Indian EconomyAn Overview

MACROECONOMICS

Nature of Indian Economy

National Income trend

Per capita income
Inequitable distribution of income

2010- 130 mn households earning

45,000 to 1,35,000

Poverty and literacy rate

Predominance of Agriculture
Rapid population growth(194737.5cr, 2008(114cr)

National Income trend

Immediately after independence problems like

partition and world war II has left India with certain
problems like inflation food shortages.
GDP during Ist three decades : 3.4% p a
80s : 5.6%
90-91 : deep crises
90s : 6.5% - 2000- 05 : 7.0%, 05-06: 8.4%
12th Finance Commission stated it to be: >9%
World bank has also approved that IE will grow
over 8%( target achieved)
PM talks of pushing growth to 10% but realistically
more that 8%(05-06)
Finance people has a sight set on 15,000 mark(06-

Economist Surjit S Bhalla has stated that a

fall in interest rate of nearly 4%, reduction in
fiscal deficit by 2-3%, increase in investment
rate by 5% from the 1990s and lower
population growth rate have contributed in
putting India on a growth trajectory
Mr. Chidambaram is saying it would be
difficult to sustain a growth rate above 8%
with given investment rate of 26.3%
India is on 4th position in league of Industrial
nation in 04 - $3319bi
In terms of Forex reserve - $200 bi (07)

Good part is Chinas growth is likely to slow

down
Reasons- 10% revaluation in Chinas
currency could eat 1.4% off its annual
growth, their heavy(80%) reliance on exports
may get adversely affected by US and
European market slowdown,moreover FDI
performance is unlikely to get any better than
$50bi per year, saving rate is also high-45%
Thus Indian economy is far better placed to
keep its growth up at least for another
decade.

Per Capita Income

Low PCI compared to western countries

In 1952-53 : PCI was 1/13th of USA
1/9th of Japan, thus used to come among the
category of underdeveloped economy
50-51- 3687.4 Rs p.a
70-71 5002.3 Rs p.a
90-91 9064 Rs p.a
97-98 17325 Rs p.a
04-05 27457 Rs p.a
05-06 - 29000 Rs p.a
07-08 33000 Rs p.a

Inequitable distribution of income

Lowest 40% household accounts for

22% of aggregate household
expenditure
Top 20% household accounts for 40%
of aggregate household expenditure
Middle 40% household accounts for
38% of aggregate household
expenditure

Poverty and literacy rate

Poverty 51-52 60% 73-74 54.9%

83-84 44.5%
93-94 36%
99-00 30.6%
03-04 26%
07-08 - 25%
But according to World Bank def. 38% of
Indian pop. Lives on less than $1 a day
Literacy rate
50 51 18%
00-01 62%
04-05 65%

Predominance of Agriculture

Occupational distribution is not

satisfactory
50-51 70% in agri. & contri.to
NI 55%
90-91 64% in agri. & contri.to
NI 28%
04-05 - 63% in agri. & contri.to
NI 23%
USA 2%, France 2%, China
18%, Thailand 11%

Rapid population growth rate

Population growth rate around 2.0% p.a.

over 45 years
But lower population growth rate have all
contributed in putting India on a high growth
trajectory
Unlike China, Indias working population as a
% of total population will continue to grow in
the next 25 years as 50% of the population is
less than 25 years of age

The World bank study(07) described India as

an emerging giant that is likely to become an
economic power house over the next 25
years. As India has a huge pool of welleducated, technically trained people,
proportionately much larger than in China or
South-East Asia. Indias number of scientist
and engineers is second only to US(thats why
Attack by militants)
Acc. Goldman Sachs a leading global
investment banker,the Indian economy is
expected to be the third largest in the world by
2050, after China and US, overtaking
France,Germany and Japan.
Also predicted India may exceed China by
2015, it will overtake Britain in 2022 and
Japan in 2032

Nature of Indian Economy

(Cont)

Unemployment rate 7.5%

Corporate India is on a hiring spree,
recruiting across sectors at every level
Among other countries in Asia Pacific region,
India tops the list i.e. Salary increase by
country (%)
India 14%
China - -8.1%
Korea 7.1%
Thailand 6.5%
Malaysia 5.4%
Hong Kong 3.4%

Scarcity of capital
Scarcity of capital:
K : O 4-5 Before 90s , 3-4 90s
Year
Agg. Saving Agg. Inv.
50-51
8.9
8.7
70-71
14.6
15.4
01-02
24.0
23.4
07-08
32.0
30.0
East Asian countries and China = 35%of
GDP

Technological backwardness:

2/3 of pop. in Agriculture

Spend on R&D as % of GNP is < 1%
80-81- 0.62
87-88 0.98
90-91 0.89
UK- 2% , Japan- 1.96, US 2.3%
Indias inherent strength lies in engineering
designs, process innovations and R&D
India has beat China in car exports in year 05 as
Indias passenger vehicle exports is 172522 units
in mainly developed and emerging countries and
China export is 160000 units predominantly in
smaller African and Asian market.

Progress in banking and financial

sector

Foreign Institutional Investors inflow in 05 crossed

$10 billion
FII holding in top 200 companies has increased
from 17.30%(04) to 22%(05)
Corporate profits at 5% of GDP
87 companies in the billion dollar club
Sensex at a all time high and has gained more than
40% during this year
India crossed $500 billion in market capitalization
becoming third largest market in Asia after Hong
Kong and S. Korea
In Mutual Funds Asset Under Management
surpassed the Rs. 200000 crores

Indian Economy

18th Cen. 22.6% of world income

1947- 3%, Today- 5%
Indian economy 2010
GDP growth
7-9
Agriculture
3-3.5
Industrial
8-10
Service
8-10
Inflation
1-3
Export
10-15
Import
10-15
Rupee
45-50 a $

Indian Economy

10 Companies of India(05-06)in terms of Mkt. Cap.

Company
ONGC
RELIANCE
1
NTPC
IOC
SAIL
BHARTI AIRTEL
TCS
ITC
TATA STEEL
INFOSYS

Rank 06
1
2
3
4
5
6
7
8
9
10

Rank 05
1
2
4
3
5
17
8
10
6
12

Branding India
Brands of India that have made an impact
in abroad
Corporate brand
Non corp. brand
Tata
Taj Mahal
Kingfisher Beer
Sachin Tendulkar
Amul
Bollywood
Infosys
Ayurveda
Oberoi Hotels
Yoga

Most Global Companies of India

Tata Tea- it marked the entry of India on the world stage

with acquisition of UKs Tetley (2000). It got world wide
business of pound 271 mi.. it also gave Tata access to
large distribution that help the company in the introduction
of its brands globally at little incremental cost. Other two
large acquisition in 06 of Tata tea is in US, Glaceau
water (enhanced water) and Eight oclock (coffee).

Ranbaxy - the generic major is charting growth path in the

global pharmaceutical market. Today it has presence in
49 countries, manufacturing operations in 8 countries and
its product available in over 125 countries.
It ranked amongst top 10 generic companies in the world.
Most of its acquisitions are from US and European
countries.

Wipro - It emerged as a worlds largest third party

engineering services co.
From being born as a vegetable oil trader, is now one of
the most revered Indian Tech. Company.
Has acquisition of 6 foreign companies.

Bharat Forge - Beginning at single location in

1966, it is today one of the largest and
technologically most advanced manufacturers of
forged and machined components today.
It has 9 manufacturing locations in 6 countries.
It aspires to be number one company in the world
by 2008.

Tata Steel - From 56th to 5th rank (06), is one of

the most cost efficient steel producers, proposes to
make after its acquisition of Chorus.
It started its global presence with the acquisition of
Singapore based Nat steel (05). It has technical
marketing arrangement with Nippon Steel of Japan.
It has diversified its export marketing to
Bangladesh, Malaysia, South Korea, Taiwan and
some African countries.

Best Cities of India(05-06)

Mumbai
Pune
Bangalore
Delhi
Chennai
Hyderabad
Nagpur
Mohali
Kolkata
Jaipur

Indian Economy

Indian Companies on Forbes list 03

SBI (268), Reliance (306), Indian oil
(325), ONGC (351), ICICI (907), Bharat
Petroleum, HLL, HP, BoI, ITC, Canara
bank, GAIL, Infosis, IDBI , Wipro,
PNB, HDFC, MTNL, Ranbaxy lab.

India as knowledge Society

1.

2.

3.

Five point agenda for Indias

development as Super knowledge
society :
Education for developing a learning
society
Global networking
Vibrant government- industryacademia interaction in policy making
& implementation

India as knowledge Society

4.

5.

Leveraging of existing competencies

in IT, telecom, biotechnology, drug
design, financial services & enterprise
Economic and business strategic
alliances built on capabilities &
opportunities

10th Five Year Plan

GDP growth rate of 8% p.a.

Doubling of PCI in 10 years
Reduction of poverty ratio from 26% to 21%
by 07
Decadal pop. Growth rate to reduce from
21.3% in 91-01 to 16% in 01-11
Growth in gainful employment
All children to be in school by 2003 and all
children complete 5 years to schooling by
2007.

10 First Year Plan

Literacy rate to from 65% 00 to 75% in

07
Providing potable drinking water in all
villages
Infant mortality rate to reduce from 72 in
99-00 to 45 in 07
Increase in forest, tree cover from 19%
in 99-00 to 25% in 07
Clearing all major polluted river
stretches.

Per Capita Income

World average: $ 5,055

Developing $ 1,319
Developed $ 30,000

China and India

Population
Literacy
Life Expectancy

China
1.3 billion
83%
70 years

GDP ( $ trillion)

1.1

of GDP
Agriculture
Industry
Services

Import (2000-01)
Export (2000-01)
FDI ( 2001)

India
1.0 billion
66%
67 years
0.5 Composition

17%
50%
33%

29%
20%
51%

$225 bl
$249 bl
$ 46 bl

$ 39 bl
$ 45 b
$ 3 bl

Comparisons
China
1.

Growth rate

9.7% (1978)

India
5.8%

(1991)

4.

Per Capita Income 2003

$1,086
Share in world GDP
3.9%
Share in W GDP growth >1990 7.5%

5.

Share global good & services

6.

Demographics till 2010

Future growth rate?
Convergence?
Services+M

2.
3.

7.
8.

5.2%

53 mill
6-7%
Manufacture+S

$510
1.6%
1.9%
.8%
87 mill
7-8%

Business Environment

China is ahead of India because of :

Opening of its economy in 79
Inclination towards business and FDI
friendly policies
Role of Chinese business abroad
Their sustained investment in their own
country
Better infrastructure

India is competitive in many sectors

of Exports.
Labour
Intensiv
e
6%

Skill &
Tech

Raw
Material

Capital
Agri
Intensive Based

40%

24%

23%

7%

Indian

Output )

Garment
Footwear
Toys
Sports
Grey cloth
synthetic fabric
Tobacco

Cars ,CVs,MUV
Drugs,telecom
electronics,auto
parts,engines,
pumps,Compres
sors,Pharma
IT Bio, Nano
Wind mills

Aluminium
Steel , Paper
Tyres & tubes
Soaps
Detergents
Cement, Salt
Non ferrous

Petro Refining
Petrochemicals
Polymer,Plastic
Organics
Glass Ceramic
Chemicals
Fertilizers,Steel

Dairy
Poultry
Horticulture
Cotton, oil seed
Wine Beer
Bakery
Tea Coffee Sugar
Cocoa

Compete

IT like strength

Target export
Country Product

Source from
World

National focus

( % of

Business Environment

Exports

The look-Eastpolicy of resurgent India has

led to Asia as a region surpassing both the
US and the EU as Indias largest trading
partner.

FDI confidence index

World bank stressed the need for sustained

growth of 8% over long term by raised
investments rates from 23% to 30% and that
can be done only by increasing FDI and
therefore India wants to replicate Chinas
successful FDI model

Business Environment

Mckinsey survey of global executives revealed

that 44% of big corporates are interested in
increasing their investments not only in IT and
technology but also lucrative heavy industry,
banking, finance, consumer goods
Challenges to faster growth

High oil prices

Regional disparity within India
Challenges of retaining the best talent within India

Business Environment

India Incs topline

Indian corporates going global
Entrepreneurs and wealth

Business Environment

Steel- with the revival of global economy, the

demand for steel is at an all time high. The
Deregulation and decentralization of Indian steel
industry provides an opportunity for the country
to emerge as global steel leader
Cement the industry is gearing up to meet the
global demand fueled by construction boom.
Obstacle in development

Low quality coal

Failure of power supply
Limited rail transportation facility

Indian Oil major are class apart, be it

the exploration giant ONGC or IOC or
private players Reliance, they are trend
setters leaders that corporate India looks
up to.
Various initiatives, right from product
branding to company branding focused
today. They also have been active on
sports sponsorship like BPCL, HPCL,
ONGC

Business Environment

FMCG mixed bag

FMCG sector witnessing stiff

competition in which the small players
are taking on industry majors
successfully

Auto in the top gear

Good monsoon, healthy growth in per

capital income, low interest rates and
easy financing has resulted in a good
demand for automobile in India
Indian market 6 per thousand
US market 463 per thousand

Pharmaceutical R & D push

IT regaining the momentum

Indian pharma companies have moved form reverse

engineering drugs to making drugs with greater value
addition, which is definitely an encouraging sign

The domestic software which has been slow

compared to the exports, is finally showing showing
signs of growth.
Mckinsey and NASSCOM India, firms have projected
IT software and service industry size to jump from $10
billion in 02 to $ 20 billion in 05

The BRICs dream