INDIAN ECONOMY AND GLOBALISATION

IRVING FISHER GROUP

WHAT IS GLOBALISATION ?


 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
GLOBALISATION
Issues
 Accountability
of Global
businesses?
 Increased gap
between rich and
poor fuels potential
terrorist reaction
 Ethical responsibility
of business?
 Efforts to remove
trade barriers.
Shape of the world’s economy is
being changed by “globalization”

Marketing
Branding
Nike Advertising

Dell Cost down

Outsourcing
Globalization – what’s really new?
New Trade and Production Patterns
ØNew 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.
ØNew production pattern: global product network
◦ companies can locate different parts of their
production, research and marketing in different
countries

 Globalization – what’s really new?
New markets
ØGrowing 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
Globalization – what’s really new?
New rules and norms
ØMarket economic policies spreading around the
world, with greater privatization and liberalization
than in earlier decades.
 ex: BRIC
ØWidespread adoption of democracy as the choice
of political regime.



Globalization – what’s really new?
New rules and norms
ØMultilateral agreements in trade, taking on such
new agendas as environmental and social
conditions.
ØNew multilateral agreements – for services,
intellectual property , communications – more
binding on national governments than any
previous agreements.

 Growth
Customer Survey
 Growing Indian Economy
2010 *
2010
qGDP – USD 1.36 trillion
qGDP growth rate – 9%
qServices contribution –
60-65%
qBalance of Trade – Negative
balance should increase with
surging imports versus exports
qInvestment goal –
USD 370 billion
2008
*
2008
qGDP – USD 1.16 trillion
qGDP growth rate – 9.5%
qServices contribution – 60% 2006
2006
qBalance of Trade – Negative qGDP – USD 590 billion
balance should increase with
qGDP growth rate – 9%
surging imports versus exports
qServices contribution – 54%
qInvestment goal –
USD 305 billion qBalance of Trade –
USD (-)46.2 billion
qInvestment goal –
USD 250 billion
*: Projected
Source: Economic Times & India Brand Equity Foundation (IBEF)
 Growing GDP

1,200
Contribution of Services -
increased from 48% to 62% and
1,000
is estimated to contribute 60% by 2010
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

*: Projected
Source: India Brand Equity Foundation (IBEF)
 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*

*: Projected
Source: Ministry of Commerce & IBEF
 Growing Imports

250
210.8
185.7
200
149.1
USD Billion

150
111.5

100

50
2004-05 2005-06 2006-07 2007-08 (A pr-
Feb)

Source: Ministry of Commerce & IBEF

 Increasing Forex Reserves
India's Forex Reserves: 2001-08 (Till 14 March 2008)
350
306
300
250
199
USD Billion

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
25
22
USD Billion

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 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
 Major M&A and Investments Announcements in India

POSCO
POSCOto
toinvest
investin
inbuilding
buildingsteel
steelmanufacturing
manufacturingplants
plantsand
andfacilities
facilitiesin
inIndia
Indiaby 2016
byUSD
2016
12 billion

Plans
Plansto
toestablish
establishthree
threemanufacturing
manufacturingplants
plantsto
toproduce
producephoto-voltaic
photo-voltaicunits
units
USD 2 billion

Plans
Plansto
tospend
spendon
onits
itsdevelopment
developmentoperations
operationsin
inIndia
Indiaover
overthe
thenext
nextfour
fouryears
USD 1.7 billion
years

Source: India Brand Equity Foundation (IBEF)

 India Inc. Investing Overseas
Main sectors:
Auto Components IT
Beverages Metals

Cosmetics Mobile Communications

Energy Pharmaceuticals

Financial Services Software

Industrial Goods

Main Destinations:
China, UAE, UK
North America is emerging as a destination.
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 13.7
11.4 11.7
USD Billion

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 and
Engineering polished
Goods & diamond &
Machinery jewellery
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, Aviation
Machinery & parts Engineering
25% Goods &
Machinery
41%

Source: US Department of Commerce

 India co. going Global
Buyer Acquisition Price

Reliance Industries Flag Telecom, Bermuda US$ 212m

Tata Motors Daewoo, Korea US$ 118m

Infosys Technologies Expert Information Services, Australia US$ 3.1m

Bharat Forge Carl Dan Peddinghaus, Germany N/A

"Toyota Motor has
chosen to source from Ranbaxy RPG (Aventis) Laboratories, France N/A
India due to its
competitive cost of Wockhardt CP Pharmaceuticals, UK US$ 18m
manufacture, availability
of abundant engineering Cadila Health Alpharma SAS, France US$ 5.7m
talent, and strong
Hindalco Straits Ply, Australia US$ 56.4m
indigenous machine
tool." 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

ØIndia is the world’s:

•2nd largest two-wheeler market,
•4th largest commercial vehicle market
•11th largest passenger car market.
ØExpected to be the 7th largest automobile
market by 2016
ØIndia has become an attractive destination for
global American, European, Japanese and
Korean OEMs.

Source: IBEF, Economic Times

GOI POLICY-FDI AND
FII
Ø
Ø
Ø 1990 FDI $ 234 Million
Ø 1998-2003 FDI $ 2.5 Billion Per Year
Ø Target FDI $ 10 Billion Per Year
Ø Over 620 FIIs Compared to 500 in 2003 and Earlier


Ø China FDI & FII

 FDI $ 50 Billion Per Year
 FII $ 20 Billion Per Year
Ø
Ø
Agriculture
Ø
Ø
ØAgriculture acquired 17% of India’s GDP in
2008.
Ø60% of population still depends on
agriculture for their livelihood.
ØOccupied 43% of India’s geographical areas.
ØAll other sectors are growing at much faster.

SHARE IN GDP

Year Industry(%) Service(%) Agriculture(%)

1991 25 31 44

2007 28 55 17
 Education
 Current Literacy rate is 64.84%


Literacy Rate Male -


Year
 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?

of software professionals. The world needs to benefit from this.“

This market (India) is critical to our plans for building a Ford Motor Co. f

Bill Gates, Microsoft Chairman

Bill Ford, Chairman and CEO

to becoming IT, manufacturing kingdom of the world

The dynamism shown by India in the last 15 years is p

Mr Yasukuni Enoki, Japanese Ambassador to India

Paul Wolfowitz, President, World Bank
India’s Problems

Ø
ØHigh growth but problem of unemployment.
Ø
ØNeed to generate 10 million jobs per year.
Ø
ØMulti party rule, hence need to
accommodate political ideology with
economic reality (reservation, labour law
reforms).
Ø
 Conclusion

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.
Thank You