india presentation sept final
TRANSCRIPT
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Razeen Sally
European Centre forInternational Political Economy (ECIPE)
London School of Economics (LSE)
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GLOBALISATION AND INDIA SHINING
India at 60
From Gandhian mysticism, economic isolation and socialbackwardness to globalisation and India Shining
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GLOBALISATION AND INDIA SHINING
a) Snapshot
-- Macroeconomic conditions-- Trade and foreign investment (FDI)-- Financial markets-- Domestic business climate
-- Politics and the state-- Comparisons with China
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GLOBALISATION AND INDIA SHINING
b) Prospects-- Politics, economic policy, the business climate-- Comparisons with China
c) Focus-- States and cities-- Higher education
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GLOBALISATION AND INDIA SHINING
History (1947-91)
-- From Fabian socialism to Soviet-style central planningand the license raj
-- Foreign policy: nationalism, non-alignment and theSoviet Union as First Friend
-- The economy: a Hindu equilibrium
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GLOBALISATION AND INDIA SHINING
Market reforms, 1991-
-- Half measures in the 1980s
-- The 1991 crisis and big -bang reforms (1991 -93)
-- Gradual, stop-go reforms (1993 to present)
-- The state of play
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Figure 1: Aggregate GDPGDP in current USD India and China (1960-2005)
0
500
1000
1500
2000
2500
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
B i l l i o n s
G D P i n c u r r e n t U S D
China India
Source: World Bank, World Development Indicators (WDI)
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Figure 2: Per-capita GDP
Source: World Bank, World Development Indicators (WDI)
GDP per capita PPP India and China (1975-2005)
0
1000
2000
3000
4000
5000
6000
7000
8000
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005
G D P p e r c a p i t a P P P ( c u
r r e n t i n t . $ )
India China
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Figure 3: Poverty as % of Population
Source: India 1950-1978 World Bank Poverty in India Dataset Poverty and Human Resources Division Policy, Research Department, The World Bank, Berk zler, Gaurav Datt,
Martin Ravallion. January 1996(http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/0,,contentMDK:20699301~pagePK:64214825~piPK:64214943~theSitePK:469382,00.html); India andChina 1981-2004 Chan and Ravillion "How have the world's poorest fared since the early 1980s?" The World Bank Research Observer, vol. 19, no. 2 (Fall 2004)
Poverty (US$ a day) % of pop. India and China (1950-2004)
0
10
20
30
40
50
60
70
1952 1958 1964 1970 1978 1984 1990 1996 2002
P o v e r t y
( U S $ a d a y ) %
o f p o p u
l a t i o n
India China
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Figure 4: Inequality India (GINI)Gini Index for India at National Level (1951-1991)
2526272829303132333435
3637383940
Aug51-Nov
51
May53-Sep
53
May55-Nov
55
Mar57-
Aug
57
Jul59-Jun
60
Feb63-Jan
64
Jul66-Jun
67
Jul69-Jun
70
Oct73-Jun
74
Jul86-Jun
87
Jul89-Jun
90
Jan92-Dec
92
G i n i I n d e x I n d i a
Source: Ozler, Berk, Gaurav Datt and Martin Ravallion. 1996. "A Database on Poverty and Growth in India," mimeo, Policy Research Department, World Bank.
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Figure 5: Savings/ GDPSavings / GDP India and China (1990-2005)
0
10
20
30
40
50
60
1990 1992 1994 1996 1998 2000 2002 2004
G r o s s D o m e s t i c S a v i
n g s / G D P
China India
Source: World Bank, World Development Indicators (WDI)
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Figure 6: Investment / GDPGross Capital Formation / GDP India and China (1990-2005)
0
5
10
15
20
25
3035
40
45
50
1990 1992 1994 1996 1998 2000 2002 2004
G r o s s
C
a p i t a l
F o r m a t
i o n
( %
o f G D P )
China IndiaSource: World Bank, World Development Indicators (WDI)
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Figure 7: Foreign Exchange ReservesForeign Exchange Reserves India and China (1990-2005)
0
100
200
300
400
500
600
700
800
900
1990 1992 1994 1996 1998 2000 2002 2004
B i l l i o n s
F o r e i g n E x c
h a n g e R e s e r v e s U S D
China India
Source: IMF International Financial Statistics (IFS)
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Figure 8 (i): Share Agriculture in GDPShare of Agriculture in GDP India and China (1990-2005)
0
5
10
15
20
25
30
35
1990 1992 1994 1996 1998 2000 2002 2004
A g r i c u
l t u
r e v a
l u e a d d e d ( %
o f G D P )
China India
Source: World Bank, World Development Indicators (WDI)
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Figure 8 (ii): Share of Manufacturing inGDP
Share of Manufacturing in GDP India and China (1990-2005)
0
5
10
15
20
25
30
35
40
1990 1992 1994 1996 1998 2000 2002 2004
M a n u
f a c
t u r i n g v a
l u e a d d e d ( %
o f G D P )
China India
Source: World Bank, World Development Indicators (WDI)
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Figure 8 (iii): Share of Services in GDPShare of Services in GDP India and China (1990-2005)
0
10
20
30
40
50
60
1990 1992 1994 1996 1998 2000 2002 2004
S e r v i c e s v a
l u e a d d e d ( %
o f G D P )
China India
Source: World Bank, World Development Indicators (WDI)
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Figure 9: Total Trade (Goods & Services)Total Trade India and China (1980-2006)
0
200
400
600
800
1000
1200
1400
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
B i l l i o n s
Years
T o t a l T r a d e ( M e r c h a n d i s e a n d S e r v i
c e )
India Total Trade China Total Trade
Source: WTO, International Trade Statistics
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Figure 10: Trade/ GDP
Source: World Bank, World Development Indicators (WDI)
Trade as % of GDP (India and China) 1980-2005
0
10
20
30
40
50
60
70
80
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
T r a d e / G D P
China India
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Figure 11: Current Account BalanceCurrent Account Balance cur't USD India and China (1995-2005)
-20
0
20
40
60
80
100
120
140
160
180
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
B i l l i o n s
B O P C u
r r e n t U S D
China India
Source: World Bank, World Development Indicators (WDI)
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Figure 12: Current Account Balance(% of GDP)
Current Account Balance % of GDP India and China (1995-2005)
-3
-2
-1
01
2
3
4
5
6
7
8
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 C u
r r e n t A c c o u
n t B a l a n c e %
o f G D P
China IndiaSource: World Bank, World Development Indicators (WDI)
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Pie 1 (i): Share of Global Trade (Goods)
Indian Share and Rank of GlobalMerchandise
Trade (2005)
Rest of the World37%
India16th1%
Korea7th3%
Hong-Kong6th4%
EU1st18%
US2nd17%
China3rd9%
Japan4th7%
Canada5th4%
Source: WTO, International Trade Statistics
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Pie 1 (ii): Share of Global Trade (Service)Indian Share and Rank of Global Services Trade (2005)
Res t of the World36%
Korea7th3%
India6th3%
Canada5th3%
China4th4%
Japan3rd7%
US
2nd18%
EU1st26%
Source: WTO, International Trade Statistics
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Figure 13: Exports of Goods and ServiceManufacturing and Services Exports India (1995-2006)
0
10
20
30
40
50
60
70
80
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
B i l l i o n s
V a l u
e U S D o f E x p
o r t s ( M a n u
f a c t u r i n g a n d S e r v i c e s )
Manufacturing exports Services exports
Source: WTO, International Trade Statistics
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Figure 14: Growth in IT Services/ GDPTelecommunications Revenue in % of GDP India (1990-2005)
0
0.5
1
1.5
2
2.5
1990 1992 1994 1996 1998 2000 2002 2004
T e l e c o m m
u n i c a t i o n s r e v e
n u e
( % G
D P )
Source: World Bank, World Development Indicators (WDI)
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Figure 15: Inward FDI Flows
Inward FDI Flows India and China (1980-2005)
0
10000
20000
30000
40000
50000
60000
70000
80000
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
I n w
a r d F D I F l o w
s ( m l n U S D )
Inward FDI Flows India Inward FDI Flows China
Source: UNCTAD, FDI Key Data
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Pie 2: Share of Global Inward FDI Stock
Indian share of Global Inward FDI Stock (2005)
Hong Kong5%
Japan1%
China3%
US16%
EU45%
India0.45%
Rest of the World30%
Source: UNCTAD, FDI Key Data
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Figure 16: Outward FDI FlowsOutward FDI Flows India (2000-2005)
0
500
1000
1500
2000
2500
2000 2001 2002 2003 2004 2005
O u t w a r d F D I F l o w
s m l n U S D
Outw ard FDI Flows India
Source: UNCTAD, FDI Key Data
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Figure 17: Stock Market CapitalisationStock Market Capitalisation India and China (1990-2005)
0
500
1000
1500
2000
2500
3000
1990 1992 1994 1996 1998 2000 2002 2004 M a r k e t C a p o f l i s t e d c o m p a n i e s ( b i l l i o n c u r r e n t U S D )
China India
Source: World Bank, World Development Indicators (WDI)
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Figure 18: Inward Portfolio Capital FlowInward Portfolio Capital Flow India and China (1990-2005)
-5
0
5
10
15
20
25
1990 1992 1994 1996 1998 2000 2002 2004
B i l l i o n s
P o r t o f o l i o i n v
e s t m
e n t , e q u
i t y
( D R S
, c u
r r e n t U S D )
China India
Source: World Bank, World Development Indicators (WDI)
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GLOBALISATION AND INDIA SHINING
Reform results
-- Massive changes: opening to the world,transformed business landscape, ITpowerhouse, emerging world-class firms
-- But lopsided growth: benefits urban middleclasses but not the vast majority of the poor unlike China
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GLOBALISATION AND INDIA SHINING
Reform gaps
-- Unreformed agriculture
-- Lack of labour-intensive manufacturing and throttledlabour markets-- Overregulated, underperforming services sectors-- Remaining trade and FDI barriers-- Remaining capital controls-- The unreformed Indian state
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Table 1: Ease of Doing BusinessTable 1: World ranking in ease of doing business 2006*
Country/Economy
Ease ofDoing
Business
Startinga
Business
Dealingwith
Licenses
Employing
Workers
Registering
Property
Getting
Credit
Protecting
Investors
Paying
Taxes
TradingAcrossBorders
EnforcingContracts
Closinga
Business
Singapore 1 11 8 3 12 7 2 8 4 23 2
Hong Kong 5 5 64 16 60 2 3 5 1 10 14
Japan 11 18 2 36 39 13 12 98 19 5 1
Thailand 18 28 3 46 18 33 33 57 103 44 38
Korea 23 116 28 110 67 21 60 48 28 17 11
Malaysia 25 71 137 38 66 3 4 49 46 81 51
Taiwan 47 94 148 154 24 48 60 78 42 62 4
Pakistan 74 54 89 126 68 65 19 140 98 163 46
Bangladesh 88 68 67 75 167 48 15 72 134 174 93
Sri Lanka 89 44 71 98 125 101 60 157 99 90 59
China 93 128 153 78 21 101 83 168 38 63 75Vietnam 104 97 25 104 34 83 170 120 75 94 116
Philippines 126 108 113 118 98 101 151 106 63 59 147
India 134 88 155 112 110 65 33 158 139 173 133
Indonesia 135 161 131 140 120 83 60 133 60 145 136
*The numbers correspond to each countrys aggregate ranking on the ease of doing business and on each of the ten topics that comprise the overall ranking.
Source: The World Bank Doing Business Database
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Table 2: Trading Across the BorderIndicators for Trading Across Borders (2006)*
Country/Economy
Ease of TradingAcross Borders
(World Rankings)
Documents forexport (number)
Time forexport(days)
Cost to export(US$ per
container)
Documents forimport (number)
Time forimport(days)
Cost to import(US$ per
container)
Hong Kong 1 2 5 425 2 5 425
Singapore 4 5 6 382 6 3 333
Japan 19 5 11 789 7 11 847
Korea 28 5 12 780 8 12 1.04
China 38 6 18 335 12 22 375
Taiwan 42 8 14 747 8 14 747
Malaysia 46 6 20 481 12 22 428
Indonesia 60 7 25 546 10 30 675
Philippines 63 6 18 1.336 7 20 1.336
Vietnam 75 6 35 701 9 36 887
Pakistan 98 8 24 996 12 19 1.005Sri Lanka 99 8 25 797 13 27 789
Thailand 103 9 24 848 12 22 1.042
Bangladesh 134 7 35 902 16 57 1.287
India 139 10 27 864 15 41 1.244
Source: The World Bank Doing Business Database
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Table 3: Governance Indicators
Percentile world rank of governance indictors for Asian countries 2005*Voice andAccountability
Political Stability/ NoViolence
GovernmentEffectiveness
RegulatoryQuality
Rule ofLaw
Control ofCorruption
Singapore 38.2 84.0 99.5 99.5 95.7 99.0
Hong Kong 52.2 89.6 92.8 100.0 91.3 92.1
Japan 74.9 80.2 84.7 85.6 89.4 85.2
Malaysia 34.3 62.3 80.4 66.8 66.2 64.5
Taiwan 69.1 64.2 83.7 79.7 78.7 70.9
Korea 68.1 60.8 78.9 71.8 72.5 69
India 55.6 22.2 51.7 41.1 56 46.8
Thailand 49.3 29.2 66 63.9 56.5 51.2
China 6.3 75.9 52.2 44.6 40.6 30.5
Vietnam 7.7 59 45 25.7 42 26.6
Indonesia 40.6 9 37.3 36.6 20.3 21.2Sri Lanka 39.6 10.8 40.7 50 54.1 47.3
Philippines 47.8 17.5 55.5 52 38.6 37.4
Bangladesh 31.4 6.6 21.1 14.9 19.8 7.9
Pakistan 12.6 5.7 34 27.7 24.2 15.8
Source: The World Bank Doing Business Database
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GLOBALISATION AND INDIA SHINING
Politics
-- The most difficult country to govern: vast, hugelydiverse, split so many different ways
-- Messy democratic politics: multi-party coalitions at thecentre; kaleidoscope of musical-chair politics in thestates
-- But advantages (compared with China): unity andstability; checks and balances; British-endowed liberalinstitutions; the English language; political and civicfreedoms
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GLOBALISATION AND INDIA SHINING
Focus (1)
-- The states in a federal system
-- Growth engines in the south and west (with outliers)-- Policy reforms and business transformation: e.g. TamilNadu, Karnataka, Andhra Pradesh, Maharashtra,Gujarat, Punjab, Haryana
-- Key sectors, NRIs and FDI-- Transformation of India: a bottom-up, not a top-down
story
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GLOBALISATION AND INDIA SHINING
Focus (2)
-- Indias expanding demand for higher (andlower) education: insufficient, low-qualitysupply; foreign investment prospects;reform hurdles
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GLOBALISATION AND INDIA SHINING
Prospects
-- The big picture: the new Asian Drama
-- Asias transformation of the world economy: much morecompetition; gains for the West and the Rest; but moredifficult adaptation required; wider inequalities; the
middle-class squeeze; the middle-income trap
-- Role of India in the new Asian Drama
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Figure 19: Share of Global GDP (i)Asia: Share of global GDP
0
10
20
30
40
50
60
70
80
90
1820 1870 1913 1950 1973 1998 2001 2030
Year
P e r c e n t
Asia Rest of the w orld
Source: Agnus Maddison
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Figure 19: Share of Global GDP (ii)Japan, China, India: Share of global GDP
0
5
10
15
20
25
30
35
1820 1870 1913 1950 1973 1998 2001 2030
Year
P e r c e n t
Japan China India Other Asia
Source: Agnus Maddison
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GLOBALISATION AND INDIA SHINING
Prospects (cont.)
-- Lou Dobbs is wrong: stupid economics; bad business
logic; noxious politics
-- Lessons for policy: contain protectionism; constructiveeconomic engagement; strategic foreign-policy
partnership