Presentation on theme: "INDIA VIS-À-VIS GLOBAL REALITIES : BRAND INDIA"— Presentation transcript:
1 INDIA VIS-À-VIS GLOBAL REALITIES : BRAND INDIA ECONOMY, AND THE CHALLENGE OFHUMAN DEVELOPMENTEconomic AnalysisDr. Rana SinghAssociate ProfessorAccurate Institute of Management and TechnologyMBA(Gold Medalist), Ph. D.
2 Presentation Agenda Part-A World Population & world GNI India vis-à-vis Global RealitiesRole of WTO in reducing global inequitiesGlobalisation as a way out to bridge the gap between the Rich and the PoorGlobalisation: Concept & ComponentsIndia vis-à-vis Globalisation IndexPart-BIndia as an Emerging Global MarketBroad contours of Indian EconomyReform packagesTwenty-Point Policy InitiativesGlobal Business Leaders’ opinions about IndiaPart-CPerformance of the Indian Economy in Post-LPG EraPart-DLimitations of the Economic Development Approach: Paradigm shift in terms of Human DevelopmentHuman Developemnt: Concept and ComponentsHDI and its TrendsConcluding observations
3 Distribution of World Population and World GNI among various groups of Countries in 2003(Exchange Rate Basis)GNI (Billion US $)Total Population (million)GNI Per Capita (US $)1. Low Income Economies1,038(3.0)2,310(36.8)4502. Middle Income Economics5,732(16.6)2990(47.7)1,9203. High Income Economics27,732(80.4)971(15.5)28,550World34,502(100.0)62715,500China1,417(4.1)1,288(20.5)1,100India568(1.6)1,064(17.0)530Source: Compiled from World Bank, World Development Report (2005)
4 INDIA vis-à-vis GLOBAL REALITIES GNI (Billion US $) Total Population GNI Per Capita(million) (US $)World34,502(100.0)62715,500China1,417(4.1)1,288(20.5)1,100India568(1.6)1,064(17.0)530
5 INFERENCES BASED ON THE ABOVE TABLES Gross inequality of incomes between the Rich and the Poor countriesWidening gap in the per capita income of Rich and Poor countriesduringDuring the past few years, the income growth rate of the poorcountries has shown rising trends, which if sustained over a longerperiod ; the gap between the Rich and the Poor will decreaseAll high income countries are not necessarily developed countries, suchas, oil-exporting Gulf CountriesTheir per capita incomes are high, but they do not fulfill other parametersof a developed economy
6 ESTABLISHMENT OF WTO TO FACILITATE FREE FLOW OF TRADE IN GOODS AND SERVICESThe establishment is based on the belief that the World would bericher and happier if we could ensure the movement of theFollowing without any restrictions and hindrances:- Goods and ServicesInvestment FlowsTechnology FlowsSystems and processes FlowsPeople FlowsAny aberration or anomaly in the above movements is sought to be correctedThrough the good offices of the WTO.
7 Blurred national identity for products and services GLOBALIZATION CONCEIVED AS A WAY OUT TO BRIDGE THEGAP BETWEEN THE RICH AND THE POOR COUNTRIESTHE CONCEPT AND THE SCOPE OF GLOBALIZATIONThere are different connotations and ramifications of the much talked about term “Globalization”. But from the point of view of Economy, Business, Human Development, and Management, the term Globalization connotes the following four basic aspects:More choicesLower pricesBlurred national identity for products and servicesCareer choices and progression
8 -Fifteen Years of consistent efforts on the part of India in terms of Globalizing its Economy, It hasnot been in a position to find a place amongthe top 20 Globalized countries of the world.The four important components of globalizationare-ECONOMIC INTEGRATIONPERSONAL CONTACTTECHNOLOGYPOLITICAL ENGAGEMENT
9 ECONOMIC INTEGRATION: TRADE, FOREIGN DIRECT INVESTMENT AND PORTFOLIO CAPITAL FLOWS, AND INCOME PAYMENTS AND RECEIPTS(INCLUDING COMPENSATION OF NON RESIDENT EMPLOYESS AND INCOMEEARNED AND PAID ON ASSETS HELD ABROAD)PERSONAL CONTACT: INTERNATIONAL TRAVEL AND TOURISM,INTERNATIONAL TELEPHONE TRAFFIC, AND CROSS-BORDER TRANSFERSTECHNOLOGY: NUMBER OF INTERNET USERS, INTERNET HOSTS,AND SECURE SERVERSPOLITICAL ENGAGEMENT: NUMBER OF MEMBERSHIPS ININTERNATIONAL ORGANIZATIONS, U.N. COUNCIL MISSIONS IN WHICH EACHCOUNTRY PARTICIPATES, AND FOREIGN EMBASSIES THT EACH COUNTRYHOSTS
10 THE ABOVE PHENOMENON HAS BEEN SHOWN IN THE FOLLOWING GRAPH
12 There is a common myth that Globalization benefits developed countries at the cost of under-developed countries. For instance, Japan figures at the 2nd largest economy of the world next to U.S.A., but in terms ofGlobalization Index Rankings (G.I.R.), Japan is at No.38. Similarly, Germany, which is considered as the 3rd largest economy of the world, figures at No.14 in terms of G.I.R..The more startling contrast is provided by China, which in the year 2005 emerged as the 4th largest economy of the world relegating U.K. to a lower position, figures at 53rd ranking of the Globalization Index. This is so because the G.I.R. are based on parameters, which are not exactly the same, which constitute the size of the economy.
13 Judged from the globalization index rankings, India figures at Rank No Judged from the globalization index rankings, India figures at Rank No.49 and small countries like Uganda, Tunisia, Senegal, Romania, Ukraine, Sri Lanka etc. have scored higher ranks than India. It’s a great surprise that in this ranking, Ireland is number 1, followed by Switzerland, whereas the great and most powerful economy of the world, namely, U.S.A. figures at Rank No.12. This ranking has been given out of 62countries and Iran figures at the last rank.
14 Who Benefits from Globalization? Allegedly at the cost of poorer nations.Higher among the G-7, but some (e.g. Japan) are low on globalizationSome emerging economies (Czech Republic) are quite highDeveloping countries exceeded the global average in trade growth
15 Globalization and the Environment Common complaint that globalization hurts the environmentArgued that firms relocate to escape tough pollution rules at homeMany firms adhere to strict codes of environmental protection, and engage in cleanup of locationsEnvironment is just one factor in location decision
16 Globalization: The Social Balance Carries promises and threats at the national, regional, organizational, and individual level.Makes less regulated, emerging economies vulnerable to volatilities.Exposes national economies to the uncertainties of the global economy.Could offer advantages to participating economies.
17 Globalization: The Social Balance –contd.. Globalization & Infrastructure –Institutional frameworks and market efficiency that support fair and transparent transactions of products or servicesStreamlines flows of commodities, capital, labour, knowledge, and information.
18 Globalization: The Social Balance- Contd.. Globalization and happiness
19 Globalization and International Business Globalization does not mean the advance of a homogeneous civilization and uniform business system.Growing interaction makes people more aware of the differences among them.
20 Concept of International Business The business activities that involve the transfer of resources, goods, services knowledge, skills or information across national boundaries.May involveIndividualsCompaniesGovernment bodiesInternational institutions
21 Concept of IB –Contd.. International transactions International trade Economic transactions that cross bordersInternational tradeOccurs when companies import or export across bordersInternational investmentOccurs when companies invest their resources across national boundariesInternational firmThose engaged in international business
22 Concept of IB –Contd.. A firm that has directly invested abroad Multinational Enterprise (MNE)A firm that has directly invested abroadHas at least one working affiliate in a foreign country
23 International versus Domestic Business International business is the outgrowth of domestic business.Most major corporations started their operations in the domestic market.International entrepreneursIndividuals or companies that invest and operate in another country without a home base
24 International versus Domestic Business Significantly different due to differences in:Environmental DynamicsCurrency, inflation, interest rates, accounting practices, cultures, social customs, laws, political stabilityOperational NatureCommunication, coordination, motivation, differences in organizational principles and management philosophies
25 Why Do Firms Expand Internationally? Firms expand internationally for various motives:- Market motives- Strategic motives- Economic motivesMotives vary from one business activity to another.
26 Why Do Firms Expand Internationally? Market Motives:Offensive motive – seize market opportunities in foreign countries through trade or investment.Defensive motive – to protect and hold a firm’s market power or position in the face of threats from domestic rivalry or changes in government policy.
27 Why Do Firms Expand Internationally? Strategic MotivesCapitalize on distinctive resources or capabilities already developed at homeBe the first mover in a target foreign marketBenefit from vertical integration involving different countriesFollow the company’s major customers abroad
28 Why Do Firms Expand Internationally? Economic MotivesIncrease return through higher revenues and/or lower costs.Enables the company to benefit from the differences in:Costs of labourNatural resourcesCapitalDifferences in regulatory treatment
29 INDIA AS AN EMERGING GLOBAL MARKET The process of Liberalization, Privatization, and Globalization(L.P.G.) initiated since 1991 have made India a BrandDestination as the 5th largest economy of the world next toU.S.A., Japan, Germany, and China. The macro-economicvariables, which have put India in such an enviable globalposition have been:
30 Broad Contours of Indian Economy Economic GrowthSustained economic performanceAverage since %%% (estimated)Forecast till 2050 –Goldman Sachs 5 % p.a.Services account for over 50% of GDPManufacturing sector grew at 9% inTrade ( )Exports growth 24% in reaching US$80 billionImports growth 35% reaching US$106 billionInvestmentForeign Investment - US$16 billion inMature Capital MarketsNSE third largest, BSE fifth largest in terms of number of tradesWell developed banking system
31 Economic Reforms-contours Industrial Policy ReformsIndustrial delicensing and deregulationLicensing limited to only 6 sectors: on security, public health & safety considerationsLiberal policy on technology collaborationTrade Policy ReformsMost items on Open General License, Quantitative Restrictions liftedProgressive reduction in customs dutyImports grew at 34% in to reach US$105 billionForeign Trade PolicyTo double India’s share in global merchandise trade in 5 years
32 5th among the top reformers in 2003: World Bank Economic ReformsRationalisation of direct and indirect tax structurePeak Custom duty: 15%Corporate Tax: 30%Tariff to be aligned with ASEAN levelsPolicies on outward investments also liberalisedRupee made fully convertible on trade accountFiscal Responsibility & Budget Management ActRevenue deficit to be brought to zero by 20085th among the top reformers in 2003: World BankReforms have been continuous indicating the commitment of successive Governments
33 Enhancing Competitiveness of the economy In addition to the above reform packages, the countryHas taken the following Twenty-Point policy initiativesto put The Indian Economy on the Global MapEnhancing Competitiveness of the economy2.Liberalization of Foreign Director Investment (FDI) PolicyForeign Technology CollaborationsEasing of Foreign Exchange Controls5. Lowering of Tax Rates both for individuals and corporates
34 Contd.. 6. Strengthening of infrastructural support Revolutionary milestones in IT andIT enabled servicesVirtual revolution in telecommunicationsThe gigantic quadrangular development ofnational highways connecting North toSouth and East to West10. Strengthening of special economic zones
35 11. Massive growth in Automobile and Auto component Industry Impressive performance of Textiles and Garments and their vast potential for future13. Impressive strides in Biotechnology and Pharma Industry14. Integrated Circuit Technology (ICT) benefitsBilateral and Multilateral Trade Agreements with leading economies of the world including U.S.A., E.U., ASEAN, NAFTA, GULF COOPERATION COUNCIL (GCC), etc.
36 16. Developed brain power facilitating knowledge power outsourcing in several fields, such as,software development, IT enabled services,Medical researches and Health care tourism,consulting etc.17. Healthcare, Sports, and Eco-tourismIndian corporates turning out to bemultinationalsStrong scientific and technologicalmanpower poolSound foundations laid in terms of excellencein education through IIMs, IITs, Engineering andTechnology Institutions, etc.
37 Global Business Leaders -On India JOHN CHAMBERS, CISCOJACK WELCH, GE“India is a developed country as far as intellectual capital is concerned”“We are expanding our presence in India to take advantage of the ample R&D talent available”MICHAEL DELL, DELL“India is handling the most sophisticated projects in the world.I am impressed with the quality of work”“India can be a major part of Dell’s operations and we are looking to capitalize on India’s human capital”BILL GATES, MICROSOFT
38 The echo of the above global leaders’ sentiments has found Expressive Support In the behavior of Foreign InstitutionalInvestments in Asia favouring IndiaForeign Institutional Investments (FIIs) Destination :Select Asian Countries($ million)20002001200220032004Malaysia-2,472-649-1,7121,0978,902Thailand-712-881-1,606-731,308China-3,991-19,406-10,34211,427196Indonesia-1,911-2441,2222,2512,793India2,3462,8531,0238,2168,833Source : Asian Development Bank (ADB) Report, 2005Source: Business & Economy, New Delhi, ( – )
39 NDP AND GROWTH RATE IN DIFFERENT ACTIVITIES 1993-94 TO 2003-04 At 1993 – 94 prices Rs. Crore and %Category(Rs. in Crores)(Rs.in crores)Growth Rate in %Agriculture and allied activities2,29,8292,93,0332.46Manufacturing1,03,7391,88,8176.17Of which OrganisedUnorganised [Non-Corporate]65,77437,9651,18,28272,5356.046.39Construction38,74970,9626.24Trade, Hotels and RestaurantOn which TradeHotels and Restaurant98,62791,3245,3032,18,9852,04,43814,5478.538.3910.62Non-Railway transport22,88850,0908.15Real Estate, ownership of Dwellings and Business Services40,43172,0015.94Other Services48,2751,02,1567.78Total NP [including other Activities]6,97,99212,74,0746.2Note: The NDP figures are at prices and the growth rate is the geometric average growth rate atconstant prices during the period. It is computed from the NAS 2005.Source: National Accounts Statistics [NAS] 2005, Central Statistical Organisation[CSO], GOI, New Delhi.Source: Business Line, New Delhi, 12/01/2006
40 At 1993 – 94 prices Rs. Crore and % SHARE OF NATIONAL INCOME AND GROWTH RATESAt 1993 – 94 prices Rs. Crore and %CategorySector ShareGrowth Rate [ to]Agriculture and forestry, fishing2,29,829 [32.9]2,93,033 [23.0]2.46Mining, Manufacturing Electricity1,27,490 [18.3]2,32,040 [18.2]6.17Services3,40,673 [48.8]7,49,001 [58.9]8.2Note : We have included construction as part of services. The NDP figures are at prices and the growth rate is thegeometric average growth rate at constant prices during the period. It is computed from the NAS 2005.Source: computed from data in National Accounts Statistics [NAS-2005, Central Statistical Organization [CSO], G.O.I New DelhiSource: Business Line, New Delhi, 12/01/2006
41 LIMITATIONS OF ECONOMIC GROWTH APPROACH: IN TERMS OF HUMAN DEVELOPMENT PARADIGM SHIFTIN TERMS OF HUMAN DEVELOPMENTPolicy makers assumed that effects of higher economic growth would trickle down to poor. Mahbub ul Haq challenged this conventional wisdom and asserted that there was no automaticlink between economic growth & human development.Economic growth is necessary but not a sufficient condition for human progress. Governments need to actively focus on HD goals & direct & use their resources efficiently so that economic growth leads to empowerment of people & poverty alleviation.Peoples’ needs & their aspirations must be at the centre of all development efforts, asserted Haq.
42 The Birth of Human Development Concept (1990 – UNDP) Basic assumptions under this conceptThe true wealth of a country is its people.There are not developed and underdeveloped countries, but developed and underdeveloped people.The best strategy to increase national income is not to accumulate capital, but to develop people.Exactly Defined as “Process of enlarging peoples choice”
43 Therefore Growth Advocates: Expanding income is an end in itself Growth does trickle downHD Advocates:income is a means; enhancing people’s capabilities the endSimultaneous expansion of choices in other dimensions – social, cultural, political - and economicnot accept trickle down as automatic
44 Is Income Enough for Well-being? Economic growth is needed, but public policy is needed to translate growth into HD. How?1. Emphasis on investment in health, education, skills of people2. More equitable distribution of assets and income3. Well structured public expenditures4. Empowerment of people to participateOtherwise the growth is voiceless, rootless, ruthless, futureless, discriminating, etc.
45 Average achievements in a country in three basic dimensions of HD GDI HOW TO MEASURE HUMAN DEVELOPMENT?IndexWhat it measuresHDIAverage achievements in a country in three basic dimensions of HDGDIGEMAdjusts the average achievement of the HDI to reflect the inequalities between men and womenFocuses on women’s opportunities rather than their capabilities
46 Human Development Index (HDI) Introduced in 1990, the HDI measures acountry's achievements in three aspects ofHuman Development:Longevity: measured by life expectancy at birth;Knowledge: measured by a combination of the adult literacy rate (2/3) and the combined gross primary, secondary, and tertiary enrolment ratio (1/3);Standard of living: measured by GDP per capita (Purchasing Power Parity of US$).
47 Construction of the HDI 1 Fixed minimum and maximum values are established for each of these indicators:1.) life expectancy at birth: 25 and 85 years;2.) adult literacy rate (age 15 and above): 0% and 100%;3.) combined gross enrollment ratio: 0% and 100%;4.) GDP per capita (PPP$): $100 and $40,000 (PPPUS$).2 For each component, individual indices are computed according to the general formula:Index=(actual value – minimum value) / (maximum value – minimum value)3 The Education Index is compiled as2/3(adult literacy index) + 1/3(gross enrolment index)
48 Construction of the HDI ( Contd) 4. The GDP index is calculated using adjusted per capita (PPP$). In the HDI income serves as a surrogate for all the dimensions of human development not reflected in a long and healthy life and in knowledge.Income is adjusted because achieving a respectable level of human development does not require unlimited income. Accordingly, the logarithm of the income is used.5. The HDI is a simple average of the life expectancy index, educational attainment index and adjusted GDP per capita PPP US$ index, and is derived by dividing the sum of these three indices by 3.
49 Uses of HDI: Focus on human outcomes, not economic data Comparisons within and between countries of the same level of development, as well as neighborsIf properly disaggregated, to monitor inequalities, recommend targeting, evaluate progress over timeTo determine priorities for policy interventionFor lobbying policy makers who make budgetary allocations (needs to be understood and used by civil society)To question national policy choices - how two countries with the same level of income per person can end up with such different HD outcomes.
50 HDI trends in 2004 (2002)The top and the bottom of the Index remain unchanged from last year: Norway is on top and Sierra Leone is on the bottomTop 5 countries: Norway (0.956), Sweden (0.946), Australia (0.946), Canada (0.943), Netherlands (0.942)Bottom 5 Countries : Burundi (0.339), Mali (0.326), Burkina Faso (0.302), Niger (0.292), Sierra Leone (0.273)India : 1975 –0.411, 1980 – 0.437, 1990 – 0.514, 1995 – 0.548, 2000 – and (Rank 127)
51 HDI trends in 2005 (2003) The top and the bottom of the Index (177 ): Norway is on top and Niger is on the bottomTop 5 countries: Norway, Iceland, Australia, Luxemburg, CanadaBottom 5 Countries : Chad, Mali, Burkina Faso, Sierra Leone, NigerIndia : (Rank 127)
52 HDI trendsThe CIS is the only region to witness an overall decline in its HDI. Nearly all the countries saw a sizeable deterioration in their income indicator, with the notable exception of Poland.Roughly half of the countries in Latin America and the Caribbean recorded either a decline or stagnation in income during the 1990s.East Asia and the Pacific region continues to forge ahead, with virtually every country making progress compared with Laos, China, Thailand and Malaysia all moved ahead in the HDI rankings. In South Asia, too, there were HDI improvements across the board.
53 SOURCE: National Science Foundation, Science and Engineering Indicators – 2004.
54 SOURCE: National Science Foundation, Science and Engineering Indicators – 2004.
55 TO CONCLUDE What should we do ? Reduction in economic and social inequalities of macro and microeconomic variablesPromotion of Equality of opportunities for all people across the nations, regions, people societies, cultures and gendersFocus on contributing to the overall GDP of the Indian EconomyEmphasis on crystallizing and outperforming international benchmarks in all sectors of the economyAim at achieving excellence in all spheres of operations
56 Earnest endeavours on Invention, Innovation, R& D, and patents of state of the art technology,products, systems and processes- Nurture high ambition and aspiration levels inIndividual, organizational and internationaldomainsFocus on Technology related areas and itsoverall contributions to Quality of life so as tomaximize India’s Ranking on HDI FrontierAdherence to Sterling Benchmarks of behaviorsbased on universal ethics and valuesCommitment to preserve the environmentalsustainability in the long run