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'India's per capita GDP in dollars will quadruple'
MUMBAI: Goldman, which separated from its Indian partner Kotak Mahindra Capital to strike out on its own in a country it bets could become the second largest economy in the world, ahead of the US, by 2050, (courtesy its latest report), has, however, cautioned that political risk (including a rise in protectionism), supply-side constraints (including business climate, education and labour market reforms) and environmental degradation could run the ship aground.
Tushar Poddar and Eva Yi, authors of the paper say that the higher growth rate under the new projections will have large implications for demand in the country. From 2007 to 2020, India's per capita GDP in dollars will quadruple (a third higher than the original BRICs projections). Indians will also consume about 5 times more cars and 3 times more crude oil as compared to 3.5 times more motor cars and 2.3 times more oil estimated by Dominic Wilson and Roopa Purushothaman in October 2003, the report says.
Purushothaman, who subsequently left Goldman to join the Future Group in India, agrees that the new estimates are entirely possible. Having seen the country's progress from within, she is more inclined to revise the earlier projections. "In some areas of corporate and structural reform, the country has used the current upswing to move at a faster rate than when the first study was done in 2003," Purushothaman told TOI.
The authors of the new paper, who measured productivity by focussing on output and stripping off cyclical variations in inputs, found that since 2003, there has been a structural increase in India's potential growth to nearly 8% from 5%-6% in the previous two decades.
"Productivity growth has been the key driver behind the jump in GDP growth, contributing to nearly half of overall growth since 2003, compared with a contribution of roughly one-quarter in the 1980s and 1990s," they say.
Goldman's restated optimism perched on a host of ifs and buts comes five weeks before finance minister P Chidambaram presents the annual budget. He is expected to simplify taxation, allow more room for foreigners in India and provide a boost to local businessmen expanding abroad. He is expected to announce more spending on health and education.
The Goldman paper says "to embark upon its growth story, India will have to educate its children and its young people (especially its women) and it must do so in a hurry. Lack of education can be a critical constraint to the growth of the knowledge-based IT sector, as well as in the move to mass employment in manufacturing. The demographic dividend may not materialise if India fails to educate its people."
Trade would be one of the key factors in the India growth story as foreign firms hope to sell more products to the growing Indian middle-class and hope to participate in economic activity such as infrastructure building.
"Average tariffs have fallen to below 15% from as high as 200% as India began to reintegrate with the global economy. The impact of opening up has been significant. Exports have risen 14 times as India has rapidly gained trade share.
This development has been most evident in the past 3 years, when trade has grown, on an average, 25% a year," the paper says.
The largest US trade delegation to ever visit India spent two weeks last month trying to sew up deals with local businessmen. UK's chancellor of the exchequer and perhaps PM-in-waiting Gordon Brown and his team of nearly 150 businessmen and women just left India after hobnobbing with Indian counterparts for a week. Brown has said he hopes to quadruple exports to India by 2020, and is targeting education as a key area for ties.
It is a seemingly unrelated event, but something changed dramatically after India proposed the nuclear agreement with the US. Immediately after it was cleared by US Senate, the country's economic prospects have begun to look up significantly.
Ron Somers, president of the US-India Business Council, told TOI recently, "The Indo-US nuclear deal is the biggest foreign policy achievement of this century. It will change many things." He was right. The country's future already looks different.
http://timesofindia.indiatimes.com/...ollars_will_quadruple/articleshow/1411487.cms
MUMBAI: Goldman, which separated from its Indian partner Kotak Mahindra Capital to strike out on its own in a country it bets could become the second largest economy in the world, ahead of the US, by 2050, (courtesy its latest report), has, however, cautioned that political risk (including a rise in protectionism), supply-side constraints (including business climate, education and labour market reforms) and environmental degradation could run the ship aground.
Tushar Poddar and Eva Yi, authors of the paper say that the higher growth rate under the new projections will have large implications for demand in the country. From 2007 to 2020, India's per capita GDP in dollars will quadruple (a third higher than the original BRICs projections). Indians will also consume about 5 times more cars and 3 times more crude oil as compared to 3.5 times more motor cars and 2.3 times more oil estimated by Dominic Wilson and Roopa Purushothaman in October 2003, the report says.
Purushothaman, who subsequently left Goldman to join the Future Group in India, agrees that the new estimates are entirely possible. Having seen the country's progress from within, she is more inclined to revise the earlier projections. "In some areas of corporate and structural reform, the country has used the current upswing to move at a faster rate than when the first study was done in 2003," Purushothaman told TOI.
The authors of the new paper, who measured productivity by focussing on output and stripping off cyclical variations in inputs, found that since 2003, there has been a structural increase in India's potential growth to nearly 8% from 5%-6% in the previous two decades.
"Productivity growth has been the key driver behind the jump in GDP growth, contributing to nearly half of overall growth since 2003, compared with a contribution of roughly one-quarter in the 1980s and 1990s," they say.
Goldman's restated optimism perched on a host of ifs and buts comes five weeks before finance minister P Chidambaram presents the annual budget. He is expected to simplify taxation, allow more room for foreigners in India and provide a boost to local businessmen expanding abroad. He is expected to announce more spending on health and education.
The Goldman paper says "to embark upon its growth story, India will have to educate its children and its young people (especially its women) and it must do so in a hurry. Lack of education can be a critical constraint to the growth of the knowledge-based IT sector, as well as in the move to mass employment in manufacturing. The demographic dividend may not materialise if India fails to educate its people."
Trade would be one of the key factors in the India growth story as foreign firms hope to sell more products to the growing Indian middle-class and hope to participate in economic activity such as infrastructure building.
"Average tariffs have fallen to below 15% from as high as 200% as India began to reintegrate with the global economy. The impact of opening up has been significant. Exports have risen 14 times as India has rapidly gained trade share.
This development has been most evident in the past 3 years, when trade has grown, on an average, 25% a year," the paper says.
The largest US trade delegation to ever visit India spent two weeks last month trying to sew up deals with local businessmen. UK's chancellor of the exchequer and perhaps PM-in-waiting Gordon Brown and his team of nearly 150 businessmen and women just left India after hobnobbing with Indian counterparts for a week. Brown has said he hopes to quadruple exports to India by 2020, and is targeting education as a key area for ties.
It is a seemingly unrelated event, but something changed dramatically after India proposed the nuclear agreement with the US. Immediately after it was cleared by US Senate, the country's economic prospects have begun to look up significantly.
Ron Somers, president of the US-India Business Council, told TOI recently, "The Indo-US nuclear deal is the biggest foreign policy achievement of this century. It will change many things." He was right. The country's future already looks different.
http://timesofindia.indiatimes.com/...ollars_will_quadruple/articleshow/1411487.cms
