Structure Economic and Political History of India Some Relevant Facts on India Emerging Indian Household Signs of success in eradicating poverty Emerg

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1 What is driving the Indian Economy: Aspirations of its People Doing Business in India Dr. Mukul P Gupta Professor of Marketing and Dean Continuing Education & International Linkages Management Development Institute Gurgaon INDIA mukul@mdi.ac.in

2 Structure Economic and Political History of India Some Relevant Facts on India Emerging Indian Household Signs of success in eradicating poverty Emergent Society driving the economy

3 Birth of Independent India As clock struck 00h00 on 15 August 1947, India became a free country British split India into two nations based on religion India, West and East Pakistan This led to the biggest migration in human history, carnage and blood bath Indian National Congress (est. 1885) had led the Freedom movement - become the ruling party

4 Political and Economic Sign-posts in History of Independent India India sets up a Constituent Assembly to write the constitution 1948 Constitution adopted in 1949 and comes into effect on 26 January India declares itself as a Sovereign Democratic Republic First General Elections held in 1951 Indian National Congress wins

5 First Approaches to Macro Economic Management Adopted the Russian Planning Model of 5-year plans since 1950 Set-up Planning Commission of India (Standing advisory body) Set-up Finance Commission for deciding of centre-state financial relations (every ten years ) Adopted mixed economy model

6 Managing the Economy First Plan focussed on Agriculture (1951) Second Plan focussed on Industry (1956) Industries (Development & Regulation) Act 1956 Created categories of industries/sectors Strategic Sector Reserved for only Government Ownership Open for Joint-sector Participation Open for private ownership Reserved for Small scale sector

7 An Adolescent Nation India moves forward slowly but the economic growth is slow and is negated by population growth Third 5-year plan refocused on agriculture since this was the largest sector of economy as well as affecting over 80% of population then Nehru decides to invest in education, technology and management

8 An Adolescent Nation Nehru decides to get India on the International Scene Establishes the Non-Aligned Movement Chinese Aggression Failure of rains - famines 1965 War with Pakistan acute food shortages

9 An Adolescent Nation First national slogan Jai Jawan, Jai Kisan Long Live the Soldier, Long Live the Farmer Rise of people s expectations and aspirations Regional Parties emerge in South India and win State Elections the feeling that India was better off under the British emerges 20 years after independence

10 India moves toward adulthood Ruling Indian National Congress has internal turmoil Trade-Unions emerge, shortage of non- agricultural jobs create resentment in youth PM Indira Gandhi (then 50) splits the Indian National Congress throws out the old guard

11 First signs of radical Changes Nationalisation of Banks to signal socialist agenda abolishes privy-purses purses of former princes Gives a new slogan Garibi Hatao Eradicate Poverty India helps liberation of East Pakistan Bangladesh is born

12 First signs of radical Changes India amends the preamble of its constitution and becomes a Sovereign Democratic Socialist Republic The green-revolution revolution happens (initiatives of payoff) self sufficiency in food followed by White revolution India joins the nuclear club 1974 Indo-Russian relations gain and Indo-American relations lose, barters arms for consumer goods

13 Young India at cross-roadsroads Education takes off more graduates arrive in the job market but there are no jobs people disenchanted JP leads a civil disobedience move mobilising the youth Indira Gandhi pronounced guilty of electoral mal-practice 1975

14 Confusions - while India Grows Rather than resign, Indira Gandhi promulgates internal emergency, suspends constitution All political leaders opposing her are jailed Era of sycophancy, governmental excesses, forced sterilisations of males, blunting of judiciary, censorship of press, raids and excesses on Indian business houses Flight of Talent Begins

15 Gains from that dark phase development programme focussing on hard work, farsighted vision, firm resolve, discipline, tree plantation and population control rolled out leading to a development Major productivity gains in public sector Improved Governance, reduction in bribery, improved civil discipline

16 Democracy Returns 1977-Indira Gandhi suddenly lifts emergency and announces elections Indian National Congress loses first time in 30 years A coalition of different parties takes office but its leaders lack the art of governance and run disjointed agendas The coalition experiment fails and the government falls

17 Democracy Returns Indira Gandhi back in office A separatist movement begins in Punjab the seat of green revolution aspires to be an independent nation proxy supported by Pakistan and radical migrants from India Indira Gandhi assassinated 1984 Her son Rajiv (40 years) an Airlines Pilot reluctantly takes over as PM announces elections and returns with three-fourth majority.

18 Rajiv Era 21 st Century Dream Sets up technology missions on literacy, telecom, river action plans, computers, rural employment schemes himself technology savvy- brings in professionals as Ministers Fires the imagination of youth sells them the dream that next century belongs to India First Structural Reforms of the economy begin Capital Markets revved up Equity Cult begins

19 Rajiv Era 21 st Century Dream Consumer Goods could come in, TV and Print Media expanded, Selective FDI allowed Improved Indo-American and Indo-Chinese Relations De-emphasised emphasised the Leanings towards Russia Had great personal chemistry with media, people and global leaders Got entangled in Bofors kick-off scandal, voted out in 1989

20 Minority and Coalition Governments An era of political confusion with 4-5 governments coming in. Coalition governments in 1998 and again in But Politicians stopped tinkering with Economy The New phrase was Good Economics is also Good Politics Then came the economic crisis in 1992 and India announced Structural Reforms Since then there has been a slow but steady ongoing process of reforms

21 India as it stands today 28- States 7- Union Territories 593- Districts 3700~ Cities & Towns 627,000~ Villages 1100 Million people Time Zone: GMT+ 5.5 GDP ~ 600 Billion USD or 4000 Billion Rand but 3000 Billion USD (PPP) Population 1901 to 1921 Stagnant 1921 to 1951 Steady Growth 1951 to 1981 Rapid High Growth 1981 to 2001 High Growth with definite signs of slow down

22 India as it stands today Persons Per Household Rural Population - 72 % Females per 1000 males Literacy Rate- 65 % Male - 76 % Female - 54 % Per Capita Income Urban ~ 2800 Rand (INR 19467) Rural ~ 1350 Rand (INR 9481) Annual Household Income Urban ~ Rand (INR ) Rural ~ 8100 Rand (INR 56630)

23 Consequences of Economic Reforms Higher Income Growth Higher Saving Growth Dramatic Changes in Indian Market Demographics Higher Consumption Growth Life Style Changes

24 Consequences of Economic Reforms Consumer Market Evolution Characterised by Structural Changes with respect to Product Availability Media Penetration Income Distribution Asset Ownership By Households

25 INCOME CLASSES (at prices) Income Class Rs. per annum Rand per annum (approx. Rs.7.0 to a Rand) Low <=45,000 <= 6500 Lower Middle 45,001-90, Middle 90, , Upper Middle 135, , High > 175,000 > Source: National Council of Applied Economic Research, New Delhi

26 Income Distribution - All India (Percentages) Households (Millions) Low Middle High

27 Shift in Income Distribution All India Households (Percentage Gains) Low Middle High

28 Income Distribution - Rural (Percent of Households) Low Middle High

29 Income Distribution - Urban (Percent of Households) Low Middle High

30 What Lies Ahead? Estimated Number of Households (millions) Year Rural Urban All India

31 Income Distribution Rural (Projected Percent of Households) Low Middle High

32 Income Distribution - Urban (Projected Percent of Households) Low Middle High

33 Income Distribution - All India (Projected Percent of Households) Households (Millions) Low Middle High

34 Key Conclusions Projected Economic Growth Rates defy Economic Logic (Where is the Capital or FDI going to come from) Projected Consumer Market Growth Rates are higher than Macro Economic Growth Rates Consumption Expenditure is rising

35 Are there Social Explanations for Economic Outcomes? Semiotic Solutions (UK) did some research on Age Cohorts in India Age cohorts are groups of people possibly born at about the same time, that grow up sharing the same values, beliefs, expectations and aspirations. The general structure of a society usually comprises of three age cohorts living together (each generation defined at 20 year gaps)

36 Semiotic Research on Indian Society They found however, that India comprises of four or may be more age cohorts together. The age cohorts are: Pre-independence Generation (born between ) Mid-night Generation (born between ) 1965) The Twilight Generation (born between ) 1980) The Millenium Generation (born between ) 1995) The futuristic Generation (born after 1995)

37 Characterisation of Cohorts Pre-independence Generation (born between ) Saw struggle for independence were willing to wait for the fruits of independence during their active life Got disillusioned later and may be regretted independence The Twilight Generation (born between ) Confused about wars, politics, emergency, and the gaps in values preached and practiced Got job-oriented as a route to survival Sought education for fetching jobs Mid-night Generation (born between ) Struggled to get anything in life Lost faith in governance Personal interests superseded larger interests, Worked very hard to give their children a better life The Millenium Generation (born between ) Came closer to grand-parents since parents were away working Learnt to be self-reliant Ignored the baggage of history Aspire to be part of the solution rather than the problem

38 Two Cohorts at Work The Twilight Generation Learning the ropes of technology Learning from the young to work harder both for personal and national goals Want their children to do well in life and become enterprising Open to children pursuing alternative careers rather than salaried jobs Value (economic) seekers but willing to splurge occasionally, but credit shy Want to see younger politicians though they are less willing to participate The Millenium Generation Born in the age of computers and technology Are very technology savvy Pursuing life for a meaning rather than just living Willing to participate in any change including politics Experience and fun seeking Hate ignorance Achievement Motivated Want elders to live with their families Seeking better standards of living even if they need to borrow

39 What young Indians believe in? Gone by is a gone by our dreams ought to be larger than our memory Tomorrow counts more than yesterday Tomorrow belongs to us and We need to make it happen rather than wait for it to happen Ignorance is the biggest hurdel on any path to success, so acquire information and knowledge Networking and relationships provide more meaning and social comfort rather than emulating someone Don t be dependent on anyone, interdependence is fine since it is reciprocal

40 Thank You!