Indian Economy 21May2010

Indian EconomyIndian Economy

Presented to the Delegation fromPresented to the Delegation from

Chinese University of Hong KongChinese University of Hong Kong

May 21, 2010May 21, 2010

IndiaIndia

India - TrendsIndia - Trends

• High growth from 2003 was driven by structural High growth from 2003 was driven by structural factors.factors.

• The growth was supported by all round The growth was supported by all round improvement in productivityimprovement in productivity

• Favourable demographicsFavourable demographics• Increasing urbanisationIncreasing urbanisation• Increasing FDIIncreasing FDI• Influence on the world Economy is growingInfluence on the world Economy is growing• Multinational companies are emerging from IndiaMultinational companies are emerging from India• Stock Market has become very robustStock Market has become very robust• Many sources are available for funding projectsMany sources are available for funding projects

Indian EconomyIndian Economy

Industrial ProductionIndustrial Production

Banks PerformanceBanks Performance

Interest RatesInterest Rates

Foreign TradeForeign Trade

Forex ReservesForex Reserves

Exchange RateExchange Rate

FutureFuture

• It is possible to achieve an economic growth It is possible to achieve an economic growth of more than 10% a year .of more than 10% a year .

• There are sectors promising a growth of more There are sectors promising a growth of more than 20% a year like Financial services, than 20% a year like Financial services, Software, Telecom , Tourism, Air Software, Telecom , Tourism, Air Transportation, Logistics,etc.Transportation, Logistics,etc.

• There are sectors which can grow more than There are sectors which can grow more than 15% a year. The sectors like Construction, 15% a year. The sectors like Construction, Textiles and a few other services.Textiles and a few other services.

• The areas which can grow fast include The areas which can grow fast include Auto,Auto components, Retail and Rural Auto,Auto components, Retail and Rural development.development.

What Mckinsey saysWhat Mckinsey says• The Growth will be 7.3% from 2005 to 2025 and the size of The Growth will be 7.3% from 2005 to 2025 and the size of

the economy will grow to $ 1.76 trillion.The Growth the economy will grow to $ 1.76 trillion.The Growth between 1985 to 2005 was at 65.between 1985 to 2005 was at 65.

• Urban average household income will rise by 5.8% and all Urban average household income will rise by 5.8% and all India by 5.3%.India by 5.3%.

• Average Household income will rise from Rs.115,000 to Average Household income will rise from Rs.115,000 to Rs.320,000.Rs.320,000.

• The urbanisation rate would grow from 29% to 37%.The urbanisation rate would grow from 29% to 37%.• Consumer market will grow from $ 370 bn to $ 1.5 trillionConsumer market will grow from $ 370 bn to $ 1.5 trillion• The growth will be mainly driven by increase in income The growth will be mainly driven by increase in income

levels.levels.• Urban India will account for 2/3rds of the growthUrban India will account for 2/3rds of the growth• India will become the fifth largest consumer market by India will become the fifth largest consumer market by

2025 with a growth rate of 7.3%. Today it ranks 122025 with a growth rate of 7.3%. Today it ranks 12thth in the in the world. ( US, Japan, China and UK will be ahead of India )world. ( US, Japan, China and UK will be ahead of India )

• Food will remain the largest consumption category whereas Food will remain the largest consumption category whereas the communication would be the fastestthe communication would be the fastest

Share of WalletShare of Wallet 1985 1995 2005 2015 2025 Health Care 4 4 7 9 13 Education 2 3 5 6 9 Communication 0 1 2 3 9 Transportation 7 11 17 19 20 Personal products and services 4 4 8 9 11 Household Products 2 2 3 3 3 Housing and Utilities 15 14 12 12 10 Apparel 6 5 6 5 5 Food and Beverages 59 56 42 34 25

Possible threats to growthPossible threats to growth

• Rupee Appreciation / DepreciationRupee Appreciation / Depreciation

• Increasing oil priceIncreasing oil price

• Low level of FDILow level of FDI

• High Current Account DeficitHigh Current Account Deficit

• High InflationHigh Inflation

• Lower capacity utilisation of assetsLower capacity utilisation of assets

• Possible erosion in international Possible erosion in international competitivenesscompetitiveness

Basic strategy for growthBasic strategy for growth

• India has the competitive advantage in India has the competitive advantage in Services. Services could be main driver for Services. Services could be main driver for growth.growth.

• Export growth could be another plank for Export growth could be another plank for providing momentum.providing momentum.

• The growth in Services will generate The growth in Services will generate additional demand for Industrial goods and additional demand for Industrial goods and specific growth strategies for individual specific growth strategies for individual sectors would facilitate the process.sectors would facilitate the process.

• In Agriculture, improving the productivity in In Agriculture, improving the productivity in farm and after farm activities would result in farm and after farm activities would result in additional value added.additional value added.

Growth driversGrowth drivers

– Increasing the productivityIncreasing the productivity– E governanceE governance– More Reliable StatisticsMore Reliable Statistics– Giving more thrust to sectors growing at Giving more thrust to sectors growing at

more than 10% a yearmore than 10% a year– Encourage sectors growing at less than Encourage sectors growing at less than

10% a year.10% a year.– Electronification of TransactionsElectronification of Transactions– Leveraging the non performing assets Leveraging the non performing assets

( Gold , Land Banks, Idle Cash)( Gold , Land Banks, Idle Cash)

Thank YouThank You