Transcript Slide 1

INDIA VIS-À-VIS GLOBAL REALITIES :
BRAND INDIA
ECONOMY, AND THE CHALLENGE OF
HUMAN DEVELOPMENT
Economic Analysis
Dr. Rana Singh
Associate Professor
Accurate Institute of Management and Technology
www.ranasingh.org
MBA(Gold Medalist), Ph. D.
9811828987
[email protected]
Presentation Agenda
-
Part-A
World Population & world GNI
India vis-à-vis Global Realities
Role of WTO in reducing global inequities
Globalisation as a way out to bridge the gap between the Rich and the
Poor
Globalisation: Concept & Components
India vis-à-vis Globalisation Index
Part-B
India as an Emerging Global Market
Broad contours of Indian Economy
Reform packages
Twenty-Point Policy Initiatives
Global Business Leaders’ opinions about India
Part-C
Performance of the Indian Economy in Post-LPG Era
Part-D
Limitations of the Economic Development Approach: Paradigm shift in
terms of Human Development
Human Developemnt: Concept and Components
HDI and its Trends
Concluding observations
Distribution of World Population and World GNI among
various groups of Countries in 2003
(Exchange Rate Basis)
GNI (Billion US $)
Total
Population
(million)
GNI Per
Capita (US
$)
1. Low Income
Economies
1,038
(3.0)
2,310
(36.8)
450
2. Middle
Income
Economics
5,732
(16.6)
2990
(47.7)
1,920
3. High
Income
Economics
27,732
(80.4)
971
(15.5)
28,550
World
34,502
(100.0)
6271
(100.0)
5,500
China
1,417
(4.1)
1,288
(20.5)
1,100
India
568
(1.6)
1,064
(17.0)
530
Source: Compiled from World Bank, World Development Report (2005)
INDIA vis-à-vis GLOBAL REALITIES
GNI (Billion US $)
Total Population
GNI Per Capita
(million)
(US $)
World
34,502
(100.0)
6271
(100.0)
5,500
China
1,417
(4.1)
1,288
(20.5)
1,100
India
568
(1.6)
1,064
(17.0)
530
INFERENCES BASED ON THE ABOVE TABLES
-Gross inequality of incomes between the Rich and the Poor countries
-Widening gap in the per capita income of Rich and Poor countries
during 1985-95
-During the past few years, the income growth rate of the poor
countries has shown rising trends, which if sustained over a longer
period ; the gap between the Rich and the Poor will decrease
-All high income countries are not necessarily developed countries, such
as, oil-exporting Gulf Countries
-Their per capita incomes are high, but they do not fulfill other parameters
of a developed economy
ESTABLISHMENT OF WTO TO FACILITATE FREE FLOW OF
TRADE IN GOODS AND SERVICES
The establishment is based on the belief that the World would be
richer and happier if we could ensure the movement of the
Following without any restrictions and hindrances:
- Goods and Services
- Investment Flows
- Technology Flows
- Systems and processes Flows
- People Flows
Any aberration or anomaly in the above movements is sought to be corrected
Through the good offices of the WTO.
GLOBALIZATION CONCEIVED AS A WAY OUT TO BRIDGE THE
GAP BETWEEN THE RICH AND THE POOR COUNTRIES
THE CONCEPT AND THE SCOPE OF GLOBALIZATION
There are different connotations and ramifications of the
much talked about term “Globalization”. But from the
point of view of Economy, Business, Human Development,
and Management, the term Globalization connotes the
following four basic aspects:
• More choices
• Lower prices
• Blurred national identity for products
and services
• Career choices and progression
-Fifteen Years of consistent efforts on the part of
India in terms of Globalizing its Economy, It has
not been in a position to find a place among
the top 20 Globalized countries of the world.
-The four important components of globalization
are
-ECONOMIC INTEGRATION
-PERSONAL CONTACT
-TECHNOLOGY
-POLITICAL ENGAGEMENT
ECONOMIC INTEGRATION: TRADE, FOREIGN DIRECT INVESTMENT
AND PORTFOLIO CAPITAL FLOWS, AND INCOME PAYMENTS AND RECEIPTS
(INCLUDING COMPENSATION OF NON RESIDENT EMPLOYESS AND INCOME
EARNED AND PAID ON ASSETS HELD ABROAD)
PERSONAL CONTACT: INTERNATIONAL TRAVEL AND TOURISM,
INTERNATIONAL TELEPHONE TRAFFIC, AND CROSS-BORDER TRANSFERS
TECHNOLOGY: NUMBER OF INTERNET USERS, INTERNET HOSTS,
AND SECURE SERVERS
POLITICAL ENGAGEMENT: NUMBER OF MEMBERSHIPS IN
INTERNATIONAL ORGANIZATIONS, U.N. COUNCIL MISSIONS IN WHICH EACH
COUNTRY PARTICIPATES, AND FOREIGN EMBASSIES THT EACH COUNTRY
HOSTS
THE ABOVE PHENOMENON HAS BEEN SHOWN IN THE FOLLOWING GRAPH
Globalization index rankings
There is a common myth that Globalization benefits
developed countries at the cost of under-developed
countries. For instance, Japan figures at the 2nd
largest economy of the world next to U.S.A., but in
terms of
Globalization Index Rankings (G.I.R.), Japan is at No.38.
Similarly, Germany, which is considered as the 3rd
largest economy of the world, figures at No.14 in terms
of G.I.R..
The more startling contrast is provided by China, which
in the year 2005 emerged as the 4th largest economy of
the world relegating U.K. to a lower position, figures at
53rd ranking of the Globalization Index. This is so
because the G.I.R. are based on parameters, which are
not exactly the same, which constitute the size of the
economy.
Judged from the globalization index rankings,
India figures at Rank No.49 and small countries
like Uganda, Tunisia, Senegal, Romania, Ukraine,
Sri Lanka etc. have scored higher ranks than
India. It’s a great surprise that in this ranking,
Ireland is number 1, followed by Switzerland,
whereas the great and most powerful economy
of the world, namely, U.S.A. figures at Rank
No.12. This ranking has been given out of 62
countries and Iran figures at the last rank.
Who Benefits from
Globalization?
• Allegedly at the cost of poorer
nations.
• Higher among the G-7, but some (e.g.
Japan) are low on globalization
• Some emerging economies (Czech
Republic) are quite high
• Developing countries exceeded the
global average in trade growth
Globalization and the Environment
• Common complaint that globalization
hurts the environment
• Argued that firms relocate to escape
tough pollution rules at home
• Many firms adhere to strict codes of
environmental protection, and engage
in cleanup of locations
• Environment is just one factor in
location decision
Globalization: The Social
Balance
• Carries promises and threats at the
national, regional, organizational, and
individual level.
• Makes less regulated, emerging
economies vulnerable to volatilities.
• Exposes national economies to the
uncertainties of the global economy.
• Could offer advantages to
participating economies.
Globalization: The Social
Balance –contd..
• Globalization & Infrastructure –
– Institutional frameworks and market
efficiency that support fair and
transparent transactions of products
or services
– Streamlines flows of commodities,
capital, labour, knowledge, and
information.
Globalization: The Social Balance- Contd..
Globalization and happiness
Globalization and International
Business
• Globalization does not mean
the advance of a
homogeneous civilization
and uniform business
system.
• Growing interaction makes
people more aware of the
differences among them.
Concept of International
Business
• The business activities that involve the
transfer of resources, goods, services
knowledge, skills or information across
national boundaries.
• May involve
– Individuals
– Companies
– Government bodies
– International institutions
Concept of IB –Contd..
• International transactions
– Economic transactions that cross
borders
• International trade
– Occurs when companies import or
export across borders
• International investment
– Occurs when companies invest their
resources across national boundaries
• International firm
– Those engaged in international
business
Concept of IB –Contd..
• Multinational Enterprise
(MNE)
–A firm that has directly
invested abroad
–Has at least one
working affiliate in a
foreign country
International versus Domestic
Business
• International business is the
outgrowth of domestic business.
• Most major corporations started their
operations in the domestic market.
• International entrepreneurs
– Individuals or companies that
invest and operate in another
country without a home base
International versus Domestic
Business
• Significantly different due to differences in:
– Environmental Dynamics
• Currency, inflation, interest rates,
accounting practices, cultures,
social customs, laws, political
stability
– Operational Nature
• Communication, coordination,
motivation, differences in
organizational principles and
management philosophies
Why Do Firms Expand
Internationally?
• Firms expand internationally
for various motives:
Market motives
- Strategic motives
- Economic motives
-
• Motives vary from one
business activity to another.
Why Do Firms Expand
Internationally?
• Market Motives:
– Offensive motive – seize market
opportunities in foreign countries
through trade or investment.
– Defensive motive – to protect and
hold a firm’s market power or
position in the face of threats
from domestic rivalry or changes
in government policy.
Why Do Firms Expand
Internationally?
• Strategic Motives
– Capitalize on distinctive resources or
capabilities already developed at
home
– Be the first mover in a target foreign
market
– Benefit from vertical integration
involving different countries
– Follow the company’s major
customers abroad
Why Do Firms Expand
Internationally?
• Economic Motives
– Increase return through higher revenues and/or
lower costs.
– Enables the company to benefit from the
differences in:
• Costs of labour
• Natural resources
• Capital
• Differences in regulatory treatment
INDIA AS AN EMERGING GLOBAL MARKET
The process of Liberalization, Privatization, and Globalization
(L.P.G.) initiated since 1991 have made India a Brand
Destination as the 5th largest economy of the world next to
U.S.A., Japan, Germany, and China. The macro-economic
variables, which have put India in such an enviable global
position have been:
Broad Contours of Indian Economy
• 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-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
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
5th among
• Rupee made fully convertible
the top
on trade account
reformers in
• Fiscal Responsibility & Budget 2003: World
Bank
Management Act
– Revenue deficit to be brought to zero
by 2008
In addition to the above reform packages, the country
Has taken the following Twenty-Point policy initiatives
to put The Indian Economy on the Global Map
1.Enhancing Competitiveness of the
economy
2.Liberalization of Foreign Director
Investment (FDI) Policy
3.Foreign Technology Collaborations
4.Easing of Foreign Exchange Controls
5.Lowering of Tax Rates both for individuals
and corporates
Contd..
6. Strengthening of infrastructural support
7. Revolutionary milestones in IT and
IT enabled services
8.Virtual revolution in telecommunications
9. The gigantic quadrangular development of
national highways connecting North to
South and East to West
10. Strengthening of special economic zones
11. Massive growth in Automobile and Auto
component Industry
12.Impressive performance of Textiles and
Garments and their vast potential for future
13. Impressive strides in Biotechnology and
Pharma Industry
14. Integrated Circuit Technology (ICT) benefits
15.Bilateral and Multilateral Trade Agreements
with leading economies of the world including
U.S.A., E.U., ASEAN, NAFTA, GULF
COOPERATION COUNCIL (GCC), etc.
16. Developed brain power facilitating knowledge
power outsourcing in several fields, such as,
software development, IT enabled services,
Medical researches and Health care tourism,
consulting etc.
17. Healthcare, Sports, and Eco-tourism
18. Indian corporates turning out to be
multinationals
19. Strong scientific and technological
manpower pool
20. Sound foundations laid in terms of excellence
in education through IIMs, IITs, Engineering and
Technology Institutions, etc.
Global Business Leaders -On
India
“India is a
developed country
as far as
intellectual capital
is concerned”
JACK WELCH, GE
“India can be a major
part of Dell’s
operations and we
are looking to
capitalize on India’s
human capital”
MICHAEL DELL, DELL
“We are expanding our
presence in India to take
advantage of the ample
R&D talent available”
JOHN CHAMBERS, CISCO
“India is handling
the most
sophisticated
projects in the
world.I am
impressed with the
quality of work”
BILL GATES, MICROSOFT
The echo of the above global leaders’ sentiments has found
Expressive Support In the behavior of Foreign Institutional
Investments in Asia favouring India
Foreign Institutional Investments (FIIs) Destination :
Select Asian Countries
($ million)
2000
Malaysia
Thailand
China
Indonesia
India
2001
2002
2003
2004
-2,472
-649 -1,712 1,097
-712
-881 -1,606
-73
-3,991 -19,406 -10,342 11,427
-1,911
-244 1,222 2,251
2,346 2,853 1,023 8,216
8,902
1,308
196
2,793
8,833
Source : Asian Development Bank (ADB) Report, 2005
Source: Business & Economy, New Delhi, (30.12.2005 – 12.01.2006)
NDP AND GROWTH RATE IN DIFFERENT ACTIVITIES 1993-94 TO 2003-04
At 1993 – 94 prices
Rs. Crore and %
Category
1993-94
(Rs. in
Crores)
2003-2004
(Rs.in crores)
Growth
Rate in %
Agriculture and allied activities
2,29,829
2,93,033
2.46
Manufacturing
1,03,739
1,88,817
6.17
Of which Organised
Unorganised [Non-Corporate]
65,774
37,965
1,18,282
72,535
6.04
6.39
Construction
38,749
70,962
6.24
Trade, Hotels and Restaurant
On which Trade
Hotels and Restaurant
98,627
91,324
5,303
2,18,985
2,04,438
14,547
8.53
8.39
10.62
Non-Railway transport
22,888
50,090
8.15
Real Estate, ownership of Dwellings and
Business Services
40,431
72,001
5.94
Other Services
48,275
1,02,156
7.78
Total NP [including other Activities]
6,97,992
12,74,074
6.2
Note:
Source:
Source:
The NDP figures are at 1993-94 prices and the growth rate is the geometric average growth rate at
constant 1993-1994 prices during the period. It is computed from the NAS 2005.
National Accounts Statistics [NAS] 2005, Central Statistical Organisation
[CSO], GOI, New Delhi.
Business Line, New Delhi, 12/01/2006
SHARE OF NATIONAL INCOME AND GROWTH RATES
At 1993 – 94 prices
Note :
Source:
Source:
Rs. Crore and %
Category
Sector
Share
1993-94
Sector
Share
2003-04
Growth Rate
[1993-94 to
2003-04]
Agriculture and
forestry, fishing
2,29,829
[32.9]
2,93,033
[23.0]
2.46
Mining,
Manufacturing
Electricity
Services
1,27,490
[18.3]
2,32,040
[18.2]
6.17
3,40,673
[48.8]
7,49,001
[58.9]
8.2
We have included construction as part of services. The NDP figures are at 1993-94 prices and the growth rate is the
geometric average growth rate at constant 1993-94 prices during the period. It is computed from the NAS 2005.
computed from data in National Accounts Statistics [NAS-2005, Central Statistical Organization [CSO], G.O.I New Delhi
Business Line, New Delhi, 12/01/2006
LIMITATIONS OF ECONOMIC GROWTH APPROACH:
PARADIGM SHIFT
IN TERMS OF HUMAN DEVELOPMENT
Policy makers assumed that effects of higher
economic growth would trickle down to poor.
Mahbub ul Haq challenged this conventional
wisdom and asserted that there was no automatic
link between economic growth & human
development.
Economic growth is necessary but not a sufficient
condition for human progress. Governments need
to actively focus on HD goals & direct & use their
resources efficiently so that economic growth leads
to empowerment of people & poverty alleviation.
Peoples’ needs & their aspirations must be at the
centre of all development efforts, asserted Haq.
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
HD Advocates:
• income is a means;
enhancing people’s
capabilities the end
• Growth does
trickle down
• Simultaneous
expansion of
choices in other
dimensions – social,
cultural, political and economic
• not accept trickle
down as automatic
Is Income Enough for Well-being?
• Economic growth is needed, but
public policy is needed to translate
growth into HD. How?
» 1. Emphasis on investment in health,
education, skills of people
» 2. More equitable distribution of assets
and income
» 3. Well structured public expenditures
» 4. Empowerment of people to participate
Otherwise the growth is voiceless, rootless,
ruthless, futureless, discriminating, etc.
HOW TO MEASURE HUMAN DEVELOPMENT?
Index
What it measures
HDI
Average achievements in a country
in three basic dimensions of HD
GDI
Adjusts the average achievement of
the HDI to reflect the inequalities
between men and women
GEM
Focuses on women’s opportunities
rather than their capabilities
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$).
Construction of the HDI
1
Fixed minimum and maximum values are established for each
of these indicators:
1.)
2.)
3.)
4.)
2
3
life expectancy at birth: 25 and 85 years;
adult literacy rate (age 15 and above): 0% and 100%;
combined gross enrollment ratio: 0% and 100%;
GDP per capita (PPP$): $100 and $40,000 (PPPUS$).
For each component, individual indices are computed
according to the general formula:
Index=(actual value – minimum value) / (maximum value –
minimum value)
The Education Index is compiled as
2/3(adult literacy index) + 1/3(gross enrolment index)
Construction of the HDI ( Contd)
4.
The GDP index is calculated using adjusted per capita
(PPP$). In the HDI income serves as a surrogate for all
the dimensions of human development not reflected in a
long and healthy life and in knowledge.
Income is adjusted because achieving a respectable level
of human development does not require unlimited
income. Accordingly, the logarithm of the income is used.
5.
The HDI is a simple average of the life expectancy index,
educational attainment index and adjusted GDP per
capita PPP US$ index, and is derived by dividing the sum
of these three indices by 3.
Uses of HDI: Focus on human
outcomes, not economic data
 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.
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)
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 : 0.602 (Rank 127)
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. Laos, China, Thailand and Malaysia all moved
ahead in the HDI rankings. In South Asia, too, there were
HDI improvements across the board.
Science & Engineering (S&E) Job Growth
Projected to Exceed Overall Job Growth Rate
Projected Increase in Employment, Percent Change from
2000 to 2010
100
90
80
70
60
47
50
40
30
20
15
10
0
All Occupations
All S&E Occupations
SOURCE: National Science Foundation, Science and Engineering Indicators – 2004.
Number of S&E Doctoral Degrees Awarded
Growing Faster Worldwide Than in US
Compounded Annual Growth Rate of S&E Doctoral Degrees
Awarded, 1991-2001
China
Taiwan
South Korea
Japan
United Kingdom
France
India
Germany
United States
0
0.05
0.1
0.15
0.2
0.25
SOURCE: National Science Foundation, Science and Engineering Indicators – 2004.
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
Thank You…!