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 1 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. 10/4/2011 Corporation Education Day Keynote Address 2 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 10/4/2011 Corporation Education Day Keynote Address 3 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 10/4/2011 Corporation Education Day Keynote Address 4 Cultural Heritage: India, an old country but a young nation Indus Valley Civilization 3000 BC: 5000 years old 10/4/2011 Soap Stone Seals used in Trade Corporation Education Day Keynote Address 5 The Aryans and the Vedas 1500 BC-800 BC: Vedas and Upanishads 10/4/2011 800-400 BC Ramayana and Mahabharata Corporation Education Day Keynote Address 6 Foreign Invasions • Arabs, Afghans, Mongols since 11th century • Europeans arrived in 1498 followed by the Dutch, the French, and the British. 10/4/2011 Corporation Education Day Keynote Address 7 Modern India • India got independence from the British rule August 15, 1947: a young nation of 64 years! 10/4/2011 Corporation Education Day Keynote Address 8 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% 10/4/2011 Corporation Education Day Keynote Address 9 1991: India Changes Course 10/4/2011 Corporation Education Day Keynote Address 10 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% 10/4/2011 Corporation Education Day Keynote Address 11 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 Corporation Education Day Keynote Address 12 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 ) 10/4/2011 Corporation Education Day Keynote Address 13 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 10/4/2011 Corporation Education Day Keynote Address 14 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). 10/4/2011 Corporation Education Day Keynote Address 15 Other Economic Indicators Unemployment rate = 6.6% Public Debt as % of GDP = 56% Foreign exchange reserves= $284 b 10/4/2011 Corporation Education Day Keynote Address 16 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 10/4/2011 Corporation Education Day Keynote Address 17 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) 10/4/2011 Corporation Education Day Keynote Address 18 IT: The New Temples of India • BPO call center WIPRO 10/4/2011 Corporation Education Day Keynote Address INFOSYS 19 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 10/4/2011 Chennai Corporation Education Day Keynote Address 20 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 10/4/2011 Corporation Education Day Keynote Address 21 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. 10/4/2011 Growth of HH Incomes over 5% Corporation Education Day Keynote Address 22 Industries most in need of growth • • • • • • Food and Beverage Alcoholic Beverages Apparel Housing and Utilities Infrastructure 10/4/2011 Corporation Education Day Keynote Address 23 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 10/4/2011 Corporation Education Day Keynote Address 24 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 10/4/2011 Corporation Education Day Keynote Address 25 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%) 10/4/2011 Corporation Education Day Keynote Address 26 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) 10/4/2011 • Export Items • • • • • • Gems and jewelry Petroleum Transport equipment Drugs Pharmaceuticals Machinery Corporation Education Day Keynote Address 27 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 Corporation Education Day Keynote Address 28 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. 10/4/2011 Corporation Education Day Keynote Address 29 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) 10/4/2011 Corporation Education Day Keynote Address 30 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 10/4/2011 Corporation Education Day Keynote Address 31 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 10/4/2011 Corporation Education Day Keynote Address 32 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 10/4/2011 Corporation Education Day Keynote Address 33 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 10/4/2011 Corporation Education Day Keynote Address 34 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 10/4/2011 Corporation Education Day Keynote Address 35 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”. 10/4/2011 Corporation Education Day Keynote Address 36 To Wartburg Community Thank you You can always reach me at skrao@iun.edu 10/4/2011 Corporation Education Day Keynote Address 37 NAMASTE 10/4/2011 Corporation Education Day Keynote Address 38
