Globalization- Challenges for Indian Development Model

By

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 Prof. Aurnob Roy
(World Bank-Management Consultant, M. A-Economics, Lucknow University, UGC-NET, New Delhi-15 Years
Research,
Development & Teaching, MBA- B-School's Experience in India and Abroad)
Faculty, Strategic Management
Amity Business School
Amity University
Lucknow Campus

THE MODEL OF GLOBALIZATION WAS GIVEN BY MICHEAL PORTER IN WHICH HE

USED 4 I'S NAMELY-1-INVESTMENT, 2-INDUSTRY OR MANUFACTURING-3-
INFORMATION TECHNOLOGY AND 4-INDIVIDUAL CONSUMER OR MARKETIZATION.
TO THISI HAVE ADDED THE 5TH I'S CALLED AS INTERNATIONAL BUSINESS
WITHOUT WHICH A NATION WILL OPERATE UNDER NO TRADE CONDITIONS CALLED
AUTARKY. BUT WITH TRADEIT CAN PRODUCE BEYOND THEIR PRODUCTION
POSSIBLITY FRONTIER, (PPF) SO AS TO PROMOTE, INTERNATIONAL BUSINESS AND
LOWER THE MANUFACTURING COSTSLIKE BARBIE DOLLS OF USAMADE BY MATTEL
TOYSARE NOWADAYSMADE IN CHINA AND THE PRIZESHAVE FALLEN FROM RS.
500/-PER DOLL TO RS. 135/- PER DOLL.

THE OPENING UP OF OVER 3000 ITEMSUNDER WTO REGIME POST-2001IN

CHINAINCREASED THE SALES OF COSMETICS, HALOGEN BULBS, TORCHESAND
TOYS, CONDOMS ETC. AND MORE THAN RS. 5000 CRORE WAS THE LOSS TO THE
INDIAN INDUSTRY. NOWWE GET DURING DIWALI RS. 100/-PER 500 PEICES OF
SMALL BULBS FOR NIGHT DECORATIONHOME ILLUMINATION AND THENDURING
HOLI FESTIVAL WE HAVE THE PLASTIC BASED CHINESE SPRANKLERS.
FURTHERMORE, THE INDIAN CONSUMER IS VERY PRICE CONSCIOUSRATHER THAN
QUALITY CONSCIOUSSO WE HAVE CHINESE MADE GANESHA AND LAXMI
IDOLSDURING DIWALI AND ALSOWE HAVE SEVERAL IDOLS OF GODDESS MAA
DURGAMADE IN CHINADURING THE DURGA POOJA.

THERE IS NO DOUBT THAT THE CHINESE INFRASTRUCTURE IS VERY STRONG. THE

CENTRAL GOVT IN MAINLAND CHINA HAS INVESTED ON HOUSES, DRAINAGE,
ROADS, ONE ROOM ACCOMODATIONS AND FREE PUBLIC TOILETS UNLIKE
BINDESHWARI DUEY'S SINCE 1960-SHULABH SHAUCHALYA WHEN 70 PER CENT OF
URBAN INDIANS GO TO THE FIELDS FOR SANITATION AND THE OLIGOPOLISTIC
MARKET OF 225 MILLION MOBILE PHONES WITH MAJOR PLAYERS VIZ. VODAFONE-
HUTCH, RELIANCE INFOCOM, AIR TEL, IDEA, SPICE, BSNL, TATA INDICOM ETC.
BRINGING A COMMUNICATION REVOLUTION BUT A SANITATION REVOLUTION IN
INDIA IS FAR BEHIND WITH NO OLIGOPOLISTIC SANITATION MARKET WITH USER
PRICE CHARGES TO MAKE IT SUSTAINABLE BUSINESS PROPOSITION WITH MARKET
BASED PRIVATE PUBLIC PARTNERSHIP INITIATIVE. iNDIA HAS FIRST CLASS CARS
HONDA ZX, TAYOTA COROLLA, INNOVA, QUALIS, GENERAL MOTORS, FORD-IKON
ETC. BUT THIRD CLASS ROADS PHYSICAL INFRASTRUCTURE. THIRD CLASS
MANAGEMENT SYSTEMS. CORRUPTION AND BRIBERY IS THE ORDER OF THE DAY
BOTH IN PUBLIC AND CORPORATE SECTOR. CORRUPTION AND MONEY INCENTIVES
IN INDIA IS SEEN AS A TECHNIQUE OF MOTIVATION. TO SET UP A BUSINESS IN
INDIA WE REQUIRE 16 LICENSES EVEN NOW WHEREAS IN CHINA THERE IS SINGLE
WINDOW CLEARANCE SYSTEM AND IN 15 MINUTES A FOREIGN COMPANY CAN SET
ITS BRANCH.

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CHINA STARTED ITS ECONOMIC REFORMS IN 1977 WITH AGRICULTUREAS THE KEY
STRATEGIC PLANK IN A COMMUNIST REFORMIST SET UP UNDER DENG XIO PENG.
LATERTHE SPREAD EFFECTS WHERE IN OTHER SECTORS.

HOWEVER, INDIA HAS FORGOTTEN AGRI-BUSINESS MGT. COMMERCIALIZATION OF

AGRICULTURE MANAGEMENT RELYING MORE ON SUBSISTENCE FARMING
AGRICULTURE. MOST OF BELOW THE POVERTY LINE PEOPLE LIVE IN RURAL AREAS
WHERE WE HAVE HAD ON AN AVAERAGE 2 PER CENT PER ANNUM AGRICULTURE
GROWTH WHEN THE REQUIREMENT IS 4 PER CENT AGRICULTURAL GROWTH. 90
PER CENT OF THE CITIZENS IN MY NATIVE STATE OF UTTAR PRADESH DO NOT
HAVE SANITATION SYSTEMS IN RURAL AREAS AND GO TO THE FIELDS TO
DEFECATE WHEREAS OUR MALLS ARE FULL WITH BRANDS LIKE MARKS AND
SPENCERWALMARTPANTALOONTESCO ETC. ALL WORLD CLASS IN A THIRD CLASS
INSTITUTIONAL MANAGEMENT SYSTEM WITH SYSTEMATIC FAILURE OF
IMPLEMENTATION AT GRASSROOT LEVELS. DECENTRALIZATION OF FINANCIAL
MANAGEMENT TO PANCHAYATS GLOCALIZATION LOW COST HOUSING, LOW COST
SANITATION SYSTEM, NATIONAL CULTURE BUILDING, LOW COST PRIMARY
EDUCATION, LOW CAT TECHNICAL, JOB RELATED EDUCATION STATEGIES ARE THE
FORTUNE AT THE BOTTOM OF THE PYRAMID MODEL YET TO BE ADOPTED
ALONGSIDE GLOBALIZATION IN INDIA.

SO FAR NO ATTEMPT HAS BEEN MADE ON A MASS SCALE TO HAVE FDI IN

AGRICULTURE OF JV WITH INDIAN AND MNC FIRMS ON GROWING EXOTIC VARIETY
OF FLOWERS TO PROMOTE FLORICULTUE WITH COLD CHAINS.

INDIA STARTED ECONOMIC REFORMS IN JULY-1991, WITH TRADE SECTOR

REFORMSAS IMMEDIATE BALANCE OF PAYMENTS PROBLEM (BOP) IN THE TRADE
SECTOR AS OUR FOREIGN EXCHANGE RESERVES WERE ONLY $2 BILLION DOLLARS,
SUFFICIENT FOR 2 WEEKS OF IMPORTS AND DEVALUATION OF THE RUPEE BY OVER
21 PER CENTBY THE GOVERNMENTPRIMARILY TO MAKE INDIA'S EXPORTS CHEAPER
AND IMPORTS COSTLIER IN THE INTERNATIONAL MARKET. BY 199510% OF INDIAS
ECONOMY COMPRIZED OF EXPORTS. TODAY, 35% OF INDIA'S ECONOMIC GNP ARE
EXPORTS ORIENTED. INDIA'S GNP IS A 1 TRILLION DOLLAR ECONOMY. THE
WORLD'S LARGEST INVESTMENT BANK GOLDMAN AND SACHS HAVE PREDICTED
THE EMEERGING MARKETS BRICS ECONOMY MODEL OF BRAZIL, RUSSIA, INDIA
AND CHINA AND COUNTRIES TO WATCH FOR LOW LABOR COST AND KPO, LPO, BPO
OUTSOURCING IN FUTURE YEARS BUT THE FACT REMAINS THAT THEY HAVE PUT
CHINA AS NO. 1, INDIA AS NO. 2 AND USA AS NO. 3 WORLD ECONOMIC GIANTS IN
ITS JANUARY 2007 ANNUAL REPORT. HOW WILL THIS BE POSSIBLE?

THE LPG MODEL WAS PROPOGATED BY THE US-BASED AGENCIES- WORLD BANK
AND THE IMF- DURING THE 1980'S AND MORE THAN 130 COUNTRIES AROUND THE
GLOBE, HAVE ADOPTED ITWITH STRINGENT REGULATIONSLIKEBRINGING
DOWNTHE FISCAL DEFICIT BELOW 5% OF GNP, BRINGING DOWN THE CAD-
CURRENT ACCOUNT DEFICIT (EXPORTS-IMPORTS=CAD) BY LESS THAN 1% OF GNP
AS EARLIER IT WAS 3% OF GNP.

MOREOVER, POVERTY IN INDIA WAS 38% OF GNP IN 1991 AND NOW, 2007IT IS
AROUND 25% OF POPULATION LIVING BELOW THE POVERTY LINE. (BPL)VIZ. 1, 800
CALORIES PER PERSONPER DAYIN URBAN AREAS AND 2, 400 CALORIESPER
PERSONPER DAYIN RURAL AREAS. THIS DATA IS PROVIDED BY THE YOJNA BHAWAN

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PLANNING COMMISSIONNEW DELHI. ANOTHER FACTWORTH NOTING PRIOR TO THE
GLOBALIZATION ERA IN 1985, 15 PAISA USED TO GO TO THE POOR OUT OF 1. 00
RUPEETHE GOVT SPENT IN EMPLOYMENT PROGRAMMES IN RURAL INDIA AND BY
2007 PROF MONTEK SING AHLUWALIA, DEPUTY CHAIRMAN, PLANNING
COMMISSION HAS FOUND OUT THAT ONLY 6 PAISA PER PERSON PER DAY WAY
ACTUALLY GOING TO POOR BENEFICIARIES OUT OF EVERY RS. 1. 00 INVESTED IN
THE PRIME MINISTER MANMOHAN SINGH'S EMLOYMENT YOJNA IN RURAL INDIA.

GLOBALIZATION IS MARGINALISING RURAL INDIAPROBLEM IS THAT FOR A 8-10

PER CENT GNP GROWTH PER ANNUM INDIA REQUIRES $150 BILLION OF
INVESTMENTS IN OHYSICAL AND SOCIAL INFRASTRUCTURE DEVELOPMENT. THEN,
NATIONAL ATTITUTDE TOO IS LACKING AMONG THE INDIANS. THEN TERRORISM
AND 160 DISTRICTS OF 600 DISTRICTS OF INDIA ARE MANAGED AND
ADMINISTERED BY THE MAFIA, GOONDA RAJ, VEERAPAN-PHOOLAN DEVI TYPE
GLOCALIZATION LORDS BECAUSE OF THE FAILURE OF NOT MARKETS BUT STATE
PLANNING AND ALSO THE INDIAN INSTITUTIONAL SECURITY SYSTEM INCLUDING
THE ARMY.

THE DAILY RAPES OF DAUGHTER'S, MOTHER'S AND WIVES OF THE CITIZENS OF J&k
BY THE ARMY PERSONNEL IS A MAJOR CAUSE OF CONCERN FOR HUMAN RIGHTS IN
THE NAME OF COMBATTING TERRORISM. ITS EMPLOYMENT, MONEY MAKING,
ENTREPRENUERSHIP AND EDUCATION WHICH ARE THE KEY STRATEGIC
INITIATIVES WHICH INDIA NEEDS TO TACKLE WITH EDUCATIONAL CULTURE
HAVING AN EXPONENTIAL EFFECT WHICH WILL BRING IN MONEY THROUGH
CREATIVE INNOVATIONS WITH R&D.

BILL GATES AND MALINDA GATES FOUNDATION HAS SPEND OVER $500 MILLION
ON AIDS AWARNESS AND CONTROL PROGRAM WHICH MANY FEAR WILL SPREAD
LIKE AN EPIDEMIC IN INDIA. MALARIA, TYPHOID, DIPTHERIA, CHICKEN POX,
TUBERCULOSIS ARE OTHER DISEASES WHICH ARE LIFE THREATENING ALONG
WITH CANCER.

GLOBALZATION SEEKS THE INTEGRATION OF ALL THE GLOBAL ECONOMIES

TROUGH FORWARD AND BACKWARD LIKNAGES. IT IS BASED ON BRIDGING THE-

1- INVESTMENT GAP -THIS INDIA IS DOING WELL 35% NOW.

2- SAVINGINGS GAP-HERE TOO INDIA IS DOING VERY WELL WITH 31%

3- MANAGERIAL GAP-IT REMAINS A CHALLENGEAS WE ARE PRODUCING MBA'S ON

A WHOLESALE MARKET RATE WITHOUT ANY REGARD TO QUALITY OF
PROFESSIONAL EDUCATIONINDUSTRY TRAINING, PROJECT, VISITS TO THE
MANUFACTURING SITES AND INDUSTRIAL TRAININGS. WATCHING HOW THE
"NAWAB BRAND" OF MANGOOF "DUSHERRI" VARIETY IS BRANDED FROM
MALIHABAD, KAKORI, MALL AND HARDOI BELT OF UTTAR PRADESH AND EXPORTED
TO CHINA, USA AND UK.

THE MANAGERIAL GAP NEEDS TO BE FILLED UP BUT THE MANAGERS NEED TO BE

OF WORLD CLASS QUALITY.

4- "FOREIGN CAPITAL GAP" WILL ALSO BRIDGE THE "TECHNOLOGICAL GAP" TO

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MAKE PRODUCTS FOR EVERY SEGMENT OF SOCIETY.

AS IT IS A REQUIREMENT IN THE WORLD. GLOBALLY, WE HAVE 6 BILLION GLOBAL

CITIZENS. SADLY 4 BILLION DO NOT HAVE TWO SQUARE MEALS A DAY, I HEARD
THE LECTURE OF PROF AMARTYA SEN IN 1986 FOR 6 HOURS ON GLOBAL HUNGER
ON A SUNDAY SPECIAL PROGRAMME ON BBC WORLD SEVICE LONDON RADIO.
LITTLE HAS CHANGED SINCE THEN AS BY 2005 PROF CK PRAHLAD, CALLED UP FOR
FORTUNE AT THE BOTTOM OF THE PYRAMID MODEL. IF THIS IS FOCUSSED BY USA,
EU, APEC, NAFT, MERCOSUR ETC ON WORLD HUNGER THE WAR ON TERRORISM
WILL BE OVER. IF EDUCATION IS ON TOP. IF ECONOMY IS ON TOP. IF EMPLOYMENT
IS ON TOP. IF INFRASTRUCTURE DEVELOPMENT BITH PHYSICAL AND SOCIAL IS PUT
ON TOP AS A MANAGEMENT MANTRA ALONG WITH PROPER MARKETING AS EVERY
BUSINESS BGINS AND ENDS WITH MARKETING WE WILL HAVE A SAFER EQUAL
BETTER WORLD TO LIVE THAN IT IS TODAY.

ONLY TWO BILLION GLOBAL CITIZENS EARN MORE THAN $2 DOLLARS A DAY WHILE
THE REST OF THE BPL-BELOW THE POVERTY LINE POOR PEOPLE EARN ONLY RS.
38/-VIZ $1/- A DAY. AS PROF CK PRAHLAD STATES THEY ARE THE FIRST LEVEL OF
FUTURE EMERGING MARKETS. FOR THEMLOW COSTHIGH QUALITY GOODS AND
SERVICES ARE REQUIRED VIZ. RS. 2/-ICE CREAM, RS. 2/-PC, RS. 2/-CELL, RS. 2/-
MOBILE PHONE SET JUST WE HAVE TODAY RS. 2/-NEWSPAPER AND RS. 2/- 1 PKT
BIDI WHOSE NET BIDI INDUSTRY WORTH IS RS. 18, 000 CRORE. INDIA'S PHARMA
INDUSTRY IS WORTH RS. 75, 000 CRORE.

POSITIVE ASPECTS OF GLOBALIZATION ARE MANY-

1- MORE CHOICE OF CARS, TV, MOBILE PHONES, REFRIGATORS, COMPUTERS, LAP

TOPS AND A PLETHORA OF FMCG AND CONSUMER DURABLES ARE AVILABLE.

2- PRICE SIGNALS AND COMPETITION GIVE PROPER PRICE TO THE CONSUMER.

3- WITH THE COMING OF LOW PRIZED RADIO, TRANSISTORS, TWO-IN-ONE, CD

PLAYER, DVD PLAYER, HAIER PLANET BRAND IN CTV, WASHING MACHINE ETC HAVE
REDUCED THE PRICE OF LUXURY GOODSNOW AFFORDABLE TO THE COMMON MAN
ON THE STREET.

4- THE EMI-EQUAL MONTHLY INSTALMENTS ON CARS, MOTORCYCLES, SCOOTER,

AUTO-RICSHAWS OPERATED BY CNG HAVE MADE IT AFFORDABLE TO THE LOWER
AND UPPER MIDDLE CLASS SEGMENT AND HAS ALSO ENCOURAGED CONSUMERISM
AMONG EVERY INCOME SEGMENT.

5- RETAIL MARKETING HAS BROUGHT TO INDIA THE VERY BEST FROM MARKS AND
SPENCER, BYFORD, PETER ENGLAND, ARROW, DENIM, SHOPPERS STOP, KHADIM'S
SHOES, TESCO, ENGLAND, WALMART, K-MART ETC. THUS HELPING IN BULK
BUYING AT CHEAPER RATES FOR CONSUMERS WITH THE ADVANTAGE OF WORLD
CLASS BRANDED PRODUCTS.

6- THE REVOLUTION IN MOBILE TELECOM IT IS HARD TO IMAGINE A PERSON IN

INDIA WITHOUT A CELL PHONE. 225 MILLION CONSUMERS IS THE INDIA MARKET.
THE 1974, MARTIN COOPER, MOTOROLA SYSTEMS ANALYST DISCOVERY HAS

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BECOME SO FASIONABLE THAT PER WEEK IN CHINAA NEW MOBILE PHONE
BRANDCOMES IN TO THE MARKETS. THE NO. OF CELL PHONES HAVE
OUTNUMBERED THE LAND LINE PHONES IN INDIA.

7- EXPORTS OF SPORTS GOODS IS ANOTHER SILVER LINING FOR INDIA.

EQUESTRIAN EVENTS, CRICKET BATS, PADS FOOTBALLS ETC.

8- THE OTHER MAJOR EVENT WAS THE NON PERFORMING ASSETS RAPIDLY CAME
DOWN OF THE PSU BANKS. PRIVATIZATION OF BANKS WAS ALSO INTRODUCED AS
PER THE RECOMMENDATIONS OF NARASHIMHAN COMMITEE-1992 AND SO WAS
THE CASE OF INSURANCE SECTOR WITH THE MALHOTRA COMMITTEE REFORMS IN
1995WHERE FOREIGN PLAYERS LIKE PRUDENTIAL OF UK, STANDAD LIFE OF UK ING
OF UK ALLIANZ OF GERMANY ETC. WERE INTRODUCED IN THE INSURANCE
GENERAL AND LIFE INSURANCE MARKETS.

9- AS FAR AS THE ECONOMIC REFORMS MODEL (ERM) IS CONCERNEDBASICALLYI

BELIEVE THAT IT WAS A SRTINGENT MODELTO DO AWAY WITH
SOCIALISMEQUALITY AND SOCIAL JUSTICE USSR BASED PARADIGMS BUT TO
BRING IN MILTON FRIEDMAN'S-USA, 1976, NOBEL PRIZE IN ECONOMICS WINNER, "
SUPPLY SIDE ECONOMICS" PRIVATIZATION, PRICE SIGNALS, TRANSACTIONS COST,
MARKETING ECONOMICS BASED USER PRICING, PRICE SIGNALS IDEOLOGY OF
PRACTICALITIES AND WORLD CLASS ADOPTION IN IMPLEMENTATION WITH
"THATCHERISM" AND "REAGANOMICS" IN THE FOREFRONT BASED ON
"MONETARISM", PRUDENT-PUBLIC EXPENDITURE/ SPENDING-CONTROL CAP WITH
"FISCAL RESPONSIBILITY BILL" IN 2003.

INDIA'S FISCAL DEFICIT MUST STAY BELOW 5% OF GNP. TO DO AWAY WITH

SUBSIDIES BILL IN FARM SECTOR.

BUT DEVELOPEDNORTH NATIONS KEEP SUBSIDIZING THEIR FARMER'S IN EU

COUNTRIES TO THE AMOUNT OF 27% OF GNP.

ECONOMIC REFORMS IN INDIA LPG WORLD BANK-IMF BASED MODEL POST JULY-
1991

FFIIT MODEL=FISCAL SECTOR REFORMS+FINANCIAL SECTOR REFORMS +

iNFRASTRUCTURE SECTOR REFORMS+INDUSTRIAL SECTOR REFORMS+TRADE
SECTOR REFORMS.

10- INDIA'S PER CAPITA INCOME HAS ALSO INCREASED FROM $470 IN 2001 TO
$875 TODAY

INDIA NEEDS A TOTAL TRANSFORMATION. A TOTAL PEACEFUL REVOLTION. THE

SCALE AND THE STYLE NEVER THOUGHT OFF BEFORE SO THAT WE MAY SAY
PROUDLY "MERA BHARAT MAHAN".

Prof. Aurnob Roy

(World Bank-Management Consultant, M. A-Economics, Lucknow University, UGC-NET, New Delhi-15 Years
Research,

6
 Development & Teaching, MBA- B-School's Experience in India and Abroad)
Faculty, Strategic Management
Amity Business School
Amity University
Lucknow Campus

Source: E-mail December 21, 2007

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