Indian economy overstated

IIPM TOWER,893/4,BHANDARKAR ROAD,DECCAN GYMKHANA,PUNE-411004,PH:020-66420401/2 FAX 020-66420422

PRSENTED BY : ADITYA BANDHOKAR, ARNOLD FERNANDES, KULDEEP SONI, ROBIN ANTONY, VRUSHABH PATIL

IIPMites presents,

1.Economic Goals

2.Economic Statistics

3.Sectors of Indian Economy

• Services

• Industry

• Agriculture

4.Is India really Shining?

5.Recommendations

CONTENT

Is India really Shining?

•Agriculture Growth

•The poverty line

•Healthcare in India

•Education Scenario

•Water & Energy Supply

•Corruption

•Literacy Rate & Unemployment

•Other Important Comparison

•Growth in IT-ITeS Industries

•Infrastructure

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Macroeconomic goals are determined by governments as representatives of society.

Final Goals: High Growth, Smooth Growth, Low Unemployment, and Low Inflation

Macroeconomic Goals3

Economic Statistics (as on March2010)

GDP $1.242 trillion (2009)(Nominal; 12th)$3.528 trillion (2009) (PPP; 4th)

GDP growth 7.2% (2009/2010) GDP per capita income

at current price $827 Inflation (CPI) 8.41% (2010) Population

below poverty line 22% (2008) Labour force 467 million (2009 est.) (2nd) Unemployment 9.5% (2009 est.) Main industries

Telecommunications, Textiles, Chemicals, Food processing, Steel, Transportation equipment, Cement, Mining, Petroleum, I.T.

FDI stock $156.30 billion (31 Dec09 est.) Foreign Exchange Reserves $278.4Bn.(as on 05.03.10)

Main data source: CIA World Fact Book/ www. statisticsofindia.com

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Economic Statistics (over the years)

Source:Econ0mic Survey 09-10

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Statistics Exports $155 billion f.o.b (2009 est.)

Export goods

software,

petroleum products,

textile goods,

gems and jewelry,

engineering goods,

chemicals,

leather manufactures

Imports $232.3 billion f.o.b (2009 est.)

Import goods

crude oil,

machinery,

gems,

fertilizer,

chemicals

Main data source: CIA World Fact Book

Economic Statistics (Export/ Import)

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Economic Statistics (Export/ Import)


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Sectors of the Indian Economy

GDP contribution sector wise

Source:Econ0mic Survey 09-10 /Central statistical organization

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Source: Central statistical organization

India: Economic Growth(Annual Growth rate,in%)

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Economic Growth (In Decades)

Source: District Domestic Product of India, 2009-10, Indicus Analytics.

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Is India Really Shining?Is India Really Shining?

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•AGRICULTURE IS STILL THE BIGGEST EMPLOYER IN INDIA, WITH 54% OF THE POPULATION ENGAGED IN FARMING.

•43 % OF ALL INDIAN LAND IS USED IN AGRICULTURE, BUT IT ONLY CONTRIBUTES 18% OF THE NATION’S GDP

•MANY FARMERS ARE SUBSISTENCE FARMERS. ACCORDING TO THE WHO, 61% OF ALL FARMERS CULTIVATE LESS THAN 0.4 HECTARES – ONLY ENOUGH TO FEED THEIR OWN FAMILY, WITH LITTLE LEFT OVER TO SELL.

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Share of agriculture in India’s GDP down from 50% to below 20% over the last four decades; but share of population dependent on agriculture hardly down from over 70% to around 55%

Indian agriculture still dependent on faith of “Indra” – 60% of cropped area in India not irrigated

Water management – one of the biggest problem areas of Indian economy

Services and Industry Zoom, but Agriculture…..

Source:India stats.com.

1951-51 2007-08

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105 105 135 145 176103 125

204 231270

561

191237

398453

0

200

400

600

800

1,000

1,200

1999-00 2002-03 2005-06 2006-07 2007-08

US

D B

illio

n

Agriculture Industry Services

Growth of Services & Industry is high, but Agriculture…

Source:India stats.com.

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009-10 2019-20

Year 2010 2020*Agriculture, Forestry & Fishing 16.1% 9.0%Mining & Quarrying 1.8% 1.3%Manufacturing 15.1% 13.5%Electricity, Gas & Water Supply 1.9% 1.2%Construction 7.3% 8.9%Trade, Hotels & Restaurant 16.1% 15.9%Transport, Storage & Communication 14.1% 25.2%

Financing, Insurance, Real Estate & Business Services 15.0% 15.8%

Community, Social & Personal Services 12.5% 9.2%

Gross Domestic Product At Factor Cost 100.0% 100.0%

Projection of 2020

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009-10 2019-20

Community,Social & Personal Services

Financing,Insurance,Real Estate & BusinessServices

Transport,Storage & Communication

Trade, Hotels & Restaurant

Construction

Electricity, Gas & Water Supply

Manufacturing

Mining & Quarrying

Agriculture,Forestry & Fishing

•Agriculture will become a far smaller part of the economy, and will finally account for less than 10% of the Indian economy. •The utilities (electricity, gas and water supply) will grow but not that much; the momentum has just not been generated yet.

• This growing economy will become thirstier for food, energy and water.

•This will continue to constrain manufacturing growth.

Source: District Domestic Product of India, 2009-10, Indicus Analytics.

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Source: Ministry of Statistics and Program Implementation, Government of India.

The Government of India says that 22% of India’s population is below

the poverty line.*

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Poverty and Inequality• 345 Million Indians live under the poverty line.

This means that one in three Indians live on less than twenty rupees per day.

• 7.2% of all Indians are unemployed – India comes in at 94th in terms of employment.

• Using the GINI coefficient – which is the only reliable method of calculating inequality India scores 0.368 were 0 is perfect equality and 1 is perfect inequality, putting India in the bottom 50 of all ranked nations in the world.

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Some more fact are…

49% of India does not have proper shelter. (National Sample Survey on Housing, 2006, NSSO)

43% of Indian villages do not have an all-weather road connecting them.

57% of India does not have access to electricity. (World Development Indicators 2008, World Bank)

80% of India does not have access to public health facilities. (Minister for Health and Family Welfare,2007)

47% of Indian children under the age of 5 years are undernourished. (Human Development Report 2008)

70% of India does not have access to a suitable toilet. (National Sample Survey on Housing, 2008, NSSO)

38% of India does not have access to a nearby water source. (National Family Health Survey, 2005-06,)

71% of the children in 15-19 age group have not completed a secondary education. (National Sample Survey on Education, 1999-00, NSSO)

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Economic Development : Urbanized


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Below Poverty Line

Source: Reserve bank of India 2008-09

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Education

Our literacy rate is 61% making us the 145th in the World, just above war-torn Sudan and just below genocidal Rwanda.

Literacy is defined as “The ability to sign one’s name” so complete literacy is likely to be even less.

Guns are more important than books: 2.9% of GDP is spend on defense compared to 2.6% on education. Is it guns or education that will really make India shine?

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•India consumes 3.4% of global energy.

•The Indian power demand is growing at a rapid pace.

•The Annual demand is increasing by 3.6% over the last 30 years.

•Capacity for power generation in India is 1,49,391.91 MW.

•Thus the per capita consumption of electricity is the lowest in India.

•Power sector faces roadblocks like inefficient distribution systems, Due to Low capacity utilization and poor maintenance.

Industry & Agriculture are the two main sectors that consume power.

By 2012, India will need another 60 to 70 GW of power, the demand would be 950,000 MW by 2030

For the Indian economy to grow at 9% annually, additional capacity of 60 GW must be added every five years. This requires approx. US$100 billion in investment every five years.

Energy Consumption

Source: India-Reports

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Water Scenario in India

Average water consumption around the world is about 53 liters per head per day.

In India, we have only about 20 liters available per head per day. India can store only small quantities of its rainfall. Whereas rich countries (such as the U.S. & Australia) have built

over 5,000 cubic meters of water storage per capita. China can store about 1,000 cubic meters per capita, India’s dams can store only 200 cubic meters per person. Moreover, India can store only about 30 days of rainfall, compared

to 900 days in major river basins in areas of developed countries.

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Health care

Healthcare: Our Fundamental Right

•Our life expectancy is 69.8 years, making our life expectancy the 139nth out of 172 countries.

•A growing threat: 5.7 million Indians have AIDS or HIV out of which 40 % are women

•We have only one hospital bed for every 74 patients.

•We have only one doctor for every 1,230 people.

•Despite these statistics, the Indian Government still spends more on defense than it does on health.

Source: indiahealthstat.com/indexmundi.com

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Corruption

•Large Bureaucratic structure –a ground for corruption

•Difficult to manage overlapping government agencies and paper work-system very complex

•Foreign investment perceived as slow, difficult way of doing business in such bureaucratic structure

•Foreign investment done at the cost of delaying projects

•Corruption at every stage , this together with other reason added to less likeliness of FDI inflowsSource:Econ0mic Survey 09-10

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BRIC: Unemployment

Source: CIA world fact book

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BRIC: Below Poverty Line


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BRIC: Literacy Rate


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Other Important Comparison:

Categories Brazil Russia India China

Population 5th 9th 2nd 1st

Labour force 5th 6th 2nd 1st

GDP (nominal) 10th 8th 12th 3rd

Exports 21st 11th 23rd 1st

Imports 27th 17th 16th 2nd

Current account balance 47th 5th 169th 1st

Received FDI 11th 12th 29th 5th

Foreign exchange reserves

7th 3rd 5th 1st


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Software & Service Export

Source : RBI & NASSCOM.

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Item 2006-07 2007-08 2008-09

IT Software & Service Employment (million)

1.62 2.01 2.20

ITeS Revenue from the Domestic Market (US $ billion)

8.2 11.7 12.4

Total Software & Service Exports (US $ billion)

31.1 40.4 46.3

IT-IT-enabledServices Revenue(including Hardware)

47.8 64.1 70.5

Current Scenario IT-ITeS Industries

Source : Department of Information Technology (DIT)

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Infrastructure

Infrastructure

(as of 2009)

Road length(in thousand) km2,483

Railway Route(in thousand km64

Cargo Handled At Major Ports

Mn.Tonnes 400.00

Electricity installed capacity(in thousand) MW138

Telephone connectionsMn lines126.00

Source :Euro monitor

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Recommendations

Need for creation of large scale skill development opportunities and infrastructure

To meet the demand of skilled work force by the industry and service sector To keep the economy growing, To facilitate employability of the rapidly growing work force

Integration of vocational education at the school level To impart the basic technical skills Special reorientation for the school drop-outs

Skill Mapping To identify precise skill requirement for the growth of industry-ready manpower

Implication of more SME’s It will lead to development to rural areas

Which decrease in Poverty line, unemployment

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• Flexibility• Academics should be more flexible and inter-disciplinary.

• Private Sector Participation (PPP model)• Participation of private sector to be encouraged.

• Rules & regulations can be appropriately framed by the Government for regulation.

• Connectivity of roads in rural areas• Would help farmers there yield to transfer faster.

• Integration of better customer service by Indian companies.

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Thank you

We are grateful for every person who has been a part of this presentation knowingly or otherwise.

For the development of the Presentation, We thank the guidance of

Prof. Aashish Suri (IIPM,Pune)

Prof. Kalamkar( Ghokhale Institute,Pune)

Prof. M/s Kalyani (IMDR,Pune)

Prof. Bhandari (IMERT,Pune)

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Indian economy overstated

Economy & Finance

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