Transcript ECONOMIC ENVIRONMENT by DR. PARAMITA DASGUPTA

ECONOMIC
ENVIRONMENT
by
DR. PARAMITA DASGUPTA
Administrative Staff College of India,
Hyderabad - 500 082
PRE LIBERALISATION THERE WAS
LESS COMPETITION AND A SLOWER
MOVING BUSINESS ENVIRONMENT
RULING MOTTO : IF IT IS NOT BROKEN
DON’T FIX IT
CHALLENGES BEING FACED TODAY ARE
DIFFERENT
GLOBALISED ECONOMY IS CREATING
BOTH MORE HAZARDS AND MORE
OPPORTUNITIES FOR EVERYONE
FIRMS ARE BEING FORCED TO MAKE
DRAMATIC IMPROVEMENTS NOT ONLY
TO COMPETE AND PROSPER BUT ALSO
TO MERELY SURVIVE
GLOBALISATION :
INDIAN CORPORATE PERCEPTION
 GREATER COMPETITION
 NEED TO EVALUATE GLOBAL
DEVELOPMENTS AND INCORPORATE
INTO STRATEGIC PLANNING
PROCESS
CONTD..
3
 NEED TO ASSESS AREAS OF
COMPETITIVE STRENGTH, BUILD
ON THOSE STRENGTHS AND
BECOME COST - PRICE AND
TECHNOLOGICALLY COMPETITIVE
CONTD..
4
 CLEAR PERCEPTION OF SHORT
TIME SPAN. AWARENESS OF NEED
TO PUT THEMSELVES IN ORDER OR
THEY WILL NOT BE ABLE TO
SURVIVE
 EXPECTATIONS
FROM
THE
GOVERNMENT SUPPORT IN POLICY
TO HELP INDUSTRY TO BECOME
COMPETITIVE
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INDIAN ECONOMY:AN
OVERVIEW
»TURBULENT INTERNATIONAL ECONOMIC
ENVIRONMENT
»EXPORTS SHOW AN UPWARD TREND IN 1999/00
AND 2000/01.
»DECLINE IN TOTAL NET CAPITAL INFLOWS IN
FIRST NINE MONTHS OF 2000/01.
»CONSEQUENT DECLINE IN FOREX RESERVES IN
2000/01.
»DECELERATION OF GDP FROM 6.6% IN 98 / 99 TO
6 % IN 2000/2001.
»RISE IN THE INFLATION RATE IN 2000/01.
OVERVIEW…..
•FLUCTUATIONS IN INDUSTRIAL
GROWTH OVER LAST TWO YEARS.
•MARGINAL INCREASE IN GROSS
DOMESTIC SAVINGS AS PER CENT OF
GDP IN 99/00.
•MARGINAL INCREASE IN GROSS
DOMESTIC CAPITAL FORMATION AS
PER CENT OF GDP IN 99/00
OVERVIEW…..
/
INADEQUATE FISCAL ADJUSTMENT.
/INADEQUATE PUBLIC INVESTMENT IN
INFRASTRUCTURE AND SOCIAL
SECTORS PARTLY DUE TO DECLINE IN
PUBLIC SECTOR SAVINGS.
/LOW PRIVATE INVESTMENT DUE TO
HIGH REAL INTEREST RATES AND
INADEQUATE INFRASTRUCTURE.
DOMESTIC ECONOMIC
ENVIRONMENT
LIBERALIZATION POLICY
 FISCAL POLICY
 TRADE & EXCHANGE RATE


POLICY
INDUSTRIAL POLICY
FINANCIAL SECTOR POLICY
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INDUSTRIAL GROWTH: BROAD
PATTERNS
CYCLICAL PATTERNS IN INDUSTRIAL
GROWTH
INCREASE IN GROWTH RATE IN 99/00
FOLLOWED BY SLOW DOWN IN 2000/01.
ACCELERATION IN GROWTH RATE OF
CONSUMER GOODS.
CAPITAL GOODS AND INTERMEDIATE
GOODS INDICATE A DOWNWARD TREND.
INDUSTRIAL GROWTH: BROAD
PATTERNS
DECLINE IN GROWTH RATE OF SIX
CORE INDUSTRIES TAKEN AS A
WHOLE.
DECLINE IN GROWTH RATES OF
STEEL, CEMENT AND ELECTRICITY.
INDUSTRIAL SECTOR :
CURRENT ISSUES
 SLOW DOWN IN DEMAND FOR CAPITAL
GOODS AND INTERMEDIATE GOODS.
 INFRASTRUCTURE CONSTRAINTS IN
POWER, ROADS AND TRANSPORT.
 HIGH INTEREST RATE ENVIRONMENT.
REQUIRED TO REVIVE
INVESTMENT IN
INFRASTRUCTURE,RATIONALISE
COSTS AND INTRODUCE
TECHNOLOGICAL CHANGES
INFRASTRUCTURE
• INFRASTRUCTURE
PERFORMANCE HAS BEEN CAUSE
OF CONCERN.
•DIVERGENT GROWTH TRENDS
ACROSS SECTORS.
•ELECTRICITY ,CEMENT SHOWING
DECELERATION.
•COAL, PETROLEUM INDICATING
UPWARD TREND.
INFRASTRUCTURE
 DEMAND OUTSTRIPPING SUPPLY IN
INFRASTRUCTURE.
 NEED TO IMPROVE EFFICIENCY &
CAPACITY UTILIZATION OF THE
EXISTING INFRASTRUCTURAL ASSETS
 NEED TO CREATE NEW CAPACITIES
PARTICULARLY IN POWER, TELECOM,
ROADS AND PORTS.
 PRIVATE
INVOLVEMENT
IN
INFRASTRUCTURE REQUIRED.
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INFRASTRUCTURE
PRIVATE PARTICIPATION NEEDED FOR
RESOURCE GENERATION AS WELL AS
IMPROVEMENT IN QUALITY OF SERVICES.
NEED FOR SECTORAL REFORMS,
RATIONALISATION OF PRICES.
REGULATORY REFORMS REQUIRED FOR
ENSURING FAIR COMPETITION AMONG
PLAYERS.
AVAILABILITY OF FINANCE .
INDIA’S EXPORTS, IMPORTS, TRADE
BALANCE (Percentage)
YEAR
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
% Change
EXPORT
IMPORT
5.6
- 1.5
3.8
20.0
18.4
20.7
5.3
4.6
-5.24
13.2
20.6
13.5
-19.4
12.7
6.5
22.9
28.0
6.7
6.0
2.03
11.4
14.4
MAJOR IMPORTS
(COMPOSITION %)
Food and Allied
Products
99/00
00/01
7.1
3.8
Fuel
23.1
35.0
Capital Goods
11.7
8.9
PRINCIPAL EXPORTS
(COMPOSITION %)
99/00
Agriculture and allied
Products
Ores and Minerals
Manufactured goods
(of which)
Gems & Jewellery
15.1
1.7
00/01
12.2
2.6
81.2
80.8
20.2
18.0
Leather and L. Manuf.
2.7
3.0
Readymade garments
12.7
13.0
Cotton yarn, fabrics,
made ups, etc.
8.7
8.0
DIRECTION OF TRADEEXPORT
COUNTRY / REGION
OECD
EU
USA
OPEC
EASTERN EUROPE
OTHER LDCs
OTHERS
percentage share)
99/00
57.6
25.1
22.7
10.6
3.0
25.1
3.6
INDIA’S INTERNATIONAL TRADE
:CURRENT ISSUES
* Competitiveness of Indian products in the
wake of removal of Quantitative Restrictions on
imports in the EXIM Policy.
*Building export competitiveness