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Effects of Interstate migration
• Some case studies show that before
migration, 24% of the migrants earned at
least minimum wages. Others earned less.
• After migration, 72% earned at least
minimum wages in the state of destination.
• Nearly 63% of the migrants built assets in
rural areas and 22% in urban areas.
• Minimum wages in rural areas below that in
urban areas.
Findings
The aver
Drivers of Growth
• Quarter century of strong economic growth built a momentum
of sustained growth; average 5% per annum.
• Services driven growth, where services account for nearly
60% of GDP today.
• More open economy (to external trade and investment); fall in
applied tariffs from over 100% in 1991 to 12% in 2006.
• Budget deficit declined from 7 to 3.7 percent of GDP from
1991 to 2001.
• Supportive international economic environment fuelled by
growth of China and the US. India itself now contributing to
global economic growth significantly.
Drivers of Growth
• “Demographic dividend” of a young population:
– Working population nearly 60% of total.
– Household savings rose from around 15-16 % of GDP in late 1980s to
22-24 percent in recent years
• A growing “middle class” fuelling domestic consumption:
– 100 million with $10 th. to $ 40 th.
– 340 million with incomes above poverty levels but less than $10 th.
– Six fold increase in sales of motor vehicles and a 10 fold increase in
telephones since 1991.
• Strong companies in a modernized capital market.
– Market capitalization on the Bombay Stock Exchange rose fourteen-fold
from $50 billion in 1990/91 to $680 billion in 2005/06.
– Share of interest outgo in gross profits dropped sharply from above 50
percent in the late 1990s to 15 percent in 2005/06
What India needs for sustaining
growth and poverty reduction
• Make growth more inclusive by stimulating agricultural growth.
• Improve the output and labour share of manufacturing. The growth
of key services like transport, storage, communication, insurance,
banking, trade and real estate has to be considerably manufacturing
driven.
• Improve labour participation rates further from 61% to 82% as in
China.
• Maintain price stability which is threatening to rise on all fronts.
• Fiscal consolidation. Difficult in an election year with pressure for
populist expenditures. However revenues have risen dramatically
over the past 2 years at over 40% per annum.
• Infrastructure bottlenecks particularly in power and roads needs to
be addressed.
What India needs for sustaining
growth and poverty reduction
• Change labour laws which are so rigid as to discourage additional
employment in the formal sector altogether. Without significant
reform of existing labour laws, India’s cheap labour advantages
remain hugely underutilized.
• Improve India’s weak human resource policies. Serious shortages in
education, skill-development, and health service provision. This
applies to both primary and tertiary schooling.
• While there is some evidence of decoupling of India’s growth from
the US, the slowdown in the global economy is nevertheless a
matter of concern. Oil price rise is another area of concern.
• Rise in the price of metals and food may also dampen some of
India’s growth expectations.
Effects Of India’s growth on the
global economy
• According to a World Bank study, “Dancing with Giants’,
there is scope for India to expand its trade significantly
without hurting development prospects of most other
economies. India is expected to contribute 12% to global
economic growth by 2020.
• Improvement in the range and quality of exports from India may create
substantial opportunities and welfare benefits to the world. The welfare
benefit for EU is one of the highest in the world valued at over 3 trillion
dollars.