The Changing Dimensions of

Business in India

Abhinav Prakash (01)

Aditya Mehandiratta (02)

Akhil Kohli (03)

Amol Azad (04)

Contents of the Presentation • Political Factors

Political Environment- Recent Developments

India’s Diplomatic relations with world- Recent Developments

• Economic Factors

Economic Development

Industrial Development

Inflation

Liberalization

Privatization

SMEs (Entrepreneurship)

India’s Global Competitiveness

Planning in India

10th Five Year Plan

11th Five Year Plan

• Social Factors

Corporate Social Responsibility

The Changing Cultural Environment

• Legal Factors

Direct and Indirect Taxes

Industrial Policy

Fiscal and Monetary Policy

Exim policy

• International Factors

Some latest International News

• Changing Demographic Environment

• Technological Factors

Business environment

• Meaning

• Internal and external environment

Environmental factors

• Political factor

• Economic factor

• Social factor

• Technological factor

• Environmental factor

• Legal factor

• Demographic factor

Significance of study

• To develop broad strategies and long term policies.

• To analyse competitor’s strategies, and thereof developing counter strategies.

• Knowledge about the environment will keep the organization dynamic in its approach.

• To foresee the impact of socio-economic changes at the national and international level.

• To adjust according to the prevailing condition.

Recent political development

• 2004- UPA came in power.

Congress was the main party with support from various regional parties and the left.

Implication- delay in various issues ranging from disinvestment to civil nuclear program.

• 2009- UPA in power again.

Lesser no. of regional parties and no left this time.

Implication- Stable government. More focus will be on the industrialization and have GDP growth above 9%.

Neighbors

• Bangladesh

1. Stable government of Sheikh Hasina from February 2009.

2. India started providing duty free access to the exports from LDCs in the SAARC including Bangladesh from 1 January 2008.

• Bhutan

1. Became a republic in 2008.

2. India will double the target of hydropower development in Bhutan to 10,000 MW for export to India by 2020.

• Nepal

1. Also became a republic in 2008.

2. Nepal and India share friendly and close political, economic, and social ties.

3. Promotion of investor-friendly business environment in Nepal would help in realization of the potential for major expansion of Indian investment in key areas like hydropower, agriculture, tourism and infrastructure in Nepal for mutual benefit.

• Pakistan

1. Relation with Pakistan are sour primarily because of the Kashmir issue.

2. After a lot of confidence building measures(CBM) the relationship again took a u-turn after Mumbai attack.

3. It has huge potential for trade, also it a N-11 group of country as predicted by the Goldman Sachs.

• Sri Lanka

1. Suppressed LTTE successfully

2. Had election just a couple of days.

3. Mahinda Rajapaksa is the new president. (said to be pro-indian)

4. Bilateral trade worth US$ 3.27 billion.

5. India also emerged as the second largest investor in Sri Lanka in 2008.

6. Increasing relationship with China is a cause of concern.

• China 1. The widening trade deficit to over $11.2 billion with China is a

cause of concern. India’s imports from China are over three times its exports to that country, according to the 2008-09 data.

2. Relationship to better after common stance at Copenhagen.

3. Bilateral trade in the calendar year 2008 reached US$ 51.8 billion , which is close to the target of US$ 60 billion by 2010 that has been set by the two countries.

4. India would also seek access for its fruits and vegetables in the Chinese market.

5. China, on its part, is likely to seek market economy status from India and may reiterate its concerns on India resorting to large number of anti-dumping cases against the neighboring country.

• India has competitive advantage on the following items

1. Rubber

2. Chemical

3. Textile

4. Auto

5. Minerals

SAARC

1. India is also implementing the projects, in the following areas -

• Telemedicine (Bhutan and Afghanistan),

• Shuttle Breeding of Pulses (Bhutan),

• Setting up of Seed Testing Laboratories (Bhutan),

• Rainwater Harvesting (Bhutan and Sri Lanka) and

• Rural Solar Energy Electrification Project (Sri Lanka).

South Asia and the Pacific

1. India continued to pursue closer relations with South East Asia and the Pacific region as envisioned in its ‘Look East Policy’.

2. The bilateral trade and investment between India and countries in ASEAN have considerably increased, touching about US$ 40 billion in 2007-08.

3. With the implementation of India-ASEAN FTA, the trade with ASEAN countries will cross the target of US$ 50 billion by 2010.

Japan

1. India-Japan relations, which have expanded and broadened in recent years, continue to undergo a significant and qualitative shift.

2. Japan presently ranks sixth largest in cumulative foreign direct investment flows into India. Japanese companies have made actual investment of US$ 3 billion between 1991 and March 2008.

3. India was the largest recipient of Japanese Official Development Assistance (Yen 236.047 billion or Rs. 11,802.4 crores approximately) in the financial year 2008-09.

4. .

• Japan Bank of International Cooperation has offered a US $75 million loan to start Western Freight Corridor between Delhi and Mumbai.

• The two sides have also continued to discuss a Comprehensive Economic Partnership Agreement (CEPA), with the objective of concluding a mutually beneficial and high quality agreement. Both sides are also engaged in discussions an Japanese assistance for a new IIT at Hyderabad.

• Most direct Japanese investment in India is in Automobile Industry (39%), Electrical Equipments (17%), Trading (6%), Services Sectors (financial & non-financial) (5%) and Telecommunications (3%).

Republic of Korea

• Our relations with the Republic of Korea have steadily grown.

• In the wake of the Comprehensive Economic Partnership Agreement (signed in August 2009), Prime Minister Manmohan Singh and South Korean President Lee Myung-bak on Monday agreed to double bilateral trade between the two countries to $30 billion by 2014.

Eurasia

• India maintained friendly and cordial relations with Russia, Ukraine, Belarus, Central Asian and Caucasian countries through visits, conclusion of bilateral agreements, periodic bilateral and multilateral engagements, cooperation programmes, cultural events and other initiatives.

• India and Russia continue to further consolidate their strategic partnership. Co-operation in defence, space and nuclear energy has intensified.

• MoU signed between India and Russia on various issues like defense, building of nuclear plants in India, human space flight etc.

• Inter government commission have five working groups as (formed in 2006)

(i) Trade and Economic Cooperation;

(ii) Mines and Metallurgy;

(iii) Energy;

(iv) Science and Technology;

(v) Tourism and Culture. Both sides set to touch 10 billion USD by 2010.

The gulf

• Gulf countries together provide 70% of our total crude oil requirement and about 4.5 million Indians live and work in the region, remitting more than US$ 10 billion annually.

• In Oman, an MoU on manpower and another for establishing India-Oman Joint Investment Fund were signed in 2008.

• 2nd round of FTA with GCC took place at Riyadh on sep, 20008.

• Bilateral trade worth 76 billion USD in 2007-08.

Africa

• April 2008 two historic documents signed between India and Africa

1. Delhi declaration

2. India Africa framework of cooperation

• These cover various issues of bilateral, regional, and international interest to India and Africa.

• CII and FICCI organised various summit to increase the business with Africa. (Dar-es-Salaam).

• Bilateral trade was 5.5 billion USD in 2001-02. It rose to 40 billion USD in 2008-09.

Europe

• India has traditionally enjoyed warm, friendly and close relations with countries of the Nordic as well as Central and Eastern Europe.

• Germany continued to be India’s largest trading partner within the EU.

• India’s engagement with EU intensified and diversified in fields such as defense & security, nuclear and space, trade and investment, energy, food security, climate change, science and technology, culture and education.

• The potential for high technology manufacturing in India, cooperation in petroleum, non-conventional energy, bio-technology, nano-technology and engineering, together with areas like deep-sea fishing and food processing raised new possibilities for collaboration.

• The EU is India’s largest trading partner. Bilateral trade crossed Euro 55 billion in 2007 and is targeted this to reach Euro 100 billion in 5 years. India and Europe have been witnessing a very dynamic investment relationship.

USA

• 123 Nuclear deal was the landmark deal signifying a better bilateral relationship between the two nations.

• US Secretary of State, Ms. Hillary Clinton visited India during 17-21 July 2009.

• The five-day visit gave a boost to Indo-US relations and laid the roadmap for bilateral interaction in the coming years. Secretary of State and EAM jointly announced a new agenda for Indo-US relations in its “third Phase" categorized as the five pillars of the relationship. They are (i) science, technology, health and innovation; (ii) strategic cooperation; (iii) energy and climate change;(iv) education and development; and (v) economics trade and agriculture.

Canada

• Given the economic complementarities between the two countries, a bilateral trade target of 20 billion Canadian dollars over five years has been set by the two countries.

• While Canada is a resource-rich country and amongst the largest producers of potash, oil seeds, oil gas, uranium, etc. and has cutting edge technology in life science, mining, aviation and energy sectors, India is a huge market and its economy is on a high growth trajectory.

• During the first nine months of 2008 (Jan-Sep),the bilateral trade between India and Canada stood at 3.07 billion Canadian dollars with India’s exports to Canada at 1.59 billion Canadian dollars and imports at 1.48 billion Canadian dollars

LAC

• India’s engagement with LAC countries intensified during the period under reference.

• As many as 21 agreements and MoUs were signed during 2008-09.

• The signing of a JV agreement between the national oil company (PDVSA) of Venezulea and ONGC Videsh for oil production and development activities in the San Cristobal oil field in eastern Venezuela, acquisition of the rights of Encana Corporation of Canada in 10 offshore blocks in Brazil by the BPRL-Videocon JV, Waiver of commercial debt and interest to the tune of Rs. 128 crores owned by Cuba to India and sale of 7 advanced Light (Dhruv) helicopters by India (HAL) to Ecuador was among the important milestones in our economic/commercial relations with LAC countries.

• Indian companies have stepped up their presence in oil, hydrocarbon, agriculture, pharmaceutical,

ICT, mining, auto industries and in service sector.

MAJOR DESTINATIONS OF INDIA’S EXPORT 2008-09

source- DGCI & S KOLKATA

MAJOR DESTINATIONS OF INDIA’S IMPORT 2008-09

SOURCE -DGCI&S KOLKATA

source: monthly report fdi 2009 november

trends in balance of payment

source : ECONOMIC SURVEY 2008-09

• India's Balance of Payments (BoP) for July-September 09 quarter shot up to USD 9.4 billion, the highest since March 2008;

• Largely because of higher capital inflows from foreign institutional investors (FIIs) and non-resident Indian (NRIs).

• The current account deficit for the July-September quarter is at USD 12.6 billion, unchanged from the year ago levels.

• A higher trade deficit and lower earnings from services were the main reasons for the current account deficit

SOURCE CNBC INDIA

• India is ready to play a significant role in recently established forums such as IRC (India-Russia-China), BRIC (Brazil-Russia-India-China) and BASIC (Brazil-South Africa-India-China). India continues to engage with groupings such as ASEM, East Asia Summit, BIMSTEC, Mekong-Ganga Cooperation, the G-15, and the G-8.

• IMPLICATION- Business to grow with the member nations in the future.

• With the regional countries their will remain huge potentials for infrastructural development.

Planning in india

• Set up in March 1950.

• Comprises eight members

1. Prime minister

2. Minister of planning

3. Minister of finance

4. Minister of defense

5. Four full time member including deputy chairman.

Objectives of planning commission

1. Attainment of higher rate of economic growth.

2. Reduction of economic inequalities.

3. Achieving full employment.

4. Attaining economic self reliance.

5. Modernization of various sectors.

6. Redressing of imbalance in economy.

GROWTH PERFORMANCE IN THE FIVE-YEAR PLANS

• Sl.No. Plan Target Actual

1. First Plan (1951-56) 2 . 1 3 . 6 0

2. Second Plan (1956-61) 4 . 5 4 . 2 1

3. Third Plan (1961-66) 5 . 6 2 . 7 2

4. Fourth Plan (1969-74) 5 . 7 2 . 0 5

5. Fifth Plan (1974-79) 4 . 4 4 . 83

6. Sixth Plan (1980-85) 5 . 2 5 . 5 4

7. Seventh Plan (1985-90) 5 . 0 6 . 0 2

8. Eighth Plan (1992-97) 5 . 6 6 . 6 8

9. Ninth Plan (1997-2002) 6 . 5 5 . 5

10. Tenth Plan (2002-07) 8.0 7.2

source PLANNING COMMISSION 2009 ELEVENTH FIVE YEAR PLAN

Tenth five year plan 2002-2007

• Reduction in the poverty ratio from 26 per cent to 21 per cent, by 2007;

• Decadal Population Growth to reduce from 21.3 per cent in 1991-2001 to 16.2 per cent in 2001-11;

• Growth in gainful employment, at least, to keep pace with addition to the labour force;

• All children to be in school by 2003 and all children to complete five years of schooling by 2007;

• Reducing gender gaps in literacy and wage rates by 50 per cent;

• Literacy rate to increase from 65 per cent in 1999-2000, to 75 per cent in 2007;

• Providing potable drinking water to all villages; Infant Mortality Rate to be reduced from 72 in 1999-2000, to 45 in 2007;

• Maternal mortality ratio be reduced from four in 1999-2000, to two in 2007;

• Increase in Forest/Tree cover from 19 per cent in 1999-2000, to 25 per cent in 2007;

• Cleaning of major polluted river stretches.

Some important focus areas of the 10th five year plan

• Dedicated Freight Corridors between Ludhiana and Son Nagar (Eastern Corridor -1230 km) and between Mumbai (JNPT) and Tuglakabad/Dadri (Western Corridor - 1469 km) to augment the capacity of Indian Railways to handle the large increase in the coming years.

• The thrust in the Tenth Plan was on creation of general and bulk cargo handling facilities with focus on container traffic and improvement in the efficiency and productivity through private sector participation.

• The thrust in the Tenth Plan was on development of infrastructure facilities with a focus on NE region and private sector participation so that there is a gradual shift of domestic cargo from rail-road modes to inland water transport.

• The main thrust in the tenth five year plan for civil aviation was on the infrastructural facilities of the airports through PPP.

• Tourism is the third largest foreign exchange earner for the country.

• The Travel and Tourism sector creates more jobs per million rupees of investment than any other sector of the economy and is capable of providing employment to a wide spectrum of job seekers from the unskilled to the specialised even in the remote parts of the country.

• India's share in international tourist arrivals was 0.34 per cent in 2002 and increased to 0.49 per cent during 2005.

• The tenth year plan had key strategic objectives,

(i) positioning tourism as a national priority;

(ii) enhancing India's competitiveness as a tourist

destination;

(iii) improving and expanding product development;

(iv) creation of world class infrastructure;

(v) effective marketing plans and programmes. (“Incredible India”)

Eleventh five year plan

• Vision

1. Inclusive growth

2. Average GDP growth rate of 9%

3. Generating productive employment at a higher pace.

4. Robust agriculture growth at 4%.

Monitorable socio economic targets of eleventh plan

• Accelerate growth rate of GDP from 8% to 10% and then maintain the growth at 10% so as to double the per capita income by 2016-17.

• Create 70 million new work opportunities.

• Reduce educated employment below 5%.

• Increase in agricultural GDP growth rate to 4%.

• Increase literacy rate to 85%.

• Reduce drop out rate from 52.2% to 20% at elementary school level.

Industrial policy

• Areas covered :

1. Industrial licensing.

2. Foreign investment

3. Technology transfer and import of foreign technology

4. Public sector policy

5. Policy related to MRTP

6. An exclusive small sector policy

Recent Industrial Licensing Policy

• Policy liberalisation

Sector wise Regulation in Foreign Investment

i) Automatic route for specified activities subject to Sectoral cap and conditions.

Sectors Cap

Airports

Existing

Greenfield

74%

100%

Air Transport Services

Non Resident Indians

Other

100%

49%

Alcohol distillation and brewing 100%

Banking (Private Sector) 74%

Coal and Lignite mining (specified) 100%

Coffee, Rubber processing and warehousing 100%

Construction and Development (Specified projects) 100%

Floriculture, Horticulture and Animal Husbandry 100%

Specified Hazardous chemicals 100%

Industrial Explosives Manufacturing 100%

Insurance 26%

Mining (Precious metals, Diamonds and stones) 100%

Non banking finance companies ( conditional) 100%

Petroleum and Natural gas

Refining (private companies)

Other areas

100%

100%

Power generation, transmission, distribution 100%

Trading

Wholesale cash and carry

Trading of Exports

100%

100%

SEZ’s and Free Trade

Warehousing Zones

100%

Through government approval

Sectors Cap

New Investment by a foreign investor in a field in which the investor

already has an existing joint venture or collaboration with another Indian

partner

New investment sought to be made in manufacture of items reserved for

Small Scale Industries

Existing Airports 74% to 100%

Asset reconstruction companies 49%

Atomic Minerals 74%

Broadcasting

o FM Radio

o Cable network

o Direct-To-Home (DTH)

o Setting up hardware facilities

o Uplinking news and current affairs

o Uplinking non-news, current affairs

TV channel

20%

49%

49%

49%

26%

100%

Cigarette manufacturing 100 %

Courier services other than those under the

ambit of Indian Post Office Act, 1898

100 %

Defense production 26 %

Investment companies in infrastructure /

service sector (except telecom)

49 %

Petroleum and natural gas refining (PSU) 26 %

Tea Sector – including Tea plantation 100 %

Trading items sourced from Small scale

sector

100 %

Test marketing for equipment for which

company has approval for manufacture

100 %

Single brand retailing 51 %

Satellite establishment and operations 74 %

• The government continues to provide protection to the small scale sector. In 2006 government launched MSMED Act.

• Industrial undertakings, other than SSI undertakings, engaged in the manufacture of items are reserved for exclusive manufacture in the small scale sector, are required to obtain an industrial license and have undertaken export obligation of 50% of their annual production.

RECENT DEVELOPMENT IN INDUSTRIAL POLICY achievement and failures.

• We have mixed economy with more focus on the free market and private sector.

• We have already crossed the 100 billion USD foreign exchange reserve limit.

• GDP growth rate of 7.2% in tenth five year plan was the highest GDP achieved by a five year plan.

• Unemployment has increased from 6.03% (1993-1994) to 9.5% (2008-09) on current daily status basis.

• Poverty eradication at a higher but still modest rate.

Recent developments in fiscal policy

• Since 2001-02 the government has started prudent fiscal policy comprising of:

1. Balanced tax structure of direct and indirect taxation based on moderate tax rates with minimum exemptions covering a wider class of tax payers.

2. An expenditure policy that aims to restrain growth in non development expenditure and adequately provide for pressing social and infrastructure needs of the country.

• However, within limits of the fiscal deficit set under FRBM Act 2003, there has been re-priortization of public expenditure along with revenue led fiscal strategy.

Crisis and the deficit

• Revenue deficit for the period April-November 2008-09 registered a growth of 102 per cent (surplus of 17.2 per cent for the same period in 2007-08) thanks to a string of financial stimulus provided by the government to the counteract the impact of the global slowdown on the Indian economy, outgo towards the Sixth Pay Commission and waiver of dues towards farm loans. The fiscal deficit too increased by 85.7 per cent (surplus of 12.2 per cent for the same period in 2007-08).

Recent development in monetary policy

• The Reserve Bank has pursued an accommodative monetary policy beginning mid-September 2008 in order to mitigate the adverse impact of the global financial crisis on the Indian economy.

• The measures taken instilled confidence in market participants and helped cushion the spillover of the global financial crisis on to our economy. However, in view of rising food inflation and the risk of it impinging on inflationary expectations, the Reserve Bank announced the first phase of exit from the expansionary monetary policy by terminating some sector-specific facilities and restoring the statutory liquidity ratio (SLR) of scheduled commercial banks to its pre-crisis level in the Second Quarter Review of October 2009

SOURCE RBI THIRD QUARTER REVIEW 09-10

• Against this backdrop, the stance of monetary policy of the Reserve Bank for the remaining period of 2009-10 will be as follows:

1. Anchor inflation expectations and keep a vigil on the trends in inflation and be prepared to respond swiftly and effectively through policy adjustments as warranted.

2. Actively manage liquidity to ensure that credit demands of productive sectors are adequately met consistent with price stability.

3. Maintain an interest rate environment consistent with price stability and financial stability, and in support of the growth process.

• Bank Rate The Bank Rate has been retained at 6.0 per cent. • Repo Rate The repo rate under the Liquidity Adjustment Facility (LAF) has been

retained at 4.75 per cent. • Reverse Repo Rate The reverse repo rate under the LAF has been retained at 3.25 per cent. • Cash Reserve Ratio It has been decided to: increase the cash reserve ratio (CRR) of scheduled banks by 75

basis points from 5.0 per cent to 5.75 per cent of their net demand and time liabilities (NDTL) in two stages; the first stage of increase of 50 basis points will be effective the fortnight beginning February 13, 2010, followed by the next stage of increase of 25 basis points effective the fortnight beginning February 27, 2010.

SWOT

Stable government.

Warm relationals with the neighbours, strategic

blocks.

High growth rate of the economy.

High unemployment rate.

Around a quarter of population below

poverty line.

Stark inequality.

Bureaucracy.

Disparity in income.

Area of infrastructure

Inflow of FDI

Huge domestic market.

High fiscal deficit.

Threat from Pakistan.

Growing import bill.

Agriculture still excessively dependent

on reforms.

ECONOMIC ENVIRONMENT The dynamics of the business environment are ever changing and to assess the state of business and economy at any point of time it becomes extremely essential to recognize the driving and the restraining forces of the economy.

The economic recovery and the urgent action to tackle climate change are complementary and they have completely changed the way in which global businesses view sustainable development.

Also the current economic turmoil has resulted in restructuring of the world’s economic order rendering it a tri-polar nature with China and India joining United States at the helm of economic power.

Thus, it is of paramount importance for us to understand the changing business environment in India so as to direct it to a better tomorrow.

"As the new global economic order is redefined, I envisage India taking centre stage in the 21st Century as the Global Knowledge based economy driven by world-class human capital and exemplary entrepreneurship."

Rana Kapoor, Founder/Managing Director and CEO, YES BANK

ECONOMIC DEVELOPMENT The economic development is one of the key parameters to assess the changing business environment.

It encompasses and reflects the contribution of most other factors that play a vital role in shaping the business environment

However, in light of the current economic recession and increasing ecological concerns the frontiers of economic development are being reoriented with focus on inclusive and sustainable growth.

"Our strategy today is not just to deliver rapid growth, but to deliver rapid and inclusive growth, a growth that will provide productive employment to our young population and raise living standards in rural areas across the country.”

Manmohan Singh, Prime Minister of India

THE STATE OF ECONOMY

GLOBAL ECONOMY The global economy is showing increasing signs of stabilisation. The growth outlook in virtually all economies is being revised upwards steadily, with the Asian region experiencing a relatively stronger rebound.

Global economic performance improved during the third and fourth quarters of 2009, prompting the IMF to reduce the projected rate of economic contraction in 2009 from 1.1 per cent made in October 2009 to 0.8 per cent in its latest World Economic Outlook (WEO) Update released on January 26, 2010.

The IMF has also revised the projection of global growth for 2010 to 3.9 per cent, up from 3.1 per cent (Table 1).

The pace and shape of recovery continue to remain uncertain. By far the biggest anxiety is about the recovery losing momentum once the props of fiscal stimulus and monetary accommodation are withdrawn.

In advanced economies, there are concerns about higher unemployment levels, growing fiscal deficits and continued credit recession to productive sectors.

Emerging economies, which are already on the recovery path, face various challenges from capital flows, potential inflationary pressures and credit revival.

INDIAN ECONOMY As stated in the Second Quarter Review of October 2009, India‘s macroeconomic context is different from that of advanced and other EMEs in at least four respects. One, India is facing rising inflationary pressures, albeit largely due to supply side factors. Two, households, firms and financial institutions in India continue to have strong balance sheets, although there is a need to encourage domestic consumption and investment demand. Three, since the Indian economy is supply-constrained, pick-up in demand could exacerbate inflationary pressures. Four, India is one of the few large EMEs with twin deficits - fiscal deficit and current account deficit. Growth during Q2 of 2009-10, at 7.9 per cent, reveals a degree of resilience that surprised many.

Strong industrial recovery has been the key underlying strength behind the recovery of GDP in the second quarter. The core infrastructure sector also exhibited stronger growth during April-December 2009.

Services activities (accounting for 64.5 per cent of the GDP) registered a growth of 9.0 per cent in the second quarter of 2009-10. The recovery was largely driven by 12.7 per cent growth in "community, social and personal services" reflecting payouts of arrears relating to the Sixth Pay Commission award. Excluding the arrears, the services sector growth would have been 7.0 per cent during the second quarter of 2009-10.

Lead indicators for services activities suggest that services dependent on domestic demand exhibited robust growth during April-December 2009, and services dependent on external demand have also shown some improvement in recent months.

“There are inherent strengths on the supply side that make it possible for India to grow, which implies we can handle the constraints,”

Montek S. Ahluwalia, Deputy Chairman, Planning Commission, India.

Agriculture registered a better than expected growth of 0.9 per cent. However, this reflects only a part of the overall adverse impact of the deficient south-west monsoon on kharif output.

Sharp deceleration in the growth of private consumption demand to 1.6 percent in the first quarter of 2009-10 - in addition to subdued growth in investment demand - had emerged as the key constraint to a faster recovery in GDP growth.

In the second quarter of 2009-10, however, private consumption demand registered a growth of 5.6 per cent, which is the highest in last six quarters.

Growth in government consumption expenditure, which had to offset the impact of deceleration in private demand on economic growth in the wake of the global recession, continues to outpace growth in private demand in the last four quarters.

Corporate performance data up to the second quarter of 2009-10 indicate that despite the persistence of dampened (y-on-y) growth in sales, sequential quarterly growth remained positive. In the third quarter of 2009-10, partial data indicate significant (Y-o-Y) growth in sales.

India is the second fastest growing economy in the world. India’s GDP has touched US$1.25 trillion. The crossing of Indian GDP over a trillion dollar mark in 2007 puts India in the elite group of 12 countries with trillion dollar economy.

In the Second Quarter Review of October 2009, the baseline projection for GDP growth for 2009-10 was placed at 6.0 per cent with an upside bias. The movements in the latest indicators of real sector activity indicate that the upside bias has materialised. Assuming a near zero growth in agricultural production and continued recovery in industrial production and services sector activity, the baseline projection for GDP growth for 2009-1 0 is now raised to 7.5 per cent (Chart 1).

Following are some key findings of the World Development Report, 2010 with regards to India’s economic development:

With the positive response and the degree of resilience exhibited by the Indian economy, India can surely continue its growth story and pursue the targets of the Eleventh Five Year Plan which are summarized as follows: Accelerate GDP growth from 8% to 10% and then maintain at 10% in the 12th Plan in order to double per capita income by 2016-17

Increase agricultural GDP growth rate to 4% per year to ensure a broader spread of benefits

Create 70 million new work opportunities.

INDUSTRIAL GROWTH Industrialization is inseparable from substantial, sustained economic development because it is both a consequence of higher incomes and a means of higher productivity.

The industrial sector, which possesses a relatively high marginal propensity to save and invest, contributes significantly to achievement of self sustaining economy, with continued high levels of investment and rapid rate of increase in income as well as industrial employment.

“Even with some amount of recovery taking place in industrial production, I think the key issue virtually every country is facing is much higher unemployment. And a consequence of that is protectionism, which we are seeing across the world.”

Azim H. Premji, Chairman, Wipro Limited

INDIAN INDUSTRY Though the growth of the industrial sector started to slowdown in the first half of 2007-08, the overall growth during the year remained as high as 8.5 per cent.

The industrial sector witnessed a sharp slowdown during 2008-09 as a consequence of successive shocks, the most important being the knock-on effects of the global financial crisis.

The pace of slowdown accelerated in the second half of 2008-09 with the sudden worsening of the international financial situation and the global economic outlook.

The year 2008-09 thus closed with the industrial growth at only 2.4 per cent as per the Index of Industrial Production (IIP).

However, 2009-10 have seen strong recovery in the industrial output with the latest IIP figures suggesting that the industrial output rose 10.3% in October, 2009 from a year earlier.

Also India's manufacturing in January grew at its fastest pace in almost 1-½ years, boosted by a sharp rise in new export orders that underpin a recovery in the industrial sector, a survey showed.

The HSBC Market Purchasing Managers' Index (PMI), based on a survey of 500 companies, rose to 57.7 in January, its strongest reading since August 2008 and up from 55.6 in December.

The new orders index rose to 62.9 from December's 60.1.

“India set to be a manufacturing superpower”

Jyotiraditya Scindia, Minister of State for Commerce and Industry of India at World Economic Forum, Davos

The IIP for the month of November 2009 reveal that the General Index stands at 298.9, which is 11.7% higher as compared to the level in the month of November 2008.

The cumulative growth for the period April-November 2009-10 stands at 7.6% over the corresponding period of the pervious year.

In terms of industries, as many as fourteen (14) out of the seventeen (17) industry groups (as per 2-digit NIC-1987) have shown positive growth during the month of November 2009 as compared to the corresponding month of the previous year.

The industry group ‘Transport Equipment and Parts’ have shown the highest growth of 38.3%. On the other hand, the industry group ‘Jute and Other Vegetable Fibre Textiles (except cotton)’ have shown a negative growth of 11.4%.

“The IIP figures clearly establish that the Indian economy has recovered and can be hoped to achieve a high growth trajectory provided the present policy parameters are not changed.”

Harsh Pati Singhania, President, FICCI

INFLATION Emerging market economies (EMEs) like India are generally recovering faster than advanced economies. But they are also likely to face increased inflationary pressures due to easy liquidity conditions resulting from large capital inflows.

So while conditions in the beginning of 2010 are significantly better than they were at the beginning of 2009, the EMEs in 2009 were engaged in mitigating the adverse impact of the global financial crisis on their real economies.

In 2010, the endeavour in the EMEs will be to strengthen the recovery process without compromising on price stability and to contain asset price inflation stemming from large capital inflows.

“Rising incomes to pressure food supply”

Manmohan Singh, Prime Minister of India

INFLATION SITUATION IN INDIA Inflation emerged as a major concern during the third quarter, dominated by significant supply factors.

On year on year basis, WPI headline inflation in December 2009 was at 7.3 per cent, whereas WPI inflation excluding food articles was 2.1 per cent, which suggests the concentrated nature of the inflation so far.

Food items (i.e. primary and manufactured) with a combined weight of 27 percent in the WPI basket have exhibited 21.9 per cent increase in prices.

In December 2009, there have been signs of emergence of generalised inflation.

Weekly WPI data on primary articles indicate that primary food articles prices have increased by 17.4 per cent (y-o-y) for the week ending on January 16, 2010.

The concentrated pressure on headline inflation arising from high food prices entails the risk of getting transmitted over time to other non-food items through expectations driven wage price revisions, and thereby magnifying into a generalised inflation.

The inflation risk looms larger when viewed in the context of global price movements. As already indicated, global commodity prices are showing signs of firming up, driven both by the recovery in demand and the asset motive.

While anchoring inflation expectations becomes important in such a situation, addressing supply constraints would be critical for enhancing the effectiveness of any anti-inflationary policy measures.

The IMF expects that in emerging and developing economies, inflation is expected to rise to 6.2 per cent in 2010 from 5.2 per cent in 2009 due to low slack in resource utilisation and increased capital inflows.

Keeping in view the global trend in commodity prices and the domestic demand-supply balance, the RBI has now raised the baseline projection for WPI inflation for end-M a r c h 2010 to 8.5 per cent .

INDIA’S GLOBAL COMPETITIVENESS Considering the industrial and economic development of India and keeping in mind the underlying nature of Indian business environment India is being seen as one of the most competitive business destinations.

This is further substantiated by ratings from different international organizations which rate India highly on the competitiveness index.

"India, today, is one of the most strategically located and economically balanced countries attracting investments from organizations, especially GGC's, across the world."

Ankur Bhatia, Executive Director, The Bird Group

Measured by World Economic Forum Measured by IMD

2002 57/75 2002 41/49

2003 48/80 2003 50/59

2004 56/102 2004 34/60

2005 55/104 2005 39/60

2006 50/117 2006 39/61

2007 43/125 2007 27/55

2008 48/131 2008 29/55

2009 50/134 2009 29/57

Rating based on economic performance, business efficiency, government efficiency and infrastructure. Source: IMD world competitiveness yearbook 2009

ECONOMIC INFRASTRUCTURE The following sectors come under the purview of infrastructure: Electricity (which would also include generation, transmission and distribution). Non conventional energy (including wind energy and solar energy). Water supply and sanitation Telecommunications. Road & bridges. Ports. Inland waterways. Airports. Railways. Irrigation. Storage. Oil and gas pipeline networks.

To sustain growth in the infrastructure of Indian economy, despite the global meltdown, the government is planning an investment of US$ 20.38 billion in the next two years for infrastructure development.

Further the government has set aside US$640.8 million for improving the condition of ports, railroads, highways and airports over a period of 15 years.

The index for the six core industries-crude oil, petroleum refinery products, coal, electricity, cement and finished carbon steel has shown a growth of 2.9 per cent for March 2009 in comparison to March 2008.

There exists an investment opportunity of US$ 25 billion by 2011-12 in India's shipping and ports sector, as the country seeks to double its ports capacity to 1500 million tons.

CHANGING TRENDS IN FOREIGN INVESTMENTS

• PORTFOLIO INVESTMENTS

• FOREIGN DIRECT INVESTMENTS

Year (April-March) Amount of FDI inflows (In US$ million)

1991-1992 (Aug-March) 167

1992-1993 393

1993-1994 654

1994-1995 1,374

1995-1996 2,141

1996-1997 3557

1998-1999 2462

1999-2000 2,155

2000-2001 4,029

2001-2002 6,130

2002-2003 5,134

2004-2005 5,755

2005-2006 8,549

2006-2007 22,079

2007-2008 59,288

2008-2009 85,700

2009-2010(uptil nov. 2009) 93,354

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Series1

GOVERNMENT POLICIES

• PRE LIBERALISATION POLICIES

Attitude towards foreign policy negative after independence.

FOREIGN INVESTMENT POLICY(1968-90) formed in which foreign equity was limited to 40%.

FERA was introduced

• LIBERALISATION POLICIES

New Industrial Policy led to abolition of industrial licensing system

Creation of a system of automatic clearance of FDI proposals.

Foreign ownership upto 100% in most manufacturing sectors

HOW SOURCES HAVE CHANGED

COUNTRY %age(1992) %age(1997) %age(2006) %age(nov. 2009)

MAURITIUS - 17.93 40.7 44.89

US 18.57 13.75 5.46 7.78

UK 40.23 11.99 2.65 1.26

Germany 12.40 5.69 1.01 2.48

JAPAN 5.55 5.36 0.54 5.38

NETHERLANDS

4.27 3.22 4.21 3.58

SWITZERLAND

4.82 2.15 0.19 0.18

Singapore - 1.23 4.84 8.14

Canada 2.81 1.01 0.78 1.12

Hong Kong - 0.95 0.87 0.92

Year EXPORT IMPORT TOTAL TRADE TRADE DEFICIT

2002-03 44 51 95 -7

2003-04 53 61 114 -8

2004-05 64 78 142 -14

2005-06 84 112 195 -28

2006-07 103 149 252 -46

2007-08 126 186 312 -60

2008-09 163 251 414 -88

2009-10(till december 09)

117.6 193.2 300.8 -75.6

SOURCE – EXIM SURVEYS TODAY’s ET

INDIA’s EXPORT- IMPORT ANALYSIS

0

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200

300

400

500

600

700

800

900

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10(tilldecember

09)

TOTAL TRADE

IMPORT

EXPORT

All this was the result of various EXIM POLICIES which had following objectives :- Accelerating the country’s transition to globally oriented vibrant economy with a view to derive maximum benefits from the expanding global market opportunities.

Stimulate a sustained economic growth by providing access to essential raw materials, intermediates, components, consumables, and capital goods.

Enhancing the technological strength and efficiency of Indian agriculture, industry, and services, thereby improving competitive strength while generating new employment opportunities

Encouraging the attainment of internationally accepted standards of quality

Providing customers with good quality products and services at reasonable prices.

WHAT HAS BEEN DONE

• EPZs and 100% EOU Scheme were introduced to provide duty free enclaves, which would enable entrepreneurs to concentrate on production exclusively for exports.

• Falta Export Processing Zone

Chennai Export Processing Zone

Noida Export Processing Zone

Cochin Export Processing Zone

Visakhapatnam Export Processing Zone

The Export Processing Zones in India had gone through four significant stages of development :- The first one witnessed the establishment of the Kandla Free Trade Zone in the city of Gujarat in the year 1965 and the consequent establishment of the Santacruz Electronics Export Processing Zone

The second stage witnessed the Second Oil Price Shock, which hampered the export activities significantly and led the establishment of a number of Export Processing Zones to boost the export sector. Thus, Export Processing Zones were set up as:- Falta Export Processing Zone Chennai Export Processing Zone Noida Export Processing Zone Cochin Export Processing Zone Visakhapatnam Export Processing Zone

The third stage witnessed economic liberalization in India and restructuring of the entire export processing zone framework in the year 1991. The stage incorporated various measures for example: More Fiscal Incentives Simplification of Policy Provisions Incorporation of more industries like horticulture, re-engineering, agriculture, aqua culture The fourth stage witnessed the introduction of the concept of SEZs in the EXIM policy of 1997-2002. Presently, most of the EPZs have been transformed into SEZs. The special economic zones extended their scope to include private companies together with the government organizations and offered space to be used for residential as well as for industrial purpose. They offer various fiscal and non-fiscal benefits to the inhabitants in the form of tax exemption, relaxation in duties, and various incentives to enhance the Indian economy.

Growth of SEZs

• Area of land that is demarcated and is treated as a foreign territory for various purposes such as tariffs, trade and duties.

• SEZs in India enjoy exemptions from Income Tax, Service Tax, Sales tax, and custom duties.

• Help in economic and industrial growth and that is why Govt. has made it easy to set up SEZs in India.

YEAR EXPORTS(Rs. In crore) %age of total exports

2000-01 8,552.3 4.20

2001-02 9,189 4.40

2002-03 10,053.4 3.94

2003-04 13,853.6 4.72

2004-05 18,309 4.88

2005-06 22,839.5 5

2006-07 34,787.5 6

2007-08 67,299 9.87

0.00

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40,000.00

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2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Series1

Demographic Environment

population ('09) - 1,156,897,766

In terms of demographics, India can be viewed as :

• A nation of working age people. ( 40 % i.e. over 400 million)

• A nation of middle age people, i.e. 30-49 years old ( 24 % )

• A nation going through a youth explosion. ( 51 % below 25 years old.)

• A nation with a huge population of kids. ( 14 % in age group 0 – 6 )

• A nation with a huge mass of senior citizens.

( 10 % above 55 years old)

Striking points regarding Demographics…

All viewpoints of Indian Demographics are correct as the overall population of the nation is huge.

The key points to note here are :

1. Even though we have the highest number of illiterates in the world, we also have the 2nd highest number of literates and the 3rd largest pool of educated and trained workforce in the world, including over 5 million scientists/engineers and IT Professionals.

Striking points regarding Demographics…

2. Dependency ratio

3. The Indian Youth is set to bring a sea of change…

This is in terms of:

Year Dependency Ratio %

1985 72

1995 68

2005 60

2015 52

2025 (estimated) 48

A sea of change… • A large, vibrant, working population with fewer

dependants,who can drive the economy and the market.

• Higher productivity of the country’s workforce.

• From destiny driven to destination driven.

• From inward focused to outward focused.

• From government employed to self employed.

• A sea change in lifestyle. (need for world class shopping experience, frequent change in gadgets, need for attractive homes, food habits, international travel.)

• In Mumbai, nearly 70 % of family purchase decisions are influenced by kids.

• Brand loyalty has started developing from the age of 2 years !

In summary, India will be reaping a ‘demographic dividend’ in terms of size as well as age mix of population…

Cultural Environment

Often, 2 interesting but opposite statements are made about the changing cultural environment:

1. Indians are reluctant to change their culture.

2. Indians have been changing a lot in recent times in the matter of their cultural orientations.

Both are true, while we are accepting new cultural orientations,

We cling tightly to the core aspects of our culture…

Another excellent example of diversity in India.

Cultural Environment contd…

A social transition

Expansion of education, growth of urbanisation, breaking down of the joint family, rise of the nuclear family, and women taking to employment in large numbers…

Influence of media

Exposure to media such as Satellite TV, has given the consumer an exposure to the lifestyles of the well to do and the products used by them. It has kindled latent aspirations..

ORG MARG data shows that 75 % of Urban India watches

Television, in some states 1 out of 2 rural people watch tv,

Whereas in some states it is 1 out of 3.

Further the per capita TV watching is 100 minutes on weekdays, and 150 minutes on weekends, with high viewing among women, children and those in lower socio-economic classes.

Influence of IT

Internet is slowly shaping a new social environment in India • IN - 1,156,897,766 population ('09)

• 81,000,000 Internet users i.e. 7.0% penetration, per ITU. (4 times the population of Australia ! )

• 5,280,000 broadband Internet connections as of June/09, per TRAI.

Constructive Discontentment

Needs are on the rise. Earlier this ‘constructive discontentment’

was limited to the middle class but not any longer…

Consumer Market Projection

The changing culture is bound to push up demand base for various product categories and enlarge India’s consumer

market manifold…

According to a study by the McKinsey Global Institute (MGI), 'Bird of Gold': The Rise of India's Consumer Market, Indian incomes are likely to grow three-fold over the next two decades and India will become the world's fifth largest consumer market by 2025, moving up from

its 2007 position

as the world's 12th largest consumer market.

Some Latest Technological Developments

• In recent years, Information, Communication, and entertainment have been the areas in which technology has brought forth a real and highly visible breakthrough.

e.g. Digital revolution and WAP (Wireless Application Protocol) .

• In addition to both of above there will be tremendous change in

Biotechnology

• During last five years, biotechnology has been growing at a rate of 40% and in 2005-06 it crossed 1.5 billion USD turnover. Annual turnover at the end of 2010 is estimated to be 10 billion USD.

Nanotechnology

1. It is certain that India will be a part of the

nanotechnology revolution.

• Also we hope that government will very soon start with the auctioning of 3G spectrum and later with 4G.

Corporate Social Responsibility

• CSR goes far beyond the old philanthropy of the past, it is not an occasional act of charity.

• It is an ongoing commitment that is integrated into the objectives and strategy of the core business.

• The trend of CSR has been rising rapidly in India.

• In India it has evolved to encompass, human rights, safety at work, consumer protection, climate protection and caring for the environment, and sustainable management

of natural resources.

Examples Of CSR in India

• HUL has dovetailed the CSR strategy into overall business strategy. Eg. “Shakti” programme, which aims at empowering rural women through a critically needed additional income by equipping and training them to become part of the organization, as entrepreneurs selling HUL’s products.

• Godrej Industries Ltd. Views CSR initiatives as philanthropy which was started by their founders and continues even today.

• Procter & Gamble believes in building the

community in which they exist and operate

by supporting it’s development.

Examples Of CSR in India

• Reliance ADAG emphasizes the need to make decisions from the point of view of stakeholder’s interest, need to minimize risk and to proactively address long term social, economic, and environmental costs and concerns.

• In case of TATA steel, the founder Jamshedji Tata had a goal of CSR in mind, which is being followed even today.

• TATA Motors provides infrastructure to various primary schools in Singur.

• TVS Electronics, Satyam Foundation,

Infosys Foundation, and GE Foundation are other

exemplary examples of growing CSR in India today…

Direct and Indirect Taxes

• Direct Taxes

Their burden cannot be shifted onto anyone else.

1. Personal Income Tax

2. Corporate Tax

3. Wealth Tax

Direct and Indirect Taxes

• Indirect Taxes

The burden of these taxes can be shifted onto other people.

1. Excise Duty

2. Value Added Tax (VAT)

3. Custom Duty

4. Sales Tax

Contd..

• IT Slab for 2009-10

• Corporate Tax

Effective = 33.99% (30 % plus 10% surcharge

plus 3% Education Cess)

How does India’s corporate tax rate compare with other countries? The corporate tax rate in Bulgaria is 10%, Hong Kong 16.5%, Egypt 20%, China 25%, the Netherlands 25.5%, Malaysia 26% and the UK 28%.

It is pertinent to note that the global average corporate tax rate is only 25.9%. And it has been going down over the years.

Income: upto 1.6 lacs

no income tax

Income : 1.6 lacs to 3 lacs

10 %

Income : 3 lacs to 5 lacs

20 %

Income : above 5 lacs

30 %

Contd..

• SalesTax

Applicable as CST (By the central govt.)

Rate 4-15 %

• VAT

Applied by State Governments.

Rate 1- 34%

• Excise

Excise Duty is an indirect tax levied and

collected on the goods manufactured in India.

• Customs Duty

Tax levied on imports.

Latest Developments in Taxation

The UPA government has proposed comprehensive indirect tax reform, goods and services tax (GST) from April 1, 2010, for the creation of a unified national market for goods and services in the country. The GST will replace the major indirect taxes — excise duty, service tax, value added tax and other state taxes — with a single levy , and will create a national common market, which is at present fragmented because of multiple levies. The plan is to phase out CST

by March 31st 2010, and roll out the GST by

April 2010. But it is highly unlikely that the

deadline will be met.

Why GST?

• Unified national market for goods and services in the country, which is at present fragmented because of multiple levies..

• It would also reduce costs of transaction..

Issues with GST

1. Confusion regarding whether to have a single rate

or double rate of GST.

2. Difficulties in passing the required

constitutional amendment bill in the budget session.

3. Some states do not want local levies like

purchase tax and octroi merged in the

new indirect tax.

4. Formula to compensate states for loss of

revenue is yet to be finalized.

Liberalisation

Serious budgetary and fiscal deficits of the government and severe pressure on the country’s BoP position by 1991 led to a new deregulatory and liberal economic regime, thereby drastically reducing the government’s licensing and regulatory functions.

The control of the government continues to reduce

even today…

A talk by Dr. Montek Singh Ahluwalia,

Deputy Chairman, Planning Commission, GOI .

Privatization

Examples

1. Higher Education : The government is shouldering responsibility to provide only primary education, whereas the higher education field is left open to private players. 100 % FDI is also being considered.

2. Telecom: Due to intense competition, the revenues

of BSNL have been declining steadily, talks are on to

convert it into a part private, part public

enterprise.

Privatization

• Banking: Ever since the Banking sector was privatised, widespread change has been visible in nationalised banks like the State Bank of India and the Vijaya Bank.

• Power : Reliance Power is currently developing 16 large and medium sized power projects with a combined planned installed capacity of 33,780 MW, one of the largest portfolios of power generation assets under development in India.

In an address to students at Bhaba Atomic Research

Centre, in August 2009 Vice President,

Mr. Hamid Ansari said that, “In the not so distant

future, the private utility providers would run nuclear power plants, also FDI upto 49 % may be allowed.”

Industries reserved for Public Sector

• Atomic Energy

• Mining of atomic minerals

• Railways

Year No. of Reserved Industries

1956 17

1991 8

1993 6

Now 3

Some International News

Globalisation has had a +ve as well as a –ve impact on our economy. Some latest developments:

• The Growing Impact of the ‘DRAGON’

A. Adverse impact on several SMEs and industries such as textiles, toys, crackers etc.

B. Cheap power generation equipment from chinese

co.s like Dongfang Electric is quickly eating into

market share of domestic co.s like BHEL.

Did you know that 33% of total thermal generation I

in our country is being done on Chinese generator’s?

Even in the 12th 5 year plan, the trend is same…

Some International News

• US President Mr. Barack Obama, on 28 Jan 2010 insisted that the United States must focus on fixing its problems since the worst of the financial crises was over. He said that US should not allow India or China to close the gap.

• He followed it up on 29 Jan 2010 by asking US Senate to stop ‘Giving tax breaks to firms which outsource jobs overseas’ . But Indian IT firms are not worried as they believe that outsourcing is here to stay, and

the recession hit US firms need to cut costs for

which they require their services.

Entrepreneurship scene in India

• Employment : 31.2 million persons (2nd only to Agriculture)

• Exports: Contribute 45 – 50 % to exports.

• Goods exported include, garments, leather products, gems, jewellery, sports goods, plastic products, processed foods.

• Contribute to 8-9 % of GDP

PROBLEMS FACED

• Problem of Credit ( Policies of banks are too stringent)

• Problem of raw material and infrastructure.

• Problem of Power ( inadequate, uncertain

power with frequent breakdowns).

Entrepreneurship contd..

• Example of the problem being faced:

(As of June 2009)

Sector: SMEs Loss: Rs 7,008 cr Share in loss of total industry: 16.5%

a) Hit by a compulsory 48-hour power cut per week, many units in the the Mohali industrial area of Punjab have shifted out their bases to other states, and some others are likely to follow suit.

b) Central Uttar Pradesh is reeling under acute power shortage with districts like Mahoba and Akbarpur facing scheduled and

unscheduled power cuts of up to 20 hours a day. This

has resulted in the closure of around 250 small and medium industrial units in these areas.

Reports from Business Standard (June 2009)

Want to become an Entrepreneur? Read On…

Even though the Indian economy is quite deregulated and liberalised, the beauracratic red tapism makes India one of the slowest countries in terms of the time taken to set up a new business.

For most of the Developed Countries, this duration varies

Between 10 – 40 Days…

Country Time Taken

United States 5 Days

China 24 Days

Pakistan 41 Days

India 89 Days

Entrepreneurship: The Good news!

Business Standard: 1 February 2010:

“ SMEs Sparkle with 25 fold increase in net profit”

In the quarter ended December 2008, the SMEs had registered a 97 % decline in profit.

Whereas in December 2009, the SME’s have registered 2436 %

Increase in profit !

Reason for this may be the superlative performance

of bigger companies like the automobile sector,

as we know that a small increase in demand in the consumer

markets leads to a huge increase in the business market

demand.

Conclusion The Changing Dimensions Summarized…

1. Since the turn of the century India is rapidly moving towards realizing its potential as an economic superpower. However, recent events like the recession and increasing environmental concerns are re-shaping the face of business and India is no less affected by this.

2. These events, however, have reinforced the growing importance of India as an economic centre with India emerging as the second fastest growing economy after China. The GDP growth rate 0f 7.9 % during Q2 2009-10, revealed the resilience of the economy surprising many.

3. Lead indicators like industrial growth, manufacturing growth and service sector are all on upswing and India is well poised to achieve the target of 10% GDP growth as per its 11th Five Year Plan.

4. However, there are few concerns that need to kept in check like inflationary pressure and the increasing fiscal deficit.

5. Altogether India is being seen as one of the most competitive business markets today but it needs to do much more in terms of providing better infrastructure, health and education services.

The Changing Dimensions Summarized…

6. Political environment to remain stable and favourable.

7. Well placed on world stage and cordial relations with powerful countries.

8. Extensive higher education system, third largest reservoir of engineers.

9. Potential in biotechnology.

10. Potential of infrastructure development.

11. Earning prospects of IT and ITES.

12. Huge agricultural resources, fishing, plantation, livestock.

13. Inflow of FDI.

14. Increasing allowance of foreign investments by the GoI, help inflow of

new technology to the country and forces the

local industry to be more competitive. The consumer is the one who is most benefited, along with the other stakeholders.

The Changing Dimensions Summarized…

15. India will be reaping a ‘demographic dividend’ in terms of size as well as age mix of population…

16. The changing culture is bound to push up demand base for various product categories and enlarge India’s consumer market manifold…

17. The trend of CSR has been rising rapidly in India.

18. Introduction of GST will result in a unified national market for goods and services in the country, which is at present fragmented because of multiple levies..

19. Regulation by the government continues to reduce

20. Although SMEs have problems, the sector is booming due to increased demand in consumer market in the recent months.

21. The role of private sector is increasing and will continue to increase in the future.

The Changing Dimensions Summarized… The Negatives

1. High unemployment rate.

2. Urban rural divide.

3. Agriculture dependent on reforms and rain.

4. Bureaucracy.

5. Poor infrastructure.

6. Stark inequality in system.

7. Increasing fiscal deficit.

8. Volatility in crude oil price and dependency on oil import.

9. Huge population.

10. Inflationary pressure.

References

1. Annual report 2008-09, Ministry of external affairs.

2. India-2010, Ministry of publishing and broadcasting.

3. Annual report 2008-09, Ministry of commerce and trade.

4. Business environment, 2nd edition Pearson Publication ,Shaikh Saleem.

5. Economic Environment Of The Business, 4th Edition S. Chand, H.L. Ahuja.

6. Marketing Management, 4th edition Mac Millan, Ramaswamy.

7. Economic Survey, 2008-2009

References

8. World Development Report, 2010

9. RBI Third Quarter Review of Monetary Policy 2009-10, January 28, 2010

10. Economic Times

11. ‘Businessworld’ January 15 2010 Edition

12. ‘Businessworld’ January 25 2010 Edition

13. ‘Entrepreneur’ January Edition.

14. Small Enterprises Development, Management &

Extension Journal. June 2008, Volume 35, Number 2.

References

15. EXIM Foreign Trade Policy

16. RBI Bulletin

17. UNCTAD and Govt. of India data

18. Guide to SEZ India- June 2009

19. Hard Copies of ‘Business Standard’ and ‘The Tribune’

20. Marketing Management (2009 ed), Ramaswamy, Namakumari; Macmillan Publishers.

Internet References

• www.livemint.com

• www.economictimes.com

• www.business-standard.com

• www.financialexpress.com

• www.ibef.com

• http://sezindia.nic.in/