October 4, 2011

43rd Annual Corporation Education Day

Wartburg College

Understanding the Potential Impact of India’s

Economic, Political and Cultural Environment

Surekha Rao
President, Indiana Academy of the Social Sciences

Indiana University Northwest, Gary, IN

10/4/2011 Corporation Education Day Keynote Address 1

In Mark Twain’s words (1910)
• India is, the cradle of the
human race, the birthplace of
human speech, the mother of
history, the grandmother of
legend, and the great grand
mother of tradition.

Corporation Education Day Keynote

10/4/2011 2
Address
 India in 2011
• India is a multi-lingual, multi-religion, multi-
cultural country
• One of the fastest growing economies in the
world
• Home to 1.21 billion people (17% of the
world)
• Continues its tradition of secularism and
democracy

Corporation Education Day Keynote

10/4/2011 3
Address
 Five main parts of my talk
 Cultural Heritage of India and Modern India

 Indian Economy and its global implications

 Business Climate of India

 India’s Domestic Political Environment

 Indo-US relations and why India matters

Corporation Education Day Keynote

10/4/2011 4
Address
 Cultural Heritage: India, an old country but a young nation

Soap Stone Seals used in Trade

Indus Valley Civilization 3000 BC:
5000 years old

Corporation Education Day Keynote

10/4/2011 5
Address
 The Aryans and the Vedas
1500 BC-800 BC: Vedas and 800-400 BC
Upanishads Ramayana and Mahabharata

Corporation Education Day Keynote

10/4/2011 6
Address
 Foreign Invasions
• Arabs, Afghans, Mongols since 11th century
• Europeans arrived in 1498 followed by the
Dutch, the French, and the British.

Corporation Education Day Keynote

10/4/2011 7
Address
 Modern India
• India got independence from the British rule
August 15, 1947: a young nation of 64 years!

Corporation Education Day Keynote

10/4/2011 8
Address
 Architects of Independent India
• Mahatma Gandhi
• Jawaharlal Nehru

• Economic policies promoted self–reliance and were inward looking

• Average growth rate 1950-1990 was 3.5%

Corporation Education Day Keynote

10/4/2011 9
Address
 1991: India Changes Course

Corporation Education Day Keynote

10/4/2011 10
Address
 India now: a Fast Growing Economy
India’s GDP 2010= $1.53tr
World Rank 12 US Rank 1
Share of the World GDP= 2%
• GDP Growth rate 2004-2009: 9%
2009-11: 7.9%

Corporation Education Day Keynote

10/4/2011 11
Address
 IMF ‘s GDP growth outlook for India & US
September 2011
Year India United States
2009 6.771 -3.486
2010 10.094 3.03

2011 7.839 1.527

2012 7.533 1.782

2013 8.102 2.538
2014 8.148 3.077
2015 8.128 3.425
2016 8.14 3.394

Corporation Education Day Keynote

10/4/2011 12
Address
 GDP (Purchasing Power Parity)
Measure of growth based on what
the currency can buy and not the
exchange rate
• GDP( PPP) = $4.3tr
• World Rank 4
(after US, China and Japan )

Corporation Education Day Keynote

10/4/2011 13
Address
 India’s growth trajectory (2001)
Jim O’ Neill, Goldman Sachs
Rank 2050 Country 2050 2040 2030

1 China 70,710 45,022 25,610

2 United States 38,514 29,823 22,817

3 India 37,668 16,510 6,683

Corporation Education Day Keynote

10/4/2011 14
Address
 GDP(PPP) Growth Trajectory (2009)
(Citi financial services report)

• India will overtake Japan by 2015 to become

the third largest economy
• India would surpass the US — currently the
world’s largest economy — to become the
second largest by 2040, next only to China.
• By 2050, Indian economy is expected to be
nearly $85.97 trillion on PPP basis and
become the largest economy ( overtake
China).
Corporation Education Day Keynote
10/4/2011 15
Address
 Other Economic Indicators
Unemployment rate = 6.6%
Public Debt as % of GDP = 56%
Foreign exchange reserves= $284 b

Corporation Education Day Keynote

10/4/2011 16
Address
 Transport and Communication
Indian farmer with a cell phone! Growth of cell phone sector
• Number of mobile phone
users= 670 millions

Demand for New

Telephones/month= 5 million

Corporation Education Day Keynote

10/4/2011 17
Address
 India: Not an Agricultural Economy
anymore!
Composition of GDP 14.9

Services = 65.0 % —Services

20.1 —Industry

Industry = 20.1 % 65
—Agriculture

Agriculture= 14.9%
(data from Reserve Bank of India)

Corporation Education Day Keynote

10/4/2011 18
Address
 IT: The New Temples of India
• BPO call center WIPRO INFOSYS

Corporation Education Day Keynote

10/4/2011 19
Address
 Major Business Centers in India : located all over the country

Patna
Ludhiana
Gurgaon

New Delhi Noida

Guwahati
Jaipur

Ahmedabad
Gujarat

Kolkata

Indore
Ranchi

Mumbai
Bhubaneshwar

Bengaluru
Hyderabad
Kerala

Kochi
Chennai
Corporation Education Day Keynote
10/4/2011
Address
20
 Business climate: Advantage India
• Huge untapped market potential
• Business friendly government policies: tax
incentives, currency convertibility
• Low cost competitiveness : $33.53 vs.$1.17
• Large English speaking and skilled manpower
• Strong macro economic fundamentals
• Political stability

Corporation Education Day Keynote

10/4/2011 21
Address
 India Calling
India’s thriving middle class
• By 2025 number of middle
class to reach 583 million Growth of HH Incomes
• India is currently the 12th over 5%
largest market
• By 2025 it will be Fifth
largest behind the United
States, Japan, China, and
the United Kingdom.

Corporation Education Day Keynote

10/4/2011 22
Address
 Industries most in need of growth

• Food and Beverage

• Alcoholic Beverages
• Apparel
• Housing and
• Utilities
• Infrastructure

Corporation Education Day Keynote

10/4/2011 23
Address
 Urbanization : New Engine of Growth

• By 2030:
68 cities over 1 million population (42
today)
70% of the Jobs; 70% of the GDP from the
urban centers

Corporation Education Day Keynote

10/4/2011
Address
24
 India’s infrastructure needs
• By 2030
– 700-900 million square meters of
commercial and residential space (a
new Chicago every year)
– 2.5 billion square meters of roads
7,400 km of metros and subways
– $1.2 trillions investment needed
Corporation Education Day Keynote
10/4/2011
Address
25
 Business Friendly Government Policies: Taxes

Domestic International
• Highest marginal INDIA - US TAX TREATY
Income tax rate= 30% Tax rate for US companies
(down from 95%) • Dividends 15% 1
• Interest Income: 15% 2
• Royalties 20% 2
• Customs and Tariffs=
• Technical Services 20% 2
10% (down from 150%)
• Other income 55%  

Corporation Education Day Keynote

10/4/2011 26
Address
 Indo-US Trade: India’s Exports

Total Exports to the • Export Items

US 2010 = $ 29.5b • Gems and jewelry
13% of India’s
• Petroleum
exports
• Transport equipment
 US Rank 2 (UAE is
• Drugs
Rank One)
• Pharmaceuticals
• Machinery

Corporation Education Day Keynote

10/4/2011 27
Address
 Indo-US trade: India’s Imports

Total Imports from • Precious stones &

US= $19.2 billions metals
• 7% of India’s imports • Machinery
• Rank second largest • Electrical machinery
after China • Aircraft, spacecraft
• Optical instruments &
equipment
• Mineral fuel, Oil, etc.
• Fertilizers
Corporation Education Day Keynote
10/4/2011 28
Address
 Government Policies: Liberalization of
Foreign Exchange Rules
1. Rupee is freely convertible on current account.
2. Rupee is almost fully convertible
on capital account for Foreign
Institutional Investors.
3. For FDI- Profits earned, dividends and proceeds out
of the sale of investments can be fully repatriated.

Corporation Education Day Keynote

10/4/2011 29
Address
What is your Dollar worth in Indian Rupees?

$ U.S. ≈ Rs. 49.42

In real terms:
US Big Mac can buy a little more
than 2 Maharaja Macs ( India’s Big
Mac)
Corporation Education Day Keynote
10/4/2011 30
Address
 India’s Political Climate
• Secularism and Democracy can be traced
through the ancient cultural times: SEN
• Parliamentary Democracy ( British style):
Prime Minister Dr. Manmohan Singh is the
Executive Head
• Federal Republic: States have less autonomy
• Politically Stable ; Peaceful transition of power
• Corruption: Hot issue

Corporation Education Day Keynote

10/4/2011 31
Address
 Indo-US relations

• The two countries have shared values of secularism

and Democracy
• US- India cooperation in Defense, Space and
Technology
• All three US Presidents since 2000 have visited India
and the last Two Indian Prime Ministers have visited
US to expand trade and friendship
Corporation Education Day Keynote
10/4/2011 32
Address
 India and geopolitics
Does India matter to the US?
 Yes: It is one of the largest and fastest growing
economies; member of G-20
 Yes: because it is the largest democracy in the
world and a peaceful country
 Yes: To maintain balance of power in Asia: to
contain China

Corporation Education Day Keynote

10/4/2011 33
Address
 Challenges facing India
1. Lack of proper Infrastructure
2. Persistent High inflation( double digit)
3. Rampant corruption
4. High levels of (female) illiteracy
5. Poverty: 400 millions ($0.64/day)
6. Inadequate Public Health System

Corporation Education Day Keynote

10/4/2011 34
Address
 Some Useful Resources
1. Embassy of India
http://www.indianembassy.org/doing-business-in-india.php
; http://www.india.gov.in/
2. World Bank Reports
Http://www.doingbusiness.org/reports
3.Mckinsey Global Institute
http://
www.mckinsey.com/mgi/publications/india_urbanization/in
dex.asp
4. National Portal of India
http://www.india.gov.in/
5. The ArgumentativeCorporation
10/4/2011
Indian: Amartaya
Education Day Keynote Sen
35
Address
 Rabindranath Tagore
Poet laureate in literature in 1913
(1861­- 1941)

"Oneness amongst men,

the advancement of
unity in diversity – this
has been the core
religion of India”.

Corporation Education Day Keynote

10/4/2011 36
Address
 To Wartburg Community

Thank you

You can always reach me at

skrao@iun.edu
Corporation Education Day Keynote
10/4/2011 37
Address
 NAMASTE

Corporation Education Day Keynote

10/4/2011 38
Address