 billion in incremental demand, more than double that of India
– USA’s current GDP is $13 trillion and 6% (nominal) GDP growth is = $780 billion, 3 times that of China
• If every economy grows at a fixed exponential rate forever, all natural resources will be exhausted
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Saumitra Chaudhuri
The reality of growth (3)
• The rate of growth will slowly plateau– So, slowly as per capita incomes rises, there
will be an inevitable slowing of growth rate• Temporary set-backs will happen
– Possible – can be due to global or local factors. • The long term trajectory will however stay
– Over a time period measured in decades, unlikely to be a significant departure from expectations. At most it is a matter of things happening 5 years later or 5 years earlier
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Saumitra Chaudhuri
The reality of growth (4)
• The process of growth will transform developing Asian economies from being poor economies to being middle-income societies
• It is unlikely that the economic conditions presently characterizing the rich nations of the West and Japan will come to materialize in India and China in a general sense
• So, any idea that we will become like them in a matter of years is perhaps excessively sanguine
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Saumitra Chaudhuri
The reality of growth (5)
• The distant future will look quite different from the present– Conveniences of a distant future are unlikely to be conveniences of
today• Technology and life style will metamorphose in ways that are difficult
to anticipate• While the distant future – say the end of the current century is difficult
to conceive – We can be more certain about some of the foundation blocks that
will need to be laid for that future – what we need to do today, so that we will finally get there
• PPP measures are useful when dealing with poverty, less so when dealing with prosperity – for the goods that are incrementally demanded with rising incomes are traded goods – and here it is the incomes at market exchange rates that matter
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Saumitra Chaudhuri
Our energy needs will swell
• Under any simulation, our energy needs –especially that of India and China will increase manifold
• They will be increasingly contributing to the world’s:– Consumption & depletion of fossil fuels– Carbon emission and other adverse impacts on
the environment
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Saumitra Chaudhuri
Market exchange rates ….
• To gauge energy use and the demand for manufactured goods, market exchange rate incomes are a superior guide
• We look at per capita incomes at market exchange rates and project them over the next few decades
• Of course relative MeRs may change – but that is another level of complexity
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Saumitra Chaudhuri
One possible projection ….
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2005 2015 2025 2050
India China
Brazil
2005 US$ Per capita GDP at market exchange rates
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Saumitra Chaudhuri
What are the energy needs?
• The energy needs to fuel this economic expansion is truly immense
• Because, the current levels of consumption of energy in China, and even more so in India, are very low compared to the industrialized countries
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Saumitra Chaudhuri
Huge differences in current levels
-
500
1,000
1,500
2,000
2,500
India China Brazil
Oil kgs / cap
Electricity Kwh / cap
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Germany Japan USA
Oil kgs / cap
Electricity Kwh / cap
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Saumitra Chaudhuri
Current level of energy usage (1)
• Electricity consumption per capita– India 520 units– China 1,470 units (India is 35%)– Brazil 2,240 units (India is 23%)– Germany 6,275 units (India is 8%)– Japan 7,540 units (India is 7%)– U.S.A. 13,400 units (India is 4%)
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Saumitra Chaudhuri
Current level of energy usage (2)
• Petroleum fuel consumption per capita– India 122 kgs– China 306 kgs (India is 40%)– Brazil 666 kgs (India is 18%)– Germany 1,788 kgs (India is 7%)– Japan 2,358 kgs (India is 5%)– USA 4,115 kgs (India is 3%)
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Saumitra Chaudhuri
If India & China consume @ Japan?
• Petroleum:– Present consumption of India & China together is 9.2
million barrels per day (mb/d)– The additional demand will be 135 mb/d !– Current world output is 83 mb/d
• Electricity:– Present combined use is 2.2 trillion units– Additional demand will be 14 trillion units, equivalent
to additional >2,000,000 MW installed generation capacity !
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Saumitra Chaudhuri
The implications are –
• Changes have to be made in the efficiency and nature of energy generation and use
• Different way of urban living will have to develop – e.g. greater reliance on rapid mass transit, efficient lighting and heating arrangements etc.
• The developing Asia of tomorrow will not be a replica of the developed nations of today. Nobody can afford that – especially the Planet Earth
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Saumitra Chaudhuri
Even then in the medium run
• Technology of use and patterns of usage will not change fast enough
• Therefore in the medium term, even after factoring in efficiency in generation and use, and maximizing of renewable sources, the demand for additional energy sources will still be enormous
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Saumitra Chaudhuri
India’s medium term energy needs
• Thermal Power Generating Capacity– Present: 130,000 MW– By 2030: 780,000 MW
• Crude petroleum– Present: 125 million tonnes– By 2030: 400 million tonnes
• Natural Gas (including Coal Bed Methane)– Present: ~1 TCF– By 2030: 8 TCF
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Saumitra Chaudhuri
India’s future energy needs
• Crude petroleum imports– Present: 95 million tonnes (3% of world trade)– By 2030: 370 million tonnes (8% of world trade; China at 13%)
• Nuclear Power Generating Capacity– Present: 3,000 MWe– By 2030: 50,000 MWe– By 2050: >200,000 Mwe
• Carbon emissions– By 2030 likely to be close to 6 billion tonnes – little more than that
of the USA today (5.5 billion tonnes).
• Source: Expert Committee on Energy, Chair: Dr Kirit Parikh, draft report, January 2006.
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Saumitra Chaudhuri
Energy policy is in flux worldwide
• Developed countries are in the process of making a tangible shift in their own energy priorities– Moving towards nuclear power, particularly
spent fuel recycling – at least as medium-term (in a technological sense - 21st century) solution
– Matching this with concern on carbon emission– High oil prices and evidence of global warming
may or may not have catalyzed this process
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Saumitra Chaudhuri
Energy security is vital for India
• Short to medium-term– Dependent for 75% of our crude oil on imports
and the prospect for enhancing domestic supply is not very bright
– Better off in natural gas, but here too imported supply will be more important tomorrow
– And imported coal will have to meet some of our future power coal requirement
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Saumitra Chaudhuri
Medium-term technology-mix must shift
• Medium to long-term– Incrementally nuclear power plays pivotal role– Our domestic uranium deposits are small and
we thus require access to overseas ore– Recycling spent fuel integral for greater energy
availability and minimizing the problem of spent fuel disposal
– Thorium reserves offer us the best option for incremental supplies in the longer-term
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Saumitra Chaudhuri
Sustaining economic growth
• Energy needs will increase by orders of magnitude so as to support the pace of economic growth
• Presently our per capita incomes are 45% that of China and 25% that of Brazil
• By 2030, it is likely that our per capita incomes will be little above the level of present-day Brazil
• To make sure that we get there we have to secure our future energy supplies today
• And this is equally true for China and other developing Asian economies as it is for India
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Saumitra Chaudhuri
Confluence of interest
• It is in the mutual interest of everybody that we co-operate – First, towards consensually managing the depleting
resources of fossil fuel – oil & gas– Second, on expanding use of clean coal technologies so
that the environmental impact is minimized– Third, and perhaps most important on technological
development, including nuclear power – How well we will be able to successfully manage the
transition away from fossil fuels [30-50 years away] will critically be dependent on international and regional co-operation
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Saumitra Chaudhuri
Cost of failure will be heavy
• There will be a cost if the future demand for energy is not managed creatively and positively
• Increased demand from China and India will push energy prices up (on net basis) worldwide– That will adversely affect everybody including the
richer nations – imagine oil at $100 or $150/barrel– The world economy will slow down painfully– India, China and other developing Asian economies
will pay a heavy price in terms of foregone growth
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Saumitra Chaudhuri
The new co-ordination problem
• In the economic literature since the time of Keynes, we are aware of the “co-ordination problem” in terms of leads and lags and timing of pro- and counter-cyclical monetary and fiscal policies, within and across national economies
• In this century, other kinds of co-ordination – that in energy, as well as in peace-keeping and disease prevention – will perhaps become the sum and substance of meaningful governance
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Saumitra Chaudhuri
Living in the global village
• This is not something coined in the cyber-world, media and communication
• With the rise of incomes and decline of poverty, there are additional burdens to bear and the inter-connections through resources and markets demand that nations learn to co-operate, rather than merely compete
• The liberal, humanist traditions – which appealed to reason and a shared sense of humanity – of the 19th century was a forerunner, certainly not of the 20th, but can perhaps be that of the 21st century
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Saumitra Chaudhuri
Thank you
For your patience
