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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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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Sector’s Share in GDP
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Basic
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All
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FRBM Fiscal Target below 3 %
FRBM Revenue Target 0 %
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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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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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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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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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Annual Growth of Merchandise Trade
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32%
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Forecast of oil price inflation on the Asia economy
Study by “Oxford Economic Forecasting Ltd’s”
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Macro Impact of the Oil Price HikeMacro Impact of the Oil Price Hike
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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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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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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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Note: Rupee per 100 Yen
Nominal Bilateral Exchange Rate
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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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Deepening Democracy
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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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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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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
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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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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