1. INDIA’S FUTURE Or prosperity will spread in India but happiness will not, until we fix governance by Gurcharan Das November 12, 2009 WIPRO Marbella

3. Where are we today?

4. Where are we going in the future?

5. Even though the world hasjust discovered it, the Indiagrowth story is not new It has been going on for 25 years

6. What is the India story?

7. 28 years of high growth Average annual GDP growth (%) 10 8.9 8 6.0 6 3.5 4 1.0 2 0 1900-1950 1950-1980 1980-2002 2002-2007

8. Population growth is slowing (%) 2.5 2.2 2.1 2.0 1.8 1.5 1.5 1.0 1.0 0.5 0 1901-1950 1951-1980 1981-1990 1991-2000 2001-2010 Sources: 1900-1990: Angus Maddison (1995), Monitoring the World Economy, 1990-2000:Census of India (2001)

9. Literacy is rising (%) 100 80 80 65 52 60 40 17 20 0 1950 1990 2000 2010 (proj) Source: Census of India (2001)

10. When middle class is 50% then the politics will also change (m) 0 32% 22% 8% 400 368 300 200 220 100 65 1980 2000 2010 Source: The Consuming Class, National Council of Applied Economic Research, 2002

11. Poverty is declining (%) 50 1% of the people have been crossing poverty line each year for 25 years Equals ~ 200m 46 40 30 26 20 16 10 0 1980 2000 2010

12. Per capita income gains 1,178 1980 2005 3,051 US$ ppp Source: World Bank

13. India is now the 4th largest economy It will overtake Japan between 2012 and 2014 to become the 3rd largest

14. The India model is unique

15. Drivers of growth India Domestic East and S.E. Asia Exports

16. Drivers of growth India Domestic Services East and S.E. Asia Exports Manufacturing

17. Drivers of growth India Domestic Services Consumption East and S.E. Asia Exports Manufacturing Investment

18. Drivers of growth India Domestic Services Consumption High tech, capital intensive industry East and S.E. Asia Exports Manufacturing Investment Low tech, labour intensive industry

19. Implications of India model ‘Domestically led’ means: Insulation from global downturns Less volatility We will come out of the global crisis faster

21. How do we take people from farms to cities?

23. Reasons for success India’s success is market-led whereas China’s is state induced The entrepreneur is at thecentre of the Indian model

24. Rise of globally competitive Indian companies

25. India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn

26. India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn 1,000 Indian Companies have received foreign institutional investment

27. India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn 1,000 Indian Companies have received foreign institutional investment 125 Fortune 500 companies have R&D bases in India

28. India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn 1,000 Indian 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

29. India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn 1,000 Indian 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)

30. India has a vibrant private space 100 Indian Companies have market cap of US$ 1bn 1,000 Indian 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)

31. Public space is a problem We have Dynamic democracy with honest elections Free, lively media and press But we also have Poor governance!

34. Land titles

36. The economy grows at night when the government is asleep

38. Key reforms Opened economy to trade and investment Dismantled controls Lowered tariffs Dropped tax rates Broke public sector monopolies

41. Understanding India’s economic success Mental revolution among the young ‘I want to be Bilgay’ Raju’s secret of success Banianisation of society 180 TV channels; 65 news channels The rise of Hinglish

43. Pain has been less than in China

44. Competitive companies have recovered faster.

45. Risk of protectionism has receded

47. Per capita income On a ppp basis ($000) 40 30 20 10 0 2000 2005 2020 2040 2066 37,000 16,800 5,800 3,050 2,100

48. Convergence in the 21st century Why convergence is intuitive? Convergence didn’t happen in the 20th century because the world was closed Returning to a world of equality prior to 1750 When China and India accounted for 45% of world GDP

49. 50% 50% India will gradually turn middle-class West of theKanpur-Chennai line East of theKanpur-Chennai line Kanpur- 32% 22% Chennai 8% 1980 2000 2010 2020 2040

51. GovernanceNone of these stopped the show in the past 25 years - Nuclear War?

52. Education System Is reasonably good for the top 20% But it is abysmal for the rest 1 in 4 teachers is absent in government primary schools Hence, 54% of children in urban India are in private schools Solution: Education Vouchers

53. Caste system Origin of India’s caste system Classical four castes vs 3000 jatis Hostage to competitive politics Source of competitive advantage Affirmative action

54. Role of Religion India’s pluralism, diversity and tolerance 1% 2% 12% 85% Hindu Muslim Sikh Christian Hinduism Spiritual entrepreneurialism: Gurus No hierarchy: Every Brahmin thinks he is the Pope 300 million gods: Lack of theological narcissism Nasadiya Temper

56. It is slower than China but its path is surer

57. However, an elephant at 8% growth is a formidable beast

58. We have waited 3000 years for this moment