“CHALLENGES FACED BY

THE INDIAN BUSINESSES

DUE TO CHANGE OF
GOVERNMENT IN U.S.”
GROUPMEMBERS

ARUN ROLL NO.2

KAVITA ROLL NO.19

PREETI ROLL NO.45

NITU ROLL NO.52

ANUJA ROLL NO.60

 This time the U.S. presidential election is
primarily influenced by the economic situation
and, therefore, it is no surprise that it went
against the incumbent Republican Party and the
Democratic Party candidate, Obama, has won.
There are various challenges being faced by the
Indian businesses due to the few new polices
which have been implemented by the current
president, Mr. Obama.
They may be as follows:

A) DIRECT CHALLENGES
B) INDIRECT CHALLENGES
 DIRECT CHALLENGES

 IT sector
 BPO
 H1B VISA
IT SECTOR AND BPO’S
 The recent spate of anti-outsourcing
outbursts in the US is worrying Indian
outsourcers. US President elect Barack
Obama has vowed to end tax breaks to
companies that ship jobs overseas.

 “As president, I would stop giving tax breaks

to companies that ship jobs overseas, and
start giving them to companies that create
jobs in the US,” said Obama.

 A statement from Obama’s campaign reads,

“We must stop the outsourcing of our most
tedious and dangerous jobs to other
countries. That work can and should be done
by Americans.”
 As per the Other Service Providers
Association of India (OSPAI), there are
approximately 2,500 BPO/KPO international
and domestic centres operational across
India employing about 7 lakh people directly
and 20 lakh indirectly, generating a revenue
of $11 billion.

 If Obama stands firm on his statements, it

will spell doom for the Indian outsourcing
industry.
TWO SIDES OF THE COIN
Will Obama put a ban on
outsourcing?
 The same practice will continue even with
the new government. Obama can’t roll
back outsourcing considering its benefits
for companies, employees and the US
economy as a whole. Obama knows how
much revenue the US gets from Indian IT,
ITeS and BPO sectors.

 There may be a slowdown; there may be

some bit of saturation for a while.
 MORE reasons as to why Obama’s policy on
outsourcing might not be implemented

 Associated Chambers of Commerce and Industry

of India (ASSOCHAM) has also reported that
Indian outsourcers like Infosys, Wipro and Tata
Consultancy Services have reported slower
revenue and profit growth over the past few
months.

 Relatively, the whole impact will reflect on the

Indian stock market and the real estate and
financial sectors, therefore hitting the overall
economy of the country. With the US looking for
the reduction of outsourcing, the need of the
hour is to look out for options that would help
outsourcers continue to grow and make profit,
which would also keep the economy going.
 The uncertainty in India about the impact
of Obama’s presidency on the Indian
outsourcing industry was also reflected
by Finance Minister P Chidambaram.

 The reason why MNCs look at India as a

potential outsourcing option is cheap and
skillful labour. Thus, a major point here to
think about is ‘can no outsourcing’ be
logically true?

 The change of guard in the US will have a

short-term impact on offshoring, but in the
long run, offshore outsourcing will only
increase.
 SOLUTION
 One major solution to this crisis is that
the outsourcers should act smart and
look for options beyond the US.

 The MNCs should shift focus from US

to other parts of the world, the likes of
UK, Middle East and Australia.

 Obama’s statement should be a wake-

up call for the Indian IT industry to look
beyond the US. Murthy says, “It is very
important for us to have a wide
portfolio.
H1B VISA
INDIRECT CHALLENGES
 INDIRECT CHALLENGES
 REAL ESTATE
 FALL IN U.S. DOLLAR
 PRICE OF GOLD
 IMPORT- EXPORT
 PETROLEUM PRICES
 INDO-U.S. NUCLEAR TREATY
REAL ESTATE
 Property firms in India as considering job
losses and some are facing salary cuts of up
to 50% as they struggle to cope with the
global credit downturn

 The Indian real estate sector plays a

significant role in the country’s economy.

 The real estate sector is second only to

agriculture in terms of employment
generation and contributes heavily towards
the gross domestic product (GDP).

 The double-digit growth is mainly attributed

to India’s booming off-shore business,
including high-end technology consulting, call
centres and software businesses.
 The IT and ITES sector alone is estimated
to require 150 million sq ft of office space
across urban India by 2010.

 The current global economic slowdown is

taking its toll on several sectors. Realty
has been among the worst hit.

 India’s largest real estate company by

market capitalisation, DLF reported a
worrying 69% fall in consolidated net
profit to Rs 670.79 cr for the third quarter
of FY09 over the corresponding period
last year.
 The unending speculation on exiting
the ambitious International Convention
Centre project in Dwarka in the capital,
uncertainty over the proposed project
at Dankuni in West Bengal and,

 The Rs 60,000-cr Bidadi project in

Karnataka are visible signs that the
company is facing the brunt of the
slowdown.
 The real estate industry has moved
from a period of abundant capital
availability to the times of liquidity
crisis.

 The current economic environment has

impacted sentiment at the macro level,
and demands both from home buyers
and corporate are being affected.
 From the global financial crisis begin,
profits of many sectors - from financial
to real estate - have dipped, prompting
them to lay off staff.

 Former Finance Minister P.

Chidambaram says the economy may
not grow as rapidly as in recent years,
but it will still expand at a faster rate
than in Western nations.
FALL IN U.S. DOLLAR
 CHALLENGES OF FALL IN US
DOLLAR ON INDIA
 The value of the US dollar is depend on
the demand and supply of US dollar.

 After the sub prime crisis housing

sector, banking sector, household
sector has been adversely affected.

 The Federal reserve bank once

announced that it is going to print
notes to pay off the debt, to over come
deflation.
 Normally any country will print the notes
on keeping gold as a reserve. This will
control the money supply in the country.

 But the US central bank is going to print

more notes keeping the gold as reserve
but on the mere “faith in Government”.
This will create more money supply in the
country which will lead to the
debasement of currencies.
 Over supply of currency will reduce the
demand and hence the value of the US
dollar will fall.

 The recession is also an important

factor which will make the currency
weaker.

 The fall of US dollar will is the create a

challenge for for the indian business
especially in Exports, oil import and
gold prices.
PRICE OF GOLD
 The prices of gold will rise
 The gold has a inverse relation with
dollar.

 Whenever the US dollar is strong the

prices of gold normally falls.

 The demand and supply factor is also

important for determining the gold prices.

 Due to the bearish situation in the stock

market the investors normally prefer gold
as the better investment .
 And hence the demand for gold is
also more.

 The demand factor and the weak

US dollar will make the gold more
glitter.
 Now a days gold is considered as a
investment commodity and hence the
demand for jellewery will fall.

 India is known for the jellwery making

in gold and hence the jewellery makers
may face a Job loss.

 The gold price is now around R.s

15500/-. But the demand for gold is on
rise .It is expected that the gold price
will see further rise.
IMPORT EXPORT
 India Import Export data
 Major items for export from India are live
animals, dairy products, milk products, human
hair, tea coffee, spices, wheat rice, tamarind
powder, plastic, cosmetic, embroidery& zari,
cotton , carpet , rugs, ready made garment ,
glassware, steel and iron, electrical items, Auto
mobile compents, tractor parts, medical
disposables, surgical& laboratory equipment,
wooden furniture, and sports goods, etc.

 Major items of import in to india are dry fruits,

almonds, chocolate, palm oil, organic chemical,
phosphorus, PVC, rubber and tyre tubes, hand
tools, blade, used machine, computer parts &
peripherals, printers, electronic, mobile phones,
monitors, telecom, meters, instument and toys.
 The US dollar is the reserve currency in
the international market.

 Because of the global meltdown there

their will be less demand for goods in
the international market.And hence
export will fall . For a developing
country like india it is not a good sign.

 And hence dollar depreciation is a

important fctor that which will affect
the countries export.
 When the dollar gets depreciated the other
major currencies will get appreciated.
Indian rupee will also appreciate assuming
that the domestic market is stable.

 If the rupee gets appreciated then we may

have to face the problem in export.

 Since US is one of the major importer of

our goods(17%). The fall in US dollar will
lead to less demand for our goods.
Export growth for 2007-2008(y-o-y;in %)

35
30
25
20
15 S eries 1
10
5 S eries 2
0
-5 april may june july aug s ep oct nov dec C olumn
1
-10
-15
IMPACT ON PETROLEUM
PRICES
 Rise in petrol prices
 Due to the heavy supply of the oil the
OPEC have reduced the prices of crude
oil from 147$ to 40$.

 The OPEC have said that if the crude

price go further down then they would
to the production cut to increase the
price.

 The price of petrol are normally quoted

in US dollar.
 And hence the price of the petrol is inversely
proportion to the dollars. If the US dollar is
strong the crude oil price will be low and
vice-versa.

 If the US dollar falls OPEC will increase the

petrol prices.

 America,India, and china are the major

importer of oil and other fuels.

 Increased oil price will affect india. The

prices for petrol will rise. And because of this
transport sector, avaiton sector, the
commodity sector will get adversely affected.
There is always a possiblity of inflation when
the prices of the crude oil rises.
 Challenges faced by the
aviation sector
 The Indian aviation sector is feeling the pinch due to
the global meltdown.
 The demand for air traveling has gone down
drastically.
 People are now avoiding to travel through aero planes
because they are very cautious about spending .
 To stimulate the demand the airlines not only domestic
but also the international have announced rate cut in
December ranging from 25%-40%.
 Thanks to the oil prices which are low. But if the dollar
price falls their will be rise in oil price will again put
the aviation industry in to troubles.
 Currently jet airways announced that they lose 1.5
crores every day due to the decline in demand.
 PRICES OF
FUEL,PETROL,DIESEL,OIL
• Analysts scorn fuel price reduction

• Taxes on petrol and diesel very high

in India

• India, China and Obama’s oil policy

 TAXES OF PETROL & DIESEL: VERY
HIGH IN INDIA
We pay approximately 52 per cent tax on petrol
and 31 per cent on diesel.

Petrol prices in rupees per liter

• Hyderabad [April 2008] – Rs 55/-

• Bangalore [May 2007] – 52/-
• Pune [Feb 08] – 51.46
• Mumbai [March 08] – Rs 56
• Kolkata [May 06] - 56.86
• Coimbatore [May 06] – 47.47
• Chennai [Dec 07] – 49.15
• Delhi [Jan 08] – 44.50
COUNTRY PETROL DIESES
% TAX RETAIL % TAX RETAIL
PRICE PRICE
FRANCE 67.6% 1.48 56.8% 1.32
GERMANY 68.6% 1.53 58.1% 1.36
ITALY 63.1% 1.57 53.8% 1.43
SPAIN 56.2% 1.21 46.1% 1.15
UK 69.9% 1.63 66.7% 1.74
JAPAN 44.4% 1.17 32.7% 0.98
CANADA 34.6% 0.78 25.3% 0.79
US 18.6% 0.59 17.9% 0.67
INDIA* 52.0% 1.00 30.4% 0.69
 INDIA,CHINA & OBAMA’S OIL POLICY
 High price at the pump become a leading
campaign issue and a very real driver of
inflationary fears

 Global dependence on oil is a reality and

demand is increasing at a steady rate
primarily driven by the economic growth of
India

 Oil price will continue to increase

 In 2010 the U.S will begin reducing foreign oil

consumption
 The Obama administration plans to create a
cartel of oil importing nations that will
include India

 Aggressively share technology that will

reduce the use of fossil fuels

 Low oil prices will further reduce the threat of

inflation high oil price fuel higher food costs
and a reduced threat of inflation will allow
central banks to maintain an easing of
monetary policy

 Low inflation will equate directly to an

increase in GDP growth and domestic
consumption.
INDO-US NUCLEAR TREATY
 Indo US Nuclear Treaty – Barack
Obama’s election – Will it affect or
effect?
 The US-Indo civilian nuclear agreement refers
to a bilateral accord on cilvil nuclear co-
operation between the US & India.

 A History
 Indo US relationship reached a crescendo
with the Nuclear Non Proliferation treaty
during the term of the former president
George W. Bush

 Under the terms of the deal, the United

States will now be able to sell nuclear fuel,
technology and reactors to India for peaceful
energy use despite the fact that New Delhi
tested bombs in 1974 and 1998 and never
signed the nuclear Non-Proliferation Treaty.
 Terms of the deal
 India agrees to allow inspectors from the
International Atomic Energy Association (IAEA), access to
its civilian nuclear program.

 By March 2006, India promised to place

fourteen of its twenty-two power reactors under IAEA
safeguards permanently.

 India has promised that

all future civilian thermal and breeder reactors shall be
placed under IAEA safeguards permanently. However, the
Indian prime minister says New Delhi "retains the sole right
to determine such reactors as civilian.

 Military facilities-and stockpiles of nuclear fuel that India

has produced up to now-will be exempt from inspections or
safeguards

 India commits to signing an Additional Protocol (PDF)-which

allows more intrusive IAEA inspections-of its civilian
facilities
.
 Kind of technology India would
receive in return
 India would be eligible to buy U.S. dual-
use nuclear technology, including
materials and equipment that could be
used to enrich uranium or reprocess
plutonium, potentially creating the
material for nuclear bombs. It would also
receive imported fuel for its nuclear
reactors.
 What do proponents say about
the deal ?
 Would encourage India to accept
international safeguards on facilities it has
not allowed to be inspected before

 Recognizes India's history of imposing

voluntary safeguards on its nuclear program

 Recognizes that India has a good record on

proliferation

 Rewards India's decision to adopt similar

nuclear export standards as those imposed
by the Nuclear Suppliers Group (NSG)
 Impact treaty would have on
Indo-US relationship
 It will enhance Indo-US partnership and deepen
their cooperation on a whole range of matters.
Importantly, it will help India to meet its growing
electricity demands while aiding in the important
effort to combat global warming.

 But this agreement is seen only as a beginning of

a much closer relationship between two great
countries-US & India.

 their common strategic interests call for

redoubling US-Indian military, intelligence and law
enforcement cooperation.

 India and America will work together to promote

their democratic values and strengthen legal
institutions in South Asia and beyond.
What role does China play in the U.S.-
Indian nuclear deal ?
 China's rise in the region is prompting the United
States to seek a strategic relationship with
India.The United States is trying to cement its
relationship with the world's largest democracy in
order to counterbalance China.

 the growing economic relationship between China

and India is so critical to New Delhi that its
interests in China cannot be threatened or
replaced by any agreement with the United
States.

 U.S. nuclear aid to India could foster a dangerous

nuclear rivalry between India and China. Though
India has a strong interest in building economic
relations with China, New Delhi is still wary of
China's military rise in the region.
 What effect will the deal have on U.S.
and Indian relations with Pakistan?
 U.S. favoritism toward India could increase
the nuclear rivalry between the intensely
competitive nations, and potentially raise
tensions in the already dangerous region.

 the two countries, both admittedly now

nuclear, could be forced to deal more
cautiously with each other.

 the U.S.-India deal could prompt Pakistan to

go elsewhere, for instance to China, for
similar terms.
Where does this go? Debate in India
 U.S. favoritism toward India could increase
the nuclear rivalry between the intensely
competitive nations, and potentially raise
tensions in the already dangerous region.

 The two countries, both admittedly now

nuclear, could be forced to deal more
cautiously with each other.

 The U.S.-India deal could prompt Pakistan to

go elsewhere, for instance to China, for
similar terms.
CONCLUSION
 CORRECTIVE STEPS
 RBI needs to neutralise the outflow of FII
money by unwinding the market stabilisation
securities that it had used to sterilise the
inflows when they happened.

 This will mean drawing down the dollar

reserves which is important at this hour.

 In the IT sector, there should be correction in

salary offerings rather than job cutting.

 Public should spend wisely and save more

 Taxes including excise duty and custom duty

should be reduced to lighten the adverse
effect of economic crunch on various
industries
 In real estate, the builders should drop prices,
so as to bring buyers back into the market.

 Also, the government should try and improve

liquidity,whileCRR and SLR must be cut
further.

 Indian Companies have to adopt a multi-

pronged strategy, which includes
diversification of the export markets,
improving internal efficiencies to maintain
cost competitiveness in a tight export market
situation.
THANK YOU