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Economic Analysis: India. Dr. Rana Singh Associate Professor www.ranasingh.org. India – Land of Opportunities. Fourth largest Economy (PPP) - A safe place to do business. Largest democracy – political stability & consensus on reforms. Largest reservoir of skilled/semi-skilled manpower.

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slide1

Economic Analysis: India

Dr. Rana Singh

Associate Professor

www.ranasingh.org

india land of opportunities
India – Land of Opportunities

Fourth largest Economy (PPP) -A safe place

to do business

Largest democracy – political stability & consensus on reforms

Largest reservoir of skilled/semi-skilled manpower

Liberal & transparent investment policies

Long-term sustainable

Competitive advantage

- High growth rate economy

Second Largest Emerging Market

global business leaders on india

JACK WELCH, GE

JOHN CHAMBERS, CISCO

MICHAEL DELL, DELL

BILL GATES, MICROSOFT

Global Business Leaders -On India

“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”

“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”

indian economy an overview
Indian Economy – An Overview
  • Economic Growth
    • Sustained economic performance
      • Average since 1991 6.2%
      • 2004-05 6.9%
      • 2005-06 7.5-8.0 % (estimated)
      • Forecast till 2050 –Goldman Sachs 5 % p.a.
    • Services account for over 50% of GDP
    • Manufacturing sector grew at 9% in 2004-05
  • Trade (2004-05)
    • Exports growth 24% in 2004-05 reaching US$80 billion
    • Imports growth 35% reaching US$106 billion
  • Investment
    • Foreign Investment - US$16 billion in 2003-04
  • Mature Capital Markets
    • NSE third largest, BSE fifth largest in terms of number of trades
  • Well developed banking system
economic reforms
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

economic reforms contours
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 2004-05 to reach US$105 billion
  • Foreign Trade Policy
    • To double India’s share in global merchandise trade in 5 years
not just knowledge based sectors
Not Just Knowledge Based Sectors
  • Second most attractive destination for manufacturing
    • AT Kearney FDI Confidence Index 2004
    • Indian industry is equally competitive in a wide range of manufacturing activities
  • Automobile sector: Major MNC’s sourcing high quality components and hardware from India
    • Volvo, GM, GE, Chrysler, Ford,Toyota, Unilever, Clariant, Cummins, Delphi
  • Bharat Forge: world’s largest single location forging facility, supplier to Toyota, Honda, Volvo, Cummins, Daimler Chrylser
  • Hero Honda: world’s largest manufacturer of motorbikes
  • Moser-baer: world’s third largest producer of optical media and lowest cost manufacturer of CD-Recorders
  • Tata Steel: World’s lowest cost producer of hot-rolled steel
skilled knowledge workforce
Skilled Knowledge Workforce
  • India’s competitive edge - its highly skilled manpower
    • Over 380 universities (11,200 colleges)
    • Over 1500 research institutions
    • Over 2,00,000 engineering graduates
    • Over 3,00,000 post graduates from non-engineering colleges
    • Over 21,00,000 other graduates
    • Around 9,000 Ph. Ds
  • Knowledge workers in software and service industry increased from 56,000 in 1990-91 to 6,50,000 in 2003;
    • to reach 2 millions by 2008
competitiveness indicators
Competitiveness Indicators

Rank out of 102 countries

  • Availability of scientist and engineers 3
  • Quality of management schools 8
  • State of cluster development 17
  • Technological sophistication 25
  • Sophistication of financial markets 37
  • Foreign ownership restrictions41

(Source: WEF’s Global Competitiveness Report, 2003-04)

competitiveness indicators contd
Competitiveness Indicators-contd..

Rank out of 102 countries

  • Prevalence of foreign technology licensing6
  • Government’s prioritization of ICT 12
  • Quality of scientific research institutions20
  • Government intervention in corporate investment34
  • Quality of educational system 36
  • Ease of access to loans 38

(Source: WEF’s Global Competitiveness Report, 2003-04)

global competitiveness rankings
Finland

United States

Sweden

Taiwan

Denmark

Norway

Singapore

Switzerland

Japan

Iceland

11 United Kingdom

Netherlands

Germany

Australia

Canada

Israel

Ireland

China

55 India

Global Competitiveness Rankings

SOURCE: World Economic Forum,

Global Competitiveness Report 2004-2005

liberalisation of fdi policy
Liberalisation of FDI Policy

More sectors opened

Equity caps raised

Conditions relaxed

FEMA enacted

Up to 100% Under

Automatic Route in

all sectors except

a small negative list

up to 74/51/50%

in 111 Sectors Under

Automatic Route

100% in some sectors

Up to 51%

under Automatic

Route for

35 Priority Sectors

Allowed selectively

up to 40%

Post 2000

Pre 1991

1991

1997

2000

investing in india entry routes
Investing in India – Entry Routes

Investing in India

Automatic Route

Prior Permission

(FIPB)

General rule

No prior permission

required

Inform RBI

within 30 days of

inflow/issue of share

By exception

Prior Government

Approval needed.

Decision generally

Within 4-6 weeks

automatic route
Automatic Route
  • FDI in activities under the Automatic Route DOES NOT require any prior approval;
  • Investor is ONLY required to inform the RBI after the investment has been made:
    • With in 30 days of inward remittances, and
    • Within 30 days of issue of shares to non-residents.
policy on fdi
Policy on FDI
  • FDI up to 100% under ‘Automatic Route’ in all activities except
    • Sectors attracting compulsory licensing
    • Equity limits under sectoral policies
    • Transfer of shares to non-residents under certain circumstances
    • Investor having existing venture in same field under certain circumstances
  • National Treatment to investment;
  • Bilateral Investment Protection Agreement with 57 countries.
manufacturing sector 100 fdi under automatic route
Cars and motor vehicles

Food processing

Electronic Hardware

Refrigerator and fire fighting equipments

Iron and steel

Private Oil Refineries

Industrial Machinery

Fertilizers

Pollution control equipments

Tyres and tubes

Packaging products

Construction Machinery

Domestic air conditioners

Electric motors, industrial electric furnaces

Mining and Quarrying Machinery

Steam engines and turbines

Non-metallic mineral products

Oil mill machinery

Chemical machinery

Drugs & pharmaceuticals and pesticides except those requiring industrial licensing

Medical equipments

Manufacturing Sector: 100% FDI under ‘Automatic Route’

FDI up to 100% allowed under ‘automatic route’ in almost all activities

Some of these activities are: (illustrative list)

infrastructure sectors 100 fdi under automatic route
Infrastructure Sectors: 100% FDI Under ‘Automatic Route’
  • Electricity generation (except atomic energy)
  • Electricity transmission
  • Electricity distribution
  • Mass Rapid Transport System
  • Roads and Highways
  • Toll Roads
  • Vehicular bridges
  • Ports and Harbors
  • Hotel and tourism
  • Townships, housing, built up infrastructure and construction development
recent fdi policy initiatives
RecentFDI Policy Initiatives
  • FDI up to 100% allowed under the automatic route in development of townships, housing, built up infrastructure and construction development projects.
  • FDI in domestic airlines increased.
  • FDI in Telecom services increased.
  • Fresh guidelines for investment with previous joint ventures issued.
  • Transfer of shares from residents shareholders put on automatic route.
foreign technology collaboration policy
Foreign Technology Collaboration Policy
  • Foreign technology agreements allowed under Automatic route:
    • Lump sum fees not exceeding US$ 2 Million;
    • Royalty @ 5% on domestic sales and 8% on exports, net of taxes;
    • Royalty up to 2% on exports and 1% also permitted for use of Trade Marks and Brand name, without any technology transfer;
  • Wholly owned subsidiaries can also pay royalty to their parent company;
  • Payment of royalty without any restriction on the duration allowed.
exchange controls taxation
Exchange Controls & Taxation
  • All investments can be on repatriation basis;
  • Original investment, profits and dividend can be freely repatriated;
  • Foreign investor can acquire immovable property incidental to or required for their activity;
  • Companies incorporated in India treated as Indian companies for taxation;
  • Double Taxation Avoidance Agreement with 65 countries
india s outward investment policy
India’s Outward Investment Policy
  • Liberalisation initiated in 1992. Policy progressively liberalized
  • Indian Corporates allowed to invest overseas up to 100% of net worth.
  • Increasing overseas investment by Indian Corporates
    • Over US$3 billion in 2002-03 & 2003-04
    • Over 55% of investment in manufacturing
    • Over 100 major acquisitions by Indian corporates in the last 2 years
    • Indians among the top 10 investors in UK
india fdi outlook
India: FDI Outlook
  • Third most attractive investment destination – AT Kearney Business Confidence Index, 2004
    • Up from 6th most attractive destination in 2003
  • Among the top 3 investment ‘hot spots’ for the next 4 years
    • UNCTAD & Corporate Location – April 2004
  • Most Preferred Off shoring destination- AT Kearney’s 2004 Offshore Location Attractiveness Index
public private partnership
Public Private Partnership
  • Infrastructure projects might not be financially viable on their own;
  • Public Private Partnership to bring in private sector resources and techno-managerial capabilities;
  • ‘Viability Gap Funding’ for
    • Roads, railways, seaports, airports;
    • Power
    • Water supply, sewerage, solid waste disposal in urban areas;
    • International convention centres.
  • Funding in the form of capital grant, Operation & Management support, interest subsidy, etc.
  • Support linked with predefined milestones.
telecommunications
Telecommunications
  • Among the fastest growing telecom markets
    • 470,000 km of optical fibre cable laid
  • Cellular phones increasing by over 2 million every month
    • To reach 200 million in 3-4 years
  • Broad Band Policy envisages:
    • 20 million broadband subscribers and
    • 40 million internet subscribers by 2010.
  • Tele-density of 9, expected to be 20 in next three years;
  • Investment Opportunities
    • Setting up manufacturing base.
    • Telecom & Value added service
power
Power
  • Policy & Incentive
    • FDI up to 100% is permitted on the automatic route in all segments except atomic power
    • Ten-year tax holiday for generation and distribution or transmission and distribution of power
  • Institutional Reforms
    • The Electricity Act 2003 enacted; allows trading in power and further deregulation;
    • Independent Regulator in most states
  • Investment Opportunities
    • Additional capacity required 1,00,000 MW till 2012
    • Investment US$120 billion needed;
    • Financial closure for over 4000 MW capacity achieved in last one year
roads
Roads
  • Policy:
    • FDI up to 100% is permitted for construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels.
    • Ten year tax holiday for road and highway projects;
  • Investment Opportunities
    • India has a road network of 3.3 million kilometers
    • Highways: 25,000 km of highways under development
      • Investment US$24 billion envisaged
    • Many more opportunities in the States;
    • Different schemes available (BOT Toll based, Annuity, SPV)
special economic zones
Policy

Duty free zones, deemed foreign territories

FDI up to 100% permitted in almost all manufacturing activities

Transfer of goods from DTA to SEZ treated as exports,

Units to be net foreign exchange earner within 5 years. No export commitments

No limits on DTA sales

Incentives

For developer: Income tax exemption or a block of 10 years in 15 years

For units: 100% Income Tax exemption for first 5 years, 50% for next 2 years

Exemption from indirect taxes; excise, sales, services tax, etc.

Freedom to raise ECB with out any maturity restrictions

Special Economic Zones

New Law on SEZ on the anvil

ict advantages
ICT Advantages
  • IT Industry US$ 16.5 billion *
    • Exports US$12 billion, growing at 32%*
    • 2008 exports target : US$60 billion, to be 35% of India’s total exports
  • High quality standards
    • 62 SEI/CMM level 5 companies, i.e. two third of world’s total, are Indian
    • 250 Fortune 500 companies clients of Indian firms
    • R&D base of over 100 FORTUNE 500 companies
  • Investment Opportunities
    • Collaborative ICT research
    • Joint Software development in a variety of applications

* NASSCOM

auto component industry
Auto Component Industry
  • Fast Growing Industry
    • Approx. US$ 8.7 billion industry in 2004-05
    • Annual growth rate 30%
    • US$17billion by 2012 (AT Kearney study)
  • High degree of export orientation
    • 60% of exports to US and Europe
  • Top global vehicle manufacturers/ tier 1 suppliers sourcing components from India:
    • General Motors, Daimler Chrysler, Volvo, Cummins, Ford, Fiat, Renault, Toyota Motors
  • Opportunities to leverage on low cost, high-skilled manpower to reduce cost of production
textiles
Textiles
  • Indian textiles sector:
    • Turnover US$37 billion;
    • Exports US$13 billion;
    • Investments of US$11 billion in the last five years;
  • India is 2nd largest producer of cloth and 3rd largest producer of cotton yarn;
  • Textiles sector has the potential to reach US$85 billion by 2010
    • Exports can reach US$50 billion
    • Garments to account for 50% of exports;
  • Investment required US$30 billion
biotechnology
Biotechnology

India’s inherent strengths

  • Rich Biodiversity
  • Large reservoirs of valuable diagnostic and clinical data
  • Vibrant and inventive pharmaceutical industry;
  • World class network of educational and research institutions
  • Known strengths in mathematics, logic and computational skills
  • Super Computing and Software strengths enable extensive use of bio-informatics in new drug discovery

Opportunities :

  • Biotech based new drugs / pharmaceuticals
  • Bio-technology parks get all facilities of 100% EOU
fiscal reforms
Fiscal Reforms
  • Rationalisation of tax structure – both direct and indirect
  • Progressive reduction in peak rates of duties;
  • Direct and indirect taxes further reduced this year
    • Peak Custom duty reduced to 15%
    • Corporate Tax reduced to 30%
    • Tariff to be aligned with ASEAN levels
  • Value Added Tax introduced from 1st April 2005
  • Rupee made fully convertible on trade account

India among the top reformers in 2003: World Bank’s Doing Business in 2005

made in india
‘Made in India’
  • Third most attractive destination for manufacturing
    • ATKearney’s FDI Confidence Index 2004
  • Indian industry equally competitive in a wide range of manufacturing skill-intensive products:
    • Apparels, electrical and electronics components; speciality chemicals; pharmaceuticals; etc.
  • Automotive components: Major MNC’s & their OEMs sourcing high-quality components from India
    • Volvo, GM, GE, Chrysler, Ford, Toyota, Unilever, Cliariant, Cummins, Delphi
  • Indian companies now having manufacturing presence in multiple countries
    • Over 55% of approved outward investment by India companies in manufacturing activities
human resources
Human Resources
  • India’s competitive edge - its highly-skilled manpower
    • Over 380 universities (11200 colleges)
    • 1500 research institutions
    • Over 200,000 engineering graduates
    • Over 300,000 post graduates from non-engineering colleges
    • 2,100,000 other graduates
    • Around 9,000 PhDs
  • Knowledge workers in software industry increased from 56,000 in 1990-91 to 650,000 in 2003;
    • to reach 2 million by 2008
  • Due to its young demographic profile, India would continue to be surplus in working population for a long-time
civil aviation
Civil Aviation
  • Investment Policy
    • In the airports, FDI up to 100% permitted
    • In domestic airlines, FDI up to 49% permitted subject to no direct or indirect equity participation by foreign airlines
      • 100% investment by NRIs
  • Investment Opportunities
    • Modernisation of International airports at Delhi, Mumbai, Chennai and Kolkata
    • Modernisation of non -metro airports
    • Private sector participation is allowed in support services and aircraft manufacture
civil aviation1
Civil Aviation

Project on Offer

Development of Metro and non Metro Air ports

civil aviation2
Civil Aviation

Airports – Traffic Projections

Passenger

• By 2010: 90-100 million (59 million domestic passengers & 35 million intl. Passengers)

Cargo

• By 2010: 3360 thousand tonnes Airports – Traffic Projections

ports
Ports
  • Policy & Incentives
    • FDI up to 100% permitted for construction and maintenance of ports and harbours.
    • Ten year tax holiday
  • Public-private partnership
    • 12 major ports, 185 minor ports
    • 12 private/ captive projects with investment of US$ 600 million completed
    • 24 projects with investment of US$1.6 billion under implementation/award
  • Investment requirement of US$22 billion to develop maritime sector
    • Ports & Shipping
    • Inland waterways
tourism
Tourism

Investment Policy

  • FDI up to 100% is allowed under the automatic route in townships, housing, built-up infrastructure and construction development projects including housing, commercial, premises, hotels, resorts, hospitals, educational institutions, recreational facilities etc.

Projects on Offer

  • International Trade cum Convention Centre , Jaipur
    • Offered to private sector for designing, finance, construct, operate and maintain the facility
    • Estimated cost Us $ 22 million
    • Time frame for implementation 18 months
  • Development of Tijara Fort, Alwar
    • Private sector would require to restore the Fort and develop interior & surroundings of the fort, would be provided for long term lease
    • Estimated cost Us $ 5.5 million
    • Time frame for implementation 18 months
  • Championship Golf Course, Udaipur, Jodhpur or Jaipur
    • Land would be acquired and offered on long term lease
    • Estimated cost Us $ 5.5 million excluding land cost
    • Time frame for implementation 18 months
  • International Convention Centre , Bangalore
    • Karnataka Govt would acquire the land for investors
    • Facilities to be provided in convention Centre : Exhibition space of 50000 sq Mt, food court, Conference Hall & suites, Convention Centre, shopping malls, health club, golf course, % & 7 star hotels, handicraft village, multiplexes etc.
    • Estimated cost Us $ 111 million
urban infrastructure
UrbanInfrastructure

FDI Policy

  • FDI upto 100% is allowed in townships, housing, built-up infrastructure and construction development projects

Opportunities

  • Us$ 26 billion proposed to be invested in next 5 years in urban infrastructure in 60 cities as a part of National Urban Renewal Mission
    • The Mission covers physical infrastructure such as water, lighting, sanitation, energy & housing.
  •  CII
petroleum refining
Petroleum Refining

Status

  • Total 18 refineries with production of 116 million tonnes (April- Feb. 2004-05) in terms of crude through put.
    • by the year 2006-07 demand is expected to increase to 155 million tonnes per annum.

FDI Policy

  • FDI is permitted up to 100% under automatic route in private sector Indian companies

Investment opportunities

  • Additional refining capacity of about 110 million tonnes per annum excluding EOUs is planned for implementation by the end of tenth plan( 2002-07)
    • Investment requirement of over US $ 22 billion.
  • Opportunity for the transfer of technologies for upgrading the bottom of the barrel and to meet the predominant demand for middle distillates and also to improve the quality of petroleum products to make them environment-friendly and globally competitive.
banking sector
Banking Sector

Status

  • No of Scheduled Banks: 362( As on March 2003) *
    • Indian Private Sector Banks: 30 (market share: 10%)
    • Foreign Banks: 36 (market share: 12%)

FDI Policy

  • FDI up to 74% from all sources under automatic route is permitted in Private Sector Banks subject to conformity of guidelines issued by RBI
  • Foreign Bank can also establish as branch or Wholly owned subsidiary

* Source: Indian bank Association http://www.indianbanksassociation.org/home/

textiles1
Textiles
  • Indian textiles sector:
    • Turnover US$37 billion;
    • Exports US$13 billion;
    • Investments of US$11 billion in the last five years;
  • India is 2nd largest producer of cloth and 3rd largest producer of cotton yarn;
  • Textiles sector has the potential to reach US$85 billion by 2010
    • Exports can reach US$50 billion
    • Garments to account for 50% of exports;
  • Investment required US$30 billion
pharmaceuticals
Pharmaceuticals
  • Indian Pharmaceutical : A US $ 4 billion industry (retail sales)
  • Exports: US $ 3.18 billion (2003-2004)
  • The country ranks 4th worldwide accounting for 8% of world’s production by volume and 1.5% by value.

Opportunities

  • Due to rising costs of R&D overseas, greater tendency towards outsourcing and networking.
  • Increasing competence in molecular biology, immunology and biotechnology
  • Potential for clinical research and initiating clinical trials
  • An efficient and cost effective source for procuring generic drugs especially the drugs going off patent in the next few years.
power1
Power

Projects on offer

  • Bairabi dam Hydro Electric project (80mw) –Mizoram
    • Ministry of environment and forests has granted environment clearance to the project.
    • CEA has issued techno economic clearance of the project
  • Athirapilly Hydro Electric project (160 MW) Kerala
    • Ministry of environment and forests has granted environment clearance to the project.
    • Techno economic clearance of the project has been accorded
  • Matnar Hydro Electric Project (60 MW) Chhattisgarh
    • Environment and forest clearances are yet to be obtained.
    • Techno economic clearance of the project has be accorded
power2
Power

Projects on offer

  • Private Sector Hydro Electric Projects
    • Dhamwari Sunda (70 MW) Himachal Pradesh by M/s Dhamwari Power Company Ltd economic clearance of the project has been accorded
    • Alliain Duhangan (192 MW), Himachal Pradesh , by M/s A.D. Hydro Power Ltd
    • Karcham Wangtoo (100 MW) Himachal Pradesh by Karcham Hydro Corporation Ltd.
    • Srinagar (330 MW), Uttaranchal by M/s Alaknanda hydro Power Co. Ltd.
1980s
1980s
  • Efforts towards deregulation and liberalization had started in the 80s
  • Reforms got jump started by the crises in the middle of 1991
  • There were fears that India would default on its international dues
  • Or else would default for want of critical imports
from crises to reforms
From crises to reforms
  • Balance of Payment crises led to the initialization of the 91 reforms
  • The 91 reforms completely reversed those being pursued until the 80s
  • Import substitution- Industrialization and self reliance were overthrown by reforms that preached deregulation and liberalization
1991 reforms
1991 reforms
  • Licences for domestic manufacturing were abolished
  • Private sector were allowed to enter reserved public sector areas
  • Import tariffs were reduced drastically
  • Rupee was devalued
the 90s saw
The 90s saw..
  • Simplification and rationalization of the excise tax structure, though with some loopholes
  • Freedom for interest rates
  • Public sector banks gave way to the entry of private banks
  • SEBI catching ground as regulatory body for the stock market
  • Transparency and e-trading in stock markets
phasing out of reforms
Phasing out of reforms
  • While many drastic changes were brought about, controls were not dropped completely
  • Conditions apply to many reforms that are being eased out slowly
  • Subsidies are being restrained but not very successfully
  • Privatization of the PSEs did not keep up its initial pace
  • APM is being dismantled slowly
impact of the reforms
Impact of the reforms
  • Impact on the following are considered to assess the reversing reforms
    • Poverty
    • Education & health
    • Employment & wages
    • Economic growth
    • Industry
    • Agriculture
    • Foreign trade & BOP
poverty faster decline over 1990s
Poverty – faster decline over 1990s

Source: Dubey Amaresh and Phil Crook (2001)

health inadequate progress
Health – inadequate progress
  • While health has improved, progress has been inadequate as compared to the earlier decade
  • Expenditure on health and education has reduced since the reforms

Source: Economic Survey of India, various years

employment grew faster
Employment - grew faster
  • Employment in organized manufacturing industries grew faster in the 90s than in the 80s

Source: Ministry of Labour (DGE&T)

wages
Wages
  • Real wage rates have improved for agricultural labour

Source: Sundaram, EPW- August 2001

economic growth
Economic Growth
  • Accelerated growth of the 80s was not sustainable
  • This was reflected by the 91 crises
  • The 91 reforms have placed the economy at a higher growth path of over 6 percent during 1992-2000

Source: India Development Report, 2002

industry growth and structure
Industry – growth and structure
  • Growth in manufacturing over 1991-2001 higher than five decades preceding it
  • Growth in registered manufacturing was more employment generating
  • Labour intensive industries such as textiles were the key employment generators
  • Chemicals and related products manufacturing had the highest share in value added
agricultural exports have increased
Agricultural exports have increased

Source: Ministry of Agriculture

but agri growth rate has declined
…But agri-growth rate has declined

Average annual growth rates of index of agricultural production

Source: India Development Report, 2002

foreign trade
Foreign trade
  • Growth of exports in the 70s was largely obtained through various export incentives
  • Accelerated growth in terms of exports + invisibles is apparent in the 90s
balance of payment
Balance Of Payment
  • Strength of the financial sector is reflected that India was able to withstand the East Asia financial crises very well
  • In November 2001 forex reserves stood at US $ 47 billion
  • In January 2003 forex reserves stood at US $ 72 billion
  • Also, less than half this amount is in the form of portfolio investment
persisting issues
Persisting issues
  • Policy makers and government have realized that the benefit of reform carried out are stagnating
  • This shows up in
    • Decelerating growth of agricultural
    • Stagnation of export in the past two to three years
    • Fiscal imbalance, even with some reduction in subsidies and APM
global perspective
Global market overview

Global rankings

Market overview

Global Perspective
1 global market overview july 2004
1. Global market overview - July 2004

During the month July 2004 IBM-PLI recorded 961 investment project announcements worldwide, expected to create around 80,000 jobs.

3 m arket overview r d
3. Market overview – R&D

*The new hires for the 12 months that end June 30, 2005, will fill both newly created positions and jobs vacated by others.

india in the global economy
INDIA IN THE GLOBAL ECONOMY
  • India’s global ranking in terms of GDP- on PPP basis-has shot up from the 8th position in 1991 to the 4th position in 2001
  • India’s annual average GDP growth of 5.6% in the nineties was next only to China and Korea
  • RBI report projects growth rate to be significantly higher than 6% in 2003-04
  • Tenth 5 year plan targets annual growth of 8% between 2002-07
  • India, today has over US$ 85 billion in foreign exchange reserves which offers import cover for 15 months – one of the highest among developing economies
where to invest sectors to look out for
WHERE TO INVESTSECTORS TO LOOK OUT FOR
  • CHEMICALS & PHARMACEUTICALS
  • OIL & GAS
  • INFRASTRUCTURE
  • BIOTECHNOLOGY
  • ENGINEERING INDUSTRY
  • MINING
  • TEXTILES & APPAREL
  • GEMS & JEWELLERY
  • TELECOMMUNICATIONS
  • AGRO & FOOD PROCESSING
  • INFORMATION TECHNOLOGY
slide76

Vocation

Incentive to Innovation

  • Cluster of Innovation
  • Incentive to R&D
  • Innovation Law
  • Industrial Policy
  • Free trade
  • Agribusiness
  • Aeronautics
  • Oil in deep waters

Sustained Competitiveness

Facilitating Conditions

  • Continuous support for basic research
  • Effective patent protection
  • Effective, efficient and predictable regulatory environment
  • Transparent business environment
  • Market based on competition and free choice
  • Biotechnology / Genomics and Health Science
slide77

Innovation is the pillar of competitiveness

Prosperity

“There are no low technology profile sectors, only low technology profile industries”

M. Porter

Competitiveness

(Productivity)

Innovative

technological

capacity

the birth of human development concept 1990 undp
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”
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

Therefore
is income enough for well being
Is Income Enough for Well-being?
  • Economic growth is needed, but public policy is needed to translate growth into HD. How?
          • Emphasis on investment in health, education, skills of people
          • More equitable distribution of assets and income
          • Well structured public expenditures
          • Empowerment of people to participate

Otherwise the growth is voiceless, rootless, ruthless, futureless, discriminating, etc.

human development index hdi
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$).
construction of the hdi
Construction of the HDI

1 Fixed minimum and maximum values are

established for each of these indicators:

  • life expectancy at birth: 25 and 85 years;
  • adult literacy rate (age 15 and above): 0% and 100%;
  • combined gross enrollment ratio: 0% and 100%;
  • 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)

3The Education Index is compiled as

2/3(adult literacy index) + 1/3(gross enrolment index)

construction of the hdi contd
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 dimension 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.

uses of hdi focus on human outcomes not economic data
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.
similar hdi different income 1997

Real GDP per capita (PPP $)

Country HDI value

Spain

15,930

0.894

Singapore

28,460

0.888

Georgia

1,960

0.729

Turkey

6,350

0.728

Morocco

3,310

0.582

Lesotho

1,860

0.582

Similar HDI, different income, 1997
hdi trends in 2004 2002
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 – 0.579 and 2002- 0.595 (Rank 127)

hdi trends in 2005 2003
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 : .602 (Rank 127)

hdi trends
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 1990. Lao, China, Thailand and Malaysia all moved ahead in the HDI rankings. In South Asia, too, there were HDI improvements across the board.
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SOURCE: National Science Foundation, Science and Engineering Indicators – 2004.

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SOURCE: National Science Foundation, Science and Engineering Indicators – 2004.

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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
  • 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
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