Transcript Presentation

“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