1. INDIA VIS-À-VIS GLOBAL REALITIES : BRAND INDIA
ECONOMY, AND THE CHALLENGE OF
HUMAN DEVELOPMENT
Economic Analysis
Dr. Rana Singh
Associate Professor
Accurate Institute of Management and Technology
MBA(Gold Medalist), Ph. D.

2. Presentation Agenda Part-A World Population & world GNI
India vis-à-vis Global Realities
Role of WTO in reducing global inequities
Globalisation as a way out to bridge the gap between the Rich and the Poor
Globalisation: Concept & Components
India vis-à-vis Globalisation Index
Part-B
India as an Emerging Global Market
Broad contours of Indian Economy
Reform packages
Twenty-Point Policy Initiatives
Global Business Leaders’ opinions about India
Part-C
Performance of the Indian Economy in Post-LPG Era
Part-D
Limitations of the Economic Development Approach: Paradigm shift in terms of Human Development
Human Developemnt: Concept and Components
HDI and its Trends
Concluding 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 Economies
1,038
(3.0)
2,310
(36.8)
450
2. Middle Income Economics
5,732
(16.6)
2990
(47.7)
1,920
3. High Income Economics
27,732
(80.4)
971
(15.5)
28,550
World
34,502
(100.0)
6271
5,500
China
1,417
(4.1)
1,288
(20.5)
1,100
India
568
(1.6)
1,064
(17.0)
530
Source: 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 $)
World
34,502
(100.0)
6271
5,500
China
1,417
(4.1)
1,288
(20.5)
1,100
India
568
(1.6)
1,064
(17.0)
530

5. INFERENCES BASED ON THE ABOVE TABLES
Gross inequality of incomes between the Rich and the Poor countries
Widening gap in the per capita income of Rich and Poor countries
during
During the past few years, the income growth rate of the poor
countries has shown rising trends, which if sustained over a longer
period ; the gap between the Rich and the Poor will decrease
All high income countries are not necessarily developed countries, such
as, oil-exporting Gulf Countries
Their per capita incomes are high, but they do not fulfill other parameters
of a developed economy

6. ESTABLISHMENT OF WTO TO FACILITATE FREE FLOW OF
TRADE IN GOODS AND SERVICES
The establishment is based on the belief that the World would be
richer and happier if we could ensure the movement of the
Following without any restrictions and hindrances:
- Goods and Services
Investment Flows
Technology Flows
Systems and processes Flows
People Flows
Any aberration or anomaly in the above movements is sought to be corrected
Through the good offices of the WTO.

7. Blurred national identity for products and services
GLOBALIZATION CONCEIVED AS A WAY OUT TO BRIDGE THE
GAP BETWEEN THE RICH AND THE POOR COUNTRIES
THE CONCEPT AND THE SCOPE OF GLOBALIZATION
There 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 choices
Lower prices
Blurred national identity for products and services
Career choices and progression

8. -Fifteen Years of consistent efforts on the part of
India in terms of Globalizing its Economy, It has
not been in a position to find a place among
the top 20 Globalized countries of the world.
The four important components of globalization
are
-ECONOMIC INTEGRATION
PERSONAL CONTACT
TECHNOLOGY
POLITICAL ENGAGEMENT

9. ECONOMIC INTEGRATION: TRADE, FOREIGN DIRECT INVESTMENT
AND PORTFOLIO CAPITAL FLOWS, AND INCOME PAYMENTS AND RECEIPTS
(INCLUDING COMPENSATION OF NON RESIDENT EMPLOYESS AND INCOME
EARNED AND PAID ON ASSETS HELD ABROAD)
PERSONAL CONTACT: INTERNATIONAL TRAVEL AND TOURISM,
INTERNATIONAL TELEPHONE TRAFFIC, AND CROSS-BORDER TRANSFERS
TECHNOLOGY: NUMBER OF INTERNET USERS, INTERNET HOSTS,
AND SECURE SERVERS
POLITICAL ENGAGEMENT: NUMBER OF MEMBERSHIPS IN
INTERNATIONAL ORGANIZATIONS, U.N. COUNCIL MISSIONS IN WHICH EACH
COUNTRY PARTICIPATES, AND FOREIGN EMBASSIES THT EACH COUNTRY
HOSTS

10. THE ABOVE PHENOMENON HAS BEEN SHOWN IN THE FOLLOWING GRAPH

11. Globalization index rankings

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 of
Globalization 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 62
countries 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 globalization
Some emerging economies (Czech Republic) are quite high
Developing countries exceeded the global average in trade growth

15. Globalization and the Environment
Common complaint that globalization hurts the environment
Argued that firms relocate to escape tough pollution rules at home
Many firms adhere to strict codes of environmental protection, and engage in cleanup of locations
Environment 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 services
Streamlines 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 involve
Individuals
Companies
Government bodies
International institutions

21. Concept of IB –Contd.. International transactions International trade
Economic transactions that cross borders
International trade
Occurs when companies import or export across borders
International investment
Occurs when companies invest their resources across national boundaries
International firm
Those 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 abroad
Has 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 entrepreneurs
Individuals 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 Dynamics
Currency, inflation, interest rates, accounting practices, cultures, social customs, laws, political stability
Operational Nature
Communication, 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 motives
Motives 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 Motives
Capitalize on distinctive resources or capabilities already developed at home
Be the first mover in a target foreign market
Benefit from vertical integration involving different countries
Follow the company’s major customers abroad

28. Why Do Firms Expand Internationally?
Economic Motives
Increase return through higher revenues and/or lower costs.
Enables the company to benefit from the differences in:
Costs of labour
Natural resources
Capital
Differences 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 Brand
Destination as the 5th largest economy of the world next to
U.S.A., Japan, Germany, and China. The macro-economic
variables, which have put India in such an enviable global
position have been:

30. Broad Contours of Indian Economy
Economic Growth
Sustained economic performance
Average since % %
% (estimated)
Forecast till 2050 –Goldman Sachs 5 % p.a.
Services account for over 50% of GDP
Manufacturing sector grew at 9% in
Trade ( )
Exports growth 24% in reaching US$80 billion
Imports growth 35% reaching US$106 billion
Investment
Foreign Investment - US$16 billion in
Mature Capital Markets
NSE third largest, BSE fifth largest in terms of number of trades
Well developed banking system

31. Economic Reforms-contours
Industrial Policy Reforms
Industrial delicensing and deregulation
Licensing limited to only 6 sectors: on security, public health & safety considerations
Liberal policy on technology collaboration
Trade Policy Reforms
Most items on Open General License, Quantitative Restrictions lifted
Progressive reduction in customs duty
Imports grew at 34% in to reach US$105 billion
Foreign Trade Policy
To double India’s share in global merchandise trade in 5 years

32. 5th among the top reformers in 2003: World Bank
Economic Reforms
Rationalisation of direct and indirect tax structure
Peak Custom duty: 15%
Corporate Tax: 30%
Tariff to be aligned with ASEAN levels
Policies on outward investments also liberalised
Rupee made fully convertible on trade account
Fiscal Responsibility & Budget Management Act
Revenue deficit to be brought to zero by 2008
5th among the top reformers in 2003: World Bank
Reforms have been continuous indicating the commitment of successive Governments

33. Enhancing Competitiveness of the economy
In addition to the above reform packages, the country
Has taken the following Twenty-Point policy initiatives
to put The Indian Economy on the Global Map
Enhancing Competitiveness of the economy
2.Liberalization of Foreign Director Investment (FDI) Policy
Foreign Technology Collaborations
Easing of Foreign Exchange Controls
5. Lowering of Tax Rates both for individuals and corporates

34. Contd.. 6. Strengthening of infrastructural support
Revolutionary milestones in IT and
IT enabled services
Virtual revolution in telecommunications
The gigantic quadrangular development of
national highways connecting North to
South and East to West
10. 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 future
13. Impressive strides in Biotechnology and Pharma Industry
14. Integrated Circuit Technology (ICT) benefits
Bilateral 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-tourism
Indian corporates turning out to be
multinationals
Strong scientific and technological
manpower pool
Sound foundations laid in terms of excellence
in education through IIMs, IITs, Engineering and
Technology Institutions, etc.

37. Global Business Leaders -On India
JOHN CHAMBERS, CISCO
JACK 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 Institutional
Investments in Asia favouring India
Foreign Institutional Investments (FIIs) Destination :
Select Asian Countries
($ million)
2000
2001
2002
2003
2004
Malaysia
-2,472
-649
-1,712
1,097
8,902
Thailand
-712
-881
-1,606
-73
1,308
China
-3,991
-19,406
-10,342
11,427
196
Indonesia
-1,911
-244
1,222
2,251
2,793
India
2,346
2,853
1,023
8,216
8,833
Source : Asian Development Bank (ADB) Report, 2005
Source: 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 activities
2,29,829
2,93,033
2.46
Manufacturing
1,03,739
1,88,817
6.17
Of which Organised
Unorganised [Non-Corporate]
65,774
37,965
1,18,282
72,535
6.04
6.39
Construction
38,749
70,962
6.24
Trade, Hotels and Restaurant
On which Trade
Hotels and Restaurant
98,627
91,324
5,303
2,18,985
2,04,438
14,547
8.53
8.39
10.62
Non-Railway transport
22,888
50,090
8.15
Real Estate, ownership of Dwellings and Business Services
40,431
72,001
5.94
Other Services
48,275
1,02,156
7.78
Total NP [including other Activities]
6,97,992
12,74,074
6.2
Note: The NDP figures are at prices and the growth rate is the geometric average growth rate at
constant 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 RATES
At 1993 – 94 prices Rs. Crore and %
Category
Sector Share
Growth Rate [ to ]
Agriculture and forestry, fishing
2,29,829 [32.9]
2,93,033 [23.0]
2.46
Mining, Manufacturing Electricity
1,27,490 [18.3]
2,32,040 [18.2]
6.17
Services
3,40,673 [48.8]
7,49,001 [58.9]
8.2
Note : We have included construction as part of services. The NDP figures are at prices and the growth rate is the
geometric 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 Delhi
Source: Business Line, New Delhi, 12/01/2006

41. LIMITATIONS OF ECONOMIC GROWTH APPROACH: IN TERMS OF HUMAN DEVELOPMENT
PARADIGM SHIFT
IN TERMS OF HUMAN DEVELOPMENT
Policy 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 automatic
link 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 concept
The 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 down
HD Advocates:
income is a means; enhancing people’s capabilities the end
Simultaneous expansion of choices in other dimensions – social, cultural, political - and economic
not 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 people
2. More equitable distribution of assets and income
3. Well structured public expenditures
4. Empowerment of people to participate
Otherwise 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?
Index
What it measures
HDI
Average achievements in a country in three basic dimensions of HD
GDI
GEM
Adjusts the average achievement of the HDI to reflect the inequalities between men and women
Focuses on women’s opportunities rather than their capabilities

46. Human Development Index (HDI)
Introduced in 1990, the HDI measures a
country's achievements in three aspects of
Human 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 as
2/3(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 neighbors
If properly disaggregated, to monitor inequalities, recommend targeting, evaluate progress over time
To determine priorities for policy intervention
For 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 bottom
Top 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 bottom
Top 5 countries: Norway, Iceland, Australia, Luxemburg, Canada
Bottom 5 Countries : Chad, Mali, Burkina Faso, Sierra Leone, Niger
India : (Rank 127)

52. HDI trends
The 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 variables
Promotion of Equality of opportunities for all people across the nations, regions, people societies, cultures and genders
Focus on contributing to the overall GDP of the Indian Economy
Emphasis on crystallizing and outperforming international benchmarks in all sectors of the economy
Aim 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 in
Individual, organizational and international
domains
Focus on Technology related areas and its
overall contributions to Quality of life so as to
maximize India’s Ranking on HDI Frontier
Adherence to Sterling Benchmarks of behaviors
based on universal ethics and values
Commitment to preserve the environmental
sustainability in the long run

57. Thank You…!