In December, a bridge in eastern India collapsed which resulted in the death of 34 passengers in a train passing by underneathTrans-shipment necessary which leads to fees, delays, inability to achieve economies of scale
Kevin Hassel Dana Wei Nick Lenard Ben Knudsen Challenges andINDI
India At a Glance 1.21 billion people 2nd largest workforce at 478.3 million people Competitive advantage is centered around labor More than half of the Indian work force is in agriculture (52%), but its major source of economic growth comes from the services industry (34%)
India At a Glance(cont…) An estimated 25% of Indian’s live on less than $2 a day, making inequality and quality of life real issues for India. Unions exist in India mainly in smaller concentrated industries and have declined over the past few decades, so poverty is rising Protectionism exists overwhelmingly within India, which has led to the takeover of a majority of the private sector by the government.
India At a Glance(cont…) India is currently involved with multiple trade agreements that include: SAFTA, APTA, BIMSTEC, and PTA in efforts to: Hasten economic growth through increased trade Increase national security and protection for local cultures. However, challenges with labor and infrastructure remain the key hindrances to India’s growth.
Overview of IndianLabor Labor is India’s competitive advantage 6% economic growth through the 1990s Job growth decelerated during the same time Estimated 30-40% of manufacturing jobs have been lost from over regulation 45 Central Laws and 170 State Statutes that regulate Labor
Labor Inefficiencies 15 million human days of work lost from work stoppage Unions have little power Less than 10 million workers are employed in the private sector Indian firms are forced to be inefficient by the labor laws Lack of Economies of Scale India’s Industrial Disputes Act: 1947
Regulation Reform Allow the market to take control Eliminate inefficient processes Stop Over-Regulating 6 attendance logs, 10 overtime accounts, etc. Stop Protectionism Allow creative destruction Allow more efficient businesses to develop Limit Government Takeovers/Allow market to naturally eliminate jobs Leads to inefficient practices
Unions Trade Union Leadership Too Many Unions & Too Much Rivalry Not enough power 68544 Unions with 893 average membership Firms do not have to recognize Unions Limited negotiations
Opportunities andChallenges Jobs will be lost as inefficiencies are eliminated Similar to China’s privatization Lost jobs, unemployment, etc. Reduce Inequality 25% of Indian’s live on $2 a day Natural Balance of Union/Firm Power Able to exploit both skilled and unskilled labor Incorporate labor in current and future trade agreements
Labor reforms “Countries that assume that their physical resourcessustain prosperity are economic dwarfs. Countries that regard their human resources as their eternal wealth are economic giants.”
Independence: 1980’s India gained independence in 1947 Trade Union Act 1946 Allows for the formation of a trade union by 7 or more workers, including outside members under different employment, which causes disputes to span many years. In 2000: 533,038 disputes pending in Indias labor courts 28,864 had been pending for over 10 years
Industrial DisputesAct: 1948 India’s heavy regulation includes over 45 national laws and 200 state laws that derive the Industrial Disputes Act of 1948. The Act requires organizations in the formal sector, as well as any organization with more than 100 workers, to seek government approval before firing an employee.
Effects of Rigidities Jobless growth in organized sector Organized: accounts for 6% GDP seeking more capital-intensive methods of production set up several plants instead of a single large one to get around labor laws Unorganized: accounts for 94% GDP
Key ImprovementsNecessary: Transportation Power Water
Transportation Airports, bridges, and highways in short supply and crumbling away, placing the country’s citizens at risk. Lack of efficiency a big issue: Absence of mass transit system has led to overcrowding In turn, overcrowding has led to traffic jams In turn, many laborers spend up to 4 hours a day commuting Ports are incompetent Turnaround rate is 3 days in India vs. 8 hours in countries like China Cannot handle many of the world’s largest cargo ships
Power Power failures are a major obstacle Last up to multiple hours are also an obstacle Can and should be expected daily Prevalent even in the highly commercial and developed areas such as Delhi, Mumbai and Bangalore India is losing out investment opportunities as a result Last year, Intel Corp. chose Vietnam over India as the site for a new chip assembly plant
Water Availability Steel production, chemical manufacturing, and India’s rapidly growing population all require huge amounts of water Shortage of water will devastate the agricultural sector as well as industrial sector Global warming and reduction in size of India’s glaciers have had a hand in this Sanitation
In 1980 India ChinaGross NationalIncome ($ current 182 188billion)Average AnnualGrowth Rate 3.30% 6.90%GDP Per Capita (2000Constant $) 223 186Populaiton Less than$1 day (million) 382 634Poverty at less than$1 day (%) 54.40% 63.80%
Air Transported Freight by Year 14000 12000Total Airtransported Freight (millions of tons) 10000 8000 6000 Air transport, freight (million ton-km) China Air transport, freight (million ton-km) India 4000 2000 0 Year
Container Port Traffic by Year140,000,000.00120,000,000.00100,000,000.00 80,000,000.00 Container port traffic (TEU: 20 foot equivalent units) China Container port traffic (TEU: 20 foot 60,000,000.00 equivalent units) India 40,000,000.00 20,000,000.00 - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Electricity Production (kWh) 4E+123.5E+12 3E+122.5E+12 2E+12 Electricity production (kWh) China Electricity production (kWh) India1.5E+12 1E+12 5E+11 0
Quality of Infrastructure4.504.30 4.32 4.284.103.90 3.983.70 Quality of port infrastructure, WEF (1=extremely underdeveloped to 7=well developed and efficient by international3.50 standards) 3.49 3.47 Quality of port infrastructure, WEF3.30 (1=extremely underdeveloped to 7=well 3.33 developed and efficient by international standards)3.102.902.702.50 2007 2008 2009
The Results: India China 1990 2005 1990 2005Gross National Income($ current billion) 313 800 356 2244Average Annual GrowthRate 6.50% 6.40% 10.40% 10.90%GDP Per Capita (2000Constant $) 317 588 392 1449Populaiton Less than $1day (million) 357 327 375 173Poverty at less than $1day (%) 42.10% 30.70% 33.00% 13.40%