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“BOOMING INDIAN ECONOMY: WHAT IS IN IT FOR GLOBAL SHIPPING? By Ravi K Mehrotra Chairman Foresight Group, London At European Parliament, Brussels (Conference Room 3E-2) On 9th November 2005 When I visited China in late 1980’s When I visited China in 2005 When I visited India in late 1980’s When I visited India in the present day WHAT DO THE PREVIOUS FOUR IMAGES TELL US? India in 1980 • Ahead of China esp. in free enterprise and per capita earnings India in 2005 • Full of vigour but political system still trapped in clanship management of the Nation instead of taking charge of enterprise How will India’s Industrial Growth look in 2010? China in 1980 • Still struggling with Communist Egalitarian past and lack of enterprise China in 2005 • Government took charge of enterprise in late 1980’s, transforming China into a modern industrial nation which increased per capita income by a factor of 5 How did China imbibe Entrepreneurship into their Management? BOOMING INDIAN ECONOMY: WHAT IS IN IT FOR GLOBAL SHIPPING ? In October Bombay Stock Exchange crossed 8,500 points: More than 35% growth in one year But is it the effect of Globalisation of Indian Economy or Industrial Revolution? Will it follow China? Or Brazil? IS INDIA THE NEXT BIG STORY? Is India ready for a repeat of the China Effect on Global Shipping? India’s Intellectual Industry Growing, Why? India presently lacks development of infrastructure and full utilisation of labour force more than 20% population unemployed or partly-employed India is the world’s largest democracy but has archaic labour employment laws Total GDP and PPP GDP 2004 Total GDP The total GDP data shown here measured in current U.S. dollars use annual, market exchange rates. This means that the values and derived rankings are subject to greater volatility due to variations in exchange rates. Inter-country comparisons based on GDP at market prices should, therefore, be treated with caution. Source: World Bank: World Development Indicators Database, 15/07/2005 Total PPP GDP The PPP method eliminates the effects of differences and changes in relative price levels GDP Growth 2000 to 2050 [2003 bn US Dollars] 45000 40000 35000 30000 25000 20000 15000 Japan 10000 Russia Brazil Germany 5000 0 2000 2005 2010 2015 2020 Source: Goldmann Sachs: The Path to 2050 2025 2030 2035 2040 2045 2050 WEAKNESSES OF INDIAN ECONOMY • Still dependent on agriculture – 25% of GDP and 40% of labour employment • Labour Laws archaic – contributes to keeping people below poverty line • Political system controlled by clan mentality • Day-to-day economic activity shackled in bureaucracy • Legal system slow & time consuming • Acute shortage of infrastructure development in the country Urbanisation Trends 1950 12,5% 87,5% 1950 13,1% 86,9% 1955 14,2% 85,8% 1955 14,3% 85,7% 1960 16,0% 84,0% 1960 15,6% 84,4% 1965 17,6% 82,4% 1965 17,0% 83,0% 1970 17,4% 82,6% 1970 18,4% 81,6% 1975 17,4% 82,6% 1975 19,8% 80,2% 1980 19,6% 80,4% 1980 21,1% 78,9% 22,6% 77,4% 24,1% 75,9% 25,6% 74,4% 27,0% 73,0% 2000 28,2% 71,8% 2010 29,1% 70,9% 2015 29,7% 70,3% 2020 30,1% 69,9% 2025 30,0% 70,0% 2030 29,5% 70,5% 1985 1990 1995 2000 2010 2015 2020 23,0% 77,0% 27,4% 1985 72,6% 31,4% 1990 68,6% 35,8% 64,2% 45,1% 49,5% 53,6% 2025 2030 1995 57,2% 60,5% 54,9% 50,5% 46,4% 42,8% 39,5% Urban population Rural population World Population Prospects: The 2004 Revision United Nations Population Database Population Division Value of Merchandise Exports & Imports [mn US-Dollars] 2003 Exports: 437.9 bn USD Imports: 413.1 bn USD Exports Imports 2003 Exports: 55.9 bn USD Imports: 70.7 bn USD STRENGTHS OF INDIAN ECONOMY • Self-sustaining & not implanted by foreign investments to utilise cheap labour • Industrial Growth improved from 6-7% to 11.7% • Largest middle-class purchasing power • Largest number of Professionals • Largest percentage of computer literate people • Self-sufficient in food production in fact net exporter China vs. India – FDI Attractiveness 78% Highly Educated Workforce 22% Rule of Law 73% 27% Management Talent 73% 27% 70% Transparency 30% 66% Cultural Barriers 34% 57% Regulatory Environment 43% 50% Availability of M&A Targets Consumer Sophistication Competitor Presence 50% 46% 54% 45% 55% Tax Regime 42% 58% Quality of Life 41% 59% 41% 59% 40% 60% 39% 61% Political/Social Stability Economic Reform Financial/Economic Stability 36% 64% Production/Labor Costs 35% 65% Government Incentives 34% 66% Infrastructure 29% Access to Export Markets 22% Market Growth Potential Market Size 71% 6% Source: FDI Confidence Index. A.T. Kearney. October 2004. Volume 7 78% 94% India China Infrastructure *) Investments [% of GDP] 20% 16% 12% 8% 4% *) Transportation, Electricity, Telecom etc. 1996 1997 1998 Source: China Statistical Yearbook, RBI, Morgan Stanley Research 1999 2000 2001 2002 SUMMARY ON INDIA • It will still take time to sort out distortions in society and its economy • Acute shortage of infrastructure development in the country • Above two weaknesses will limit economic growth • For next 5 years India will have a negative trade balance • Population growth means young labour force for next 20 years • Hydrocarbon exploration in river deltas due perennial rivers from Himalayas will contribute to India being self-sufficient in energy • Due globalisation of Indian economy Bombay Stock Exchange will continue in positive direction CONCLUSION India will reach 8% Growth Rate in next 5 years Economy will grow to between 10 – 12% between 2010 – 2015 QUOTE: “We can be a developed Nation by 2020 if we make this our Mission Statement” – Dr A P J Abdul Kalam, Indian President Will India fulfil the President’s Statement? Will India’s Development have an effect on Global Shipping? Will International Ship Owners reap similar profits which they had from China over the last two years? “BOOMING INDIAN ECONOMY: WHAT IS IN IT FOR GLOBAL SHIPPING? By Ravi K Mehrotra Chairman Foresight Group, London At European Parliament, Brussels (Conference Room 3E-2) On 9th November 2005