EMERGENCE OF NEW INDIA

Opportunities & Challenges

Study the past if you would divine the future

- Confucius

Valu e adde d

First wave-Resource rich Second wave-Skill rich Third Wave Knowledge rich

1750-1950

Industrial relation

Up to 1750

Industrial Relation Knowledge & Information Physical Facilities Second Wave Third Wave

Agricultu re Revolutio n LandCattle

First wave

F i

Economic Growth

Initial Phase

YEARS Y

A study of Marx and Lenin produced a powerful effect on my mindThe practical achievements of the Soviet Revolution advanced human society by a great leap and had lit a bright flame which could not be smothered andIt had laid the foundations for that new civilization towards which the world could advance.
- The Discovery of India, Nehru

Economic Policies
100%
Communism Socialism

50% 50
Mixed Economy

100%
MercantIlism
CAPITALISM

State Control Central planning Licenses,Permits & quotas Public Sector Social banking State Trading Free Education Free Health Care

No industrial policy & control No planning No licenses Only private sector Commercial banking Private trading Paid education Paid healthcare

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

The Vicious Cycle of Under Development

Low Savings & Investments
Low average Income Low Productivity Low pace of capital accumulation

Successful development requires tasking requires taking steps to Break the chain at many points

The Socialist Sins

The myth of self sufficiency

The myth of protection

Pin to an aero plane No focus on comparative advantage

Inefficient Industries High prices

The myth of public sector

The myth of central planning

Commanding heights Rs. 1,13,000 crores investment Massive subsidies Lack of accountability

Misallocation of scarce resources Low capital productivity

The myth of free lunch

Before 1947 No Industrial Licensing

1947-91 Industrial Licensing DGTD(1950) MRTPCA(1969)

After-1991 Abolition Of industrial licencing Dilution of MRTPCA (Presently competition Act.) Dilution of FERA Now FEMA Disinvestment of PSU Pvt Bank & Insurance Companies

No MRTPCA

No FERA

FERA (1974)

No Public sector, subsidies Banking & Insurance in Pvt sector

Expantion of PSU, Subsidies Nationlization of Bank(1969)

Before 1947 1947-91

No meddling in education no UGC
UGC Subsidies for higher education Ignorance of primary and secondary education

After 1991
Education reforms

Simple corporate law

Extremely complex company law

Company Law reforms(emphasis on corporate governance) Free market

Free market

Planned Economy

Current Economic Scenario

Pre 1991
Socialist frame work Protecting the local economy Neglecting the consumer

Post-1991
Market oriented Frame work Competition for local Economy Focus on the Consumer

Licence permit-Quota - Economic Raj Liberalization

Paradigm Shift & Transformation

Renaissance

Changing & crisis

New vision

Decline
Original vision

ECONOMIC REFORMS Allocative Power Shift from state to market Earlier Price Planning commission
Credit rating

Now Functional market

Better allocative efficiency Free pricing No free lunch Self correcting mechanism Power of market of market discipline Transport system

Not always based on economic criteria Administrative prices Built in Subsidies Unsound criteria Serious distortion

Economic Reforms Phase 1(1991-96)

Maro economic stabilization

Dismantling regulation

Capital market reforms

Banking reform

Fiscal reforms
Direct taxes

Forex reform
One way globalization

Indirect taxes

Economic Reforms Phase II(1991-Continuing)

Infrastructure

Labor laws
Bankruptcy Law

Transport Energy Communication

PSU Privatization
State-level Economic reforms

Insurance sector

Subsidies Education

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

The Demand of todays world Development of strong conceptual Skill.Very important in todays complex business scene Work as an effective team member- resolving conflicts And facilitating a consensus decision Appreciates divergent views Sound grasp of key issues having an impact on Indian business ( immediate/short term & medium) Example

a) Globalisation b) Entry into WTO c) Use of IT in Business

The Demand of todays world Skill to view business in totality and not functionally Strong commitment to task within the time frame Look beyond the imaginary square ( of the 9 dots puzzle) for possible solution Ability to focus on key issues and segregate grain from husk

Strong people dimension- skill to build harmonious relationships and a blend of firmness and a blend of firmness and consideration- being fair. Look at all issues in financial term, as business is money

Industry Expects A Summary

Major breakthrough skills

How to think out of box?

How to compete effectively?

How to obtain a fresh perspective on market, People,cost,customer? What does it mean to deliver value? How to develop a culture that delivers it

The 5 point for rapid Economic Progress

Switch from centrally planned economy to free market Economy

Let the capital market allocate the resources Focus on competitive advantage for economic growth Globalize the economy vigorously Invest in human resources education and health care

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

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

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

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