The
Political
Economy
of India
C-Change 2013,
Golden Palms,
Bangalore
Friday 22 February 2013
Paranjoy
Guha
Thakurta
Incredible
India
A country with 1.2 billion
people
Infrastructure bursting at
the seams
Population Density in Asia 2008
India’s population
• India’s population rose from 1.03 billion to 1.21
billion between 2001and 2011
• India’s population comprises 9,15,01,158 males
and 8,99,54,828 females
• India accounts for 17.5% of the planet’s
population (with less than 2.5% of total land area)
• The country’s headcount is equal to the
combined population of USA, Indonesia, Brazil,
Pakistan, Bangladesh and Japan
India’s Late surge
Comparative India and China demographic profiles
World Hunger Map
Two Indias
Literacy
•
The 2001-2011 period is the first
decade – with the exception of 19111921 – which has actually added
lesser population compared to the
previous decade.
•
Among the states and territories Uttar
Pradesh is the most populous state
with 199 Million people and
Lakshwadeep the least populated.
•
According to the data, literates
constitute 74% of the total population
aged 7 and above and illiterates form
26%
The literacy rate has gone up from
64.83% in 2001 to 74.04% in 2011,
showing an increase of 9.21%
•
Female literacy still
remains a challenge
The Global Crisis
World Economy: Reading Between the Lines
The World Economy
GDP Growth Rates by
Country/Region
2011
2012
2013
2014
(projections)
United States of America
1.8
2.3
2.0
3.0
Europe Part (Germany, France,
Italy and Spain)
1.4
-0.4
-0.2
1.0
Japan
-0.6
2.0
1.2
0.7
Russia
4.3
3.6
3.7
3.8
CIS
6.2
3.9
4.3
4.7
ASEAN + 5 (Indonesia,
Malaysia, The Philippines,
Thailand and Vietnam)
4.5
5.7
5.5
5.7
9.3
7.8
8.2
7.9
4.5
5.9
China
India
Source : World Economic Outlook – IMF, January 23, 2013
8.5
6.4
The future Silhouette
Good Prospects?
India’s GDP Growth
The Agrarian Crisis
20
00
20 200
01 1
20 200
02 2
20 200
03 3
20 200
04 4
20 200
05 5
20 200
06 6
20 200
07 7
20 200
08 8
20 200
09 9
-2
01
0
The Agrarian Crisis In India
20
15
10
Agriculture
5
0
-5
-10
Manufacturing
Trade
©P. Sainath
Indian
for Lord Indra
Crisis
in Agriculture:
Indian Waiting
Agriculture
 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 munificence of
Indra – 60% of cropped area in India not irrigated
 Water management – one of the biggest problem areas
of Indian economy
 Average size of farm in India very small, less than 1.5
hectare
Crisis in Indian Agriculture
•
Agriculture and allied sectors like forestry, logging and fishing
accounted for 15.7% of the GDP in 2009–10, employed 52.1% of the
total workforce.
• The farmers does not have enough land for themselves due to various
reasons and the lands are also getting fragmented due to the ceiling
acts and also due to family disputes.
• With a figure of at least 14,027 in 2011, according to the National Crime
Records Bureau (NCRB), the total number of farm suicides since 1995
has touched 2,70, 940.
• In 2004-05, the share of agriculture in national income is around onefifths, but this sector still continues to employ nearly three-fifths of the
workers.
• Maharashtra remains the worst single state for farm suicides for over a
decade now.
Changes in GDP structure (% share)
Sector
1980
1990
2000
Agriculture
China
India
Industry
39.2
42.8
27
31
18
28
China
India
Services
38.2
21.9
42
28
49
26
China
India
22.6
35.3
31
41
33
46
Simple average of UK Brent, Dubai and West Tecas
Intermediate (US $/barrel) Source : World Bank
World Oil Prices
Due to the poltical considerations kerosene and fertilizer prices will remain highly
subsidized, petrol prices have been linked to market rates, but government faces
stiff opposition to doing the same diesel, LPG and kerosene prices.
The Fuel Economy
• India's passenger car and commercial vehicle manufacturing industry is
the seventh largest in the world, with an annual production of more than
3.7 million units in 2010 and one of the fastest growing globally.
• According to recent reports, India is set to overtake Brazil to become the
sixth largest passenger vehicle producer in the world, growing 16-18 per
cent to sell around three million units in the course of 2011-12.
• In 2009, India emerged as Asia's fourth largest exporter of passenger cars,
behind Japan, South Korea, and Thailand.
• As of 2010, India is home to 40 million passenger vehicles. More than 3.7
million automotive vehicles were produced in India in 2010 (an increase of
33.9%), making the country the second fastest growing automobile market
in the world.
• According to the Society of Indian Automobile Manufacturers, annual
vehicle sales are projected to increase to 5 million by 2015 and more than
9 million by 2020. By 2050, the country is expected to top the world in car
volumes with approximately 611 million vehicles on the nation's roads
Mahindra Scorpio- India’s Indigenously produced SUV
The Indian IT Industry
The India IT Landscape
• The IT-BPO sector in India is estimated to
aggregate revenues of US$ 88.1 billion in
FY 2011, with the IT software and services
sector (excluding hardware) accounting for
US$ 76.1 billion of revenues.
• The share of IT-BPO industry in the total Indian exports (merchandise plus
services) increased from less than 4 per cent in FY 1998 to 26 per cent in
FY 2011.
• Software and services revenues (excluding Hardware), comprising over
86 per cent of the total industry revenues, expected to post US$ 76.1
billion in FY 2011; estimated growth of about 19.1 per cent over FY 2010.
• As a proportion of national GDP, the sector revenues have grown from 1.2
per cent in FY 1998 to an estimated 6.4 per cent in FY 2011.
• According to Gartner: PC shipments in India are expected to total 13.2
million units in 2011, a 24.7% rise from 2010.
The Challenge: Role of the IT/ITeS Sector in
Driving the India Growth Story, Further
• Challenges
– Increasing competition from other countries with incentivised
low costs
– Rising costs in India with wage-push inflation
– Increasing costs of relevant talent and skilled personnel Need to keep an
eye on developments in the economy and seriously devise a plan to
handle manpower attrition and rising salary costs
• Opportunities
– As a proportion of national GDP, IT/ITeS sector’s contribution have risen
from 1.2% in 1997-98 to an estimated 7.5% in 2011-12
– One area that provides considerable opportunities to the
IT/ITeS sector is the Small and Medium Enterprises (SME)
segment in India.
– Another area that has generated considerable interest is Cloud
Computing, (dubbed as the next big thing) which is still in its nascent
stage in India.
India’s Political Economy : History
• The development of India’s
economy was based on socialisminspired policies after
independence. It emphasized
state-ownership of various industrial
sectors and bureaucratic regulation
– often described as the “licence
control raj”
• The political economy of India has
rapidly changed with the
liberalisation of the economy in the
1900s.
• It is currently the world’s second
fastest growing economy.
Era of Coalitions
 The Indian polity will remain fragmented in the foreseeable
future – no party will be able to dominate the polity leave
alone the government
 The two largest political parties are together unable to obtain
more than half the votes – polity not becoming bi-polar, will
remain multi-polar
 Congress and BJP marginal players in Uttar Pradesh and Bihar –
the paradox of the children of the Ganga
Era of coalition politics
 Coalitions imply small parties will have more clout
at the Union and larger parties will have to become
more regional in their outlook – tail wagging the
dog syndrome
 Governments will have to strive harder to build
consensus, resolve disputes, live with ideological
contradictions and arrive at compromise solutions
 Consensus breaks down on LPG – liberalization,
privatization and globalization – not only across the
political spectrum but also within the Congress and
the BJP
 Consensus on certain areas cuts across ideological
barriers – improving the social infrastructure
(primary health-care, elementary education, rural
development) and the physical infrastructure or
the other BSP – bijli (electricity), sadak (roads),
paani (water)
Dominant players
The Congress and the BJP are
poles of the polity in only 8
out of the 28 states in India;
the two largest political
parties would be lucky to
remain where they are
States dominated by the
BJP/Congress
• Madhya Pradesh
• Delhi
• Haryana
• Gujarat
• Rajasthan
• Karnataka
• Chhattisgarh
• Uttarakhand
India’s
Mineral Map
Mining &
Forest
Belt
The red
corridor
Dichotomy
Encouraging teacher attendance through monitoring with cameras in
rural Udaipur, India
• Difficult to predict politics in India; fragmentation of the
polity may continue after the 16th
• Youngest nation-state in the world and will remain one of
the fastest growing economies
• Would become third largest economy in the world well
before the middle of the twentieth century
• Democratic institutions to mature – hopefully corruption
and electoral malpractices would come down with a more
vigilant media and a more active judiciary
Thank You
Paranjoy Guha Thakurta
paranjoy@gmail.com
Night view of Asia