GLOBALIZATION & INDIAN CONTEXT

By Abhishek Sisodia

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

Accountability of Global businesses?

Increased gap between rich and poor fuels potential terrorist reaction

Ethical responsibility of business?

Efforts to remove trade barriers.

Nike

Dell

Marketing Branding Advertising

Cost down Outsourcing

India & China emerged as cheapest and best markets for 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

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

medical advice to software writing to data processing --

that could never really be traded before.

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: BRICS

(South Africa is the latest addition in this

group)

Widespread adoption of democracy as the choice

of political regime.

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.

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

2006

Growing Indian Economy

*: Projected

Source: 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

2008 *

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

2010 *

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)

*: Projected

Source: Ministry of Commerce & IBEF

83.5

103.1

126.3

155

200

50

90

130

170

210

US

D 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

4.36

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

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

460

7971021

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 billion

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

years

USD 2 billion

Plans to establish three manufacturing plants to produce photo-voltaic units

USD 12 billion

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 1.21 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 to 52 currently.

India’s Trade with USA

Imports from USExports 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

USD

Billion

Major Items Exported to USA (2006)

Textiles

36%

Engineering

Goods &

Machinery

15%

Organic

Chemicals

6%

Iron & Steel

5%Cut and

polished

diamond &

jew ellery

38%

Source: US Department of Commerce

Major Items Imported from USA (2006)

Fertilizers

9%

Optical & Medical

Instruments

11%

Precious stones &

Metals

14%

Aircraft, Aviation

Machinery & parts

25%

Engineering

Goods &

Machinery

41%

Source: US Department of Commerce

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

Reliance British Petroleum $7.2 Billion

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

RISE OF MALL CULTURE IN CITIES

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

Agriculture acquired 16.4% of India’s GDP in 2010.

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.

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

1991 25 31 44

2007 28 55 17

Current Literacy rate is 74.04%

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 64.8 75.3 53.7 21.6

2011 74.04 82.14 65.46 16.68

"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, Chairma

n 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).

DO ELECTIONS SLOW DOWN ECONOMIC GLOBALIZATION PROCESS IN INDIA?

IT’S POLITICS STUPID !

The motto behind slowing down the economic globalization process before elections is that it leads to polarization of voters and thus negatively affects the incumbent government.

PERIOD POLICIES OF G.O.I RESPONSES OF FOREIGN COMPANIES

Industrial Policy1947-1961

Industrial policy 1948,Industrial policy 1956

Nearly 60 US companies set up sales &marketing offices in India.Steady increase in FDI during the period:1948 to 1961.General Motors, Ford Motors, Pepsi ceasedoperations in India

1962-1976 Industrial Licensing Guidelines 1970,MRTP. Foreign Exchange RegulationAct, 1973.

Nearly 60 companies including IBM and Cokeceased operations in India

1977-1990 Industrial Licensing Policy, 1977.Industrial Licensing Policy, 1980

Limited FDI from the foreign companies.

1991-2004 Industrial Licensing Policy, 1991.Industrial Licensing Policy, 1999

Flooding of FDI in India, especially in theservices sector

Privatizing The Airwaves: The impact of globalization on broadcasting in India

An exponential growth in the number of television channels from one state-controlled channel in 1991 to nearly 70 in 1998 as India adapts its broadcasting industries to the deregulated and privatized media environment of the late 1990s.

The new economic policy encouraged privatization, dismantling state controls and liberalizing media regulation, paving the way for the entry of global media conglomerates into what used to be one of the most closed broadcasting systems in any democracy.

Live coverage of the 1990–1 Gulf crisis by the Cable News Network , Cricket match live broadcasting with efficient advertising & IPL FEVER, Exploiting the indianfemales with so called SAAS- BAHU serial revolution, YOUTH targeting by MTV & ‘V’, this list is endless with many more to come to please THE GREAT INDIAN MIDDLE CLASS.

DOORDARSHAN had a monopoly in past over broadcating scenario in this country with a huge poulation base.

In late 90’s ,with the advent of globalization cable networks risen drasticallly & thus resulted in drastic reduction of doordarshan’s base.

Also many new radio playyers came into competition with AIR , like MIRCHI ,RED ,BIG FM.

More consumer centric approach is followed nynew channels to gain their bases.

Advent of D2H technology in india.

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 YouTHANK U !!