October 4, 2011
43rd Annual Corporation Education Day
Wartburg College
Understanding the Potential Impact of India’s
Economic, Political and Cultural Environment
Surekha Rao
President, Indiana Academy of the Social Sciences
Indiana University Northwest, Gary, IN
10/4/2011
Corporation Education Day Keynote Address
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In Mark Twain’s words (1910)
• India is, the cradle of the
human race, the birthplace
of human speech, the
mother of history, the
grandmother of legend, and
the great grand mother of
tradition.
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India in 2011
• India is a multi-lingual, multi-religion, multicultural country
• One of the fastest growing economies in the
world
• Home to 1.21 billion people (17% of the
world)
• Continues its tradition of secularism and
democracy
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Five main parts of my talk
Cultural Heritage of India and Modern India
Indian Economy and its global implications
Business Climate of India
India’s Domestic Political Environment
Indo-US relations and why India matters
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Cultural Heritage: India, an old country
but a young nation
Indus Valley Civilization 3000 BC:
5000 years old
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Soap Stone Seals used in Trade
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The Aryans and the Vedas
1500 BC-800 BC: Vedas and
Upanishads
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800-400 BC
Ramayana and Mahabharata
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Foreign Invasions
• Arabs, Afghans, Mongols since 11th century
• Europeans arrived in 1498 followed by the
Dutch, the French, and the British.
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Modern India
• India got independence from the British rule
August 15, 1947: a young nation of 64 years!
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Architects of Independent India
• Mahatma Gandhi
• Jawaharlal Nehru
• Economic policies promoted self–reliance and were inward
looking
• Average growth rate 1950-1990 was 3.5%
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1991: India Changes Course
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India now: a Fast Growing Economy
India’s GDP 2010= $1.53tr
World Rank 12 US Rank 1
Share of the World GDP= 2%
• GDP Growth rate 2004-2009: 9%
2009-11: 7.9%
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IMF ‘s GDP growth outlook for India & US
September 2011
10/4/2011
Year
India
United States
2009
6.771
-3.486
2010
10.094
3.03
2011
7.839
1.527
2012
7.533
1.782
2013
8.102
2.538
2014
8.148
3.077
2015
8.128
3.425
2016
8.14
3.394
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GDP (Purchasing Power Parity)
Measure of growth based on what
the currency can buy and not the
exchange rate
• GDP( PPP) = $4.3tr
• World Rank 4
(after US, China and Japan )
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India’s growth trajectory (2001)
Jim O’ Neill, Goldman Sachs
Rank 2050
Country
2050
2040
2030
1
China
70,710
45,022
25,610
2
United States
38,514
29,823
22,817
3
India
37,668
16,510
6,683
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GDP(PPP) Growth Trajectory (2009)
(Citi financial services report)
• India will overtake Japan by 2015 to become
the third largest economy
• India would surpass the US — currently the
world’s largest economy — to become the
second largest by 2040, next only to China.
• By 2050, Indian economy is expected to be
nearly $85.97 trillion on PPP basis and
become the largest economy ( overtake
China).
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Other Economic Indicators
Unemployment rate
= 6.6%
Public Debt as % of GDP = 56%
Foreign exchange reserves= $284 b
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Transport and Communication
Indian farmer with a cell phone!
Growth of cell phone sector
• Number of mobile phone
users= 670 millions
Demand for New
Telephones/month= 5 million
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India: Not an Agricultural Economy
anymore!
Composition of GDP
Services = 65.0 %
Industry = 20.1 %
Agriculture= 14.9%
14.9
Services
—
Industry
—
20.1
Agriculture
—
65
(data from Reserve Bank of India)
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IT: The New Temples of India
• BPO call center WIPRO
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INFOSYS
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Major Business Centers in India : located all
over the country
Patna
Ludhiana
Gurgaon
New Delhi
Noida
Guwahati
Jaipur
Ahmedabad
Gujarat
Kolkata
Indore
Ranchi
Mumbai
Bhubaneshwar
Bengaluru
Kerala
Hyderabad
Kochi
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Chennai
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Business climate: Advantage India
• Huge untapped market potential
• Business friendly government policies: tax
incentives, currency convertibility
• Low cost competitiveness : $33.53 vs.$1.17
• Large English speaking and skilled manpower
• Strong macro economic fundamentals
• Political stability
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India Calling
India’s thriving middle class
• By 2025 number of middle
class to reach 583 million
• India is currently the 12th
largest market
• By 2025 it will be Fifth
largest behind the United
States, Japan, China, and
the United Kingdom.
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Growth of HH Incomes
over 5%
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Industries most in need of growth
•
•
•
•
•
•
Food and Beverage
Alcoholic Beverages
Apparel
Housing and
Utilities
Infrastructure
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Urbanization : New Engine of Growth
• By 2030:
68 cities over 1 million population (42
today)
70% of the Jobs; 70% of the GDP from the
urban centers
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India’s infrastructure needs
• By 2030
–700-900 million square meters of
commercial and residential space (a
new Chicago every year)
–2.5 billion square meters of roads
7,400 km of metros and subways
–$1.2 trillions investment needed
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Business Friendly Government Policies:
Taxes
Domestic
International
• Highest marginal
Income tax rate=
30%(down from 95%)
INDIA - US TAX TREATY
Tax rate for US companies
15% 1
• Dividends
• Interest Income: 15% 2
20% 2
• Royalties
• Technical Services 20% 2
• Other income 55%
• Customs and Tariffs=
10% (down from 150%)
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Indo-US Trade: India’s Exports
 Total Exports to the
US 2010 = $ 29.5b
 13% of India’s
exports
 US Rank 2 (UAE is
Rank One)
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• Export Items
•
•
•
•
•
•
Gems and jewelry
Petroleum
Transport equipment
Drugs
Pharmaceuticals
Machinery
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Indo-US trade: India’s Imports
 Total Imports from
US= $19.2 billions
• 7% of India’s imports
• Rank second largest
after China
10/4/2011
• Precious stones &
metals
• Machinery
• Electrical machinery
• Aircraft, spacecraft
• Optical instruments &
equipment
• Mineral fuel, Oil, etc.
• Fertilizers
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Government Policies: Liberalization of
Foreign Exchange Rules
1. Rupee is freely convertible on current account.
2. Rupee is almost fully convertible
on capital account for Foreign
Institutional Investors.
1. For FDI- Profits earned, dividends and proceeds out
of the sale of investments can be fully repatriated.
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What is your Dollar worth in Indian
Rupees?
$ U.S. ≈ Rs. 49.42
In real terms:
US Big Mac can buy a little more than
2 Maharaja Macs ( India’s Big Mac)
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India’s Political Climate
• Secularism and Democracy can be traced
through the ancient cultural times: SEN
• Parliamentary Democracy ( British style):
Prime Minister Dr. Manmohan Singh is the
Executive Head
• Federal Republic: States have less autonomy
• Politically Stable ; Peaceful transition of power
• Corruption: Hot issue
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Indo-US relations
• The two countries have shared values of
secularism and Democracy
• US- India cooperation in Defense, Space and
Technology
• All three US Presidents since 2000 have visited
India and the last Two Indian Prime Ministers
have visited US to expand trade and friendship
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India and geopolitics
Does India matter to the US?
Yes: It is one of the largest and fastest growing
economies; member of G-20
Yes: because it is the largest democracy in the
world and a peaceful country
Yes: To maintain balance of power in Asia: to
contain China
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Challenges facing India
1.
2.
3.
4.
5.
6.
Lack of proper Infrastructure
Persistent High inflation( double digit)
Rampant corruption
High levels of (female) illiteracy
Poverty: 400 millions ($0.64/day)
Inadequate Public Health System
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Some Useful Resources
1. Embassy of India
http://www.indianembassy.org/doing-business-inindia.php; http://www.india.gov.in/
2. World Bank Reports
Http://www.doingbusiness.org/reports
3.Mckinsey Global Institute
http://www.mckinsey.com/mgi/publications/india_
urbanization/index.asp
4. National Portal of India
http://www.india.gov.in/
5. The Argumentative Indian: Amartaya Sen
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Rabindranath Tagore
Poet laureate in literature in 1913
(1861- 1941)
"Oneness amongst
men, the advancement
of unity in diversity –
this has been the core
religion of India”.
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To Wartburg Community
Thank you
You can always reach me at
skrao@iun.edu
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NAMASTE
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