IRVING FISHER GROUP

INDIAN ECONOMY AND GLOBALISATION

The term globalization means International Integration.

It is a process through which the diverse world is unified into a single society.

Opening up of world trade, development of advanced means of communication, internationalisation of financial markets, growing importance of MNC's, population migrations and more generally increased mobility of persons, goods, capital, data and ideas

WHAT IS GLOBALISATION ?

GLOBALISATION

Issues

Accountability of Global businesses?

Increased gap between rich and poor fuels potential terrorist reaction

Ethical responsibility of business?

Efforts to remove trade barriers.

Shape of the world’s economy is being changed by “globalization”

Nike

Dell

Marketing Branding Advertising

Cost down Outsourcing

New trade pattern: developing countries ◦ don't just have to trade their raw materials to the West

and get finished products in return; ◦ can become big-time producers as well.

New production pattern: global product network◦ companies can locate different parts of their

production, research and marketing in different countries

Globalization – what’s really new? New Trade and Production Patterns

Growing global markets in services people can now offer and trade services globally -- from

medical advice to software writing to data processing -- that could never really be traded before.

Globalization – what’s really new? New markets

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

Indian accountantUS tax payers

Market economic policies spreading around the world, with greater privatization and liberalization than in earlier decades.ex: BRIC

Widespread adoption of democracy as the choice of political regime.

Globalization – what’s really new? New rules and norms

Multilateral agreements in trade, taking on such new agendas as environmental and social conditions.

New multilateral agreements – for services, intellectual property , communications – more binding on national governments than any previous agreements.

Globalization – what’s really new? New rules and norms

GrowthCustomer Survey

GDP – USD 590 billion

GDP growth rate – 9%

Services contribution – 54%

Balance of Trade – USD (-)46.2 billion

Investment goal – USD 250 billion

20062006

Growing Indian Economy

*: ProjectedSource: Economic Times & India Brand Equity Foundation (IBEF)

GDP – USD 1.16 trillion

GDP growth rate – 9.5%

Services contribution – 60%

Balance of Trade – Negative balance should increase with surging imports versus exports

Investment goal – USD 305 billion

20082008 *

GDP – USD 1.36 trillion

GDP growth rate – 9%

Services contribution – 60-65%

Balance of Trade – Negative balance should increase with surging imports versus exports

Investment goal – USD 370 billion

20102010 *

105 105 135 145 167103 125

204 231287

682

191237

398453

0

200

400

600

800

1,000

1,200

1999-00 2002-03 2005-06 2006-07 2010*

US

D B

illio

n

Agriculture Industry Services

Contribution of Services - increased from 48% to 62% and

is estimated to contribute 60% by 2010

Growing GDP

*: ProjectedSource: India Brand Equity Foundation (IBEF)

*: ProjectedSource: Ministry of Commerce & IBEF

83.5

103.1

126.3

155

200

50

90

130

170

210U

SD B

illio

n

2004-05 2005-06 2006-07 2007-08* 2008-09*

Growing Exports

Source: Ministry of Commerce & IBEF

Growing Imports

111.5

149.1

185.7

210.8

50

100

150

200

250

US

D B

illio

n

2004-05 2005-06 2006-07 2007-08 (Apr-Feb)

India's Forex Reserves: 2001-08 (Till 14 March 2008)

5475

112141 152

199

306

0

50

100

150

200

250

300

350

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08(Till 14

March 08)

US

D B

illio

n

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

monetary instability

Increasing Forex Reserves

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

Growing FDI Inflows

* Provisional Source: Department of Commerce

8.9

22

30

4.3 6

0

5

10

15

20

25

30

35

2003-04 2004-05 2005-06 2006-07* 2007-08*

US

D B

illio

n

Electronic equipment, manufacturing and telecom have witnessed significant

FDI inflow

Electronic equipment, manufacturing and telecom have witnessed significant

FDI inflow

India is ranked second in AT Kearney’s FDI confidence

index (2007)

India is ranked second in AT Kearney’s FDI confidence

index (2007)

Increasing Per Capita Income

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

460797

1021

2000

4000

0

500

1000

1500

2000

2500

3000

3500

4000U

SD

2000-01 2006-07 2007-08 2016-17 2025

Major M&A and Investments Announcements in India

USD 1.7 billionUSD 1.7 billionPlans to spend on its development operations in India over the next

four years

Plans to spend on its development operations in India over the next

four years

USD 2 billion USD 2 billion

Plans to establish three manufacturing plants to produce

photo-voltaic units

Plans to establish three manufacturing plants to produce

photo-voltaic units

USD 12 billion USD 12 billion POSCO to invest in building steel

manufacturing plants and facilities in India by 2016

POSCO to invest in building steel manufacturing plants and facilities

in India by 2016

Source: India Brand Equity Foundation (IBEF)

Main sectors:

Main Destinations: China, UAE, UKNorth America is emerging as a destination.

India Inc. Investing Overseas

• Auto Components • IT

• Beverages • Metals

• Cosmetics • Mobile Communications

• Energy • Pharmaceuticals

• Financial Services • Software

• Industrial Goods

Additional economic indicators:• India has a consumer base of 1.14 billion people

• India is the 4th largest economy in the world when measured by PPP

• India’s has a growing middle class of over 300 million people - 30% of India’s population – and larger than the population of the US

• India is the 3rd largest global telecom market. The mobile subscriber base has grown from 0.3 Million in 1996 to over 250 million currently.

• India is likely to add over 200 shopping malls by 2010 and 715 malls by 2015

• The number of billionaires in the country were 3 in 1999; 23 in 2006; and are 48 currently.

India’s Trade with USA

Imports from US

Exports to US

Source: Department of Commerce, Govt of India

11.4

5

13.7

7

17.3

9.4

18.8

11.7

0.0

5.0

10.0

15.0

20.0

2003 - 04 2004 - 05 2005 - 06 2006 - 07

US

D B

illion

Major Items Exported to USA (2006)

Textiles36%

Engineering Goods &

Machinery15%

Organic Chemicals

6%

Iron & Steel5%

Cut and polished

diamond & jew ellery

38%

Source: US Department of Commerce

Major Items Imported from USA (2006)

Fertilizers9%

Optical & Medical Instruments

11%

Precious stones & Metals14%

Aircraft, Aviation Machinery & parts

25%Engineering

Goods & Machinery

41%

Source: US Department of Commerce

India co. going Global Buyer Acquisition Price

Reliance Industries Flag Telecom, Bermuda US$ 212m

Tata Motors Daewoo, Korea US$ 118m

Infosys Technologies Expert Information Services, Australia US$ 3.1m

Bharat Forge Carl Dan Peddinghaus, Germany N/A

Ranbaxy RPG (Aventis) Laboratories, France N/A

Wockhardt CP Pharmaceuticals, UK US$ 18m

Cadila Health Alpharma SAS, France US$ 5.7m

Hindalco Straits Ply, Australia US$ 56.4m

Wipro NerveWire Inc, USA US$ 18.5m

Aditya Birla Dashiqiao Chem, China US$ 8.5m

United Phosphorus Oryzalin Herbicide, USA US$ 21.3m

"Toyota Motor has chosen to source from India due to its competitive cost of manufacture, availability of abundant engineering talent, and strong indigenous machine tool."

Automotive Sector - Overview

India is the world’s:

• 2nd largest two-wheeler market,

• 4th largest commercial vehicle market

• 11th largest passenger car market.

Expected to be the 7th largest automobile market by 2016

India has become an attractive destination for global American, European, Japanese and Korean OEMs.

Source: IBEF, Economic Times

1990 FDI $ 234 Million 1998-2003 FDI $ 2.5 Billion Per Year Target FDI $ 10 Billion Per Year Over 620 FIIs Compared to 500 in 2003 and

Earlier

China FDI & FII FDI $ 50 Billion Per Year FII $ 20 Billion Per Year

GOI POLICY-FDI AND FII

Agriculture acquired 17% of India’s GDP in 2008.

60% of population still depends on agriculture for their livelihood.

Occupied 43% of India’s geographical areas. All other sectors are growing at much faster.

Agriculture

SHARE IN GDP

Year Industry(%) Service(%) Agriculture(%)

1991 25 31 44

2007 28 55 17

Current Literacy rate is 64.84%

Education

Year Literacy Rate Male - Female

Person Male Female Gap

1981 43.6 56.4 29.8 26.6

1991 52.2 64.1 39.3 24.8

2001 65.4 75.8 54.2 21.6

"India has a fantastic pool of software professionals. The world needs to benefit from

this.“

Bill Gates, Microsoft Chairman

This market (India) is critical to our plans for building a Ford Motor Co. for the 21st

century

Bill Ford, Chairman and

CEO

India on its way to becoming IT, manufacturing kingdom

of the world

The dynamism shown by India in the last 15 years is

phenomenal

Mr Yasukuni Enoki, Japanese

Ambassador to India

Paul Wolfowitz, President, World

Bank

What are people talking about India?

High growth but problem of unemployment.

Need to generate 10 million jobs per year.

Multi party rule, hence need to accommodate political ideology with economic reality (reservation, labour law reforms).

India’s Problems

Conclusion

Companies in India That Have Successfully Met Competition by Multinationals & Domestic Companies Had A Spirit Of Innovation Not Only In Their Products And Services But Also With Reference To All Their Resources And Effectively Restructured Them In A Time And Cost Frame And Met Customer Needs And Improved Their Top And Bottom Line.

Thank You