Impact of Globalization on Indian Economy

WHAT IS GLOBALISATION ?

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

GLOBALISATION

Issues

Accountability of Global businesses? Increased gap between rich and poor fuels potential terrorist reaction Ethical responsibility of business? Efforts to remove trade barriers.

Shape of the worlds economy is being changed by globalization

Marketing Branding Advertising

Nike

Dell

Cost down Outsourcing

Globalization whats really new? New Trade and Production Patterns

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 whats really new? New markets

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.

W-2, W-4, 1099 bonuses & stock statements

US tax payers

Indian accountant

Globalization whats really new? New rules and norms

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 whats really new? New rules and norms

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.

Growth
Customer Survey

Growing Indian Economy

2010 * 2010 qGDP USD 1.36 trillion qGDP growth rate 9% qServices contribution 60-65% qBalance of Trade Negative balance should increase with surging imports versus exports qInvestment goal USD 370 billion 2008 2008

qGDP USD 1.16 trillion qGDP growth rate 9.5% qServices contribution 60% qBalance of Trade Negative balance should increase with surging imports versus exports qInvestment goal USD 305 billion 2006 2006 qGDP USD 590 billion qGDP growth rate 9% qServices contribution 54% qBalance of Trade USD (-)46.2 billion qInvestment goal USD 250 billion

*: Projected

Source: Economic Times & India Brand Equity Foundation (IBEF)

Growing GDP
1,200 1,000 800 600 400 191 200 0 103 105 237 125 105 204 135 2005-06 Industry 231 145 2006-07 Services 398 453

Contribution of Services increased from 48% to 62% and is estimated to contribute 60% by 2010
682

USD Billion

287 167 2010*

1999-00 2002-03 Agriculture

*: Projected Source: India Brand Equity Foundation (IBEF)

Growing Exports

210 170 USD Billion 126.3 130 90 50 2004-05 2005-06 2006-07 2007-08* 83.5 103.1 155

200

2008-09*

*: Projected Source: Ministry of Commerce & IBEF

Growing Imports
250

210.8 185.7

200 USD Billion

149.1
150

111.5

100

50 2004-05 2005-06 2006-07 2007-08 (A prFeb)

Source: Ministry of Commerce & IBEF

Increasing Forex Reserves

India's Forex Reserves: 2001-08 (Till 14 March 2008) 350 300 USD Billion 250 200 150 100 50 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 (Till 14 March 08) 54 75 141 112 152 199 306

Steadily increasing Forex reserves offer adequate security against any possible currency crisis or monetary instability

Source: Reserve Bank of India & India Brand Equity Foundation (IBEF)

Growing FDI Inflows

35 30 25
USD Billion

30 22

20 15 10 5 0

8.9 4.3
2003-04

6
2004-05 2005-06 2006-07* 2007-08*

India is ranked second in AT Kearneys FDI confidence index (2007)

Electronic equipment, manufacturing and telecom have witnessed significant FDI inflow

* Provisional Source: Department of Commerce

Increasing Per Capita Income

4000 4000 3500 3000 2500 USD 2000 1500 1000 500 0 2000-01 2006-07 2007-08 2016-17 2025 797 460 1021 2000

Source: India Brand Equity Foundation (IBEF) & Economic Survey 2007-08

Major M&A and Investments Announcements in India

POSCO to invest in building steel manufacturing plants and facilities in India byUSD 12 billion POSCO to invest in building steel manufacturing plants and facilities in India by2016 2016

Plans to establish three manufacturing plants to produce photo-voltaic units Plans to establish three manufacturing plants to produce photo-voltaic units 2 billion USD

Plans to spend on its development operations in India over the next four years 1.7 billion USD Plans to spend on its development operations in India over the next four years

Source: India Brand Equity Foundation (IBEF)

India Inc. Investing Overseas

Main sectors:

Auto Components Beverages Cosmetics Energy Financial Services Industrial Goods

IT Metals Mobile Communications Pharmaceuticals Software

Main Destinations:

China, UAE, UK North America is emerging as a destination.

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 Indias has a growing middle class of over 300 million people - 30% of Indias 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.

Indias Trade with USA

20.0 13.7 11.4 11.7 9.4 7 5 5.0 18.8 17.3

15.0

USD Billion

10.0

0.0

2003 - 04

2004 - 05

2005 - 06

2006 - 07

Exports to US

Imports from US

Source: Department of Commerce, Govt of India

Major Items Exported to USA (2006)

O a ic rg n C e ica h m ls 6 % E g e rin n in e g G o s& od M ch e a in ry 1% 5

Iro &S e n te l 5 %

Cta d u n p lish d o e d mn & ia o d je lle we ry 3% 8

T xtile e s 3% 6

Source: US Department of Commerce

Major Items Imported from USA (2006)

Precious stones & Metals 14% Aircraft, Aviation Machinery & parts 25% Optical & Medical Instruments Fertilizers 11% 9% Engineering Goods & Machinery 41%

Source: US Department of Commerce

India co. going Global

Buyer Reliance Industries Tata Motors Infosys Technologies Acquisition Flag Telecom, Bermuda Daewoo, Korea Expert Information Services, Australia Carl Dan Peddinghaus, Germany RPG (Aventis) Laboratories, France CP Pharmaceuticals, UK Alpharma SAS, France Straits Ply, Australia NerveWire Inc, USA Dashiqiao Chem, China Oryzalin Herbicide, USA Price US$ 212m US$ 118m US$ 3.1m N/A N/A US$ 18m US$ 5.7m US$ 56.4m US$ 18.5m US$ 8.5m 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."

Bharat Forge Ranbaxy Wockhardt Cadila Health Hindalco Wipro Aditya Birla United Phosphorus

Automotive Sector - Overview

India is the worlds: 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.

Source: IBEF, Economic Times

GOI POLICY-FDI AND FII

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

 Agriculture acquired 17% of Indias GDP in 2008. 60% of population still depends on agriculture for their livelihood. Occupied 43% of Indias geographical areas. All other sectors are growing at much faster.

Agriculture

SHARE IN GDP

Year 1991 2007

Industry(%) 25 28

Service(%) 31 55

Agriculture(%) 44 17

Education
Current

Literacy rate is 64.84%

Literacy Rate Person Male Male Female Female Gap
29 . 8 39 . 3 54 . 2 26 . 6 24 . 8 21 . 6

Year

1981 1991 2001

43 . 6 52 . 2 65 . 4

56 . 4 64 . 1 75 . 8

What are people talking about India?

of software professionals. The world needs to benefit from this.

This market (India) is critical to our plans for building a Ford Motor Co. f

Bill Gates, Microsoft Chairman

Bill Ford, Chairman and CEO

to becoming IT, manufacturing kingdom of the world The dynamism shown by India in the last 15 years is p

Mr Yasukuni Enoki, Japanese Ambassador to India

Paul Wolfowitz, President, World Bank

Indias Problems
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).

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.

Thank You