Indian Economy - 2

1. INDIAN ECONOMY AND GLOBALISATION
IRVING FISHER GROUP

2.  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 MNC's, population
migrations and more generally increased
mobility of persons, goods, capital, data and
ideas

4.  Accountability
of Global businesses?
 Increased gap
between rich and poor
fuels potential
terrorist reaction
 Ethical responsibility
of business?
 Efforts to remove
trade barriers.

5. Marketing
Nike Branding
Advertising
Dell Cost down
Outsourcing

6.  New trade pattern: developing countries
◦ don't 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

7.  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 accountant
US tax payers

8.  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.

9.  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.

10. Growth
Customer Survey

11. Growing Indian Economy
*
2010
 GDP – USD 1.36 trillion
*
2008
 GDP growth rate – 9%
 Services contribution –
 GDP – USD 1.16 trillion
60-65%
 GDP growth rate – 9.5%
 Balance of Trade – Negative 2006
balance should increase with  Services contribution – 60%
surging imports versus exports
 Balance of Trade – Negative  GDP – USD 590 billion
 Investment goal – balance should increase with
 GDP growth rate – 9%
USD 370 billion surging imports versus exports
 Services contribution – 54%
 Investment goal –
USD 305 billion  Balance of Trade –
USD (-)46.2 billion
 Investment goal –
USD 250 billion

12. Growing GDP
1,200 Contribution of Services -
increased from 48% to 62% and
is estimated to contribute 60% by 2010
1,000
800 682
USD Billion
600 453
398
400
237
191 287
204 231
200 125
103
105 105 135 145 167
0
1999-00 2002-03 2005-06 2006-07 2010*
Agriculture Industry Services

13. Growing Exports
200
210
155
170
USD Billion
126.3
130
103.1
83.5
90
50
2004-05 2005-06 2006-07 2007-08* 2008-09*

14. Growing Imports
250
210.8
185.7
200
USD Billion
149.1
150
111.5
100
50
2004-05 2005-06 2006-07 2007-08 (Apr-
Feb)

15. Increasing Forex Reserves
India's Forex Reserves: 2001-08 (Till 14 March 2008)
350
306
300
250
USD 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)

16. Growing FDI Inflows
35
30 30
25
USD 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

17. Increasing Per Capita Income
4000
4000
3500
3000
2500 2000
USD
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

18. 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)

19. India Inc. Investing Overseas
Main sectors:
• Auto Components • IT
• Beverages • Metals
• Cosmetics • Mobile Communications
• Energy • Pharmaceuticals
• Financial Services • Software
• Industrial Goods

20. 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.

21. India’s Trade with USA
18.8
20.0
17.3
15.0 13.7
USD 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

22. Major Items Exported to USA (2006)
Organic
Iron & Steel
Chemicals
5%
6% Cut and
Engineering polished
Goods & diamond &
Machinery jew ellery
15% 38%
Textiles
36%
Source: US Department of Commerce

23. Major Items Imported from USA (2006)
Precious stones & Optical & Medical
Metals Instruments Fertilizers
14% 11% 9%
Aircraft, Aviation
Machinery & parts Engineering
25% Goods &
Machinery
41%
Source: US Department of Commerce

24. Buyer Acquisition Price
"Toyota Motor has Reliance Industries Flag Telecom, Bermuda US$ 212m
chosen to source from
India due to its Tata Motors Daewoo, Korea US$ 118m
competitive cost of Infosys Technologies Expert Information Services, Australia US$ 3.1m
manufacture,
availability of Bharat Forge Carl Dan Peddinghaus, Germany N/A
abundant engineering
talent, and strong Ranbaxy RPG (Aventis) Laboratories, France N/A
indigenous machine Wockhardt CP Pharmaceuticals, UK US$ 18m
tool."
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

25. 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.

26.  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

27.  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.

28. Year Industry(%) Service(%) Agriculture(%)
1991 25 31 44
2007 28 55 17

29.  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

30. What are people talking about India?
"India has a fantastic pool of
software 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
CEO
India 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

31.  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).

32. Companies in India That Have Successfully Met Competition by
Multinationals & Domestic Companies Had A Spirit Of Innovation Not Only In
Their Products And Services But Also With Reference To All Their Resources
And Effectively Restructured Them In A Time And Cost Frame And Met
Customer Needs And Improved Their Top And Bottom Line.