India. In pictures.

A graphical representation of the Indian economy

dia: Key facts & figures…
c Indicators India China
S$ bn, 2001) 477.3 1,159.0
capita (PPP US$, 2003) 2,830.0 4,690.0
s (% of GDP, 2002) 21.5% 51.1%
re (% of GDP
GDP, 2002) 23 9%
23.9% 15 4%
15.4%
(% of GDP, 2002)
US$ bn, 2002)
54.6%
52.7
33.5%
325.7
INDIA,
US$ bn, 2002) 65.2 281.5
xpenditure
p on education ((% of GDP, 1998-2000)) 4.1% 2.1%
xpenditure on health (% of GDP, 2001) 0.9% 1.9% SHINING?
eficit (% of GDP, 2003) 5.4% -3.0%
serves (US$ bn, 2003) 119.8 439.8

Development Indicators
on (million, 2001) 1,033.0 1,285.2
opulation growth (1975-2001) 2.0% 1.3%
on density (people per 1sq km) 324.0 130.0
on under age g 15 33.7% 24.3%
on living below $ 1 a day (1990-2001) 34.7% 16.1%
oyment (% of labour force, 2002) 9.9% 9.0%
Factors that play a very vital
racy rate (15 years and above) 58.0% 85.8% role in achieving our objective
adult literacy rate (15 years and above) 46.4% 78.7% of a sustainable long-term
ctancy (years, 2001) 63.3 70.6 growthth in
i GDP.
GDP We
W still
till h
have a
rtality rate (per 1,000 live births, 2001) 67.0 31.0 long way to go!
al GDP growth: 5-year average…
.0

.0

.0

.0

.0

.0
FY56 FY62 F68 FY74 FY80 FY86 FY92 FY98 FY04

t this graph means? Our view…

view

s Domestic Product (GDP), in crude terms, is The graph indicates that real GDP growth, as
al GDP growth & Per capita GDP…
P capita
Per it GDP (Rs)
(R ) R l GDP growth
Real th (RHS,
(RHS %)
00 10.0

00 8.0

00 6.0

00 4.0

00 2.0

0 0.0
FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04

t this graph means? Our view…

view

from the growth in GDP, how this growth is While India boasts of as one of the fastest growing
al GDP contributors (%)…
Agriculture & allied Industry Services

1950s 1960s 1970s 1980s 1990s 2000-01 2001-02 2002-03

t this graph means? Our view…

view

basically comprises of output by agriculture, As can be seen from the graph above, the
P & its constituents (% growth)…
I d t
Industry S
Services
i A i lt
Agriculture GDP
14.0

10.0

60
6.0

2.0

-2.0

-6.0
1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

t this graph means? Our view…

view

th of an economy is a influenced by the One of the basic reasons of the underperformance of

owth in agricultural production & GDP…
Agricultural production (%) GDP (RHS,
(RHS %)
9.0

8.0

7.0

0 6.0

50
5.0

4.0

1996 9
1996-97 199 98
1997-98 1998 99
1998-99 1999 00
1999-00 2000 01
2000-01 2001 02
2001-02 2002 03
2002-03 2003-04

t this graph means? Our view…

view

graph is indicative of a high level of co-relation We have already mentioned in the previous slide
vestments by the manufacturing sector…
Gross fixed assets (% growth) Sales (% growth)
0

0
1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03

t this graph means? Our view…

view

omy functions in cycles i.e. trough, recovery, The excess investments by the manufacturing sector
 ere the Rupee comes from…

er Capital Receipts Tax Revenue

(17.7%) (42.0%)

Borrowings
(24.4%)
Non-Tax
Non Tax Revenue
(15.9%)

t this graph means? Our view…

view

pie chart represents various sources of revenue While tax revenue accounts for a larger portion of
ere the Rupee goes…

Other Non-Plan Expenditure

(18.4%) Plan Expenditure
(27 6%)
(27.6%)

ubsidies
11.1%)

Interest Payments
Defense (28.1%)
(14.9%)
t this graph means? Our view…
view

government, like a company, has to spend The pie indicates that the government spends a big
nstituents of tax receipts (% of GDP)…
Di
Direct
t Tax
T I di
Indirect
t Tax
T E
Expenditure
dit
0

0
1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

t this graph means? Our view…

view

graph indicates the Central governments’ major As we had mentioned in the previous slide, growth in
nstituents of non-plan expenditure (%)…
S b idi
Subsidies D f
Defense I t
Interest
t payments
t
5.0

00
0.0

5.0

0.0

5.0

0.0

5.0

0.0
1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

t this graph means? Our view…

view

graph shows various constituents of the The high levels of interest payments, as shown in the
reasing debt burden of the government…
O t t di internal
Outstanding i t l debt
d bt (Rs
(R trillion)
t illi ) % off GDP (RHS)
44.0

38.0

32.0

26.0

20.0
1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

t this graph means? Our view…

view

above graph indicates the Central government’s As the previous slide indicated, the biggest burden on
jor Deficit Indicators of Central Govt. (%)…
Fiscal Deficit Revenue Deficit Primary Deficit

2001-02 2002-03 2003-04

t this graph means? Our view…

view

it simply means the excess of expenditure over While deficits are unavoidable for a developing
erest rate & Change in money supply…
Interest Rate (%) Money Supply (RHS,
(RHS %)
.0 17.0

.0 16.0

.0 15.0

.0 14.0

.0 13.0
1999-00 2000-01 2001-02 2002-03 2003-04

t this graph means? Our view…

view

market-based economy, the price of money Despite the Indian government’s high deficit and
erest rate & GDP growth…
I t
Interest
t Rate
R t (%) GDP Growth
G th (RHS,
(RHS %)
.0 10.0

.0 8.0

.0 6.0

.0 4.0

.0 2.0
1996 97
1996-97 1997-98
1997 98 1998-99
1998 99 1999-00
1999 00 2000-01
2000 01 2001-02
2001 02 2002-03
2002 03 2003-04
2003 04

t this graph means? Our view…

view

graph shows the co-relation between interest As shown in the graph, the softer interest rate regime
erest rate & Inflation…
I t
Interest
t Rate
R t (%) I fl ti (RHS,
Inflation (RHS %)
4.4

4.2

4.0

3.8

36
3.6
1999-00 2000-01 2001-02 2002-03 2003-04

t this graph means? Our view…

view

graph shows the relationship between interest Despite rising fiscal deficit and strengthening of oil
/US$ rate & Forex reserves…
Forex Reserves (US$ bn) Rs/US$ rate (RHS)
49.0

48.0

47.0

46.0

45 0
45.0

44.0

43.0

42.0

41.0

40.0
1999-00 2000-01 2001-02 2002-03 2003-04

t this graph means? Our view…

view

graph indicates rising foreign exchange inflows A large amount of these forex inflows have come in
dia: So, what’s the call?
India: So
So, what
what’s
s the call?
easons to buy… Reasons not to buy…

he essence of democracy  Lack of vision among policy makers

rowing entrepreneurial culture  Bureaucratic hurdles

hanging population mix (rising middle-  Poverty, illiteracy and inadequate

ass and younger population) healthcare

ow penetration levels across sectors  Concerning

C i fifiscall situation
it ti

robust financial sector

rge low
l cost talent
l pooll
y terms…
al Deficit is the excess of expenditure over government’s
government s receipts in an accounting year
year.
e simply, it equals the amount of borrowings made by the government in a year.

= Total Expenditure – Revenue Receipts – Disinvestment Receipts – Recovery of loans

er Fiscal Deficit leads to Increased Govt. Borrowing leads to Increased Spending leads to
ater Money Supply leads to Inflation leads to Demand for money exceeding supply leads to
er Interest Rates

enue Deficit is the excess of revenue expenditure over revenue receipts.

mary Deficit is measured by Fiscal Deficit less interest payments.

sidies, as defined by the Economist, are payments, usually made by the government, to keep
es below what they would be in a free
f market, or to keep alive businesses that would otherwise
ust, or to make activities happen that otherwise would not take place. Subsidies can be a form
otectionism, by making domestic goods and services artificially competitive against imports.
tion means rising
ti i i prices.
i IInflation
fl ti erodes
d the
th purchasing
h i power off a unit
it off currency. M
More simply,
i l
e prices rise, Re 1 spent tomorrow will buy you lesser amount than what it can buy you today.
 Thank you!
Thank you!
y
Please mail your feedback at info@equitymaster.com