Indian economic model

1. Indian Economy: Strengths Indian Economic Model Dr. Varadraj Bapat Indian Institute of Technology, Mumbai varadraj@som.iitb.ac.in 9892413119

2. Dr. Varadraj Bapat CA., CWA., M.Com., DISA, PhD. School of Management Indian Institute of Technology, Mumbai Teaching Interests: Financial Accounting, Management Accounting, Indian Economy Research Interests: Financial Accounting, Financial Inclusion, Corporate Finance Others: Yoga, Spirituality, Sanskrut, Bharatiya Sanskriti, ABVP

3. 3 What is GDP ? How much is GDP of India

4. 4 What is GDP ? Total value of production of goods n services (in India). How much is Indian GDP ?

5. 5 • Indian Economy - GDP • $2.05 Tn (nominal) 10th; Oct. 2014 • $2.22 trillion (Nominal, Dec 2015)[3] • $2.25 trillion (Nominal, 7th; Apr 2016) • $7.277 trillion (PPP: 3rd; Oct. 2014)[1] • $8.52 trillion (PPP, December 2015) • $8.72 trillion (PPP, Apr 2016) • GDP growth • 3.986% (2012–13) • 7.4% (2014-15) 7.6% (2015-16)[4]

6. 6 • Indian Economy • Inflation (CPI) • CPI: … WPI: …… [2] • (2016) • CPI: …., WPI: …. % (April 2013)

7. 7 • Indian Economy • Inflation (CPI) • CPI: 5.77, WPI:1.62 (Apr 2016) • CPI: 5.41%, WPI:-1.99% (Nov 2015) • CPI: 5.11%, WPI:-0.39% (Jan, 2015) • CPI: 9.31%, WPI: 4.7% (April 2013)

8. 8 • Public Finances • Public debt • …. of GDP • Budget deficit …% of GDP • Credit rating • ……… • Foreign reserves • $ … billion

9. 9 • Public Finances • Public debt • 66.5% of GDP (2016) • 66.7% of GDP (2013) • Budget deficit • 3.9% of GDP (2015–16) • 4.1% of GDP (2014–15)

10. 10 • Budgetory Deficit • How is it funded ?

11. 11 • Credit rating • BBB- (Domestic/ Foreign) • (Standard & Poor's) • Foreign reserves • $366.77 billion (as of 26 August 2016) • $352.5 billion (as of 11 Dec 2015) (9th) • $338.08 billion (as of 27 Feb 2015) • Main data source: CIA World Fact Book

12. 12 • Is India's response to globalisation different ? • Will India be able to move from a very poor economy to prosperous economy ? • What are the strenghs and weaknesses of Indian economy ? • What is Indian Economic Model ?

13. Western Vs. Bharatiya Economic Thoughts

14. 14 • Capitalism भाांडवलशाही • Vs. Communism मार्क्सवाद • Consumerism

15. 15 Capitalism भाांडवलशाही • 1770

16. 16 Capitalism भाांडवलशाही •

17. 17 Capitalism भाांडवलशाही • १७७०

18. 18 • Communism मार्क्सवाद • शोषण मुक्ती • समानता

19. Marxism • Marx and Engels studied the history of the world’s economies Basic Communism Feudalism Capitalism Communism !!!! Socialism •They believed they discovered an inevitable pattern

20. 20 • Communism • First Country ?

22. USSR • USSR stands for: Union of Soviet Socialist Republics. • The USSR was formed in December 1922. • USSR a.k.a. Russia. • The USSR is a Communist party.

23. Communist control of the World • Moscow

24. माक्सस वाद शोषण मुक्ती / समानता •धमस / परंपरा नष्ट करा •मानवी मुल्य पायदळी

25. माक्सस वाद •हुकु मशाही •हत्या •खून •गररबी

26. माक्सस वाद १० कोटी हत्या

29. 29 • Capitalism भाांडवलशाही • Vs. Communism मार्क्सवाद • • १९९० • Consumerism

30. 30 • Capitalism भाांडवलशाही • Consumerism अनिर्बंध उपभोग

31. 31 • Capitalism भाांडवलशाही • Consumerism अनिर्बंध उपभोग • Bush urged the U.S. public to go shopping and take vacations (2001 -9/11) • (http://consortiumnews.com/2011/09/11/chronicling-americas-911-descent/)

32. 32 • Capitalism भाांडवलशाही • Consumerism अनिर्बंध उपभोग

33. 33 ववषमता

34. 34 ववषमता

35. 35 • Capitalism भाांडवलशाही • Consumerism अनिर्बंध उपभोग • Market Economy • Market Society • Market Family

36. 36 • Capitalism भाांडवलशाही • Consumerism अनिर्बंध उपभोग • Market Economy • Market Society • Market Family

37. 37 Family Destroyed - Marriage In US, More than 50 % of children born to under 30 women are out of wedlock - Marriage is Luxury Good http://parenting.blogs.nytimes.com/2012/02/19/for-younger- mothers-out-of-wedlock-births-are-the-new-normal/ http://www.nytimes.com/2012/02/18/us/for-women-under-30- most-births-occur-outside-marriage.html?pagewanted=all

40. 40 Family Destroyed - Marriage A million children growing up without fathers in UK In UK there are more households with TV’s than fathers http://www.bbc.co.uk/news/education-22820829 (9 June 2013)

41. Marriage or divorce in US or Europe Year Marriages per 1000 unmarried women 1970 63.4 2008 37.4 Year Households with children less than 18 1960 49 percent 2008 31 percent ‘;k Children living with single parents 1960 9 percent 2008 26 percent

42. Society and Family • Warnings came true sooner than later • This cost 88 million additional houses, valued at $16 trillion at current prices. Year Average persons per house 1930 4.5 1950 3.5 2010 2.6

43. Avg persons per house in us • Pic

44. 10/24/2016 Dr. Varadraj Bapat, IIT Mumbai 44

45. 45 High rate of crime प्रचंड गुन्हेगारी. भ्रष्टाचार खून मारामारी बलात्कार

46. 46 High rate of crime The dataset includes figures for 126 countries. India a rate of Murders reported per 100,000 population

47. 47 High rate of crime The dataset includes figures for 126 countries. No of prisoners

48. 48 High rate of crime The dataset includes figures for 126 countries. India is 79th on that list with a rate of 1.8 rapes reported per 100,000 population

49. 49 ्ृष्टीचे शोषण नैसर्गसक संपत्ती चा ववध्वंस प्रचंड प्रदूषण

55. 55

56. 10/24/2016 Dr. Varadraj Bapat, IIT Mumbai 56 56 Impact ? • Saving Rates ?

57. US on a binge

58. 10/24/2016 Dr. Varadraj Bapat, IIT Mumbai 58 58 US personal savings U.S. personal savings rate has been on its way down. In other words, consumers have been spending more than they have been earning. Some economists warn that this is troubling and unsustainable. http://www.businessinsider.in/CHART-OF-THE-DAY-Why-The-Personal-Savings- Rate-Is-Tumbling/articleshow/21189234.cms 9 Apr 2013

59. 59 US • Foreign investments made in the US total almost $2.4 trillion, which is more than twice that of any other country. (2012) • Wiki CIA World jgf

60. 60 US • What made USA to borrow so much and reduce savings ? • Alan Greenspan -

61. Greenspan • Alan Greenspan served as Chairman of the Federal Reserve of the United States from 1987 to 2006. • Directed the very course of US economy and of the globe for two decades. • God of Money • Sparing the Americans from the need to save. Enticing them to spend.

62. Beginning of Economic crisis • the decline of families first. • Later, such decline in turn led to more and more social welfare spend to support the weakening families, thus feeding each other. • US families reels under debt.

63. Current situation • Home loans of households top $10 trillion. • More than 1/3rd weren’t incurred to buy houses. • According to Greenspan himself, household borrowed $3.2 trillion against security of appreciation in their home values (called ‘home equity cashed out’) during 2002-2007, and splurged into consumption.

64. Current situation • 111 million US households use 1.2 billion credit cards, on which they owe $2.5 trillion. • Not just families, their finances too are broken, thanks to the financial networks of the US praised by Greenspan, having ‘enticed’ and made the US families profligate. • The state-provided social security that has replaced the families and made them state- dependent is stressed and potentially bankrupt.

65. 65 Overall Debt % of GDP CANADA= 276 % RUSSIA= 72% UNITED STATES=280% CHINA= 184 % BRAZIL = 148% INDIA= 122 % BRITAIN = 507 % JAPAN= 512 % GERMANY= 278 % SOUTH KOREA=314% FRANCE= 346 % SWITZ= 314 % SPAIN= 363 % ITALY = 314 % @Prof R.Vaidyanathan,IIMB,2012 http://www.economist.com/blogs/graphicdetail/2012/01/daily-chart-8

66. 66 • VERY HIGH level of Debt • Govt • Household

67. 67 Debt in USA • Fannie Mae http://grandfather-economic-report.com/debt-nat.htm 81% ($46 trillion) of all debt was created since 1990, a period primarily driven by debt instead of by productive activity.

68. 68 Household Debt % of GDP

69. 69 Household Debt in US

70. A sign in a US bank: “We can loan you enough money to get you completely out of debt.” US Debt

71. 71 What is Driving US ? U.S. household consumer debt profile: Average credit card debt: $15,112 Average mortgage debt: $146,215 Average student loan debt: $31,240 (Rs. 18 Lakhs) In total, American consumers owe: $11.08 trillion in debt $846.9 billion in credit card debt $7.75 trillion in mortgages $1,002.0 billion in student loans (As of November 2013) • http://www.nerdwallet.com/blog/credit-card- data/average-credit-card-debt-household/ accessed on 8.11.2013

72. Saving Rates • India • US 10/24/2016 Dr. Varadraj Bapat, IIT Mumbai 72

73. Saving Rates in Bharat GDS as % of GDP 10/24/2016 Dr. Varadraj Bapat, IIT Mumbai 73 0 5 10 15 20 25 30 35 1990 [YR1990] 2000 2006 2009 2012 2014

74. US personal saving -2 0 2 4 6 8 1992 1997 2002 2007 as % of disposable income US on a binge

75. 75 Share in % of world GDP based on PPP--

76. Strengths of India The magic mantra of ‘Demographic Dividend’

77. Concept of Demographic Dividend Rapid and sustainable economic growth as consequence of a demographic transition from high fertility and high mortality to low fertility and low mortality equilibrium; reducing the dependency ratio and increasing the size of the working age population;

78. Concept of Demographic Dividend This large cohort of working age population presents the opportunity to stimulate economic growth – demographic dividend;

79. Changes in the child dependency ratio Once fertility begins to decline, the child dependency ratio falls. Child dependency ratio (<15/15-64) Increasing survival of children initially raises the ratio Then declining fertility reduces the ratio.

80. Changes in the old-age dependency ratio • Serious population aging begins more than a century after the transition starts. • The old-age dependency ratio rises rapidly, by a factor of five or six. Old-age dependency ratio (65+/15- 64) Onset of serious population aging is late in the transition

81. Rising dependency as mortality falls Population aging Rising dependency as mortality falls The “first dividend”: Dependency falls Dependency ends where it began. Transitory effect. Variation in the total dependency ratio

82. Population aging Rising dependency as mortality falls The “first dividend”: dependency falls At start: Many children and few elderly. At end: Many elderly and few children. This generates the “second dividend”. Variation in the total dependency ratio

83. How Dependency Ratios Change Over A Classic Demographic Transition: Actual and Projected for India and Simulated, 1900-2100 USA Least develope d countries Chin a Europe There is great variation in projected old age dependency ratios for 2050 Southern Europe  Ratio in Southern Europe projected to be 6 times as high as in the least developed countries.  Differences are due to position in transition, baby booms and busts, and fertility below replacement. Japan

84. LABOUR INCOME AND CONSUMPTION

85. How labour income and consumption vary by age • To understand the economic implications of age structures, we need to know how labour income and consumption vary with age.

86. Asian Country: Thailand, 1998 Thailand's Economic Lifecycle, 1998 Per capita labor income and consumption per year (baht) 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 0 10 20 30 40 50 60 70 80 90+ Consumption Labor income Source: Chawla 2005.

87. Western countries have high consumption in old age (USA, 2003) 0 10000 20000 30000 40000 50000 60000 0 20 40 60 80 Dollars(US,2000) Labor Income Consumption 40000 50000 ) Source: National Transfer Account data.

88. 88 Strengths Saving Mindset Family Values Social Capital Integral approach Sustainable thinking Democratic Values Diversity Language skills Long history of Higher Education Entrepreneurship Bharatiya Sanskruti

89. 89 Strength: Bharatiya Sanskruti

90. 90 Strengths Saving Mindset Bharatiya Sanskruti

91. 91 Gold • Investment: beneficial or harmful ? • Gold accumulation by Indian families

92. 92 Gold: Consumer Demand 1995-2011 Countries 1995 2000 2005 2008 2010 2011 2014 India 477 855 722 713 1006 933 843 China 427 329 293 432 667 811 813 Middle East 365 498 388 346 234 200 212 USA 315 396 377 267 235 195 179 Total Incl.others 2864 3288 3092 3048 3217 3450 3923 Gold price ($/oz) 384.1 279.1 444.5 872 1224. 5 1571. 5 1571. 5 Note: 1 Tonne=32,151 troy oz of fine gold; * Jewellary only Source: World Gold Council—Gold Demand Trends various issues

93. 93 Strengths Family Values Social Capital Bharatiya Sanskruti

94. 94 Family Values Social Capital • Strong family ties • Low rate of crimes • Rapes are 30 times more in US than in Bharat

95. 95 • REMITTANCES from abroad ?

96. 10/24/2016 Dr. Varadraj Bapat, IIT Mumbai 96 96 REMITTANCES Top recipient countries of remittances (in billions of US Dollar) (update) Country 2008 2009 2010 2011 India 50 49 53 64 China 23 23 33 40 Mexico 26 22 22 24 Philippines 19 20 21 23 Nigeria 19 18 20 21 http://en.wikipedia.org/wiki/Remittance

97. 97 Strengths Integral approach Sustainable thinking Bharatiya Sanskruti

98. 98 • What is world economic history ?

99. 99 Share of World GDP from 0 to 1998 Year 0 100 0 150 0 160 0 170 0 182 0 187 0 191 3 195 0 197 3 199 8 W. Eur 10.8 8.7 17.9 19.9 22.5 23.6 33.6 33.5 26.3 25.7 20.6 USA 0 0 0.3 0.2 0.1 1.8 8.9 19.1 27.3 22.0 21.9 Chin a 26.2 22.7 25.0 29.2 22.3 32.9 17.2 8.9 4.5 4.6 11.5 Indi a 32.9 28.9 24.5 22.6 24.4 16.0 12.2 7.6 4.2 3.1 5.0 Worl d 100 100 100 100 100 100 100 100 100 100 100 Source: Table-B-20 Appendix B; pp263; The World Economy: A millennial Perspective—Angus Maddison OECD Development Centre Studies --2007

100. GDP during 2,000 years Source: Angus Maddison. 2001. The World Economy: A Millennial Perspective. OECD, Paris Share of Global GDP (%): Year 0-1998 0 5 10 15 20 25 30 35 40 0 1000 1500 1600 1700 1820 1870 1913 1950 1973 1998 Western Europe United States Japan China India

101. 101 • India is not a story from Rags to Riches. • It’s an economic empire re-establishing itself • Western economies have to loot others to sustain

102. 102 • Bharatiya approach is integral and sustainable

104. 104 The Integral Approach 0 Individual 1 Family 2 Society 3 Nation 4 Nature 5 Parameshti

107. 107 Strengths Entrepreneurship Bharatiya Sanskruti

108. @Prof R.Vaidyanathan,IIMB,2012 • Global entrepreneurship monitor shows that …………. % of India Population is engaged in various entrepreneurial activities. • Also Guess for US, Eurpoe and China

109. @Prof R.Vaidyanathan,IIMB,2012 • Global entrepreneurship monitor shows that …………. % of India Population is engaged in various entrepreneurial activities. • 18 % • US 11 % • Europe 5 % • China 3 %

110. @Prof R.Vaidyanathan,IIMB,2012 • Rise of Bharat, is unique – without high FDI, high export and mostly domestic forces-led, unlike that of China. Also the Global Entrepreneur Monitor [GEM] study 2003 showed that Indian economy was entrepreneur-led, unlike China which is investment and state- led.

111. The performing India • UNIDO study in 1997 identified 370 clusters in India • 2600 rural and artisan clusters. • Of these only 13 Govt.sponsored • Contribute 70% of Industrial out-put and 66% of direct exports • Panipat – 75% of blankets produced in the country • Tirupur – 80% of cotton knitwear • Agra – 75% of leather exports • Ludhiana – 95% of woollen knitwear,85% of sewing machines,60% of Bi-cycles and spares • Surat – 85% of diamond polishing and 60% of synthetic textiles • High technology easily absorbed and improvised

112. Domestic Consumption drives growth • The economist Stephen Roach of Morgan Stanley puts it, "India's domestic consumption-led approach to growth is better balanced than resource-mobilization & export driven model of China."

113. 113 Strengths Democratic Values Diversity Bharatiya Sanskruti

114. 114 Strengths Language skills – multiple language capacity of Indians Sanskrit Long history of Higher Education “Beautiful Tree” Dharma Pal ji Bharatiya Sanskruti

115. Despair …? • We continue to look to at West for our own solution.

116. India on the move…? • Towards Superpower ? or • Towards Jagat Guru ?

117. From Davos to DevGiri ! • Reasons to rejoice: – Transition from Exploited Subdued India to Enlightened Self-confident Bharat

118. Economics that hurt the moral well-being of an individual or a nation are immoral and therefore sinful. MM-263 That economics is untrue which ignores or disregards moral values. XXV-475

119. Our object in framing the Constitution is rally two-fold: (1) To lay down the form of political democracy, and (2) To lay down that our ideal is economic democracy and also to prescribe that every Government whatever is in power shall strive to bring about economic democracy. The directive principles have a great value, for they lay down that our ideal is economic democracy.

120. Deendayal Upadhyay “I visualize for India a decentralized polity and self-reliant economy with the village as the base. We cannot rely upon superficial Western concepts like individualism, socialism, communism, capitalism and need to be rooted in the timeless traditions of our ancient culture. He was of the view that the Indian intellect was getting suffocated by Western theories and ideologies and consequently there was a big roadblock on the growth and expansion of original Bharatiya thought.

121. • Maharishi Aurobindo said: “India shall arise upon the ruins of the west” He said by the year 2011 the western countries will fall and India will rise.

122. India has to get into act •The Question is are we getting ready to create a new world order?

123. Bharat has to get into act

124. References 1 Indian Models of Economy, Business and Management Models- K Kanagasabapathi 2 India Unincoporated- L Vaidyanathan 3 Indian Business and Financial Models course by S Gurumurthy conducted at IITB.

125. Further readings 1 Too big to fail- Andrew Ross Sorkin 2 The Inside Job- A Documentary on how the global economic crisis happened.

126. 126

Indian economic model

Indian economic model

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