The document discusses innovations in the Indian economy and business. It describes how India liberalized its economy in 1991 after a balance of payments crisis, deregulating many industries and encouraging foreign investment and trade. This led to strong economic growth. The document also provides examples of innovative Indian companies like ITC's e-Choupal rural marketing initiative and LG Electronics and HUL adapting products for rural and low-income consumers.

1. India:
INNOVATIONS in
Business and Economy

2. The Big Story
 What is INNOVATION ?
 Innovations in India?
 Innovations in Indian Economy
 Corporate Innovations in India

3. What is INNOVATION?
I N N O V A T I O N
VALUE CREATING
SUSTAINABLE
Dynamic
ON-GOING
FINDING NEW WAYS OF DOING
ANYTHING BUT ‘BUSINESS AS USUAL’

4. Innovations in Indian Economy

5. Innovations in Indian Economy
Indian Economy before REFORMS

6. India before REFORMS
 Closed Economy
 License Raj: tangle of regulations giving bureaucrats too much control
over too much of economy
 Unabated corruption
 Public Sector: fountainhead of industrial development
 Private Sector under constraint
 Restriction on growth and diversification (license raj)
 Restriction on technology and capital flow ( import, forex control)
 Reservation for small sector
 Government dominance of R&D activity

7. And the CRISIS
 Over the 80s Government expenditure grew faster than government
earnings
 High level of borrowings by government from the Reserve Bank of
India, IMF, World Bank
 Populist spending policies of the government
 Expenditure on subsidies grew from Rs 19.1 billion in 1980-81 to Rs 107.2
billion in 1990-91
 Resulted large Fiscal Deficit and Balance of Payment crisis
 Current account deficit doubled from an annual average of 1.3 % of GDP
during the first half of 1980s to 2.2 % of GDP during the second half
 Forex Reserves dwindled to USD 975 million, hardly enough to pay for
two weeks of imports

8. And the 1991 INNOVATION
In the form of LIBERALIZATION

9. 1991 REFORMS…
 Almost all industrial licensing abolished
 Restrictions under Monopolies and Restrictive Trade Practices Act reduced
 Private Entry requirements both for domestic and foreign players eased
 Custom duties, the peak protective duty rates were brought down from
300 % in 1991 to 85% by March 1993
 Foreign Direct Investment caps on various sectors relaxed to a large
extent
 Archaic Foreign Exchange Regulation Act amended and replaced by
Foreign Exchange Management Act

10. And the results are…
India's Gross Domestic Product (at Factor Cost)
0
5000
10000
15000
20000
25000
30000
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
RsBillion

11. And the results are…
India's Balance of Payments
-5000
0
5000
10000
15000
20000
25000
30000
35000
40000
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06PR
2006-07P
USDmillion

12. And the results are…
Movement of India's Forex Reserves
0
20
40
60
80
100
120
140
160 1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
USDBillion

13. India today is a…
 Strong, vibrant and fast growing economy
 Will be third largest economy in the world after China and US by 2050
 Key strengths
 Dynamic and competitive private sector
 Sound and independent legal system
 Large and growing consumer market
 Vast-pool of English-speakers
 Skilled managerial and technical manpower
 Key sectors of influence
 Outsourcing for MNCs
 Exporting software
 Financial, research, technology services
 GDP growing at average rate of 8% - Industry and Services sectors
largest growth drivers

14. Corporate Innovations in India

15. Innovations in Global Economy
 Both the developped as well as emerging markets presents attractive
opportunities for the corporates
 However making minor adjustments to existing products, lowering prices
or replicating existing sales channels does not led to success in the current
global economy
 Corporates need to be innovative enough to rethink value propositions
 Understand consumer behavior and needs of the individual target markets
 Develop new product offerings keyed to unique needs of individual markets
 Globalise research and developments
 Develop and retain the key employees for the different markets and
integrate them into the global network
 Ways to manage regulatory risks of the different markets

16. Innovations in Global Economy
 There is a surge in competition in the emerging global economy
 Markets around the world are being liberalised
 Long term reductions in the cost of transportation and communication
have opened up new markets
 Consumer learn about new fashions, ideas and products faster than ever
before
 Science technology are providing new opportunities for business to
compete based on exploiting knowledge, skills and creativity to produce
more valuable goods and services
 Increasing environmental concerns, growing demand for environment
friendly systems
 All these factors are making challenges to innovate urgent and continuous

17. ITC: e-Choupal

18.  ITC’s national crop procurement network of 6,500 ``e-Choupal,'' kiosks
 A two way rural direct marketing channel for rural India
 E-choupal: a computer typically housed in the farmer’s house
 linked to internet via phone lines
 Managed by a trained local farmer
 Serves an average of 600 farmers in 190 surrounding villages in 5 km
radius
 The farmers can use the computer to
 access daily closing prices on local mandis
 as well as to track global price trends or
 find information about new farming techniques
 Order seed, fertilizer and other consumer goods from ITC or its partners
ITC: e-Choupal

19. ITC: e-Choupal
 At harvest time ITC offers to buy crops directly from any farmer
 Procurement is at the previous day’s closing price
 Farmer transports crop to an ITC processing center
 Farmer is paid for crop and transport fee
 “Bonus Points” are provided for products with quality above norm
 Points are exchangeable for products that ITC sells
 Farmers that come to sell usually go back with their required FMCG
product from the ITC sells counters
 3.5 million farmers connected through a IT network in rural India
 E-Choupal has won the Stockholm Challenge Award 2006 in the Economic
Development Category and many more

20. LG ELECTRONICS

21. LG ELECTRONICS
 LG entered India as Lucky Goldstar in 1993 in JV with a local partner
 Rather unlucky start, JV entered into messy break up
 Six years after the Reforms, LG re-entered India as a 100% subsidiary ‘LG
Electronics India Pvt Ltd’
 LG took to localisation of its operation.
 Established manufacturing plant at Noida in1998, introduced ‘digital
manufacturing system’ ensuring local and efficient manufacturing to
reduce cost
 Innovative product localisation
 Hindi and regional language menus on its TV
 Introduced low priced “Cineplus” and “Sampoorna” range for the rural market
 First brand to introduce gaming in CTVs. Cricket gaming in CTVs
 Created R&D set-up in India
 Indianised electrical goods matching the tastes of Indian consumers
 designed a standard 220 volt appliance to withstand India's 170 volt to 350
volt power surges

22. LG ELECTRONICS
 Adopted Regional distribution model, distributors work directly with the
company, stock rotation
 Innovative marketing strategies
 Sponsored 1999 Cricket Worldcup, followed it up to 2003
 Brought in four captains of the Indian Cricket team to endorse it products
 Cultural marketing in the form of discounts and special offers in time of
festivals specially during Diwali
 LG today is one of the most formidable brands in the consumer durables
and home appliances
 Total turn over of the company in the year 2006 was Rs 82.5 billion and is
expecting a growth of 15% this year

23. INNOVATION

24. INNOVATION
 For more than 50 years HUL served India’s elite class who can afford to
buy MNC products (top of THE PYRAMID)
 Nirma’s offering of detergent products for poor consumers in 1990s was
an eye opener for HUL
 In 1995 HUL took to product innovation
 Drastically altered its traditional business model of high margins
 Approach towards profits driven by volume and capital efficiency
 New detergent ‘Wheel’ was formulated, substantially reducing ration of oil
to water in the product responding to the fact that the poor often wash
their clothes in rivers and other public water systems
 Decentralized production, marketing and distribution of product leveraging
the abundant labour pool in rural India

25.  Initiated micro-credit initiative “Shakti” expanding its distribution system
 mutually beneficial alliances with rural Self Help Groups (SHGs)
 SHGs are being offered the option of distributing relevant products of the
company as a sustainable income-generating activity
 Shakti has over 19,000 women entrepreneur reaching out to 80,000 villages
in 345 districts in 12 states of the country
 By the end of 2010, it aims to reach out to 1,00,000 entrepreneurs covering
5,00,000 villages and touching 600 million population
 HUL’s news business yield 20 % growth in revenue per year and a 25 %
growth in profits per year between 1995 and 2000
 Market cap grew to USD 12 billion- agrwth rate of 40 % per year
 HUL’s parent Unilever transported these principles to create new detergent
market among poor in Brazil
 ‘Bottom of the Pyramid’ is a corporate ‘strategic priority’ for Unilever now
INNOVATION