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IRVING FISHER GROUP
INDIAN ECONOMY AND GLOBALISATION
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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
WHAT IS GLOBALISATION ?
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GLOBALISATION
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Issues Accountability
of Global businesses? Increased gap
between rich and poor fuels potential terrorist reaction
Ethical responsibility of business?
Efforts to remove trade barriers.
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Shape of the world’s economy is being changed by “globalization”
Nike
Dell
MarketingBrandingAdvertising
Cost down Outsourcing
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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
Globalization – what’s really new? New Trade and Production Patterns
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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.
Globalization – what’s really new? New markets
W-2, W-4, 1099 bonuses & stock statements
Indian accountantUS tax payers
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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.
Globalization – what’s really new? New rules and norms
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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.
Globalization – what’s really new? New rules and norms
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GrowthCustomer Survey
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GDP – USD 590 billion GDP growth rate – 9% Services contribution – 54% Balance of Trade –
USD (-)46.2 billion Investment goal –
USD 250 billion
2006
Growing Indian Economy
GDP – USD 1.16 trillion GDP growth rate – 9.5% Services contribution – 60% Balance of Trade – Negative
balance should increase with surging imports versus exports
Investment goal – USD 305 billion
2008* GDP – USD 1.36 trillion
GDP growth rate – 9% Services contribution –
60-65% Balance of Trade – Negative
balance should increase with surging imports versus exports
Investment goal – USD 370 billion
2010*
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105 105 135 145 167103 125
204 231287
682
191 237
398453
0
200
400
600
800
1,000
1,200
1999-00 2002-03 2005-06 2006-07 2010*
US
D B
illio
n
Agriculture Industry Services
Contribution of Services - increased from 48% to 62% and
is estimated to contribute 60% by 2010
Growing GDP
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83.5103.1
126.3
155
200
50
90
130
170
210U
SD B
illio
n
2004-05 2005-06 2006-07 2007-08* 2008-09*
Growing Exports
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Growing Imports
111.5
149.1
185.7210.8
50
100
150
200
250U
SD B
illio
n
2004-05 2005-06 2006-07 2007-08 (Apr-Feb)
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India's Forex Reserves: 2001-08 (Till 14 March 2008)
5475
112141 152
199
306
0
50
100
150
200
250
300
350
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08(Till 14
March 08)
US
D B
illio
n
Steadily increasing Forex reserves offer adequate security against any possible currency crisis or
monetary instability
Increasing Forex Reserves
Source: Reserve Bank of India & India Brand Equity Foundation (IBEF)
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Growing FDI Inflows
* Provisional Source: Department of Commerce
8.9
22
30
4.3 60
5
10
15
20
25
30
35
2003-04 2004-05 2005-06 2006-07* 2007-08*
USD
Bill
ion
Electronic equipment, manufacturing and telecom have witnessed significant
FDI inflow
India is ranked second in AT Kearney’s FDI confidence
index (2007)
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Increasing Per Capita Income
Source: India Brand Equity Foundation (IBEF) & Economic Survey 2007-08
460797
1021
2000
4000
0
500
1000
1500
2000
2500
3000
3500
4000U
SD
2000-01 2006-07 2007-08 2016-17 2025
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Major M&A and Investments Announcements in India
USD 1.7 billionPlans to spend on its development operations in India over the next four years
USD 2 billion Plans to establish three manufacturing plants to produce photo-voltaic units
USD 12 billion POSCO to invest in building steel manufacturing plants and facilities in India by 2016
Source: India Brand Equity Foundation (IBEF)
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Main sectors:
India Inc. Investing Overseas
• Auto Components • IT• Beverages • Metals• Cosmetics • Mobile Communications• Energy • Pharmaceuticals• Financial Services • Software• Industrial Goods
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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.
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India’s Trade with USA
Imports from US
Exports to US
Source: Department of Commerce, Govt of India
11.4
5
13.7
7
17.3
9.4
18.8
11.7
0.0
5.0
10.0
15.0
20.0
2003 - 04 2004 - 05 2005 - 06 2006 - 07
USD
Bill
ion
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Major Items Exported to USA (2006)
Textiles36%
Engineering Goods &
Machinery15%
Organic Chemicals
6%
Iron & Steel5% Cut and
polished diamond & jew ellery
38%
Source: US Department of Commerce
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Major Items Imported from USA (2006)
Fertilizers9%
Optical & Medical Instruments
11%
Precious stones & Metals14%
Aircraft, Aviation Machinery & parts
25%Engineering
Goods & Machinery
41%
Source: US Department of Commerce
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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
Ranbaxy RPG (Aventis) Laboratories, France N/A
Wockhardt CP Pharmaceuticals, UK US$ 18m
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
"Toyota Motor has chosen to source from India due to its competitive cost of manufacture, availability of abundant engineering talent, and strong indigenous machine tool."
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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.
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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
GOI POLICY-FDI AND FII
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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.
Agriculture
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SHARE IN GDP
Year Industry(%) Service(%) Agriculture(%)
1991 25 31 44
2007 28 55 17
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Current Literacy rate is 64.84%
Education
Year Literacy Rate Male - Female
Person Male Female Gap1981 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
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"India has a fantastic pool of software professionals. The world
needs to benefit from this.“
Bill Gates, Microsoft Chairman
This market (India) is critical to our plans for building a Ford
Motor Co. for the 21st century
Bill Ford, Chairman and
CEO
India on its way to becoming IT, manufacturing kingdom of the
worldThe dynamism shown by
India in the last 15 years is phenomenal
Mr Yasukuni Enoki, Japanese Ambassador
to India Paul Wolfowitz, President, World
Bank
What are people talking about India?
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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).
India’s Problems
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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.
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Thank YouMade By :-
Dipesh Rafalia