21 years of economic reforms: The journey so far and the road ahead

A report by Hanmer MSL, part of MSLGROUP

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Table of contents

04 06 10 15

EXECUTIVE SUMMARY REFORMS: A BRIEF HISTORY

a. Launchpad b. Falling short

KEY ACHIEVEMENTS
a. b. c. d. e. Growth Innovation Investment The battle against poverty Literacy

WHATS LEFT
a. b. c. d. e. f. Social sector Hunger Corruption Infrastructure Administrative reforms Fiscal management

19 25 26 27 28

WHAT LIES AHEAD

a. b. c. d. Growth Investment Private and public consumption Will the RBI relent?

TOP PRIORITIES INDIAS ECONOMIC JOURNEY INDUSTRY MILESTONES INDIA AT A GLANCE

Executive summary

On July 24, 1991, with the country dangerously close to defaulting on its debt and with foreign exchange reserves enough to pay only for three weeks of imports, then finance minister Manmohan Singh presented a landmark budget. India gave up socialism, adopted liberalisation and started shaking off the fetters that had held it back for far too long. Days earlier, the country had airlifted 47 tons of gold to the Bank of England as collateral for debt, and turned in desperation to the International Monetary Fund (IMF) for aid. Singh went on to devalue the rupee, started unravelling the licence raj and began opening the country to foreign capital. Suddenly, multinationals such as Coca-Cola, which had been driven out of India years earlier, were being wooed to return. Singh concluded his speech in Parliament by quoting Victor Hugo: No power on Earth can stop an idea whose time has come. A moment of humiliation was turned into one of hope. It was historic. Since then, India has averaged growth of 7%, second only to China. India has also witnessed the rise of the middle-class, the worlds largest, which has contributed to and partaken of the growth in equal measure. However, economic reforms are not an end in themselves. Growth is not a wholesome indicator. Equally important are quality of life, literacy, the battle against poverty, and equitable growth. The last has spawned the most heated debates. While supporters of the economic policy say that the effect on the overall population will inevitably be slow, its critics assert that reforms have only made the rich richer and the poor poorer. In Indias cities, the changes are obvious the once-ubiquitous Premier Padmini has disappeared while Marutis, Hyundais, Hondas, Mitsubishis, Mercedes and Skodas jostle for space on cramped roads. Malls and multiplexes have become the new places to be seen at.

In economics it is a far, far wiser thing to be right than to be consistent.

-John Kenneth Galbraith, economist

However, the paradox is apparent as you travel to the rural heartland. India has fared miserably in agriculture, which is growing at a mere 2% on average even as grain stocks are ravaged by rodents, hundreds of thousands die of starvation and farmers in Vidarbha region and Andhra Pradesh province commit suicide due to crippling debt. Of what use are reforms if children dont have schools to go to, child labour is rampant, and healthcare and sanitation are all but absent, ask the critics. Reforms cannot succeed unless they are coupled with social renewal. An economy that works cannot be built on weak social foundations. The good news is that India is now a resilient economy that is relatively insulated from the global crisis. All it needs is another major push. This is what India is looking forward to as Finance Minister Pranab Mukherjee rises to present the union budget in early March. A lot has been achieved in the past 21 years. Lots more needs to be done a concrete policy on FDI in core sectors, a faster pace of public sector disinvestment, administrative reforms that are key to maintaining growth and building a strong economy, elimination of wastage in social sector programmes and sustainable spending.

None of this easy, and much of it has serious political connotations. Several crucial provincial elections are being held this year; the temptation to use the budget as a tool to attract votes will be immense. The country has also seen a mass campaign against corruption and the government has come off looking badly. There could be a tendency to neutralise the sentiment with populist decisions that would eventually hurt the economy. Finally, India is one of the few shining lights amid the turmoil in the global economy. Its growth is based on internal demand and the vibrant services sector. However, India is not insulated against the gloom. The challenge before Mukherjee is to use the situation to the countrys advantage by pushing through key reform such as FDI in retail, which could open the floodgates of foreign investment and further bolster the economy. Will he? Time will tell.

A study of economics usually reveals that the best time to buy anything is last year.
-Marty Allen, comedian

Reforms: A brief history

When India gained independence from British rule in 1947, there was hope but no deliverance. A country that should have reached out to the world, giving a wide canvas to its huge potential and skill instead adopted an inward looking economic model, sceptical of free markets and international trade. Socialism, with an emphasis on self-sufficiency and the public sector, became the mantra. As the government decided that the answer to poverty was tax-and-spend, peak incometax rates hit 97.75% in the 1970s, and growth averaged a mere 3.5% the so-called Hindu Rate of Growth while other Asian economies managed double that. To top it all, the poverty ratio was not even dented in the 30 years that followed. Unable to fathom why Nehruvian socialism wasnt working, the government sought to put growth on the fast track in the 1980s by borrowing big. It succeeded for a while, with growth accelerating to 5.5%, but it was unsustainable, eventually resulting in the foreign exchange crisis of 1991. Ultimately, it fell upon a political lightweight, PV Narasimha Rao, to turn around the economy. Rao was the quintessential political backroom player, crafty and well versed in the way politics and the bureaucracy worked, yet never a public icon. After Rajiv Gandhi was assassinated in 1991 before the general election and the Congress formed a minority government, he was the partys surprise choice for prime ministership. While Rao continued to spout the partys economic mantra in public, it was clear to him after the collapse of the Soviet Union that socialism was past its sell-by date. He already had a shining example in China of what reforms could do Deng Xiaoping had sparked off an economic revolution, freeing markets and opening up the country to investment.
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India, Rao knew, had no choice. Reform, even if slow and pragmatic, was the only answer.

Economics is a subject that does not greatly respect ones wishes.

-Nikita Khrushchev, Soviet leader

A political storm followed the opposition alleged that Rao had sold out to the IMF but two years of financial stability and 7.5% growth changed all that. Soon, most political parties were singing the reforms tune. The process had taken deep root and it continued, even if haltingly at times.

While India has never been able to match China in its manufacturing and export might, largely due to restrictive labour laws, it has come to be seen as a services hub. Indian laws make it very tough to shed workers, making entrepreneurs wary of setting up labour-intensive factories for exports. One indicator of how this hurt industry was that, as a garment manufacturing hub, India was overtaken by Bangladesh! However, India has several positives to show for every negative. For instance, in 1991, Manmohan Singhs budget lowered the maximum import duty to a still whopping 150% from an unimaginable 300%. Today, the standard import duty is 10%, roughly the average for South-East Asia. At that time, more than 800 items were reserved for production by small-scale industries, and more for the public sector. These reservations have been brought down substantially. Controls on industries, imports and foreign exchange are much more relaxed. Private investment in previously restricted sectors, such as telecom and infrastructure, has shown great results. The sceptics were proven wrong. In the 2000s, India averaged 8.5% growth. With the abolition of controls, industry flourished and many companies went on to make a mark globally. Indian companies were taken over by multinationals (Coca-Colas acquisition of Parle brands, for instance) while Indian firms took over iconic foreign ones (the Tatas acquisition of Jaguar is an example).

Launchpad
While labour law reform remained neglected because of its political implications, India emerged as a force in intellect-intensive industries such as computer software. By the time the Asian financial crisis hit in 1997, India was financially strong enough to keep growing though it slowed without great damage or having to seek aid. This was around the time the software industry came into its own, bagging major Y2K bug-clearing contracts. The crisis second wave in 2001 saw India in an even stronger position with corporations outsourcing their software and business services to Indian firms.

In economics, the majority is always wrong.

-John Kenneth Galbraith, economist

Falling short
The failures on the social front arent due to lack of resources. In fact, social sector spending has risen consistently over the last two decades. The problem lies in the delivery of service, most notably in the provision of affordable food to the poor. Corruption and wastage led to the failure of the Public Distribution System, through which subsidised

Photo by Terinea IT Support on Flickr

grain and kitchen fuel were supplied to the deserving.

Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else.
-Lyndon B Johnson, former US president

There are other worrying signs. Indias proportion of underweight children a measure of malnutrition was the third-worst in the world at 46.7%. There is an internal militant communist insurgency dubbed Naxalism that is spread over several provinces and has deprived a large part of central India from the economic benefits enjoyed by the rest of the country. In recent times, there has been an outcry against corruption, which has affected the entire administrative chain. Ministers have been jailed for crimes ranging from undervaluing telecom spectrum to taking bribes in return for construction contracts for the Commonwealth Games held in

Delhi. Social activist Anna Hazares call for a countrywide agitation to demand an effective anti-corruption law was answered by citizens across the socio-economic spectrum. The governments image and the politys as a whole suffered. Indias journey has been long and arduous. As it takes on the challenges listed above, a longer and tougher struggle lies ahead.

First rule of Economics 101: our desires are insatiable. Second rule: we can stomach only three Big Macs at a time.
-Doug Horton, clergyman

Excerpts from Manmohan Singhs 1991 budget speech

The new government, which assumed office barely a month ago, inherited an economy in deep crisis. The balance of payments situation is precarious. We have been at the edge of a precipice since December 1990 and more so since April 1991. The foreign exchange crisis constitutes a serious threat to the sustainability of growth processes and orderly implementation of our development programmes. Internal public debt of the central government has accumulated to about 55% of GDP. The burden of servicing this debt has become onerous. Interest payments alone are about 4% of GDP and constitute almost 20% of the governments total expenditure. Without decisive action now, the situation will move beyond the possibility of corrective action. There is no time to lose. Neither the government nor the economy can live beyond its means year after year. The room for manoeuvre, to live on borrowed money or time, does not exist any more. The time has come to expose Indian industry to competition from abroad in a phased manner. After four decades of planning for industrialisation, we have now reached a stage of development where we should welcome, rather than fear, foreign investment. Few would disagree that I am one of the most harassed finance ministers in recent times. Victor Hugo once said: No power on earth can stop an idea whose time has come. I suggest to this august house that the emergence of India as a major economic power in the world happens to be one such idea. Let the whole world hear it loud and clear. India is now wide awake. We shall prevail. We shall overcome.

INDIAs GDP GROWTH

10 8 6 4 2 3.5% 5.5% 6% 8.5%

1950-80

1980-92

1992-2003

2003-10

Source: Economic Survey 2010-11

Key achievements

While India has made rapid strides on various counts, its growth has often been outpaced by the Asian tiger economies. On the other hand, its emphasis on slower but stronger, riskfree growth has held it in good stead during troubled times. Here are some of the long strides taken during the last two decades.

From 2005 onwards, however, growth averaged 9.5%. The recession of 2007-09 again slowed growth to 6.8%, but it bounced back to 8% and 8.5% respectively over the next two years.

GDP GROWTH IN POOR STATES

States Bihar Chhattisgarh Jharkhand Madhya Pradesh Orissa Uttar Pradesh All India Mean % growth (200004) 4.5 6.1 1.9 1.9 4.8 3.3 5.6 Mean % growth (200409) 12.4 9.7 8.5 6.6 10.2 6.7 8.5

Growth
The quick growth often touching 8.5% over the last decade found a paradox in the slow pace of reforms. The impact was felt after years. It was only in 1994-95 that GDP growth hit 7.5% (1994-95 to 1996-97). Growth averaged only 5.5% between 1997 and 2002 due to global economic troubles (1997-99), two droughts (2000 and 2002) and a recession in 2001.

Source: Central Statistical Organisation data

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History shows that where ethics and economics come in conflict, victory is always with economics. Vested interests have never been known to have willingly divested themselves unless there was sufficient force to compel them.
-BR Ambedkar, author of the Indian constitution

The savings rate shot up from 21.5% of the GDP in 199192 to 34% in 201011. As a result, investment levels eventually rose to 37% of the GDP from 22.1%, enabling sustainable growth of more than 8%. In laymans terms, the higher the domestic savings rate the less dependent India is on foreign inflows. This, in turn, makes it easier to tide over financial turbulence and strengthens the economy.

SAVINGS RATE
Savings rate As % of GDP 198081 18.5 199091 22.8 200001 23.7 201011 34

Source: Economic Survey (201011)

Photo by Balaji.B on Flickr

The savings rate apart, Indias per capita income is up from $300 in 1991 to $1,700 today. This has led to a tax collections spike, which in turn has financed the rise in social and infrastructure spending. These impressive growth and savings figures were not achieved by setting up sweat shops factories using cheap, often exploited labour to churn out goods for exports that are preferred by several Asian countries, most notably China. Most of Indias exports are based on the intellect, such as software services. It should be noted that though India is known for software services, they account for only 2% of the GDP. Other services legal, engineering, R&D exceeded $10 billion in 201011. As much as exports of these services matter, India remains driven mainly by domestic demand.

The initial production run cost the equivalent of $2,000 and has found a rival in a car being launched by Bajaj Auto for the equivalent of $3,000. The Nano, incidentally, claims to run 25 kilometres per litre of petrol far more than any other car in India. Most cellphone calls cost less than a rupee, while hospitals such as Narayan Hrudalaya provide major surgeries at a fifth of the cost in the West. Over time, jugaad has come to imply innovation.

The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.
-Thomas Sowell, writer

Investment
When India began welcoming foreign direct investment (FDI), many feared that Indian companies would not be able to compete and would be gobbled up by multinationals. That didnt happen. Not only did Indian companies hold their own, many used the opportunity to go global themselves outbound FDI as a proportion of GDP is 0.9%, higher than Chinas 0.6%. Tata Steel, for instance, acquired European steel major Corus and Tata Motors bought Jaguar Land Rover. The Birla group acquired Canadian firm Novellis to become the sixth largest aluminum company in the world, while Bharti Airtel took over Zain and is present in 14 African countries.

Innovation
Jugaad has become a buzzword in India. Loosely translated as making do, it signifies Indians success in producing goods cheaper than most other countries can with only a fraction of the resources available elsewhere. The Nano, the worlds cheapest car, produced by the Tatas is an example of this ingenuity.

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I learned that economics was not an exact science and that the most erudite men would analyse the economic ills of the world and derive a totally different conclusion.
-Edith Clara Summerskill, UK politician

Remittances have helped balance the volatility of foreign capital in tough times. This has allowed the government to decline aid from smaller donors, asking them to approach non-profits directly. The country has opted instead for debt from the World Bank. It is an indicator of the countrys confidence that its soft loans have fallen from almost 100% in the 1970s to less than 30% today.
Photo by Niyantha on Flickr

Indias FDI norms have been the subject of much debate. The significant barriers, especially in retail, ensured that inflows were never as high as they could have been FDI peaked at $26 billion in 2009-10 before slipping to $19.4 billion the next year. That said, most leading multinationals do business in India. Accenture and IBM have more employees here than in the US. Intel and Microsoft use India as R&D hubs, while Suzuki, Hyundai, Bosch, Pfizer and others use it as a manufacturing base. One reason why FDI has been steady is that Indias stock markets plagued by price manipulations, fraud and delayed settlements in the past have been cleaned up. In 1992, following a large securities fraud, India created a fully electronic exchange the National Stock Exchange even before London or New York did. This ended most rigging. Shares were held only in electronic form and settlements were down to T+3 levels (payment after three days of the transaction). Today, Indias stock markets are among the most efficient in the world. Before reforms, India got foreign aid by the bucketful but had little to show for it. While at $5.9 billion (2009-10) it still seems like a lot, it pales in comparison to the foreign investment of $51.2 billion and remittances from overseas Indians at $53.9 billion in the same period.

India, in fact, has become a substantial donor. Among its recent grants was $1 billion to Bangladesh. Credits worth $5 billion to African countries were also announced recently.

$26 billion
FDI in 2009-10; it slipped to $19.4 billion the next year

0.9%
Outbound FDI as a proportion of GDP; in China, it is 0.6%

A large part of crime is economics if people are working and have a home and family to support, then I believe you can reduce the crime rate.
-Vincent Frank, musician

The battle against poverty

Many believe that the reforms have bypassed poor sections such as the Dalits (untouchables as per the now-abolished caste system; they still face discrimination across India) and regions. This, the critics say, is

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Photo by Tobias Leeger on Flickr

why the desperately poor have radicalised and taken up Naxalism. Almost one-fourth of India is affected by this campaign against the state.

All of the problems were facing with debt are manmade. We created them. Its called fantasy economics. Fantasy economics only works in a fantasy world. It doesnt work in reality.
-Michele Bachmann, US politician

The fact is that the proportion of people claiming to be hungry in some or all months fell from 17.3% in 1983 to 2.5% in 2004-05. Six backward states, accounting for half of Indias population Uttar Pradesh, Bihar, Madhya Pradesh, Orissa, Chhattisgarh and Jharkhand grew fast, many faster than the national average, though admittedly from a smaller base. Between 2004 and 2009, growth surged in poor northern and central states Bihar (12.4%), Chhattisgarh (9.7%), Jharkhand (8.5%), Madhya Pradesh (6.6%), Orissa (10.2%) and Uttar Pradesh (6.7%). Indias growth could have been possible only if the bulk of the population improved its productivity. While national growth raised tax revenues, which was shared with the states, it was a case of trickle-up, not trickle-down growth.

The growth and, perhaps, rising literacy levels sparked a demographic transformation. Over the last decade, for the first time since independence, the number of children aged 0-6 years declined by 3.08%. The sharpest decline was in poor states. Again for the first time since independence, the number of workers is rising and that of dependents is falling. China reaped a demographic dividend earlier thanks to Maos one-child policy, but that could backfire once the country starts ageing. The condition of Dalits was thought to be the worst, especially in Uttar Pradesh with a population of 200 million, Indias biggest state. However, Dalits have emerged as a major political force. Today, the state has a Dalit chief minister, Mayawati. A recent survey in two districts of Uttar Pradesh showed great leaps in Dalits living standards TV ownership was up from zero to 45%, cellphone ownership up from zero to 36%, two-wheeler ownership up from zero to 12.3%, and children eating leftovers down from 95.9% to 16.2%. The findings on Dalits social status were even more striking. Cases of Dalits being seated separately at weddings were down from 77.3% to 8.9%, cases of non-Dalits accepting food at a Dalit home were up from 8.9% to 77.3%, bonded labour incidence was down from 32% to 1%, the Dalit proportion running their own businesses was up from 6% to 37% and the proportion of those working as agricultural labourers was down from 46.1% to 20.5%. Today, many Dalit businessmen have become millionaires and there is also a Dalit Chamber of Commerce and Industry. While the upliftment of Dalits is far from complete, they have gained substantially from reforms.

Economics has never been a science - and it is even less now than a few years ago.
-Paul Samuelson, economist

POVERTY RATES
Poverty ratio % of population 199394 45.3 200405 37.2 200910 32

Source: Economic Survey (201011)

HUNGER RATE
Homes reporting hunger % of population 1983 199394 1999 2000 3.6 2004 05 2.5

17.3

5.2

Source: Food and Nutrition in India: Facts and Interpretations, by Angus Deaton and Jean Dreze in Economic and Political Weekly, February 14, 2009

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Every nation on the Earth that embraces market economics and the free enterprise system is pulling millions of its people out of poverty. The free enterprise system creates prosperity, not denies it.
-Marco Rubio, US politician

Geography has made us neighbours. History has made us friends. Economics has made us partners, and necessity has made us allies. Those whom God has so joined together, let no man put asunder.
-John F Kennedy, former US president

Photo by United Nations Photo on Flickr

Literacy
Literacy rates are closely linked to the poverty ratio. It is no surprise then that as Indias poverty ratio dropped, the literacy rate shot up. Since 1991, Indias literacy rate rose by a record 21.83% to 74.04%. In the earlier two decades, it rose only 17.8%. Again, the poorer states fared better. In the last decade, the improvement in allIndia literacy (9.7%) was exceeded by Bihar (16.82%), Uttar Pradesh (11.45%), Orissa (10.37%) and Jharkhand (16.07%). Women did even better on the literacy scale. Female literacy improved dramatically by 11.8% across India, and higher in Bihar (20.2%), Uttar Pradesh (17.1%), Orissa (13.9%) and Jharkhand (15.3%)

LITERACY TRAIL
Literacyrate % of population 195051 18.3 196061 28.3 197071 34.4 198081 43.6 199091 52.2 200001 64.8 201011 74

14

Source: Census 2011

Whats left

I had four or five years in school training as a soprano. I fell into pop singing because of economics. I got out of high school and had to go work, and they werent hiring opera singers.
-Jo Stafford, singer

A remarkable story has been scripted over the last two decades. Yet, a longer journey awaits. There is a large, unfinished reforms agenda, not least of which is fixing a basic issue ease of doing business. The Heritage Foundations 2011 Index of Economic Freedom ranked India 124th among 183 countries on this parameter. The World Banks Doing Business report, meanwhile, placed India 134th among 183 nations. Globally, there seems to be consensus that India has lots to do before it can be called business-friendly. From getting building permits to enforcement of contracts, the Indian story is one of unending red tape, restrictions and delays. India has the dubious distinction of leading the world in terms of legal backlog nearly 31.5 million pending cases. Rigid labour laws are a barrier for those wishing to set up labourintensive industries that could provide millions of jobs, not to mention curbs on investment in infrastructure, retail and education. Here are a few sectors that require urgent attention.

There is little accountability, and administrative reforms are the need of the hour. The lack of education has led to severe shortage of skilled labour, and the shambolic school system ensures that those who pass through it are functionally illiterate. India needs to take great strides in education and vocational training.

7.27
Spending on social sector, as percentage of GDP, in 2009-10. In 2005-06, it was 5.49%

Hunger
Indias nutritional indicators are staggering. Anaemia affects over 80% of the population in some states. Child malnutrition, measured by low weight for age, affects 46.7% of all children (on this count, we fare worse than any African country). There has been virtually no improvement in child malnutrition between 1998-99 and 2005-06. Indian children suffer from stunting and low weight. Calorie intake is falling despite rising income, probably because poor people want to switch to superior, tasty food rather than get more calories out of basic food. Hence, nutrition is a bigger problem than hunger, which makes awareness of the importance of vitamin, iron and iodine intake critical.

An economist is a man who states the obvious in terms of the incomprehensible.

-Alfred A Knopf, publisher

Social sector
A boom in social spending has been accompanied by innovations such as the National Rural Employment Guarantee Scheme, the Sarva Shikhsa Abhiyan (a national education mission), the Right to Education and the Food Security Act that extends subsidised food facilities to the poor. There is also a rural health mission and the Jawaharlal Nehru National Urban Renewal Mission. Social spending rose from 5.49% of GDP in 2005-06 to 7.27% in 2009-10. However, these schemes are beset by corruption and waste. Free government schools and health centres are barely functional, while unions ensure that there is no accountability from teachers, health workers and other service providers. Absenteeism is rampant and bribes are the norm.

80
Estimated percentage of Indian children suffering from anaemia

46.7
Estimated percentage of children who suffer from malnutrition, measured by low weight for age. India fares worse than any African country on this count. There has been virtually no improvement in child malnutrition between 1998-99 and 2005-06

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Corruption
This is the hottest topic of discussion in India today, and has implications for businesses. After enduring two generations of criminals and corruption in politics and the bureaucracy, public anger has boiled over. A mass campaign for effective anti-corruption laws led by social activist Anna Hazare found resonance across the country. It was especially popular among the youth and shook the government into action. While the law that the government tabled in parliament which was eventually not voted on became the subject of heated debate, there is little doubt that the campaign marked the rise of an assertive middle class and media. Will it affect election results in the end? The jurys out on that. Most people believe that corruption is getting worse and that politicians are catalysing the rot in the system. The Corruption Perception Index of Transparency International ranks India 87th out of 178 countries, behind China (78th). India has actually improved its score slightly, from 2.7 out of 10 in 2002 to 3.3 in 2010. This may be because several areas

licenses, foreign exchange norms, etc have been deregulated, which reduces the avenues of corruption. There are, however, areas where corruption is still rampant real estate and government-financed infrastructure, for instance. There is too much room here for political discretion and favouritism. This affects the business climate and investor sentiment. As far as criminality in politics goes, 150 of the Lok Sabhas 545 seats were won by those with criminal records; in the 2004 election, 128 such politicians won. The glacial pace of the judicial process allows criminals to dominate polls through bribery and intimidation. Obviously, this has led to greater corruption in government An effective Lokpal an anti-corruption ombudsman that has the powers to investigate ministers, the bureaucracy and even the Prime Ministers Office would go a long way in reducing corruption. Another option is to fast-track cases against politicians.

There can be no real individual freedom in the presence of economic insecurity.

-Chester Bowles, former US diplomat

If all economists were laid end to end, they would not reach a conclusion.
-George Bernard Shaw, writer

87
Indias rank, among 178 countries, on Transparency Internationals Corruption Perception Index

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Photo by India Kangaroo on Flickr

150
Isnt it interesting that the same people who laugh at science fiction listen to weather forecasts and economists?
-Kelvin Throop III, fictional character created by RAJ Philips Number of Lok Sabha members with criminal records. The Lok Sabha, the lower house of parliament, has 545 members in all. In the 2004 election, 128 politicians with criminal records were elected to it

of the economic miracle reach everybody, it cannot afford to ignore governance reforms. Reform of the judicial system will improve detection and lower corruption; it will also improve contract enforcement and protection of property rights. If national resources such as mines and telecom spectrum are auctioned transparently, it too will improve the economic environment and benefit the consumer more.

Infrastructure
Lack of infrastructure could prove to be a major hurdle to the countrys progress. It could impede the delivery of health services and education, and prevent social schemes from reaching the needy. Here, too, corruption is endemic because roads, power, ports, railways and telecom are all linked to natural resources, land and government contracts all of which provide ample opportunity for kickbacks. No agricultural land can be converted into non-agricultural land for industry without state permission, which too provides opportunities for corruption. India requires transparency in policies and procedures, and an end to political discretion in these areas.

Fiscal management
The countrys fiscal situation is a concern, as is the management of the fiscal deficit and foreign borrowings. The union budget is expected to bring an admission that the fiscal deficit target of 4.6% will be missed, wrote James Lamont in the Financial Times on January 26. Fiscal restraint will become more difficult the nearer the Congress party gets to the 2014 parliamentary elections, which are often won by doling out freebies and welfare programmes to the poor. Already a votewinning food security bill is in the works, he added. The impact of this bill on the deficit is anybodys guess. External stresses are likely to remain a theme for the rest of FY12 and in H1-FY13. We expect little relief for the trade deficit as exports slow and the reduction in the import bill is limited by oil imports and investors huge appetite for gold. Hence, despite stable flows in the form of services exports and remittances, funding the current account deficit forecast at 3.1% of GDP in FY12 and 2.8% in FY13 may prove challenging, predicted Standard Chartereds Global Focus 2012 report.

An economist is an expert who will know tomorrow why the things he predicted yesterday didnt happen today.
-Laurence J Peter, academic

Administrative reforms
While economic reform is deep-rooted and well on its way, governance reforms are languishing. If India is to maintain its growth rate and ensure that the benefits

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Photo by celblau on Flickr

Indian banks, meanwhile, are under pressure amid the high policy rates and low growth.

In all recorded history there has not been one economist who has had to worry about where the next meal would come from.
-Peter Drucker, management guru

However, most banks are in good enough shape to absorb the pressure; they are also better capitalised than they were in 200809. Also, the government intends to boost their capital base by March 2012; further announcements on this are expected in the budget. Finally, the focus on increasing the purchasing power of vulnerable groups without a corresponding emphasis on supply-side policies has resulted in inflation. Hence, expenditure reforms are critical.

Subsidies need to be reduced, particularly given that the expected slippage in the FY12 fiscal deficit to 5.6% of GDP from the targeted 4.6% is driven primarily by the subsidy burden, said the Standard Chartered report. This report too said that this years provincial elections would make it tough to curb populist expenditure. At the same time, it pointed out, slower growth might curb revenues. This would probably keep the FY13 fiscal deficit at a high 5.5% of GDP. Barclays Capitals The Emerging Markets Quarterly report also predicted that the government would miss its fiscal deficit target.

STANDARD CHARTERED FORECASTS FOR INDIA

2011 2012 7.4 6.5 7.0 48.5 -2.8 -5.5 2013 8.0 6.0 7.0 46.5 -2.6 -5.0 2014 8.0 6.0 7.0 44.0 -2.5 -5.0 GDP (real % y/y) WPI (% y/y) Repo rate (%)* USD- INR* Current account balance (% GDP) Fiscal balance (% GDP) 7.0 8.7 8.5 51.5 -3.1 -5.6

Economics is the painful elaboration of the obvious.

-Friedrich von Hayek, economist

Note: All forecasts except USD-INR refer to the April-March fiscal year starting in the year in the column heading; *end-period. Source: Standard Chartered Research

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What lies ahead

According to a recent Business Monitor International (BMI) report, real GDP growth is expected to slow to a three-year low of 6.8% in FY2011-12 on the back of the rising cost of capital (the central bank has been raising interest rates regularly to curb inflation that hit 12% at one stage), receding export growth and slowing credit expansion. We expect activity to recover somewhat in FY2012-13 (with our full-year growth forecast currently at 7.3%) as the central bank starts to cut its policy rates, which have essentially choked the Indian economy over the past year, said the report titled Economic Analysis An Economic Resurgence or the Calm Before the Storm?

Growth
While its widely expected that India will escape the pain that many Euro zone economies as well as the US are experiencing, the BMI report states that purchasing managers indices (PMI) suggest a rebound in overall economic activity. Manufacturing PMI rose from its September 2011 low of 50.4 to 57.5 in January 2012 an eightmonth high. The PMI for services rose to 58.0 from a low of 49.1 in October 2011. This could lead to a reassessment of BMIs growth projection for India. However, if growth does not exceed the 6.8% predicted, it would mean a sustained slowdown through H2 FY2011-12. If that happens, growth could fall to 6.4% year-on-year (y-o-y) in H2 from 7.3% in H1. Also, a Financial Times report on January 26 said that many industrialists have been discouraged by growth slipping from forecasts of 9%. Double-digit growth, said Richard Iley, economist at French bank BNP Paribas, to the newspaper, is firmly in the rear view mirror. Despite the encouraging PMI data, macroeconomic trends suggest a weakening economy. Q3 of FY2011-12 started badly, with Industrial production falling for the first time on a y-o-y basis since June 2009. Exports fell too. November trade data showed growth falling to 3.9% y-o-y. Finally, commercial credit growth, which has been falling since the beginning of 2011, dropped to 13.4% y-o-y in December 2011 a level last seen in December 2009. Until the Reserve Bank of India (RBI) loosens its official stance on monetary policy, which we do not see happening until Q212, consumption and investment activity are likely to remain weak. Furthermore, we do not see the country exporting its way out of this downturn, nor is the government in a position to enact stimulative fiscal measures, the BMI report said.
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Economic statistics are like a bikini, what they reveal is important, what they conceal is vital.
-Sir Frank Holmes, professor

The deteriorating global situation will also impact Indian exports this year. World GDP growth could slow to 2.8% (it was 3.1% in 2011), the US economy will continue to stagnate and the Euro zone seems to be on the brink of a recession. BMI expects net exports to contract, with their growth clocking -6% and -3.6% in FY2011-12 and FY2012-13 respectively. High inflation, delays in government approvals and rising interest rates have also affected business sentiment. Expectations that Prime Minister Manmohan Singh, said the Financial Times, would use his second term for bold reforms have quickly drained away. Instead, the Congress party-led coalition has suffered repeated setbacks at the hands of the opposition, its allies and civil society activists. We in India have had our share of problems. The Indian economy has slowed down and Inflation edged up. Concern about corruption moved to the centrestage, Singh acknowledged. This was reflected in the Bombay Stock Exchange index, the Sensex, turning stagnant and the rupee falling 16% over 2011. Its clear, said Standard Chartereds Global Focus 2012 report, that the current combination of relatively slow growth and

high inflation is a warning signal that policy inaction needs to be addressed and reforms need to be accelerated. The economic outlook for the rest of FY12 and FY 13 will hinge on the governments ability to restore investors confidence in Indias long-term story

Investment
An Ernst & Young report released at the World Economic Forum in Davos in January said FDI in India is set to swell as investors look beyond issues transparency, poor infrastructure and policy paralysis in search of growth. The fundamentals that make India attractive to investors remain intact, Farokh T Balsara, head of markets at Ernst & Young India, wrote. However, our respondents continue to cite inadequate infrastructure and a lack of governance and transparency as major obstacles to investment. FDI in India rose 13% to $50.81 billion in the first 11 months of 2011 from a year earlier, while the total number of projects rose 25% to 864, the report said, quoting additional data from the Financial Times FDI Intelligence service.

Doing econometrics is like trying to learn the laws of electricity by playing the radio.
-Guy Orcutt, economist

20

Photo by SknaB noIA on Flickr

The First Law of Economists: For every economist, there exists an equal and opposite economist. The Second Law of Economists: Theyre both wrong.
-David Wildasin, professor

Most of the companies surveyed for the report were confident of the long-term prospects for investment in India. Of the 382 international firms surveyed, 70% planned to increase or maintain operations in India, while 19% said they didnt plan to enter the country or were preparing to withdraw. The areas of concern, Barclays Capitals The Emerging Markets Quarterly report said, were weaknesses in private sector capital expenditure (a result of monetary tightening) and slower government investments due to its poor fiscal health. Automakers led investments in India last year, boosting spending by 46%, the Ernst & Young report said. Technology and life sciences companies came next, while spending by foreign firms on infrastructure and retail projects declined. Ford had said earlier that it would spend $142 million on Indian operations, while Renault-Nissan also said it would step up investments. While foreign investment in several industries has been facilitated, it remains a touchy issue for retail. With a market of 1.2 billion people and worth about $450 billion, and a middle class in

consumerist mode, India is one of the worlds most attractive retail markets. However, pushing through FDI in retail is an uphill battle, as the government discovered recently. In November 2011, New Delhi said it was throwing open the market to global supermarket chains such as Wal-mart and Carrefour and Tesco only to be forced by its allies to withdraw the move. The proposal to permit foreign groups to own up to 51% of supermarkets sparked protests and paralysed parliament. Critics predicted it would it would kill family-run shops that make up more than 90% of Indias retail sector. Tesco branded the U-turn a missed opportunity. Harsh Mariwala, the head of consumer products firm Marico, called it a highly regressive move, reported the Financial Times. Rajiv Kumar, of the Federation of Indian Chambers of Commerce and Industry, said opponents of FDI in retail had whipped up xenophobic sentiments about the return of colonialism. Almost as a consolation for reforms proponents and to reassure global investors, the government allowed 100% foreign ownership of single-brand stores.

An economist is someone who, when he finds something that works in practice, tries to make it work in theory.
-Joan Violet Robinson, economist

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Photo by Greenbelf Alliance on Flickr

Having an in-house economist became for many business people something like having a resident astrologer for the royal court: I dont quite understand what this fellow is saying but there must be something to it.
-Linden, writer

Expect brands such as Ikea, Adidas and Marks and Spencer, which were allowed to own up to 51% of a store, to flock to India without domestic partners. The decision is likely to result in more foreign companies entering the market or expanding their presence, said Fitch, the credit agency. This is a welcome move with a clear potential to lift the general mood in the economy, chimed in Rajan Bharti Mittal, vice-chairman and managing director of Bharti Enterprises, one of the countrys largest retailers, to Financial Times. However, the fear of policy reversal still lurks. Thats why Ikea, the Swedish furniture giant, is not expected to come to India soon, though it is keen to. It doesnt help that policy flip-flops arent the only challenge; land acquisition and a market that is anything but homogenous are problems too. Thats why the World Bank ranks India 132nd out of 183 countries for ease of doing business. The evolution of the retail sector, it now seems, will be long drawn out.

on household budgets over the last 18 months. As a result, the outlook is grim on private consumption, which accounts for roughly 65% of the GDP. Interest rates (the repo rate, the benchmark at which the central bank buys government securities from banks to control money supply, was at 8.5% at the time of writing) are pretty high too with a wary RBI refusing to lower them until it is certain inflation has been tamed. The stock markets arent doing great either, staying range-bound between 16,000 and 17,500 points. Even the rupee has weakened more than 19% since its July 2011 peak. BMI expects private consumption to grow by 6.0% and 6.2% in FY2011-12 and FY2012-13 respectively a considerable slowdown from the 8.8% growth in FY2010-11. While household consumption currently at its weakest level on record is likely to find a floor thanks to government spending in rural areas and a healthy labour market, weak consumption will weigh on investment in a feedback loop, said Standard Chartereds Global Focus 2012 report. On the public consumption front, the government has been hamstrung by the global financial crisis. One indicator of this is the fall in public spending growth in 2008, government spending averaged 26.7% y-o-y growth. Spending over the 2011s four quarters expanded only at 3.2%. Combine negative revenue growth and a growing expenditure bill due to the various social schemes announced and what you get is little room for the government to push through fiscal stimulation. BMI projected public consumption to grow by 3% and 5% in FY2011-12 and FY 2012-13 respectively.

Economics is the only field in which two people can get a Nobel Prize for saying exactly the opposite thing.
-Heard at the London School of Economics

13%
Rise in FDI in India in the first 11 months of 2011 from a year earlier; total FDI for the period was $50.81 billion, according to an Ernst & Young report

25%
Rise in number of projects; total number of projects in the period was 864, said the report

70%
Proportion of firms, of the 382 surveyed, that planned to increase or maintain operations in India; 19% said they didnt plan to enter the country or were preparing to withdraw

Private and public consumption

22

Though food inflation has come down to manageable levels, there was great pressure

65
Percentage of GDP accounted for by private consumption

6.2%
Inflation is the one form of taxation that can be imposed without legislation.
-Milton Friedman, economist Expected rise in private consumption in FY2012-13, according to BMI, a considerable fall from the 8.8% growth in FY2010-11

might only be in the mid-teens for the current fiscal year, in marked contrast with the average of more than 20% rate of recent years. However, food inflation is falling fast. As Pranab Mukherjee pointed out the substantial improvement, Kaushik Basu, the finance ministrys chief economic advisor, told the Financial Times: We have seen the worst of the [rate] rises. The Barclays Capital report estimated that repo rate the RBI drops the rate to expand money supply and raises it to squeeze supply cuts could be introduced from mid-2012. The rate increases, though, found support in some quarters. C Rangarajan, Manmohan Singhs chief economic adviser, said that India, which has a high poverty rate, must keep inflation below 5% to achieve sustainable growth. His views found an echo in the RBI. The Financial Times reported that RBI officials felt that the economy cannot grow more than 8% without inflicting high inflation on the poor. Besides, not everyone is impressed with the excessive pessimism. Arvind Panagariya, economist at Columbia University, told the newspaper that India can quickly recover the 2 percentage points of economic growth it lost during the global financial crisis. Former World Bank chief economist Joseph Stiglitz pointed to the achievement of 7% growth amid the downturn. The risk remains, though, of global commodity prices surging as they did in 2010, flaming inflation again and delaying rate cuts. The RBI has one other worry a weakening rupee. Currency depreciation in a country that runs a current account deficit and imports most of its oil may fuel inflation again. The weakening is a result of the rupees overvaluation and deteriorating risk sentiment. The Barclays Capital report said the rupee would remain weak in the near term, clawing back to 49/$ in six months and to 48/$ in a year. Keeping prices in check while maintaining growth will be a key challenge for Mukherjee.

3.2%
Growth in government spending over the four quarters of 2011. In 2008, it averaged 26.7% year-on-year growth

Will the RBI relent?

As FY2012-13 approaches, the easing of key interest rates could be crucial, providing a much-needed boost. Through FY2012-13, BMI expects cuts of 75 basis points on the back of falling inflation. The cuts could be higher if inflation recedes faster than expected. Indias policymakers have battled over the past 18 months to bring down inflation, the highest among BRIC (Brazil, Russia, India, China) nations. While inflation fell to acceptable levels at the beginning of 2012, it has come at the cost of growth. Rather than economic growth, we expect downside surprises to come through on inflation, Robert Prior-Wandesforde, economist at Credit Suisse in Singapore, told the Financial Times. This because policymakers have resorted to monetary tightening to rein in prices, raising benchmark lending rates 13 times over the past two years despite other emerging markets despite critics pointing out that other emerging markets cut them to protect growth. They accused the RBI of acting timidly, while industrialists blamed higher borrowing costs for choking off growth and deterring investment. As Barclays Capitals The Emerging Markets Quarterly report pointed out: higher interest rates and prolonged tightness in liquidity are visibly hurting several rate-sensitive sectors such as manufacturing, construction, real estate, banking and finance. Credit growth has already slowed considerably and, we estimate,

Having a little inflation is like being a little pregnantinflation feeds on itself and quickly passes the little mark.
-Dian Cohen, economist

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GROWTH AND INFLATION (% CHANGE)

When goods dont cross borders, soldiers will.
-Fredric Bastiat, economist
2007 Real GDP growth ASEAN China India Inflation ASEAN China India 9.3 6.7 14.2 9.6 4.9 5.6 4.8 6.4 2008 5.7 4.3 9.6 5.1 7.1 9.9 5.9 8.3 2009 5.2 1.1 9.2 9.1 2.8 2.6 -0.7 10.8 2010 8.3 7.9 10.4 8.8 5.1 4.4 3.2 12.0 2011 6.5 5.2 9.2 7.1 5.9 6.0 5.6 8.9 2012 6.1 5.2 8.1 6.3 4.9 4.9 3.5 7.8 2013 6.8 5.7 8.4 8.3 4.6 4.7 4.9 7.9 2014 6.5 5.7 7.9 8.2 4.4 4.6 4.3 7.7 2015 6.6 5.8 7.9 8.4 4.2 4.7 3.9 7.5

Source: Economist Intelligence Unit

The primary reason for a tariff is that it enables the exploitation of the domestic consumer by a process indistinguishable from sheer robbery.
-Albert Jay Noc, author

EYE ON INDIA
2012 Nominal GDP 1,4 (in Rs bn) Nominal GDP 2,4 (in $ bn) Real GDP growth 2,4 (% change, y-o-y) GDP per capita 4 (in $) Population5 (in mn) Indl prodn index (% y-o-y, average) 3,4 2,287.6 f 7.3 f 1,818 f 1,258.4 f 0.0 f 2,620.2 f 7.8 f 2,055 f 1,275.1 f 7.5 f 3,108.8 f 7.7 f 2,407 f 1,291.8 f 7.9 f 3,669.8 f 7.5 f 2,805 f 1,308.2 f 7.6 f 4,223.6 f 7.5 f 3,189 f 1,324.4 f 7.5 f 4,747.5 f 7.4 f 3,542 f 1,340.4 f 7.5 f 104,241.3 f 2013 118,401.2 f 2014 133,486.1 f 2015 150,232.6 f 2016 168,945.7 f 2017 189,900.4f

f: BMI forecasts. 1 GDP at market prices,fiscal years ending March 31 (1990=1990/91). 2 2011=FY2011/12,factor cost, f=BMI forecast. 3 New series used from 2005/06 onwards. Sources: 4 Central Statistics Organsation/BMI; 5 World Bank/UN/BMI

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Top priorities

In the long run we are all dead.

-John Maynard Keynes, economist

As the country looks ahead to the budget, here are the issues that are likely to be on Pranab Mukherjees mind. Fiscal consolidation Growth has slowed along with a slippage in investment. Interest rates have been raised to arrest inflation, which has squeezed funds available to fuel growth. To top it all, the fiscal deficit target of 4.6% is likely to be missed. The budget would do well to lay a roadmap for fiscal consolidation, allowing the RBI to lower rates and stimulate demand. The threat of Inflation could be neutralised by easing supply constraints. Helping markets With growth slowing and rates rising, Indian markets have been stagnant for far too long. The abolition of the Securities Transaction Tax to make transactions cheaper and resisting the temptation to raise taxes in order to boost revenues would aid the return of market buoyancy. Two other policy changes are critical: public sector disinvestment needs to get on the fast track again and pension and provident funds should be allowed to invest more in stocks. Job creation Indias unemployment rate fluctuates between 9% and 10%. However, as the workforce gets increasingly younger, even 7% growth may not be enough. Whats urgently needed is investment in and, perhaps, cheaper credit for labourintensive industries. Skill development is important, but there are few incentives for industry to upgrade employees talents. Most importantly, inclusive growth would ensure that all industry sectors and sections of society would flourish, creating more employment.

Bring back reforms Political constraints have pushed reforms to the backburner. This has contributed to the slowdown and loss of investor sentiment. The introduction and subsequent withdrawal of a policy allowing FDI in retail is an example. The government needs to send a clear signal that it is serious about reforms. Agriculture Growing at a mere 2%, agriculture is a worry. If food security is to be achieved, India will have to do better on this front. The farm-to-consumer chain is far too long; its time to link farmers to markets. This will make agriculture more lucrative and lower food prices. India spends the equivalent of $20 billion on food and fertiliser subsidies, but that hasnt eased supply or made farmers richer. Its the delivery mechanism that has failed; better subsidy management is the need of the hour.

It is difficult to get a man to understand something when his salary depends on his not understanding it.
-Upton Sinclair, author and politician

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Indias economic journey

500 BC 1 AD 1000 1500 1600

: Silver punch-marked coins minted; its a period of intensive trade and urban development : India has 32.9% share of global income, the largest in the world : India has 28.9% share of world income, the largest in the world : India has 24.5% share of world income, second largest in the world after China, which has 25% share : Indias income of 17.5 million (under Akbars Mughal empire, population of roughly 150 million) was greater than the entire treasury of Great Britain in 1800 (16 million) : India has 24.4% share of world income, largest in the world, under Aurangzebs empire : Cornwallis Permanent Settlement Instituted in Bengal : China is worlds largest economy followed by the UK and India. Industrial revolution in the UK, British begin treating India as an unequal partner : Indias GDP estimated at 40% of Chinas. British cotton exports reach 30% of Indian market : First estimation of Indias national income by Dadabhai Naoroji : India has 12.2% share of world income : India has 7.6% share of world income : India gains Independence : Government sets up Planning Commission, Jawaharlal Nehru is chairman. Objective is to streamline resource allocation, put economy on development path : First Five-Year Plan launched. Major portion of resources directed to agriculture, rural infrastructure. Food production rises by 18% : India has 3.8% share of world income : Economy at $494.8 billion, has 3.1% share of world income : Balance of payments crisis. External debt rises to $70 billion, exacerbated by Gulf War. Rising oil prices deplete countrys foreign exchange reserves. India is on the verge of default; has enough to pay for only three weeks worth of imports. In May, government sells and pledges gold to raise $605 million. Rupee devalued on July 1 and 3. Economic reforms begin : Government switches from fixed exchange rate system to dual exchange system. Boost for the economy, but inflation rate is high and poor industrial growth cause concern. Securities and Exchange Board of India established to oversee financial markets : Unified exchange rate system introduced

Far better an approximate answer to the right question, which is often vague, than an exact answer to the wrong question, which can always be made precise.
-John Tukey, statistician

1700 1793 1820 1850 1868 1870 1913 1947 1950

In general, the art of government consists in taking as much money as possible from one party of the citizens to give to the other.
-Voltaire, philosopher

1951 1952 1973 1991

19801991 : Economy virtually closed

1992

1993

1993-2010 : Reforms continue. Public sector disinvestment introduced, as are various administrative reforms. Stock market booms, crossing 20,000 points at one stage before falling due to an economic slowdown 2009 2010 2011
26

: Global slowdown impacts economy, jobs; India, however, maintains a growth rate of over 6% : Indias economy is at $4.06 trillion, accounting for roughly 6% share of world income, the fourth largest in the world : Fuel prices deregulated. Inflation hits record highs, crossing 12%. Numerous rate hikes follow : Inflation brought under control, but fears of slowing growth persist

2012

Industry milestones

1945 1952 1956 1969 1970 1972

: Tata Motors established in Mumbai to build locomotives : Mohan Mittal starts steel business (later Ispat) in Kolkata : Nand Kishore Ruia founds the iron ore export company Essar in Chennai : Tata appoints FC Kohli to head computer services : OP Jindal opens steel plant in Hisar : India-born MIT graduate Narendra Patni founds Data Conversion (later Patni) in the US with back-office operations in Pune Tata obtains software contract from Burroughs, first major software project outsourced by the US : Azim Premjis Bangalore-based Wipro starts selling first computer made in India : 57 foreign firms, including IBM, shut Indian plants rather than meet demands for some degree of Indian ownership : Karnataka state agency Keonics establishes Electronics City in Bangalore. Deng launches economic reforms in China : Wipro, to fill a gap after IBMs exit, hires Sridhar Mitta to set up offices in Bangalore to make computers : Narayana Murthy founds Infosys in Bangalore. Mukesh Ambani joins family business, Reliance : Anil Ambani joins Reliance : Sunil Mittal founds Bharti Telecom : Gautam Adani opens trading house in India : India sets up Software Technology Parks of India (STPIs) to promote software exports, opens first park at Electronics City of Bangalore. OP Jindal splits between his children his steel and power conglomerate. India abandons socialism, liberalises economy after Manmohan Singh is appointed finance minister. Wipro wins software contract from a US customer that interacts via the internet : American Express outsources management of credit card business to its Indian office, first major project of business process outsourcing to India : Essar Group run by Nand Kishore Ruias sons, Shashi and Ravi, extends from shipping to steel, oil, power and telecom. Lakshmi, son of Mohan Mittal, founds his own steel business, LNM Group (later Mittal Steel). LG acquires Zenith : Gautam Adani buys Mundra port, creates a special economic zone of 100 sq km. : Azim Premji becomes Indias richest person, Wipro has highest market capitalisation in the country : Ambani brothers split their business empire. Lenovo acquires IBMs personal computer business : Lakshmi Mittals Luxembourg-based ArcelorMittal becomes worlds largest steel maker : Tata acquires Jaguar : Anil and Mukesh Ambani are 6th and 7th richest persons in the world respectively. Infosys sets up worlds largest corporate university at Mysore. : Bharti Airtel becomes worlds fifth largest telecom operator. Lakshmi Mittal is Europes richest person

We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.
-Winston Churchill, former England prime minister

1975 1977 1978 1979 1981 1983 1986

You cant get rid of poverty by giving people money.

-PJ ORourke, political satirist

1988 1991

1993 1995

1998 1999 2005 2006 2008 2009 2010

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India at a glance

Photo by smlp.co.uk on Flickr

Capital New Delhi Largest city Mumbai Official languages Hindi, English Area 3,287,263 sq km Population 1,210,193,422 (2011 census) Population density 367.3/sq km GDP (purchasing power parity), 2011 estimate $4.469 trillion; $3,703 per capita GDP (nominal), 2011 estimate $1.843 trillion; $1,527 per capita

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