India economic-survey-main-findings
-
Upload
wendy-stokle -
Category
Documents
-
view
11.450 -
download
1
Transcript of India economic-survey-main-findings
www.oecd.org/eco/surveys/economic-survey-india.htm Follow us :
OECD OECD Economics
2014 OECD ECONOMIC SURVEY OF INDIA
Stronger and better growth Delhi, 19 November 2014
The economy is recovering but more should be done to go back to a 8% growth rate or above:
1. Less subsidies, more investment in social and physical infrastructure and tax reform would contribute to fiscal consolidation and boost incomes for all
2. Structural barriers have hampered growth and job creation, especially in the manufacturing sector
3. Parts of the banking system are vulnerable
4. More and better jobs for women would raise equity and boost growth by over 2 percentage points
5. For most Indians, health care is poor
Main findings
1. Reduce energy subsidies and increase investment in social and physical infrastructure
2. Implement a broad national value-added tax (GST)
3. Introduce a simpler and more flexible labour law to cover more workers
4. Strengthen bank supervision and reduce bad loans
5. Extend female quotas to state and national parliaments and strengthen the implementation of gender-related laws
6. Increase public spending on preventive and primary health care, especially in rural areas and urban slums
Key recommendations
The Indian economy is turning around
The Indian economy slowed more than many other economies since the mid-2011, but is recovering faster Investment and exports are rebounding and should drive growth The manufacturing sector is key for future growth
-10
-5
0
5
10
15
2007 2008 2009 2010 2011 2012 2013 2014
Y-o-y % change
A. GDP growth¹
India BrazilIndonesia ChinaOECD average -25
-20-15-10-505
101520253035
2007 2008 2009 2010 2011 2012 2013 2014
Y-o-y % change B. GDP, exports and investment¹
GDPGross fixed capital formationExports of goods and services
- 10
- 5
0
5
10
15
20
25
2007 2008 2009 2010 2011 2012 2013 2014
Y-o-y % change C. GDP at factor costs²
GDP Agriculture Manufacturing Services
1. Nominal sector share in GDP. Data for China are for year 2011. 2. For India, data are for fiscal year 2013-14. Source: Indian Central Statistics Office, OECD calculation, and World Development Indicators database.
Key short-term challenges
Support the economic recovery by a sounder macroeconomic framework:
Reduce inflation further Cut the public deficit and debt further Improve the business climate Reduce bad loans
Inflation expectations remain high
Consumer price inflation has long been much higher than in other BRIICS Inflation expectations remain stubbornly high Adopting the flexible inflation-targeting framework will help to contain inflation expectations and thus support saving and investment decisions
1. The consumer price index (CPI) inflation is shown. Year 2014 is based on the data of the first nine months. Source: OECD Outlook 96 database and Reserve Bank of India.
0
2
4
6
8
10
12
14
2007 2008 2009 2010 2011 2012 2013 2014
Y-o-y % change
B. Inflation expectation and the actual CPI inflation
Inflation expectations: Current CPI
-202468
101214
2007 2008 2009 2010 2011 2012 2013 2014
Y-o-y % change
A. Inflation is higher than in other EMEs and the OECD area¹
India BrazilChina Indonesia
Public deficit and debt are still high
Despite fiscal consolidation at the central government, the public debt and debt are high Public spending efficiency and targeting should be improved. Subsidy reforms and the implementation of the unique identification number (Aadhaar) are key. India also needs to raise more revenue in a less distortive way – implementing the GST is essential
Source: Brazilian Ministry of Economics, CEIC, Chinese Ministry of Finance, IMF, OECD Analytical database, OECD Economic Outlook 96 database and World Bank.
0123456789
1011
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
% of GDP A. Recent developments in India
States' fiscal deficit Central government's fiscal deficit
0
20
40
60
80
100
120
0
20
40
60
80
100
120
CHL CHN IDN TUR ZAF MEX BRA IND OECD
% of GDP% of GDP B. General government debt in emerging countries, 2013 or latest year available
0123456789
0123456789
MEX CHN TUR IDN BRA CHL ZAF OECD IND
% of GDP% of GDP C. General government deficit in emerging countries, year 2013 or latest year
External vulnerability is a less immediate concern
The current account deficit has narrowed Gross foreign liabilities are low, though dominated by debt with a short-term component Net FDI is lower than in the late 2000s Competitiveness has deteriorated, threatening exports
1. Real effective exchange rate (REER) based on consumer prices. An increase implies a loss of competitiveness. 2. Or latest available figures. Source: India Ministry of Commerce and Trade, Reserve Bank of India, OECD - International trade and balance of payments database, OECD - National accounts database, Bank for International Settlements and IMF Balance of Payments Statistics.
-202468
10121416
2007 2008 2009 2010 2011 2012 2013 2014
% of GDP
A. The current account deficit has recently narrowed
Current account deficitTrade deficitNet FDI
0
20
40
60
80
100
120
POL ZAF MEX TUR BRA RUS IDN CHN IND
% of GDP
B. Gross foreign liabilities are low
2013² 2007
0
10
20
30
40
50
60
70
80
TUR IND POL MEX RUS IDN CHN BRA ZAF
%
C. Debt accounts for a large share of gross foreign liabilities
2013² 2007
0.010.0120.0140.0160.0180.020.0220.0240.0260.028
75
80
85
90
95
100
105
USD for Rupee
(2010 = 100)
D. Competitiveness has deteriorated
Competitiveness indicator, (REER)¹2000-08 REER averageNominal exchange rate (RHS)
Banks are in poor shape and the private bond market is too small
1. In percentage of gross advances. The NPL ratio is the ratio between the value of non-performing loans (NPL) and the total value of the loan portfolio. 2. The Capital to risk-weighted assets ratio (CRAR) is equal to the capital of the bank divided by aggregated assets weighted for credit risk, market risk and operational risk. Source: IMF Financial Soundness Indicators database and Reserve Bank of India.
The banking sector is dominated by public banks. They are the least profitable and hold majority of distressed assets. The steady rise of distressed assets is a concern. Banks and financial institutions are required to invest a significant share of their financial holdings in government securities. The corporate bond market cannot meet long-term financing needs.
0 1 2 3 4 5 6 7 8 9 10
0
5
10
15
20
25
India
Braz
il
China
South
Afric
a
Philip
pines
Malay
sia
Turke
y
Colom
bia
Indon
esia
Arge
ntina
%%A. Soundness and profitability are low
2014 Q2 or latest available dataRegulatory capital to risk-weighted assetsReturn on assets (RHS)
0
2
4
6
8
10
12
14
16
Total Public sector Private sector Foreign
%B. Distressed assets are concentrated in
public sector banks¹, March 2014
Gross non-performing assetsRestructured loans
0.0
0.5
1.0
1.5
2.0
0
5
10
15
20
Public sector Private sector Foreign
%%C. Public sector banks are
underperforming, March 2013Capital assets ratio (LHS)²Return on assets (RHS)
0 5
10 15 20 25 30 35 40 45
Indon
esia
India
South
Afric
a
Braz
il
China
Russ
ia
% of GDPD. Bond market capitalisation (2011)
Private bond marketPublic bond market
Longer-term challenges
Reduce barriers to the growth of the manufacturing sector to create more and better jobs
Use more effective and better targeted social spending to make growth more inclusive
Increase economic opportunities for women
A jobless growth so far … while more people will enter the labour force
Employment creation has not kept up with the growing working age population and has benefitted mostly men Demographics will favour labour force growth up to the 2040s More than 100 million people may enter the labour force between 2010 and 2020, mainly a young and more educated cohort An increase in the very low female labour force participation would also raise the supply of workers
1. According to the ILO definition, working age population is made of individuals aged 15 or more. 2. The age dependency ratio is the ratio of the population younger than 15 or older than 64 to the working-age population, which is those aged 15-64. From 2015 World Bank projections are shown. 3.The labour force participation of women is equal to the percentage of working women aged 15-64 over the overall female population aged 15-64. Data refer to the simple average of the dependency ratio for each period. Source: ILO (2013), Key Indicators of the Labour Market (KILM) database, OECD (2014) Perspectives on Global Development and World Bank WDI databank.
50 51 52 53 54 55 56 57 58 59 60
50 51 52 53 54 55 56 57 58 59 60
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
%% A. Employment creation has not kept up with the growing working age population
Ratio of employment to working age population¹
0102030405060708090
100
IND BRA CHN IDN MEX RUS ZAF OECD
B. The dependency ratio is projected to decline up to the 2040s²
1991-2050
01020304050607080
01020304050607080
IND BRA CHN IDN MEX RUS ZAF OECD
C. The labour force participation of women is low³
1991-1995 1996-20002001-2005 2006-2012
Manufacturing has created few and low quality jobs
Net job creation in the manufacturing sector has been poor Most new jobs are with firms with more than 10 employees and with temporary contracts and no social security benefits
1. Employment is based on usual principal and subsidiary status. 2. Informal workers are those with no social security benefits (Mehrotra et al., 2014). Source: OECD Labour market statistics, NSSO, Employment and unemployment survey, rounds no. 61 and 68; and Mehrotra et al. (2014).
-40
-30
-20
-10
0
10
20
30
Agriculture Construction Manufacturing Services and white-collar Total
Change in millions A. Employment creation¹ in the manufacturing sector has been low, 2005-12
-1
0
1
2
3
4
5
6
Formal Informal Total Formal Informal Total
Change in millions B. Most manufacturing jobs created over the period 2005-12 were informal²
Organised Unorganised
Manufacturing has not contributed much to the growth of GDP and exports
Productivity in the manufacturing sector tends to be low, reflecting the small size of firms Manufacturing has contributed little to GDP growth
1. The productivity is measured by gross value added at basic prices divided by the number of hours worked. This measure is then converted in current USD using the PPP conversion factor for GDP. 2. The productivity of labour is measured in terms of value added per worker. Value added is measured in rupees. Source: World Input Output Database and Worldbank WDI database; ASI 2010-2011 Summary results for the Organised sector, Key Results of Survey on Unincorporated Non-agricultural Enterprises (excluding construction) in India (2010-2011) Indian Central Statistics Office; OECD calculation.
05
101520253035
IND CHN BRA MEX RUS TUR IDN
USD PPP A. Value added per hour worked¹, 2009Manufacturing Services
0 200 400 600 800
1 0001 2001 400
Unor
ganis
edse
ctor 0-
14
15-1
9
20-2
9
30-4
9
50-9
9
100-
199
200-
499
500-
999
1000
-199
9
2000
-499
9
5000
+
Orga
nised
secto
r
Value added per worker
Number of employees
B. Productivity is low in smaller firms²
0 10 20 30 40 50 60 70
1980
-81
1981
-82
1982
-83
1983
-84
1984
-85
1985
-86
1986
-87
1987
-88
1988
-89
1989
-90
1990
-91
1991
-92
1992
-93
1993
-94
1994
-95
1995
-96
1996
-97
1997
-98
1998
-99
1999
-…20
00-0
120
01-0
220
02-0
320
03-0
420
04-0
520
05-0
620
06-0
720
07-0
820
08-0
920
09-1
020
10-1
120
11-1
220
12-1
320
13-1
4
%
C. Indian manufacturing has not risen as a share of GDPSectoral decomposition of GDP
Agriculture Manufacturing Industry non manufacturing Services
20
40
60
80
100
120
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
% D. Manufacturing exports in total merchandise exports Brazil China India South Africa
There are barriers to manufacturing growth
Labour regulations become relatively stringent and costly to comply with when firms grow The quality of infrastructure is below par Taxes are complex and costly to comply with The business environment is cumbersome and the outdated bankruptcy law makes it difficult to reallocate capital to most productive activities
Source: OECD Employment Protection Database, 2013 update; World Bank Online Database; PWC Paying Taxes, 2014 Report; World Bank Doing Business database.
0
1
2
3
4
5
6
USA
CAN
GBR
NZL
HUN
CHE
IRL
AUS
JPN
EST
SVK
MEX
ESP
OECD IS
LGR
CBE
LDN
KAU
TPO
L EU TUR
NOR
LUX
KOR
ISR
FIN
SVN ITA
SWE
CHL
FRA
DEU
NLD
CZE
PRT
BRA
ZAF
RUS
CHN
IND
IDN
A. Employment protection legislation is highly restrictive, 2013
0
10
20
30
India Brazil Mexico Indonesia South Africa World Chile OECD China Korea
In % of the outputB. Electric Power Transmission and Distribution (T&D) losses
1990 2000 2010 2011
0100200300400500
Unite
dKi
ngdo
m
Cana
da
Fran
ce
Unite
d Stat
es
Russ
ia
South
Afric
a
Colom
bia
Germ
any
Indon
esia
Italy
Japa
n
China
Arge
ntina
Braz
il²
Hours per year C. Time to comply with taxes for small and medium-sized enterprises
Consumption tax Labour tax Corporate income tax
736
490
1374
India
OECD
ARG
AUSAUTBEL
BRA
CAN
CHLCHN
COLCZE
DNK
EST
FIN
FRA
DEU
GRCHUN
ISL
INDIDN
IRL
ISRITA
JPNKOR
LUX
MEX
NLDNZL
NOR
POLPRT
RUS
SVKSVN
ZAF
ESP SWE
CHE
TUR
GBRUSA
0
20
40
60
80
100
0 1 2 3 4 5
Recovery rate (cents on the dollar)
Time (years)
D. There is scope to improve the insolvency legislation and debt-recovery rates
Women’s economic participation is low
• Gap with men is over 50%
• Regional differences are large – more women work in the southern states
• More than half of working women are paid or unpaid self-employed
• Women wages are often half on men’s at similar education levels
Notice: Data refer to working age population (15 to 64 years). The gap is male minus female participation rate. Source: ILO, Economically Active Population, Estimates and Projections (6th edition, October 2011); and NSSO, Employment and Unemployment Survey, Rounds no. 43, 50, 55, 61, 66 and 68.
0
10
20
30
40
50
60
70
Illiterate Literate Primary Middle Secondary Graduate
%B. LFPR by education - urban
2000 2005 2010 2012
0
10
20
30
40
50
60
70
Illiterate Literate Primary Middle Secondary Graduate
% C. LFPR by education - rural
2000 2005 2010 2012
0
10
20
30
40
50
60
RUS CHN OECD average ZAF BRA IDN IND
% A. Gap in male-female labour force participation rate
Low participation reflects complex factors
• Social status of staying home
• Discriminatory labour laws
• Weak implementation of gender-related laws
• Bias in inheritance laws affects access to collateral
• Jobless growth
1. Data refer to working age population (15 to 64 years). Source: OECD, Gender, Institutions and Development Database 2012; and NSSO, Employment and unemployment survey, rounds no. 55, 61, 66 and 68.
Net increase in…. 2000 2012 Change 2000-12
Working age population 304 403 99 Labour force Employment 123 129 6 Unemployment 2 3 1 Remaining outside labour force In education 18 42 24 Not in education 161 229 68
Working age population 326 427 101 Labour force Employment 274 343 69 Unemployment 7 8 1 Remaining outside labour force In education 32 61 29 Not in education 13 15 2
Unemployment rate by education¹
Employment trendsMillions, 15-64 years of age
Female
Male
0
5
10
15
20
25
30
35
Illiter
ate
Liter
ate
Prim
ary
Midd
le
Seco
ndar
y
Grad
uate
% B. Urban female2000 2005 2010 2012
0
5
10
15
20
25
30
35
Illiter
ate
Liter
ate
Prim
ary
Midd
le
Seco
ndar
y
Grad
uate
% C. Rural female2000 2005 2010 2012
00.20.40.60.8
1Discriminatory Family Code
Restricted Physical Integrity
Son BiasRestricted Resources andEntitlements
Restricted Civil Liberties
A. Social institutions and gender index (SIGI)
BrazilChinaIndiaSouth Africa
Health and well-being can be vastly improved
Health outcomes have improved but remain below par Poor living conditions – including low access to sanitation – play a role Public resources invested in health care are limited, unequally spread, and quality is often an issue 1. Nearest available year.
Source: OECD (2014), Health Database; World Bank (2014), World Development Indicators Database; and WHO (2014), Public Health and Environment Database.
83.2
82.5
82.1
82.1
81.5
81.3
81.0
81.0
81.0
80.7
80.2
78.9
78.7
76.5
75.6
75.2
75.2
74.8
74.6
74.4
74.2
74.1
73.7
70.7
70.3
70.2
66.4
66.3
56.1
0
20
40
60
80
100
120
Japa
nSp
ainAu
strali
aFr
ance
Cana
daKo
rea
Germ
any
Irelan
dUn
ited…
Gree
ceOE
CD Chile
Unite
d Stat
esEs
tonia
Viet
Nam
China
Hung
ary
Malay
siaTu
rkey
Mexic
oTh
ailan
dSr
i Lan
kaBr
azil
Indon
esia
Bang
lades
hRu
ssian
Fed
.Pa
kistan Ind
iaSo
uth A
frica
A. Life expectancy at birth 2012 ¹ 1970 ¹
0
10
20
30
40
50
60
70
1990 1995 2000 2005 2010
%B. Rural population with access to improved sanitation
China IndiaIndonesia South AfricaBrazil
0
2
4
6
8
10
12
Russ
ian F
ed.
Germ
any
Austr
alia
OECD
Fran
ce
Unite
d…
Cana
da
Unite
d Stat
es
Japa
n
Mexic
o
Kore
a
Braz
il
Chile
Turke
y
China
Malay
sia
Viet
Nam
Philip
pines
Pakis
tan
South
Afric
a
India
Sri L
anka
Myan
mar
Thail
and
Bang
lades
h
Indon
esia
Camb
odia
Per 1 000 personsC. Number of doctors and nurses
2012 or latest year available
Doctors Nurses
More information…
Compare your country data visualization tool
OECD Economic Surveys: India 2014
• Read this publication
• Website with additional information
www.oecd.org/eco/surveys/economic-survey-india.htm
OECD OECD Economics
Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
Key recommendations to strengthen the monetary and fiscal policy frameworks
• Implement flexible inflation targeting • Pursue fiscal consolidation while avoiding
one-off measures and cuts in growth-enhancing spending
• Shift public spending away from energy subsidies towards investment in physical and social infrastructure.
• Implement a national value-added tax (GST) with only limited exemptions
Recommendations to raise the effectiveness of the financial sector
• Strengthen bank supervision by early recognition of asset deterioration and stricter provisioning standards
• Wind down bank lending obligations to priority sectors and gradually reduce the proportion of government bonds required to be held by banks and institutional investors (statutory liquidity ratio)
• Further ease restrictions on bond market investments by foreign institutional investors
• In promoting financial inclusion, rely further on mobile banking and branching through local businesses, allow MFIs to take deposits
Key recommendations to improve labour market performance
• Reduce barriers to formal employment by introducing a simpler and more flexible labour law which does not discriminate by size of enterprise
• Continue improving access to education, especially at the secondary level, and better focus on the quality of education at all levels. Provide better and earlier vocational training
Recommendations to improve the quality of infrastructure
• Impose clear timelines, rationalise documentation, and implement single-window clearance
• Improve the land registry. Assess and amend as needed the new land acquisition law. The government should review the timelines within the Bill and aim to make land acquisition faster
Recommendations to improve the business environment
• Continue improving the business environment and opening up the economy
• Strengthen governance of state-owned enterprises, and reduce public ownership over time
• Further simplify regulations and reduce administrative burdens on firms. Introduce a modern bankruptcy law
Key recommendations to increase female economic participation
• Extend female quotas to state and national parliaments
• Further modernise labour laws to ensure equal work opportunities for women
• Enhance the implementation of gender-related laws
• Expand secondary and higher education for women and skills training for female entrepreneurs
Key recommendations to improve health outcomes for all
• Increase public spending on health care with particular focus on preventive and primary care, especially in rural areas and urban slums
• Expand the number of health professionals and up-skill professionals located in rural areas
• Strengthen the management of public health care facilities and ensure that private facilities and their employees meet minimum quality standards