PPT is about case study economy growth rate of india 2001 presented by Mckinsey.

1. PRESENTED BY :- ABHISHEK YADAV
RAVINDRA KUMAR
JAYA CHADDHA

2. ABOUT
• McKinsey was founded in 1926 by James McKinsey.
• 108 offices
• McKinsey & Company is a global management consulting firm
that serves leading businesses, governments, non governmental
organizations, and not-for-profits.
• Earlier McKinsey worked on the economic performance of
Sweden,Australia,france,Germany,Netherlands,brazil,korea,UK,R
ussia,Poland and japan.

3. About Case study
• On Sep 6,2001 a team from the consulting firm McKinsey
designed a road map to increase India’s growth from 5% to
10%.
• McKinsey did some study then gave :
Barrier for growth.
13 step to avoid the barriers.

4. Mckinsey study
India and china had roughly same GDP per capita.
McKinsey studied Indian economy to see what is holding back
growth and what policy changes might accelerate it.
Better and new economic policies could improve India’s
situation.

5. They examined 13 sectors:
• 2 Agriculture
• 5 manufacturing
• 6 service
Identified the barriers to productivity and output growth in each
of these sectors.
Cont..

6. Investment vs. productivity
• In Normal productivity- measure of work done in a unit of time.
• If we take Indian power sector-
• By privatizing to plug thefts, subsidies and waste, which will first
yield more power and next attract fresh investments.

7. • According to Stanford professor Paul Romer
• Economists have considered land, labor and capital as being in
lock-step with growth numbers.
• Robert Solow who proposed that technical advances will get
economies to start jogging.

8. Outcome
• Awareness, laws, enforcement, education and business climate
of a country are conducive to competition and productivity,
things automatically perk up: investment follows, infrastructure
is created , global competitiveness is enhanced and steady
growth is achieved.

9. McKinsey promise
• To increase the growth of India.
• Growth of more than 4% is denied to India by just three barriers:
distortions in product-markets [2.3%]
distortions in land-markets [1.3%]
state ownership of business [0.7%]

10. Three Barriers
• Regulations governing products and markets
• Land market distortions
• Government owned businesses

11. Product Market
Product market barriers and the rules and policies governing different sectors of the economy
delay GDP growth by 2.3 % a year.
5 features especially damaging to competition and productivity:
Inequitable regulation:
• Many regulations restrict competition because they are inequitable and ill-conceived.
• Example:- Telecommunications
Uneven enforcement:
• The rules are not applied equally to all players.
• Example:- Small-scale mills frequently steal electricity and underreport their sales to avoid
tax.

12. Reservation of products for the small scale enterprises:
• Example:- clothing and textiles
Restrictions on Foreign Direct Investment (FDI):
• FDI is prohibited in certain sectors of Indian economy.
• Example:- Retail
Licensing :
• In several sectors of the Indian economy, operators need a license from
the government to compete
• Example:- Dairy industry
Cont.…

13. Land Market
Land market distortion includes:
Unclear Ownership:
• Indian courts might take a century to resolve the dispute of ownership.
• Being unclear about who owns what makes it very difficult to buy land for retail and housing
developments.
Counterproductive taxation:
• Low property tax, ineffective tax collection
• With more efficient collection of tax, government could invest in infrastructure.

14. Government
Ownership
• McKinsey proves that the Indian worker is not naturally unproductive
Labor productivity in state unit vs. private sectors are as follows:
• 3:27 in dairy;
• 10:20 in power generation;
• 0.5:3 in power transmission;
• 10:55 in banking.
McKinsey says, "electricity boards lose 30 to 40 percent of their power, mostly to theft.
By comparison, best-practice private power distributors lose only around 10 percent,
mostly for technical reasons".

15. 13 steps suggested by Mckinsey
• Eliminate reservation of product for small scale industries.
• Equalize sales taxes and excise duties for all categories of players.
• Establish an effective regulatory framework and strong regulatory bodies.
• Remove all licensing restrictions .
• Reduce import duties on all goods to the levels of Southeast Asian countries (10 percent)
over five years.
• Remove the ban on foreign direct investment in the retail sector.

16. • Resolve unclear real-estate titles by setting up fast-track courts to settle
disputes, computerizing land records, freeing all property from constraints
on sale, and removing limits on property ownership
• Raise property taxes and user charges for municipal services and cut
stamp duties.
• Reform tenancy laws to allow rents to move to market levels
• Privatize the electricity sector and all companies owned by the central and
state governments.
Cont.

17. • Reform labor laws by repealing section 5-B of the Industrial Disputes Act.
• Transfer the management of the existing transport infrastructure to the
private sector.
• Strengthen extension services to help farmers improve their yield.
Cont.