“BOOMING INDIAN ECONOMY: WHAT IS IN IT FOR GLOBAL SHIPPING?

By Ravi K Mehrotra Chairman

Foresight Group, London

At

European Parliament, Brussels

(Conference Room 3E-2)

On

9th November 2005

When I visited China in late 1980’s

When I visited China in 2005

When I visited India in late 1980’s

When I visited India in the present day

WHAT DO THE PREVIOUS FOUR IMAGES TELL US?

India in 1980• Ahead of China esp. in

free enterprise and per

capita earnings

China in 1980• Still struggling with

Communist Egalitarian past and lack of enterprise

India in 2005• Full of vigour but political

system still trapped in clanship management of the Nation instead of taking charge of enterprise

China in 2005• Government took charge of

enterprise in late 1980’s, transforming China into a modern industrial nation which increased per capita income by a factor of 5

How will India’s Industrial Growth look in 2010?

How did China imbibe Entrepreneurship into their

Management?

In October Bombay Stock Exchange crossed 8,500 points: More than 35% growth in one year

But is it the effect of Globalisation of Indian Economy or Industrial Revolution?

Will it follow China? Or Brazil?

BOOMING INDIAN ECONOMY: WHAT IS IN IT FOR GLOBAL SHIPPING ?

IS INDIA THE NEXT BIG STORY?

Is India ready for a repeat of the China Effect on Global Shipping?

India’s Intellectual Industry Growing, Why?

India presently lacks development of infrastructure and full utilisation of labour force more than 20% population unemployed or partly-employed

India is the world’s largest democracy but has archaic labour employment laws

Total GDP and PPP GDP 2004

Source: World Bank: World Development Indicators Database, 15/07/2005

The total GDP data shown here measured in current U.S. dollars use annual, market exchange rates. This means that the values and derived rankings are subject to greater volatility due to variations in exchange rates. Inter-country comparisons based on GDP at market prices should, therefore, be treated with caution.

The PPP method eliminates the effects of differences and changes in relative price levels

Total GDP Total PPP GDP

GDP Growth 2000 to 2050

Source: Goldmann Sachs: The Path to 2050

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

[2003 bn US Dollars]

Germany

Brazil

Japan

Russia

WEAKNESSES OF INDIAN ECONOMY

• Still dependent on agriculture – 25% of GDP and 40% of labour employment

• Labour Laws archaic – contributes to keeping people below poverty line

• Political system controlled by clan mentality

• Day-to-day economic activity shackled in bureaucracy

• Legal system slow & time consuming

• Acute shortage of infrastructure development in the country

Urbanisation Trends

60,5%

57,2%

53,6%

49,5%

45,1%

35,8%

31,4%

27,4%

23,0%

19,6%

17,4%

17,4%

17,6%

16,0%

14,2%

12,5%

39,5%

42,8%

46,4%

50,5%

54,9%

64,2%

68,6%

72,6%

77,0%

80,4%

82,6%

82,6%

82,4%

84,0%

85,8%

87,5%

2030

2025

2020

2015

2010

2000

1995

1990

1985

1980

1975

1970

1965

1960

1955

1950

29,5%

30,0%

30,1%

29,7%

29,1%

28,2%

27,0%

25,6%

24,1%

22,6%

21,1%

19,8%

18,4%

17,0%

15,6%

14,3%

13,1%

70,5%

70,0%

69,9%

70,3%

70,9%

71,8%

73,0%

74,4%

75,9%

77,4%

78,9%

80,2%

81,6%

83,0%

84,4%

85,7%

86,9%

2030

2025

2020

2015

2010

2000

1995

1990

1985

1980

1975

1970

1965

1960

1955

1950

Urban populationRural population

Urbanisation Trends

World Population Prospects: The 2004 Revision United Nations

Population Database Population Division

Value of Merchandise Exports & Imports

[mn US-Dollars]

20032003Exports: 437.9 bn USDExports: 437.9 bn USDImports: 413.1 bn USDImports: 413.1 bn USD

20032003Exports: 55.9 bn USDExports: 55.9 bn USDImports: 70.7 bn USDImports: 70.7 bn USDImports

Exports

STRENGTHS OF INDIAN ECONOMY

• Self-sustaining & not implanted by foreign investments to utilise cheap labour

• Industrial Growth improved from 6-7% to 11.7%

• Largest middle-class purchasing power

• Largest number of Professionals

• Largest percentage of computer literate people

• Self-sufficient in food production in fact net exporter

China vs. India – FDI Attractiveness

India

China

6%

22%

29%

34%

35%

36%

39%

40%

41%

41%

42%

45%

46%

50%

57%

66%

70%

73%

73%

78%

94%

78%

71%

66%

65%

64%

61%

60%

59%

59%

58%

55%

54%

50%

43%

34%

30%

27%

27%

22%

Market Size

Market Growth Potential

Access to Export Markets

Government Incentives

Production/Labor Costs

Infrastructure

Financial/Economic Stability

Economic Reform

Political/Social Stability

Quality of Life

Tax Regime

Competitor Presence

Consumer Sophistication

Availability of M&A Targets

Regulatory Environment

Cultural Barriers

Transparency

Management Talent

Rule of Law

Highly Educated Workforce

Source: FDI Confidence Index. A.T. Kearney. October 2004. Volume 7

Infrastructure *) Investments

Source: China Statistical Yearbook, RBI, Morgan Stanley Research

4%

8%

12%

16%

20%

1996 1997 1998 1999 2000 2001 2002

[% of GDP]

*) Transportation, Electricity, Telecom etc.

SUMMARY ON INDIA • It will still take time to sort out distortions in society and its

economy

• Acute shortage of infrastructure development in the country

• Above two weaknesses will limit economic growth

• For next 5 years India will have a negative trade balance

• Population growth means young labour force for next 20 years

• Hydrocarbon exploration in river deltas due perennial rivers from Himalayas will contribute to India being self-sufficient in energy

• Due globalisation of Indian economy Bombay Stock Exchange will continue in positive direction

CONCLUSION India will reach 8% Growth Rate in next 5 years

Economy will grow to between 10 – 12% between 2010 – 2015

QUOTE: “We can be a developed Nation by 2020 if we make this our Mission Statement” – Dr A P J Abdul Kalam, Indian

President

Will India fulfil the President’s Statement?

Will India’s Development have an effect on Global Shipping?

Will International Ship Owners reap similar profits which they had from China over the last two years?

“BOOMING INDIAN ECONOMY: WHAT IS IN IT FOR GLOBAL SHIPPING?

By Ravi K Mehrotra Chairman

Foresight Group, London

At

European Parliament, Brussels

(Conference Room 3E-2)

On

9th November 2005