IRVING FISHER GROUPINDIAN ECONOMY AND GLOBALISATION
The term globalization means InternationalIntegration. It is a process through which the diverse worldis unified into a single society. Opening up of world trade, development ofadvanced means ofcommunication, internationalisation of financialmarkets, growing importance ofMNCs, population migrations and moregenerally increased mobility ofpersons, goods, capital, data and ideas
Accountabilityof Global businesses? Increased gapbetween rich and poorfuels potentialterrorist reaction Ethical responsibilityof business? Efforts to removetrade barriers.
New trade pattern: developing countries◦ dont just have to trade their raw materials to the Westand get finished products in return;◦ can become big-time producers as well. New production pattern: global product network◦ companies can locate different parts of theirproduction, research and marketing in differentcountries
Growing global markets in servicespeople can now offer and trade services globally -- frommedical advice to software writing to data processing --that could never really be traded before.W-2, W-4, 1099bonuses & stockstatementsIndian accountantUS tax payers
Market economic policies spreading around theworld, with greater privatization and liberalizationthan in earlier decades.ex: BRIC Widespread adoption of democracy as the choiceof political regime.
Multilateral agreements in trade, taking on suchnew agendas as environmental and socialconditions. New multilateral agreements – forservices, intellectual property , communications –more binding on national governments than anyprevious agreements.
GDP – USD 590 billion GDP growth rate – 9% Services contribution – 54% Balance of Trade –USD (-)46.2 billion Investment goal –USD 250 billion2006Growing Indian Economy*: ProjectedSource: Economic Times & India Brand Equity Foundation (IBEF) GDP – USD 1.16 trillion GDP growth rate – 9.5% Services contribution – 60% Balance of Trade – Negativebalance should increase withsurging imports versus exports Investment goal –USD 305 billion2008 * GDP – USD 1.36 trillion GDP growth rate – 9% Services contribution –60-65% Balance of Trade – Negativebalance should increase withsurging imports versus exports Investment goal –USD 370 billion2010 *
105 105 135 145 167103 125204 23128768219123739845302004006008001,0001,2001999-00 2002-03 2005-06 2006-07 2010*USDBillionAgriculture Industry ServicesContribution of Services -increased from 48% to 62% andis estimated to contribute 60% by 2010Growing GDP*: ProjectedSource: India Brand Equity Foundation (IBEF)
Indias Forex Reserves: 2001-08 (Till 14 March 2008)5475112141 1521993060501001502002503003502001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08(Till 14March 08)USDBillionSteadily increasing Forex reserves offer adequate securityagainst any possible currency crisis or monetary instabilityIncreasing Forex ReservesSource: Reserve Bank of India & India Brand Equity Foundation (IBEF)
Growing FDI Inflows* ProvisionalSource: Department of Commerce8.922304.36051015202530352003-04 2004-05 2005-06 2006-07* 2007-08*USDBillionElectronicequipment, manufacturing andtelecom have witnessedsignificant FDI inflowIndia is ranked second in ATKearney’s FDI confidence index(2007)
Increasing Per Capita IncomeSource: India Brand Equity Foundation (IBEF) & Economic Survey 2007-0846079710212000400005001000150020002500300035004000USD2000-01 2006-07 2007-08 2016-17 2025
Major M&A and Investments Announcements in IndiaUSD 1.7 billionPlans to spend on its developmentoperations in India over the next fouryearsUSD 2 billionPlans to establish three manufacturingplants to produce photo-voltaic unitsUSD 12 billionPOSCO to invest in building steelmanufacturing plants and facilities inIndia by 2016Source: India Brand Equity Foundation (IBEF)
Main sectors:Main Destinations:China, UAE, UKNorth America is emerging as a destination.India Inc. Investing Overseas• Auto Components • IT• Beverages • Metals• Cosmetics • Mobile Communications• Energy • Pharmaceuticals• Financial Services • Software• Industrial Goods
Additional economic indicators:•India has a consumer base of 1.14 billion people•India is the 4th largest economy in the world when measured by PPP•India’s has a growing middle class of over 300 million people - 30% ofIndia’s population – and larger than the population of the US•India is the 3rd largest global telecom market. The mobile subscriber basehas grown from 0.3 Million in 1996 to over 250 million currently.•India is likely to add over 200 shopping malls by 2010 and 715 malls by2015•The number of billionaires in the country were 3 in 1999; 23 in 2006; andare 48 currently.
India’s Trade with USAImports from USExports to USSource: Department of Commerce, Govt of India11.4513.7717.39.418.811.70.05.010.015.020.02003 - 04 2004 - 05 2005 - 06 2006 - 07USDBillion
Major Items Exported to USA (2006)Textiles36%EngineeringGoods &Machinery15%OrganicChemicals6%Iron & Steel5%Cut andpolisheddiamond &jew ellery38%Source: US Department of Commerce
Major Items Imported from USA (2006)Fertilizers9%Optical & MedicalInstruments11%Precious stones &Metals14%Aircraft, AviationMachinery & parts25%EngineeringGoods &Machinery41%Source: US Department of Commerce
Buyer Acquisition PriceReliance Industries Flag Telecom, Bermuda US$ 212mTata Motors Daewoo, Korea US$ 118mInfosys Technologies Expert Information Services, Australia US$ 3.1mBharat Forge Carl Dan Peddinghaus, Germany N/ARanbaxy RPG (Aventis) Laboratories, France N/AWockhardt CP Pharmaceuticals, UK US$ 18mCadila Health Alpharma SAS, France US$ 5.7mHindalco Straits Ply, Australia US$ 56.4mWipro NerveWire Inc, USA US$ 18.5mAditya Birla Dashiqiao Chem, China US$ 8.5mUnited Phosphorus Oryzalin Herbicide, USA US$ 21.3m"Toyota Motor haschosen to source fromIndia due to itscompetitive cost ofmanufacture,availability ofabundant engineeringtalent, and strongindigenous machinetool."
Automotive Sector - OverviewIndia is the world’s:• 2nd largest two-wheeler market,• 4th largest commercial vehicle market• 11th largest passenger car market.Expected to be the 7th largestautomobile market by 2016India has become an attractivedestination for globalAmerican, European, Japanese andKorean OEMs.Source: IBEF, Economic Times
1990 FDI $ 234 Million 1998-2003 FDI $ 2.5 Billion Per Year Target FDI $ 10 Billion Per Year Over 620 FIIs Compared to 500 in 2003 and Earlier China FDI & FIIFDI $ 50 Billion Per YearFII $ 20 Billion Per Year
Agriculture acquired 17% of India’s GDP in2008. 60% of population still depends onagriculture for their livelihood. Occupied 43% of India’s geographical areas. All other sectors are growing at much faster.
Current Literacy rate is 64.84%Year Literacy Rate Male -FemalePerson Male Female Gap1981 43.6 56.4 29.8 26.61991 52.2 64.1 39.3 24.82001 65.4 75.8 54.2 21.6
"India has a fantastic pool ofsoftware professionals. Theworld needs to benefit fromthis.“Bill Gates,MicrosoftChairmanThis market (India) is criticalto our plans for building aFord Motor Co. for the 21stcenturyBillFord, Chairman and CEOIndia on its way to becomingIT, manufacturing kingdom ofthe worldThe dynamism shown by Indiain the last 15 years isphenomenalMr YasukuniEnoki, JapaneseAmbassador to IndiaPaul Wolfowitz,President, World BankWhat are people talking about India?
High growth but problem of unemployment. Need to generate 10 million jobs per year. Multi party rule, hence need to accommodatepolitical ideology with economic reality(reservation, labour law reforms).
Companies in India That Have Successfully MetCompetition by Multinationals & Domestic CompaniesHad A Spirit Of Innovation Not Only In Their ProductsAnd Services But Also With Reference To All TheirResources And Effectively Restructured Them In A TimeAnd Cost Frame And Met Customer Needs And ImprovedTheir Top And Bottom Line.