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Indian Council for Research on International Economic Relations 1 Indian Economy: Has It Taken Off ? Indian Economy: Has It Taken Off ? 26 June 2006 26 June 2006 Rajiv Kumar Rajiv Kumar Brussels Brussels
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Page 1: Indian Economy: Has It Taken Offbruegel.org/wp-content/uploads/imported/events/EN_Kumar... · Electricity, Coal, Steel, Cement, Petroleum Crude & Petroleum Refinery. Indian Council

Indian Council for Research on International Economic Relations 1

Indian Economy: Has It Taken Off ?Indian Economy: Has It Taken Off ?

26 June 200626 June 2006Rajiv KumarRajiv Kumar

Brussels Brussels

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Indian Council for Research on International Economic Relations 2

Annual Growth of GDP (%)

4.4

5.8

3.8

8.5

7.5

8.4

0

1

2

3

4

5

6

7

8

9

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06

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Indian Council for Research on International Economic Relations 3

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Indian Council for Research on International Economic Relations 4

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Indian Council for Research on International Economic Relations 5

Sector’s Share in GDP

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Indian Council for Research on International Economic Relations 6

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Indian Council for Research on International Economic Relations 7

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Indian Council for Research on International Economic Relations 8

Basic

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Indian Council for Research on International Economic Relations 9

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Indian Council for Research on International Economic Relations 10

All

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Indian Council for Research on International Economic Relations 11

FRBM Fiscal Target below 3 %

FRBM Revenue Target 0 %

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Indian Council for Research on International Economic Relations 12

Deficits of Central & State Governments

0

2

4

6

8

10

12

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

% to

GD

P

Gross fiscal deficit Gross primary deficit Revenue deficit

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Indian Council for Research on International Economic Relations 13

29.1

Share of Gross Domestic Saving to GDP

20

21

22

23

24

25

26

27

28

29

30

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

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Indian Council for Research on International Economic Relations 14

30.1

Share of Gross Domestic Capital Formation to GDP

20

22

24

26

28

30

32

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

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Indian Council for Research on International Economic Relations 15

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Indian Council for Research on International Economic Relations 16

Market Capitalization % to GDP (2005)

0

20

40

60

80

100

120

140

160

180

200

China India South Korea Taiwan Thailand Philippines

Source: Bloomberg

107

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Indian Council for Research on International Economic Relations 17

Annual Growth of Merchandise Trade

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Indian Council for Research on International Economic Relations 18

32%

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Indian Council for Research on International Economic Relations 19

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Indian Council for Research on International Economic Relations 20

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Indian Council for Research on International Economic Relations 21

Forecast of oil price inflation on the Asia economy

Study by “Oxford Economic Forecasting Ltd’s”

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Indian Council for Research on International Economic Relations 22

Macro Impact of the Oil Price HikeMacro Impact of the Oil Price Hike

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Indian Council for Research on International Economic Relations 23

Imports of Oil & Remittance

0

5

10

15

20

25

30

35

40

1990-911991-921992-931993-941994-951995-961996-971997-981998-991999-002000-012001-022002-032003-042004-05 2005-06

Billi

on U

S $

Oil Imports Remittance Note: Remittance 2005-06 projected

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Indian Council for Research on International Economic Relations 24

Balance of Payments in Current Account ( % to GDP )

-7

-5

-3

-1

1

3

5

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

20022003-042004-052005-06

%

Merchandise Invisbles Current

Note: 2005-06 BOP are projected

5.1

-7.6

-2.5

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Indian Council for Research on International Economic Relations 25

12 %

17 %

18 %

Share of Exports + Imports + Invisibles % to GDP

05

101520253035404550

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

Exports Imports invisbles

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Indian Council for Research on International Economic Relations 26

Note: Rupee per 100 Yen

Nominal Bilateral Exchange Rate

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Indian Council for Research on International Economic Relations 27

U.S.A, Japan ,U.K, Germany and France

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Strong Fundamentals

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Decadel Growth rate of GDP

3.73.3 3.4

5.4

6.2 6.4

0

1

2

3

4

5

6

7

1950-59 1960-69 1970-79 1980-89 1990-99 2000-06

%

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Indian Council for Research on International Economic Relations 37

Deepening Democracy

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Indian Council for Research on International Economic Relations 38

Profit Margin (%) of FDI Companies

13.714.0

10

10.5

11

11.5

12

12.5

13

13.5

14

14.5

All Companies

2002-03 2003-04

Higher Return

Source: RBI

India has emerged as the top foreign direct investment (FDI) destination on the basis of higher returns on investment (RoI) that foreign investors earn in the country compared to the otheremerging markets like China, Brazil and Mexico,

-KPMG (2005)

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Indian Council for Research on International Economic Relations 39

FDI Confidence Index (2004)

0.50 0.70 0.90 1.10 1.30 1.50 1.70 1.90 2.10

China USA India

UnitedGermany

FranceAustralia

Hong KongItaly

JapanRussiaPolandSpain Czech

Malaysia Canada

BrazilSingapore

HungaryThailand

South Korea Mexico

Indonesia Netherland

Taiwan

India Climbed up 3 places in one year, to be the 3rd most favoured FDI destination

Source: A.T.Kearney

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Indian Council for Research on International Economic Relations 40

Source: World Bank

Strength o f Investor Protection(Higher Values Indicating Better Investment Protection)

6.0

5.3

5.0

4.3

4.0

4.5

5.0

5.5

6.0

6.5

India Brazil Russia China

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Indian Council for Research on International Economic Relations 41Source: A.T.Kearney

2Russia27Brazil5China 1India

2006 Rank

Global Retail Development Index(Emerging Markets)

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India has been ranked as the fourth most India has been ranked as the fourth most attractive investment country and the attractive investment country and the preferred location for call centre and back preferred location for call centre and back office activities.office activities.

-- Ernst and YoungErnst and Young

India is second among all nations in Total India is second among all nations in Total Entrepreneurship Activity Entrepreneurship Activity -- Global Entrepreneurship Monitor Report 2002.Global Entrepreneurship Monitor Report 2002.

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Indian Council for Research on International Economic Relations 43

Demogarphic Dividend

0

10

20

30

40

50

60

70

80

90

1940 1960 1980 2000 2020 2040 2060

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The demographic bonus

0 70

0 - 45 - 9

10 - 1415 - 1920 - 2425 - 2930 - 3435 - 3940 - 4445 - 4950 - 5455 - 5960 - 6465 - 6970 - 7475 - 79

80+

070 0 60

0 - 45 - 9

10 - 1415 - 1920 - 2425 - 2930 - 3435 - 3940 - 4445 - 4950 - 5455 - 5960 - 6465 - 6970 - 7475 - 79

80+

060

China 2020 India 2020

Note: females on the left, males on the right scale

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WeaknessWeakness

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Infrastructure constraints Infrastructure constraints Education Education Under developed Under developed labourlabour marketmarketMiss match of skill Miss match of skill GovernanceGovernance

a) Delivery of public goods a) Delivery of public goods b) Exist investment condition b) Exist investment condition

Fiscal deficit Fiscal deficit

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Electricity, Coal, Steel, Cement, Petroleum Crude & Petroleum Refinery

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