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SUSTAINING GROWTH AND
PROMOTING INCLUSION IN INDIA
Nicholas Stern
IG Patel Professor of Economics and Government
Dharm Narain lecture
October 2007
Growth I
Rise in GDP per capita growth
GDP per capita growth (3-year Moving Average)
0,08
0,07
0,06
0,05
0,04
GDP per capita
grow th (3-year
Moving
Average)
0,03
0,02
0,01
0
-0,01
1960
1965 1970
-0,02
Central Statistical Organisation
1975 1980
1985 1990
1995 2000 2005
Growth II
Faster growth has been underpinned by increased savings
and investment
40%
Savings and Investm ent (% of GDP)
35%
30%
25%
20%
15%
10%
5%
Gross Domestic Savings (%) of GSDP
Gross Capital Formation (%) GSDP
0%
Investment has moved in line with savings and as a share of GDP has increased
from 23% in 2001/02 to 34% in 2005/06
Central Statistical Organisation
Growth III
Rising savings driven by households and firms
30%
Savings (%GDP)
25%
20%
15%
10%
House holds savings, gross dome stic
Non-financial & financial corporation savings, gross domestic
Government savings, gross domestic
Government savings have been declining for 20 years
Central Statistical Organisation
2005-06
2003-04
2001-02
1999-00
1997-98
1995-96
1993-94
1991-92
1989-90
1987-88
1985-86
1983-84
1981-82
1979–80
1977–78
1975–76
1973–74
1971–72
1969-70
1967-68
-5%
1965-66
5%
0%
Productivity I
Unit labour costs in registered manufacturing
have been falling
45%
40%
35%
30%
Wages/Gross
Value Added
25%
20%
15%
10%
5%
0%
Annual Survey of Industries: Central Statistical Organisation
Total
Compensation/
Gross Value
Added
Productivity II
Incremental Capital Output Ratio (ICOR) is falling
6.0
5.0
4.0
3.0
2.0
1.0
0.0
1991/92-1999/2000
Central Statistical Organisation
2000/01-2002/03
2003/04-2006/07
Inclusion I
Regional disparity has increased
Per capita GSDP for UP as a share of all-India
average
4.5%
4.0%
55%
50%
3.5%
Lagging states
45%
Other states
3.0%
40%
35%
2.5%
30%
2.0%
Central Statistical Organisation; World Bank
2004-05
2002-03
2000-01
1998-99
1996-97
1994-95
1992-93
1990-91
1988-89
1986-87
1984-85
1982-83
1980-81
25%
1980/811989/90
1990/912004/05
Inclusion II
Share of agriculture has been falling
0,7
0,6
0,5
Agriculture
0,4
Industry
0,3
Services
0,2
0,1
Central Statistical Office
2004
2000
2002
1998
1996
1994
1992
1990
1988
1984
1986
1982
1980
1978
1976
1974
1972
1968
1970
1966
1964
1962
1960
1958
1956
1952
1954
1950
0
Inclusion III
Participation of women in labor force remains low
60
50
40
30
20
10
Rural Male
Rural Fe m ale
Urban Male
Urban Fe m ale
0
19721973
19771978
National Sample Survey
1983
19871988
19931994
19992000
2004-05
The future of growth & inclusion; in hope
India’s growth & inclusion will be sustained by
• Improving investment climate, including
infrastructure and competition in service sector
• Investment in rural areas, including
infrastructure
• Stronger investment in people, including higher
education
• Improved growth and governance in lagging
regions
• Stronger integration of women in labour force
• World tackles problem of climate change