Acronym

A presentation to Study Mission participants on India's economy compared and contrasted India and China. As recently as 1991, China and India stood on similar levels of economic development. However, today the Chinese standard of living is more than twice of that of India. Here are some statistics that I found interesting:

- In India, 809 million survived in 2005 on less than $2 a day, compared to 591 million in China.

- Life expectancy in 2005 was 63 years, compared to 71 in China.

- Child mortality was 85 per 1000, compared to 31 in China.

- Morgan Stanley estimates unemployment in India at 20 percent of the workforce or 80 million people. The UN estimates that by 2015, the working population in India will have risen by 138 million, twice that of China.

India needs faster growth for reducing poverty, alleviating the misery that comes from poverty. They need to create the jobs to absorb the growing workforce, lest they have social unrest. For faster growth they need greater investment, for which they need funding.

How did China manage such funding? They had a much higher level of savings and foreign investment.

Looking at capital expenditures in India is eye-opening. India’s investment on infrastructure in 2005 was estimated at $28 billion compared to $201 billion in China (3.6 percent of GDP vs. 9 percent). Although the savings rate in India is beginning to increase, other sources of funding is necessary to accelerate growth, specifically foreign investment which they are actively pursuing.

Currently India controls less than 2 percent of global trade, but that is expected to increase with foreign investment.

The growth opportunity is huge for many sectors, especially in the area of telecommunications, where one company recently sold 400,000 telephones in one day!

Some growth projections:

- India will become the fifth largest consumer market by 2025.

- The Indian middle class will grow to 583 million.

- Rising incomes will lift 23 million out of poverty.

- By 2025, over 291 million (more than the population of Australia) will become extremely wealthy individuals.

- Most of these incomes will be generated in urban areas.