1. Kevin Hassel
Dana Wei
Nick Lenard
Ben Knudsen
Challenges and
INDI

2. The macro-
economic
environment

3. India At a Glance
 1.21 billion people
 2nd largest workforce at 478.3 million people
 Competitive advantage is centered around labor
 More than half of the Indian work force is in agriculture
(52%), but its major source of economic growth comes
from the services industry (34%)

4. India At a Glance
(cont…)
 An estimated 25% of Indian’s live on less than $2 a day,
making inequality and quality of life real issues for India.
 Unions exist in India mainly in smaller concentrated
industries and have declined over the past few decades,
so poverty is rising
 Protectionism exists overwhelmingly within India,
which has led to the takeover of a majority of the private
sector by the government.

5. India At a Glance
(cont…)
 India is currently involved with multiple trade
agreements that include: SAFTA, APTA, BIMSTEC, and
PTA in efforts to:
 Hasten economic growth through increased trade
 Increase national security and protection for local
cultures.
However, challenges with labor and infrastructure
remain the key hindrances to India’s growth.

6. Labor
Challenges

7. Overview of Indian
Labor
 Labor is India’s competitive advantage
 6% economic growth through the 1990s
 Job growth decelerated during the same time
 Estimated 30-40% of manufacturing jobs have been lost
from over regulation
 45 Central Laws and 170 State Statutes that regulate
Labor

8. Labor Inefficiencies
 15 million human days of work lost from work stoppage
 Unions have little power
 Less than 10 million workers are employed in the private
sector
 Indian firms are forced to be inefficient by the labor
laws
 Lack of Economies of Scale
 India’s Industrial Disputes Act: 1947

9. Regulation Reform
 Allow the market to take control
 Eliminate inefficient processes
 Stop Over-Regulating
 6 attendance logs, 10 overtime accounts, etc.
 Stop Protectionism
 Allow creative destruction
 Allow more efficient businesses to develop
 Limit Government Takeovers/Allow market to naturally
eliminate jobs
 Leads to inefficient practices

10. Unions
 Trade Union Leadership
 Too Many Unions & Too Much Rivalry
 Not enough power
 68544 Unions with
 893 average membership
 Firms do not have to recognize Unions
 Limited negotiations

11. Opportunities and
Challenges
 Jobs will be lost as inefficiencies are eliminated
 Similar to China’s privatization
 Lost jobs, unemployment, etc.
 Reduce Inequality
 25% of Indian’s live on $2 a day
 Natural Balance of Union/Firm Power
 Able to exploit both skilled and unskilled labor
 Incorporate labor in current and future trade agreements

12. Labor reforms
“Countries that assume that their physical resources
sustain prosperity are economic dwarfs. Countries that
regard their human resources as their eternal wealth
are economic giants.”

13. Independence: 1980’s
 India gained independence in 1947
 Trade Union Act 1946
 Allows for the formation of a trade union by 7 or more
workers, including outside members under different
employment, which causes disputes to span many years.
 In 2000: 533,038 disputes pending in India's labor courts
 28,864 had been pending for over 10 years

14. Industrial Disputes
Act: 1948
 India’s heavy regulation includes over 45 national laws
and 200 state laws that derive the Industrial Disputes
Act of 1948.
 The Act requires organizations in the formal sector, as
well as any organization with more than 100 workers, to
seek government approval before firing an employee.

15. Effects of Rigidities
 Jobless growth in organized sector
 Organized: accounts for 6% GDP
 seeking more capital-intensive methods of production
 set up several plants instead of a single large one to get
around labor laws
 Unorganized: accounts for 94% GDP

16. Infrastructur
e challenges

17. Key Improvements
Necessary:
 Transportation
 Power
 Water

18. Transportation
 Airports, bridges, and highways in short supply and
crumbling away, placing the country’s citizens at risk.
 Lack of efficiency a big issue:
 Absence of mass transit system has led to overcrowding
 In turn, overcrowding has led to traffic jams
 In turn, many laborers spend up to 4 hours a day
commuting
 Ports are incompetent
 Turnaround rate is 3 days in India vs. 8 hours in countries
like China
 Cannot handle many of the world’s largest cargo ships

19. Power
 Power failures are a major obstacle
 Last up to multiple hours are also an obstacle
 Can and should be expected daily
 Prevalent even in the highly commercial and developed
areas such as Delhi, Mumbai and Bangalore
 India is losing out investment opportunities as a result
 Last year, Intel Corp. chose Vietnam over India as the
site for a new chip assembly plant

20. Water
 Availability
 Steel production, chemical manufacturing, and India’s
rapidly growing population all require huge amounts
of water
 Shortage of water will devastate the agricultural sector
as well as industrial sector
 Global warming and reduction in size of India’s
glaciers have had a hand in this
 Sanitation

21. Source: World Bank Report on Water in India

22. In 1980
India China
Gross National
Income ($ current 182 188
billion)
Average Annual
Growth Rate 3.30% 6.90%
GDP Per Capita (2000
Constant $) 223 186
Populaiton Less than
$1 day (million) 382 634
Poverty at less than
$1 day (%) 54.40% 63.80%

23. Policy Making:

24. Air Transported Freight by Year
14000
12000
Total Airtransported Freight (millions of tons)
10000
8000
6000 Air transport, freight (million ton-km) China
Air transport, freight (million ton-km) India
4000
2000
0
Year

25. Container Port Traffic by Year
140,000,000.00
120,000,000.00
100,000,000.00
80,000,000.00
Container port traffic (TEU: 20 foot
equivalent units) China
Container port traffic (TEU: 20 foot
60,000,000.00
equivalent units) India
40,000,000.00
20,000,000.00
-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

26. Electricity Production (kWh)
4E+12
3.5E+12
3E+12
2.5E+12
2E+12
Electricity production (kWh) China
Electricity production (kWh) India
1.5E+12
1E+12
5E+11
0

27. Quality of Infrastructure
4.50
4.30
4.32
4.28
4.10
3.90 3.98
3.70 Quality of port infrastructure, WEF
(1=extremely underdeveloped to 7=well
developed and efficient by international
3.50 standards)
3.49 3.47 Quality of port infrastructure, WEF
3.30 (1=extremely underdeveloped to 7=well
3.33 developed and efficient by international
standards)
3.10
2.90
2.70
2.50
2007 2008 2009

28. Total Rail Lines (km)
70,000.00
65,000.00
60,000.00
55,000.00
Rail lines (total route-km) China
Rail lines (total route-km) India
50,000.00
45,000.00
40,000.00
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

29. Cellphone Subscriptions
800,000,000.00
700,000,000.00
600,000,000.00
500,000,000.00
400,000,000.00
Mobile cellular subscriptions China
Mobile cellular subscriptions India
300,000,000.00
200,000,000.00
100,000,000.00
-
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

30. The Results:
India China
1990 2005 1990 2005
Gross National Income
($ current billion) 313 800 356 2244
Average Annual Growth
Rate 6.50% 6.40% 10.40% 10.90%
GDP Per Capita (2000
Constant $) 317 588 392 1449
Populaiton Less than $1
day (million) 357 327 375 173
Poverty at less than $1
day (%) 42.10% 30.70% 33.00% 13.40%

31. Questi
ons?