India’s Economic ProspectsProf. GulshanSachdevaJ Nehru U Delhi & ICCR Chair at CGG, KU
What’s on our plate? • Introduction by Piet Sercu, FEB @ KU Leuven • Reforms since early nineties have faltered • Huge needs, e.g. • Infrastucture (traffic, power, courts, etc) • Administration • Labour markets • New opportunities: • BJP has a clear majority, • PM has a promising track record • Main Talk by GulshanSachdeva, J Nehru U & ICCR Chair
Economic Prospects of India By Prof Dr GulshanSachdeva ICCR India Chair, KU Leuven Chairperson, Centre for European Studies School of International Studies, Jawaharlal Nehru University, New Delhi 27 October 2014
1.25 billion population (2013)Equal to = EU + USA + Brazil + Japan + Russia
16 Indian States with a population of minimum 25 million ( 2011 census)Another 20 states/UT range between 0.6 million to 16 million
Land borders, coastline TOTAL LAND BORDER: 14,103 km 1. Bangladesh 4,053 km 2. Bhutan 605 km 3. Myanmar 1,463 km 4. China 3,380 km 5. Nepal 1,690 km 6. Pakistan 2,912 km COASTLINE 7516 km
Truly Multi Cultural Society • Multi Ethnic- All the five major racial types - Australoid, Mongoloid, Europoid, Caucasian, Negroid found in India • Multi Religious- Hindus 80.5 %, Muslims 13.4% Christians,2.3%, Sikhs,1.9%, Buddhists 0.8%, Jains 0.4%, others 0.7% (2001 census) • Multi Lingual - 22 languages have been recognized by the Constitution of India, of which Hindi ( and English) are the official national language + hundreds of languages and dialects. • Its diversity makes it unsuitable for any other form of government but DEMOCRACY
Political System • Democratic • Federal – demarcation of roles and responsibilities • Secular • Republic • Union Government ( President- Prime Minister heads Council of Ministers)- Supreme Court Bicameral- LokSabha ( lower House), RajyaSabha ( Upper House) • State Government- (Governor- Chief Minister- High Court)
Grassroots Democracy • 73rd and 74th amendment of constition “ • Panchayati Raj” • 600,000 villages • About 240,000 village panchayats • 6000 blocks, 500 districts • Towns/ municipalities ( 8000 towns) • 2.8 million elected representatives (1/3 women)
2014 LokSabha ( lower House) election results272 seats needed to form government
India is making a successful transition from an excessively inward-oriented economy to a more globally integrated economy. • As a result of new policies, it has become one of the fastest growing economies of the world • Despite serious challenges ( global slowdown, energy security, infrastructure, poverty, regional disparities, internal security) indications are that high growth may continue
Background • After independence, the critique of colonialism formed the basis for the policy of “self reliance’ in India • The policy emphasized a state directed, inward-oriented, import substituting industrialization as an appropriate strategy for India • Some reforms started in the 1980s • Reforms triggered by macroeconomic crisis in 1991
Nature of Indian reforms • Coincided with economic transformation in the former Soviet bloc from a Centrally Planned Economy to Market Economy • In Transition economies- Stab, Lib, Priv • In India- Removal of License/ Permit Raj ( removing restrictions from the private sector/ opening to outside world
Economic Reforms since 1991 • External Sector Reforms Exchange rate, Tariffs, FDI, portfolio inv • Internal Sector Reforms Industrial reforms • removal of licensing regime, controls • deregulation of product prices • reduction in protection to SME • disinvestment ( privatisation) • labour reforms
Economic Reforms • Fiscal reforms tax structure, fiscal prudence • Banking sector reforms • Infrastructural reforms • roads • ports, • telecom, • airports, • power, • SEZs • Agriculture
Growth Performance in Five Year PlansEleventh Plan ( 2007-12) Average Growth 7.9% ( Target 9%)Average 7.8% in the last ten years ending 2012
12 FYP ( 2012-17) • The focus is on creating human, physical and institutional capabilities to achieve targeted 8.2 per cent growth in the next five years. • Although rapid growth in the last ten years has raised expectations, domestic and global circumstances are less favourable today.
Still, the overall aim is to bring 9 per cent growth back by the end of 12th plan. • As a result of these changes, India is adapting itself simultaneously to the economic globalization and to the emerging balance of power. • Changes in India’s internal and external economic policies also coincided with the end of the Cold War.
The strategic consequences of Indian economic performance in the last two decades are clearly evident. • Growth and outward orientation has helped India to forge new relationships with its neigbours in Asia and with major powers • India has also moved towards regional integration (SAFTA, India- ASEAN; India-Japan, Singapore; AUS, NZ, bilateral deals, negotiations are on with many partners)
India and Regionalism • Compared to its earlier faith in global trade deals, India has also taken an aggressive approach towards regionalism. • The collapse of Doha development round of WTO negotiations pushed many countries including India to look for alternatives to multilateral negotiations to improve their trade positions. • Since 2005 India has put its proposed regional trade agreements on fast track.
In the past, India had adopted a cautious approach to regionalism, and was engaged in only a few bilateral/regional initiatives, mainly through Preferential Trade Agreements (PTAs) or through open regionalism. • In recent years, it has started concluding Comprehensive Economic Cooperation Agreements (CECAs) with many countries.