Download India and the Global Economy

India- A Future Economic Power
India - At a Glance
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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
India and the Global Economy
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Spices and Precious Material
Cotton and Silk
Cow, Elephant, Rhino and Tiger
Yoga and Spirituality
Call Centers and Software
India - At a Glance
• One of the oldest
civilizations in the world
India - At a Glance
• Seventh largest country in
the world
India - At a Glance
• Largest democracy in the
world with a population of
over 1 billion people
India - At a Glance
• Great geography and wild
life
India - At a Glance
• More than 350 dialects
• Most English speaking
people in a country
outside of US
India- At a Glance
• Multiple Religions
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
India: At a Glance
• Cows and Snake Charmers
India: At a Glance
• Saree, Bindi and
Jewellery
India: At a Glance
• Spirituality and Yoga
India: At a Glance
• Call Centers
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
India and the Global Economy
• Indian Economy (2005)
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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
India and the Global Economy
• Transformation
from a
underdeveloped
to an emerging
economy
India and the Global Economy
• One of the fastest growing economies in the
world (average growth rate of over 7%)
India and the Global Economy
• Leading Markets
• Major Exports (2005-06)
– US: 17.6%
– Engineering goods: 21%
– China: 8.7%
– Textile and Textile Products:
– UAE: 7.7%
15.6%
– UK: 4.5%
– 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 Suppliers
– China: 6.9%
– US: 6.1%
– Belgium: 4.9%
– Singapore: 4.6%
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
India and the Global Economy
• Emerging as Multinationals
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
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
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
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
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)
Key Offshore Models
• Third Party
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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
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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
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
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
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
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
Hurdles to Cross
Indian Economy: What’s stopping it?
• Infrastructure
– Transport, Power and Water supply inadequate
Indian Economy: What’s stopping it?
• Divide between Rural and Urban India
– Poverty and Education
Indian Economy: What’s stopping it?
• Democracy and Market Economy
– Coalitions and Strong Regional Parties
– Finance, Retail, Insurance and Power Sectors
still partially controlled
Indian Economy: What’s stopping it?
• Inadequate Planning for Rapid Growth
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Inflation rose above 6%
Financial lending high
Educated labor pool limitation
Cities and urban areas choking
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
India and the Global Economy
• What will India’s economy look like in the
future?
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