Finance Minister P Chidambaram on Thursday exuded confidence that "it would take us much shorter than 14 years to join the league of developed nations."
Addressing a special session on 'Advantage India,' organised at the 39th annual meeting of Board of Governors of Asian Development Bank in Hyderabad, Chidambaram said that it had taken India 14 years to evolve from a poor and, perhaps, forgotten country to a thriving and increasingly noticed emerging economy and that it was poised to join the comity of developed nations much before 2020.
He said that investor confidence in India is at an all-time high today. Global consultancy A T Kearney in 'The FDI Confidence Index 2005' has ranked India as the second most attractive investment destination. World Investment Report 2005 too has ranked India as the second most attractive investment destination among transnational corporations.
Stating that India was now among the fastest growing economies in the world, he said: "What makes our development story different is the fact that our reforms are embedded in a strong democratic polity, are equitable and inclusive."
He said that India's growth has been largely fuelled by domestic savings. "However, we also accept that FDI (foreign direct investment) would play a very important role in not only stepping up the investment rate but in also enabling transfer of technologies and the globalisation of Indian firms.
Referring to some concerns voiced about India's FDI policy, he said that it was an evolving policy. The foreign investors, who are already doing business in India, have had a satisfactory business experience in this country.
A recent BCG study noted that the average return on capital employed for MNCs was 19 per cent. One half of the MNCs earned higher returns in India than their global average.
"I understand that all the European and American banks operating in India are more profitable here than their global average. Samsung, LG and Hyundai have each built $1 billion business in India," he noted.
He said India's GDP growth over a decade after the economic reforms, from 1992-93 to 2000-01, averaged 6.3 per cent.
"If that was unprecedented, look at what has happened in the last three years, the growth has been in the range of 7 to 8 per cent. In the global context, India's growth performance in the last decade and a half ranked among the top six in the world growth league -- along with China, South Korea, Thailand, Singapore and Vietnam. "In purchasing power parity terms, the growth puts us among the top four in the world," he observed.
Citing the reasons for factors that made Indian economy resilient and robust, he said that the country has managed to break away from the 2 to 4 per cent per capita growth average of the past, as per the early indications. Goldman Sachs has estimated that the number of people with incomes over $3,000 could increase by nearly 14 times in the next decade.
By 2025, according to one estimate, there could be more than 200 million new people earning incomes above $15,000.
He said the household savings have moved onto a higher growth trajectory. In the late 1990s, savings of Indian households were pegged at 17 per cent of GDP but by the beginning of 2006 they were in excess of 29 per cent. By next year, India would catch up with the savings rate in the ASEAN region.
Before economic reforms kicked in, India's exports accounted for less than six per cent of GDP. By the beginning of 2006, they accounted for more than 13 per cent. In a decade and a half, thus, India's goods and service exports have gone up by nearly eight times from $25 billion in 1991 to $200 billion in early 2006.
He said that among the emerging economies, India appeared to be the most financially solvent. India's short-term debt to total external debt ratio is in single digits, close to only 5 per cent, far more conservative than other emerging countries, including China, Russia, Brazil and Thailand.
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