© swaminathan 2007 india- a future economic power jayashankar m. swaminathan kenan-flagler business...
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© Swaminathan 2007
India- A Future Economic Power
Jayashankar M. Swaminathan
Kenan-Flagler Business School
University of North Carolina, Chapel Hill
© Swaminathan 2007
India - At a Glance
• One of the oldest civilizations in the world• Seventh largest country in the world • Largest democracy in the world with over 1 billion people• Blessed with natural landscape and wildlife • More than 300 dialects • Most English speaking in a single country outside US• Secular with multiple religions• One of the largest country in terms of number of people
below poverty line
© Swaminathan 2007
India and the Global Economy
• Spices and Precious Material• Cotton and Silk• Cow, Elephant, Rhino and Tiger• Yoga and Spirituality• Call Centers and Software
© Swaminathan 2007
India - At a Glance
• One of the oldest civilizations in the world
© Swaminathan 2007
India - At a Glance
• Seventh largest country in the world
© Swaminathan 2007
India - At a Glance
• Largest democracy in the world with a population of over 1 billion people
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India - At a Glance
• Great geography and wild life
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India - At a Glance
• More than 350 dialects• Most English speaking
people in a country outside of US
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India- At a Glance
• Multiple Religions
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India – At a Glance
• Poverty
• One of the largest country in terms of number of below poverty line
• High percentage of illiterates in rural parts
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India: At a Glance
• Cows and Snake Charmers
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India: At a Glance
• Saree, Bindi and Jewellery
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India: At a Glance
• Spirituality and Yoga
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India: At a Glance
• Call Centers
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India and the Global Economy
• From ancient days India has been known for its spices and craftsmen– Marco Polo, Vasco De Gama and Columbus
traveled long distances searching for India
• In the early part of 19th century India was the major producer of cotton for the globe
• In the most recent times, India has emerged as a popular destination for knowledge intensive work
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India and the Global Economy
• Indian Economy (2005)– Population 1.08 billion (Growth- 1.5%)– GDP: $797.5 billion ($738 per capita)– GDP (PPP): $3.79 trillion ($3508 per capita)– Inflation: 5% (approx)– Foreign Direct Investment: 0.9% of GDP
Source: The Economist
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India and the Global Economy
• Transformation from a underdeveloped to an emerging economy
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India and the Global Economy
• One of the fastest growing economies in the world (average growth rate of over 7%)
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India and the Global Economy• Major Exports (2005-06)
– Engineering goods: 21%– Textile and Textile Products:
15.6%– Gems and Jewellery: 15.1%– Petroleum Products: 11.2%
• Major Imports (2005-06)– Petroleum Products: 30.9%– Electronic goods: 9.9%– Gold and Silver: 7.9%– Machinery: 6.9%
• Leading Markets– US: 17.6%– China: 8.7%– UAE: 7.7%– UK: 4.5%
• Leading Suppliers– China: 6.9%– US: 6.1%– Belgium: 4.9%– Singapore: 4.6%
© Swaminathan 2007
India and the Global Economy• Indian Market
– 200 million people in the middle class
– India’s retail market projected to be $300 billion in 2010
– Only 2% of retail sector is organized retailing – rest is mom and pop stores
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India and the Global Economy• Emerging as Multinationals
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India and the Global Economy
• Indian Workforce– More than 100000 professionals engineers and
doctors from universities– More than 50% of population is under 25
years– Large pool of english speaking workers– Cultural mindset geared towards knowledge
and skill related work
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India and the Global Economy
• Indian Manufacturing Sector– In the recent years, manufacturing sector is
picking steam– 5 Deming quality prizes for Indian firms
(largest outside of Japan)– Major investments by US, European and
Asian firms - POSCO, Dell, Motorola, Flextronics, BMW, Ford, Intimate Apparels
© Swaminathan 2007
India and the Global Economy• Indian BPO Sector
– The domestic BPO sector is projected to increase to $4 billion in 2004 and reach $65 billion by 2010 (McKinsey)
– There are over 200 call centers in India with revenues over $2 billion and a workforce of over 150,000
– Offshoring activities are moving towards higher value added activities such as legal, consulting, healthcare processing and insurance from technical support and airline reservations
© Swaminathan 2007
India and the Global Economy• Indian Software Sector
– Bangalore has become a synonym for best software off-shoring
– 80 of the World’s 117 highest quality certified firms (CMM- Level 5) are based in India
– From cost to quality to innovation
Source: McKinsey Nasscom
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Offshoring to India• Global demand for information technology $847 billion• India is among the top spot in offshore outsourcing
– ITES: $ 0.6 billion in 2000 to $8.4 billion in 2007– Software: $5.3 billion in 2000 to $31.4 billion in 2007
• Growth from simple low end activities to high end R&D outsourcing
• 347 institutes of higher education• Only 10-15% of the workforce is directly employable on a global
platform• Shortfall of 500,000 by 2010 (Nasscom)
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Key Offshore Models• Third Party
– Economical for smaller teams (<100)
– Responsiveness to client requirements
– Bench strength to accommodate rapid growth
– Staff rotation to add and create more variety
– Dedicated offshore centers to emulate a captive center
• Captive– Economical for larger teams (>100)
– Greater liberty in deciding incentive pattern of employees
– More leeway in hiring, retention and training of employees
– Possibility of utilizing cutting edge technology
© Swaminathan 2007
Dissatisfaction with Offshoring• Client Contributions
– Systemic problem in Managing the Offshoring Process
– Unreasonable Expectations
– Lack of Awareness of How to Make Offshoring Succeed
• Supplier Contributions– Ineffective Project Management– Lack of Communication– Inadequate Investments towards
Improving Employee Productivity– Ineffective Management of
Operational Challenges
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Operational Challenges• Hiring
– Challenge in recruiting and training talent• Training
– Large training budgets required• Turnover
– 15% to 30% of team turnover• Quality
– Scaling the quality processes in the BPO sector is a considerable challenge
• Communication and cultural differences – Manage both written and verbal communication
• Protecting client intellectual property rights– NASSCOM “4E Framework” and India IT Act
© Swaminathan 2007
India and the Global Economy• India's GDP will reach $ 1
trillion by 2011, $ 2 trillion by 2020, $ 6 trillion by 2032, $ 10 trillion by 2038, and $ 27 trillion by 2050
• Will become the 3rd largest economy after USA and China
• In terms of GDP, India will overtake Italy by the year 2016, France by 2019, UK by 2022, Germany by 2023, and Japan by 2032
Source: Goldman Sachs
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India and the Global Economy
• Some recent news– Two of the biggest acquisitions in steel by
Mittal (Arcelor for $32b) and Tata (Corus for $11b) last year
– Fastest growing market for cellular phones in the world
– 3rd most number of billionaires in the country after USA and Russia (Forbes 2007)
– The stock market is at an all time high
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Hurdles to Cross
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Indian Economy: What’s stopping it?
• Infrastructure– Transport, Power and Water supply inadequate
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Indian Economy: What’s stopping it?
• Divide between Rural and Urban India– Poverty and Education
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Indian Economy: What’s stopping it?
• Democracy and Market Economy– Coalitions and Strong Regional Parties– Finance, Retail, Insurance and Power Sectors
still partially controlled
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Indian Economy: What’s stopping it?
• Inadequate Planning for Rapid Growth– Inflation rose above 6%– Financial lending high– Educated labor pool limitation– Cities and urban areas choking
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Indian Economy: What’s stopping it?
• Potential Religious and Regional Tensions– Hindu Muslim Conflicts– Threat of War with Pakistan– Violence in Sri Lanka and Nepal
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India and the Global Economy
• What will India’s economy look like in the future?
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India and the Global Economy
• What will India’s economy look like in the future?Title: Indian Economic Power: Fiction or Future
Jayashankar M. Swaminathan
Publish Date: Summer 2008
Publisher: Imperial College Press, London and
World Scientific, Singapore
© Swaminathan 2007
Thank You !