Emergence Of New India

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Emergence Of New India

  1. 1. EMERGENCE OF NEW INDIA Opportunities & Challenges Suneel Gupta Associate Professor GHS-IMR, Kanpur
  2. 2. “Study the past if you would divine the future” - Confucius
  3. 3. First wave-Resource rich Second wave-Skill rich Value Third Wave – Knowledge added rich Industrial relation 1750-1950 Industrial Relation Knowledge Up to 1750 Agriculture & Information Revolution Physical Land-Cattle Facilities Second Wave Third Wave First wave F i
  4. 4. “A study of Marx and Lenin produced a powerful effect on my mind……The practical achievements of the Soviet Revolution advanced human society by a great leap and had lit a bright flame which could not be smothered and………It had laid the foundations for that new civilization towards which the world could advance.” - The Discovery of India, Nehru
  5. 5. Economic Policies 100% 50% 100% Communism Socialism 50 Mixed MercantIlism Economy CAPITALISM State Control No industrial policy & control Central planning No planning Licenses,Permits & No licenses quotas Only private sector Public Sector Commercial banking Social banking Private trading State Trading Paid education Free Education Paid healthcare Free Health Care
  6. 6. Economic Myth 1947 - 1991  Economic self – reliance  Protection to domestic industry  Public sector is for public good  Controls are required for orderly economic growth  Distribution is more important than creations  Markets do not allocate resources efficiently  Capitalism and imperialism are same
  7. 7. The Vicious Cycle of Under Development Low Savings & Investments Low average Low pace of capital Income accumulation Low Productivity Successful development requires tasking requires taking steps to Break the chain at many points
  8. 8. The Socialist Sins  The myth of self  The myth of protection sufficiency  Inefficient Industries  Pin to an aero plane  High prices  No focus on  The myth of central comparative advantage planning  The myth of public sector  Misallocation of  Commanding heights scarce resources  Rs. 1,13,000 crores  Low capital investment productivity  The myth of free lunch  Massive subsidies  Lack of accountability
  9. 9. Before 1947 1947-91 ` ` After-1991 No Industrial Industrial Licensing Abolition Licensing DGTD(1950) Of industrial licencing No MRTPCA MRTPCA(1969) Dilution of MRTPCA (Presently competition Act.) No FERA FERA (1974) Dilution of FERA Now FEMA No Public sector, Expansion of PSU, Disinvestment of PSU subsidies Subsidies Banking & Insurance Nationalization of Pvt Bank & Insurance in Pvt sector Bank(1969) Companies
  10. 10. Before 1947 1947-91 After 1991 No meddling in UGC Education reforms education no UGC Subsidies for higher education Ignorance of primary and secondary education Simple corporate law Extremely complex Company Law company law reforms(emphasis on corporate governance) Free market Planned Economy Free market
  11. 11. Current Economic Scenario Pre 1991 Post-1991 Socialist frame work Market oriented Frame work Protecting the local Competition for local economy Economy Neglecting the consumer Focus on the Consumer Licence permit Economic Liberalization -Quota -Raj
  12. 12. ECONOMIC REFORMS Allocative Power – Shift from state to market Earlier Price Now Planning commission Functional market Credit rating Better allocative efficiency Not always based on Free pricing economic criteria No free lunch Administrative prices Self correcting mechanism Built in Subsidies Power of market of market Unsound criteria discipline Serious distortion Transport system
  13. 13. Economic Reforms Phase –1(1991-96) Maro economic Capital market reforms stabilization Banking reform Dismantling regulation Forex reform Fiscal reforms One way globalization Direct taxes Indirect taxes
  14. 14. Economic Reforms Phase –II(1991-Continuing) Infrastructure Labor laws Bankruptcy Law Transport Energy PSU Privatization Communication State-level Economic reforms Insurance sector Subsidies Education
  15. 15. Economic Reforms Phase –III( 2005 onwards) Education sector Downsizing the govt. Privatization of govt. department Two way globalization Reduction of public debt Reduction of external debt
  16. 16. 19 0 10 20 30 40 50 91 -9 19 2 92 47 1 9 -9 3 93 35 1 9 -9 4 7 94 - 19 95 95 13 1 9 -9 6 5 96 - 19 97 97 1 19 -98 98 -9 Disinvestment 19 9 Sa 1 5 99 Privatization 2 0 -0 0 2 00 2 0 -0 1 4 01 companies -0 20 2 02 10 -0 3 Sale of equity in no of 6
  17. 17. Value added by industry 1600 1400 1200 1000 Rs. 800 Series1 Bill 600 400 200 0 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 85- 86- 87- 88- 89- 90- 91- 92- 93- 94- 95- 96- 97- 98- 99- 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00
  18. 18. Strategic Implication for next few years Compete forces will come into full play Both global and domestic Commercial, Utilities and not for profit Export oriented firm will grow while import-intensive/ import –substitution unit will have to struggle a lot Economic of scale will go up significantly, SSI sector And medium scale unit have a tough time ahead
  19. 19. Strategic Implication for next few years The relative importance of govt. in economic management will sharply decline Privatization of PSU and infrastructure Financial sector reforms Tax and company law reform MNCs will be on the rise. Weak Indian firms will have to be reorganized trough merger, alliance and closers
  20. 20. ECONOMIC HISTORY 0F INDIA  THE DECADE OF PLANNING: 1947-56  THE DECADE OF CONSOLIDATION: 1957-6  THE DECADE OF STAGNATION:1967-76  THE DECADE OD DEREGULATION:1977-1986  THE YEARS OF LIBERALISATION-I:1987-92  THE YEARS OS LIBERALISATION- II: 1993-97  THE YEARS OF GLOBALISATION:1998-02
  21. 21. SWOT analysis of Indian Business Environment
  22. 22. Strength  Huge pool of labour force  High percentage of cultivable land  Huge English speaking population, availability of skilled manpower  Stable economy,does not get affected by external changes  Extensive higher education system  Abundant natural resources  Rapid growth in IT sector
  23. 23. Weakness  High percentage of population in Agriculture  One fourth of population below poverty  High Unemployment and equity  Low productivity and high population  Low level of mechanization and literacy  Inequality and rural urban divide  Poor Infrastructure
  24. 24. Opportunities  Scope of entry of private firms in various sectors of business  Inflow of FDI likely to increase in every sector  Huge forex earning in IT &ITES sector  Investment in R&D, biotecthnology  Huge population of Indian Diaspora abroad  Huge domestic market  Huge natural gas reserve  Vast forest area and diverse wildlife  Huge agricultural resources,fishing plantation crop & livestock
  25. 25. Threats  High fiscal deficit  Government intervention  Volatility in crude oil prices across the world  Growing import bill  High growth rate of population  Agriculture extremely dependent on mansoon
  26. 26. THANK YOU

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