ABSTRACT
(After researching)We have doneonwhere we have seen Indias role in business around the world. As per our studies we have discovered that Indian MNCs exist from past couple of centuries or even more than that and not as per our general view from 1991 when liberalization was done. It only came into a halt for some time. Every country around the world has developed on a certain path and certain sequence step 1 2 3 & so on. However India has developed exactly in the opposite direction. Consumption is the one of the main key factor for Indias Economic growth. In1991, the process of liberalization turned the picture of Indian companies& here we saw India emerging inthe manufacturing sector. The biggest trend that we have as a country is our intellectual prowess. It is this intellectual prowess that has seen us move after 1991 to where we are today, where the world is beginning to recognize India. It started with a revolution in the services sector. It's now moving to the manufacturing sector-pharmaceuticals, automotive industry etc. India is the most preferred place for FDI. As all sectors in India are growing and more FDI are attracted so it is estimated that by 2050 India would have the worlds third largest GDP after Us and China. There are many e.g. where we can say that India is favoring many other countries in their growth like Obama visiting India, South Korean company POSCO coming to Orissa for their steel plant project of Rs.5000cretc. So India is not only boosting its own economy and making it stronger but also indirectly helping in the growth of world economy.
Industrial revolution brought in the concept of limited liability, which is, how business all over the world are run today - on this single golden concept of limited liability. Industrial revolution began the process of transforming the Raj MNCs to something else altogether. It took a long time but this is the point from where it no longer mattered that the son of a priest should become a priest, and the son of a king should become a king.
TREND NUMBER ONE: -Every country around the world has developed on a certain
path, and in a certain sequence-step one - step two- step three - step four - step five. India has developed exactly in the opposite direction-step five - step four - step three - step two - step one. As a result, foreigners find it very difficult to understand India; Indians find it even more difficult to understand India. Europe, China, Japan, Korea, Taiwan, Malaysia - most of them began by dealing with agriculture by improving agricultural productivity and land reforms. Then they moved into low value-added labor intensive manufacture like garments and shoes. Then, they built out the infrastructure in their country-roads, sports, electricity. Then, they moved into higher value-added manufacturing-from shaped metals to auto components to assembled engineered products. Then finally, they went into services. What is happening in India is exactly the opposite. We have built out our services sector. Then we seem to be going backwards and claiming that the time for manufacturing has now arrived in India. We are now talking about infrastructure. Textile exports and labor-intensive production like manufacturing is core strength of India has not been touched upon. The whole world is going right side, and India is going the left side. Yet, both are progressing. The implication of this trend is that we will not always have the horse before the cart, but the cart before the horse.
you find that India gets 65 per cent of its GDP from consumption expenditure, whereas Brazil is 56 per cent and China is only 39 percent (Current figures).In the mumbo jumbo of economics, what this means is that whatever little money people have, they save and whatever else is left with them, they really spend it on all sorts of needs. So, the per capita consumption of products may be low, but as money increases, the propensity to spend is very high. That makes India an outstandingly stable consumer market. Even as exports decline during the global slowdown, Indias robust domestic consumption helped offset the impact.
Apart from Consumption the Other Main Key Factors Sustaining the Growth momentum are:1. Economic fundamentals:Indias highly regulated financial sectors also kept it from being dealt a body blow by the crisis. Indias total financial assets to nations income ratio stood at 1.1 in 2009 compared to 1.7 for china and 3.4 for U.S.A. additionally, strong domestic demand and the governments employment creation initiatives kept the jobless rate relatively stable during the crisis compared to other countries.
2. Focus on infrastructure to support growth:The government plans to increase infrastructure spending as a percentage of GDP to 9% under the 11th five year plan. The plan also aims to envisage investments of over USD 500bn during 2007-2012.
3. Growing Rural Market holds Huge Untapped Potential:Indias rural market-home to around 700mn people-could become a significant consumption driver in the coming years. Government focuses on rural markets through special schemes, such as national rural employment schemes (NREGS), has pushed incomes level higher. The confederation of India industries (CII) estimates the rural consumer market to top USD 425bn in 2010-2011 compared to USD 220bn in 20042005.
4. Focus on Education ensures Sustainability of Growth:Highlighting the role of education in the development of nation, the National Common Minimum Programme (NCMP) had set a target of raising its expenditure on education to 6% of the GDP in the 11th five year plan from 3.6%in 2006-2007. In addition Indias vast pool of scientific, technical and managerial work force (available at relative lower cost) provides a strong competitive edge. It also has the second largest English speaking population in the world. In addition, the country is expected to be the largest contributed to the worlds working age population over the next six years.
sectors are moving. The opportunity in a consumption-oriented market looks better than it probably ever has been in the last 5,000 years of our history. This is a very unique moment for all Indians.
The Reasons for the growth of the Service Sector contribution to the Indias GDP The contribution of the Services Sector has increased very rapidly in the India GDP for many foreign consumers have shown interest in the country's service exports. This is due to the fact that India has a large pool of highly skilled, low cost, and educated workers in the country. This has made sure that the services that are available in the country are of the best quality. The foreign companies seeing this have started outsourcing their work to India especially in the area of business services which includes business process outsourcing and information technology services. This has given a major boost to the Services Sector in India, which in its turn has made the sector contribute more to the India GDP.
The Indian government must take steps in order to ensure that Services Sector Growth Rate in India GDP continues to rise. For this will ensure the growth and prosperity of the country's economy.
Growth in GDP at factor cost at 2004 -2005 prices ( % ) 2005-06 Mining & Quarrying Manufacturing Electricity, Gas, Water supply 1.3 10.1 7.1 2006-07 7.5 14.3 9.3 2007-08 3.7 10.3 8.3 2008-09 1.3 4.2 4.9 2009-10 6.9 8.8 6.4 2010-11 6.2 8.8 5.1
However the manufacturing sector which recorded a growth of 10.3% during 2007-2008, was adversely impacted by global economic slowdown. The sector grew 4.2% in 2008-2009 although the rise in domestic consumption supported production, Indias index of industrial production (IIP) turn negative for the first time in the 15 years December 2008 primarily due to decline in exports. Backed by the government stimulus manufacturing sector is gaining momentum.
If we go back and look at past 5 years the Mergers and Acquisition has geared up significantly whether it be a as big deal as of Tata And Corus or a small Acquisition of Shurjo Energy Pv and PAE Limited. Through this the Indian Economy is booming to a large extent. The world expects India to be a global partner and to be a part of the solution to the present global crisis.
Indian GDP Trend Of Growth Rate 1960-1980 : 1980-1990 : 1990-2000 : 2000-2009 : 3.5% 5.4% 4.4% 6.4%
The contributions of various sectors in the Indian GDP for 2005-2006 are as follows: Agriculture: Industry: Service Sector: 20% 26% 54%
The contributions of various sectors in the Indian GDP for 2007-2008 are as follows: Agriculture: Industry: Service Sector: 17% 29% 54%
The contributions of various sectors in the Indian GDP for 2009-2010 are as follows: Agriculture: Industry: Service Sector: 17.5% 20% 62.5%
It is great news that today the service sector is contributing more than half of the Indian GDP. It takes India one step closer to the developed economies of the world. Earlier it was agriculture which mainly contributed to the Indian GDP. The Indian government is still looking up to improve the GDP of the country and so several steps have been taken to boost the economy. Policies of FDI, SEZs and NRI investment have been framed to give a push to the economy and hence the GDP.
3. Purchasing Power Parity India is ranked 4th in terms of purchasing power parity which show that Indian currency is gaining higher value i.e. Rupee is appreciating.
List by the International Monetary Fund (2010)
Rank 1 2 3 4 5 6 7 8 9 10
Country World European Union United States People's Republic of China Japan India Germany Russia Brazil United Kingdom France Italy
GDP (PPP) $Million 74,004,249 15,150,667 14,624,184 10,084,369 4,308,627 4,001,103 2,932,036 2,218,764 2,181,677 2,181,069 2,146,283 1,771,140
4. Foreign Direct Investment FDI has helped the Indianeconomy grow, and the government continues to encourage more investments of this sort. Foreign direct investment (FDI) in India has played an important role in the development of the Indian economy. FDI in India has - in a lot of ways - enabled India to achieve a certain degree of financial stability, growth and development. This money has allowed India to focus on the areas that may have needed economic attention, and address the various problems that continue to challenge the country. India has continually sought to attract FDI from the worlds major investors. In 1998 and 1999, the Indian national government announced a number of reforms designed to encourage FDI and present a favorable scenario for investors. FDI investments are permitted through financial collaborations, through private equity or preferential allotments, by way of capital markets through Euro issues, and in joint ventures. FDI is not permitted in the arms, nuclear, railway, coal & lignite or mining industries. Sectors Attracting FDI Though the services sector in India constitutes the largest share in the Gross Domestic Product, still it has failed to some extent in attracting more funds in the forms of investments. Important sectors of the Indian Economy attracting more investments into the country are as follows: y y y y y y y y y y Electrical Equipments (Including Computer Software & Electronic) Telecommunications (radio paging, cellular mobile, basic telephone service) Transportation Industry Services Sector (financial & non-financial) Fuels (Power + Oil Refinery) Chemical (other than fertilizers) Food Processing Industries Drugs & Pharmaceuticals Cement and Gypsum Products Metallurgical Industries
Countries encourage the inflow of capital from abroad to supplement the domestic savings for a higher investment and a larger increase in production capacities. Foreign Direct Investment is considered as the most preferred route of supplementing the domestic savings as it brings along with the investment new management practices and technologies. Besides enlarging the productive capacity they also contribute to enhancement of export potential/earning of the country. Over the years, India has emerged as a preferred destination for foreign investment. Besides the sustained GDP growth of economy, which has expanded
market in India, the enabling environment and a transparent open policy regime has significantly contributed to the emergence of India as a preferred location. The outcome of the government initiatives and liberalization measures undertaken have resulted in tremendous response and growth in the FDI equity inflows to India since 2003-04, which have increased nearly thirteen-fold until the last financial year (i.e. 2009-10). In terms of international practices of calculating FDI (i.e. by taking into account re-invested earnings and other capital), the FDI inflows into India were nearly US $ 37.18 billion during 2009-10. FDI inflows have somewhat flattened out over the course of the last three years, the pace of inflows has been stable, including during 2009-10, at the height of the global economic slowdown. India was ranked 32nd in the world on FDI inflows in 2001(as per UNCTAD data), its ranking improved to the 9th position in 2009. Indias ranking, in terms of FDI inflows among developing countries (as per UNCTAD data), has jumped from 13th in 2005 to 4th (in 2009). Its share of world FDI inflows has jumped from 0.78% in 2005 to 3.11 per cent in 2009. India is today rated as one of the most attractive investment destinations across the globe. The UNCTAD World Investment Report (WIR) 2010, in its analysis of the global trends and sustained growth of Foreign Direct Investment (FDI) inflows, has reported India to be the second most attractive location for FDI for 2010-2012.
y y y
Corporate investments in industry Economic stability Ready to Experiment attitude of Indian industrialists
Sectors like pharmaceuticals, IT, ITES, telecommunications, steel, construction, etc., have proved their worth in the international scenario and the rising participation of Indian firms in signing M&A deals has further triggered the acquisition activities in India. In spite of the massive downturn in 2009, the future of M&A deals in India looks promising. Indian telecom Major BhartiAirtel is all set to merge with its South African counterpart Zain with a deal worth $10.7 billion.
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Conclusion
As we have seen that Indian MNCs exist from past many centuries(have existed for centuries) and they were doing an EXCELLENT business in those days too. This statement can be proved by a nick name given to IndiaSONE KI CHIDIYA which means GOLDEN BIRD. But Indians have cut them self from the trade in those ancient days and were thinking that world have forgotten them but this was not the case. It was remembered by many i.e. Aryans then Mughals and then British people came to India to do business. Let it be any era a company will do business with those countries only in which they see profit and not only profit rather HUGE PROFIT. Now,( however looking back) looking forward in our 1st five year plan we have no doubt that government have(had) given emphasis on agriculture but after that they have neglected that area and started going in other directions and it took long time to India to come to this position in which we are today. But still it was going good (in a slower pace). India is a country that is turning One billion people into one billion consumers, and being in India becomes a competitive necessity for any global corporation. So there is huge potential in India to do business and also to generate business for other countries and grow the WORLD ECONOMY. This indirectly will generate employment, proper utilization of available resources, and reduction in poverty, generate revenue to government etc.(which will result in reduced government BUDGET DEFICITand many more problems). As more and more people are getting employed there will be an increase in disposable income which in turn will increase the consumption expenditure of population which will contribute in the growth of GDP As we know there is still a huge untapped rural future consumer in India when covered our economy will be a SUPER POWER. How can we know that there is huge potential in India??? The answer to this simple Question is Foreign Direct Investment (FDI) and Mergers and Acquisition which is increasing on a good rate. Studies shows that in world India is the second most preferred destination for foreign direct investment. Which shows that India has a huge potential to help grow others too. As said by Mr. B.N. Kalyani(CMD BharatForgeLtd) in one of the business conference that the potential in India is to grow the economy by 12% a year in spite of current situation of 8 to 8.5%. If we look at the past couple of years when recession hit the world badly, India was still doing well with not much of effect on our economy. This was possible due to quick intervention of government and also due the excellent domestic consumption which up hold our economy. What is happening in India Currently? To understand it let us take an example. There is a Mangalore-based small scale company manufacturing watch movements for a Swiss company. The movements go from Bangalore to
Geneva for assembling; from Geneva, they go to Bangkok for packaging; and then they are marketed in New York. If you are selling that watch for 100 dollars, and making a profit of 25 dollars; the guy in Bangalore is making three dollars and making a profit of one dollar, he is very happy in making that 50 per cent profit. But on 25 dollars, India gets only one dollar. India has a potential to manufacture, assemble, packing and even marketing any product but it not being properly utilized. To overcome from this situation we should encourage our entrepreneur and entrepreneurship. It is estimated that by 2050 India would have the World's third largest GDP after the US & China. According to the analysis we are sure that India will be a super power by 2050.(Estimated
Figures)
China
70,710
57,310
45,02 2 29,82 3
34,34 8 26,09 7
25,61 0 22,81 7
18,437
12,630
8,133
4,667
38,514
33,904
20,087
17,978
16,19 4 1,900
14,535
37,668
25,278
16,51 10,51 6,683 0 4 6,631 5,471 6,320 3,286 4,963 4,102 5,265 2,192 3,720 3,068 4,265 1,479
4,316
2,848
1,256
4 5 6 7
Indonesia 8 9 Japan United Kingdom 6,677 5,133 6,300 4,744 6,042 4,344 5,886 3,937 5,814 3,595 5,570 3,333 5,224 3,101 4,861 2,835 4,604 2,546
10 Germany
5,024
4,714
4,388
4,048
3,761
3,631
3,519
3,326
3,083
So there is a huge potential which India can utilize in near future to become super power.
We have no doubt in our mind that India is on a march. We have no doubt in our mind that in coming years, India will be a major economic superpower. Thank you.
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