“booming indian economy: what is in it for global shipping? by ravi k mehrotra chairman foresight...
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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
China in 1980• Still struggling with
Communist Egalitarian past and lack of enterprise
India in 2005• Full of vigour but political
system still trapped in clanship management of the Nation instead of taking charge 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 will India’s Industrial Growth look in 2010?
How did China imbibe Entrepreneurship into their
Management?
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?
BOOMING INDIAN ECONOMY: WHAT IS IN IT FOR GLOBAL SHIPPING ?
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
Source: World Bank: World Development Indicators Database, 15/07/2005
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.
The PPP method eliminates the effects of differences and changes in relative price levels
Total GDP Total PPP GDP
GDP Growth 2000 to 2050
Source: Goldmann Sachs: The Path to 2050
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
[2003 bn US Dollars]
Germany
Brazil
Japan
Russia
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
60,5%
57,2%
53,6%
49,5%
45,1%
35,8%
31,4%
27,4%
23,0%
19,6%
17,4%
17,4%
17,6%
16,0%
14,2%
12,5%
39,5%
42,8%
46,4%
50,5%
54,9%
64,2%
68,6%
72,6%
77,0%
80,4%
82,6%
82,6%
82,4%
84,0%
85,8%
87,5%
2030
2025
2020
2015
2010
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
29,5%
30,0%
30,1%
29,7%
29,1%
28,2%
27,0%
25,6%
24,1%
22,6%
21,1%
19,8%
18,4%
17,0%
15,6%
14,3%
13,1%
70,5%
70,0%
69,9%
70,3%
70,9%
71,8%
73,0%
74,4%
75,9%
77,4%
78,9%
80,2%
81,6%
83,0%
84,4%
85,7%
86,9%
2030
2025
2020
2015
2010
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
Urban populationRural population
Urbanisation Trends
World Population Prospects: The 2004 Revision United Nations
Population Database Population Division
Value of Merchandise Exports & Imports
[mn US-Dollars]
20032003Exports: 437.9 bn USDExports: 437.9 bn USDImports: 413.1 bn USDImports: 413.1 bn USD
20032003Exports: 55.9 bn USDExports: 55.9 bn USDImports: 70.7 bn USDImports: 70.7 bn USDImports
Exports
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
India
China
6%
22%
29%
34%
35%
36%
39%
40%
41%
41%
42%
45%
46%
50%
57%
66%
70%
73%
73%
78%
94%
78%
71%
66%
65%
64%
61%
60%
59%
59%
58%
55%
54%
50%
43%
34%
30%
27%
27%
22%
Market Size
Market Growth Potential
Access to Export Markets
Government Incentives
Production/Labor Costs
Infrastructure
Financial/Economic Stability
Economic Reform
Political/Social Stability
Quality of Life
Tax Regime
Competitor Presence
Consumer Sophistication
Availability of M&A Targets
Regulatory Environment
Cultural Barriers
Transparency
Management Talent
Rule of Law
Highly Educated Workforce
Source: FDI Confidence Index. A.T. Kearney. October 2004. Volume 7
Infrastructure *) Investments
Source: China Statistical Yearbook, RBI, Morgan Stanley Research
4%
8%
12%
16%
20%
1996 1997 1998 1999 2000 2001 2002
[% of GDP]
*) Transportation, Electricity, Telecom etc.
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