INDIAN ECONOMY AND GLOBALISATION IRVING FISHER GROUP
The term globalization means International Integration. It is a process through which the diverse world is unified into a single society. Opening up of world trade, development of advanced means of communication, internationalisation of financial markets, growing importance of MNCs, population migrations and more generally increased mobility of persons, goods, capital, data and ideas
Accountability of Global businesses? Increased gap between rich and poor fuels potential terrorist reaction Ethical responsibility of business? Efforts to remove trade barriers.
MarketingNike Branding Advertising Dell Cost down Outsourcing
New trade pattern: developing countries ◦ dont just have to trade their raw materials to the West and get finished products in return; ◦ can become big-time producers as well. New production pattern: global product network ◦ companies can locate different parts of their production, research and marketing in different countries
Growing global markets in services people can now offer and trade services globally -- from medical advice to software writing to data processing -- that could never really be traded before. W-2, W-4, 1099 bonuses & stock statements Indian accountantUS tax payers
Market economic policies spreading around the world, with greater privatization and liberalization than in earlier decades. ex: BRIC Widespread adoption of democracy as the choice of political regime.
Multilateral agreements in trade, taking on such new agendas as environmental and social conditions. New multilateral agreements – for services, intellectual property , communications – more binding on national governments than any previous agreements.
Increasing Forex Reserves Indias Forex Reserves: 2001-08 (Till 14 March 2008) 350 306 300 250USD Billion 199 200 141 152 150 112 100 75 54 50 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 (Till 14 March 08) Steadily increasing Forex reserves offer adequate security against any possible currency crisis or monetary instability Source: Reserve Bank of India & India Brand Equity Foundation (IBEF)
Growing FDI Inflows 35 30 30 25USD Billion 22 20 15 10 8.9 5 6 4.3 0 2003-04 2004-05 2005-06 2006-07* 2007-08* India is ranked second in AT Electronic equipment, Kearney’s FDI confidence index manufacturing and telecom have (2007) witnessed significant FDI inflow * Provisional Source: Department of Commerce
Increasing Per Capita Income 4000 4000 3500 3000 2500 2000USD 2000 1500 1021 797 1000 460 500 0 2000-01 2006-07 2007-08 2016-17 2025 Source: India Brand Equity Foundation (IBEF) & Economic Survey 2007-08
Major M&A and Investments Announcements in India POSCO to invest in building steel manufacturing plants and facilities in India by 2016 USD 12 billion Plans to establish three manufacturing plants to produce photo-voltaic units USD 2 billion Plans to spend on its development operations in India over the next four years USD 1.7 billion Source: India Brand Equity Foundation (IBEF)
India Inc. Investing OverseasMain sectors: • 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% of India’s population – and larger than the population of the US • India is the 3rd largest global telecom market. The mobile subscriber base has 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 by 2015 • The number of billionaires in the country were 3 in 1999; 23 in 2006; and are 48 currently.
India’s Trade with USA 18.8 20.0 17.3 15.0 13.7USD Billion 11.4 11.7 9.4 10.0 7 5 5.0 0.0 2003 - 04 2004 - 05 2005 - 06 2006 - 07 Exports to US Imports from US Source: Department of Commerce, Govt of India
Major Items Exported to USA (2006) Organic Iron & Steel Chemicals 5% 6% Cut andEngineering polished Goods & diamond & Machinery jew ellery 15% 38% Textiles 36% Source: US Department of Commerce
Major Items Imported from USA (2006) Precious stones & Optical & Medical Metals Instruments Fertilizers 14% 11% 9%Aircraft, AviationMachinery & parts Engineering 25% Goods & Machinery 41% Source: US Department of Commerce
Buyer Acquisition Price"Toyota Motor has Reliance Industries Flag Telecom, Bermuda US$ 212mchosen to source fromIndia due to its Tata Motors Daewoo, Korea US$ 118mcompetitive cost of Infosys Technologies Expert Information Services, Australia US$ 3.1mmanufacture,availability of Bharat Forge Carl Dan Peddinghaus, Germany N/Aabundant engineeringtalent, and strong Ranbaxy RPG (Aventis) Laboratories, France N/Aindigenous machine Wockhardt CP Pharmaceuticals, UK US$ 18mtool." Cadila Health Alpharma SAS, France US$ 5.7m Hindalco Straits Ply, Australia US$ 56.4m Wipro NerveWire Inc, USA US$ 18.5m Aditya Birla Dashiqiao Chem, China US$ 8.5m United Phosphorus Oryzalin Herbicide, USA US$ 21.3m
Automotive Sector - Overview India is the world’s: • 2nd largest two-wheeler market, • 4th largest commercial vehicle market • 11th largest passenger car market. Expected to be the 7th largest automobile market by 2016 India has become an attractive destination for global American, European, Japanese and Korean OEMs.
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 & FII FDI $ 50 Billion Per Year FII $ 20 Billion Per Year
Agriculture acquired 17% of India’s GDP in 2008. 60% of population still depends on agriculture 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 - Female Person Male Female Gap 1981 43.6 56.4 29.8 26.6 1991 52.2 64.1 39.3 24.8 2001 65.4 75.8 54.2 21.6
What are people talking about India? "India has a fantastic pool ofsoftware professionals. The world This market (India) is critical to needs to benefit from this.“ our plans for building a Ford Motor Co. for the 21st century Bill Gates, Microsoft Bill Ford, Chairman Chairman and CEOIndia on its way to becoming IT, manufacturing kingdom of the The dynamism shown by India world in the last 15 years is phenomenal Mr Yasukuni Enoki, Japanese Ambassador to Paul Wolfowitz, India President, World Bank
High growth but problem of unemployment. Need to generate 10 million jobs per year. Multi party rule, hence need to accommodate political ideology with economic reality (reservation, labour law reforms).
Companies in India That Have Successfully Met Competition byMultinationals & Domestic Companies Had A Spirit Of Innovation Not Only InTheir Products And Services But Also With Reference To All Their ResourcesAnd Effectively Restructured Them In A Time And Cost Frame And MetCustomer Needs And Improved Their Top And Bottom Line.