Transcript INDIA`S OVERSEAS INVESTMENTS

INDIA’S OVERSEAS
INVESTMENTS
A Case Study
Ketaki Bhirdikar
Pushkar Borse
Nupur Khanna
Shantala Samant
INDIA – A STEP ANALYSIS
POLITICAL ENVIRONMENT
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Stable democracy
Deregulation of most sectors
Dominant role of Congress (UPA)
Internal party dynamics
Combating effects of slowing economic growth
Measures targeting rural sector
Budget 09-10 high on spending
Corruption
ECONOMIC ENVIRONMENT
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Industry and service economy
Indian overseas investment policies liberalized
Large public sector
Sizeable, diversified private sector
Trade deficit US$129.1bn in 2008
Imports jumped by 31.9% to US$305.5bn
Real GDP growth forecast to slow to 5.5%
Consumer price inflation forecast 6%
SOCIAL ENVIRONMENT
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Population 1.1 billion
Age structure: 0-14 years – 31.8%, 15-64 years
– 63.1% and 65 years and above – 5.1%
52% literacy rate
Domestic demand - mainstay of economy
16 national languages but English speaking
Country of two speeds: urban vs. rural
New middle class with purchasing power
TECHNOLOGIC ENVIRONMENT
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R&D expenditure less than 1% of GDP
Number of international patents
Infrastructure, energy, power
Manual skill and knowledge based sectors
Technically qualified low cost workforce
Low cost of operations
Coping with globalization and time compression
Second-rate technology investment
What has prompted Indian firms to operate
abroad?
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Events:
 Post 1947 : Socialist Policy
 Regulations were dubbed by License Raj
 Central government controlled foreign exchange
transactions
 FERA rarely allowed Foreign Exchange holdings
 There was slow growth rate -> Hindu Growth Rate
 1985 : India in great debts -> Balance of Payment
problem
 1990 : Economic Crisis
What has prompted Indian firms to operate
abroad?
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1991 break through reform started:
 Opening up of International trade &
Investment
 Deregulation
 Initialization of Privalization
 Automatic approval of FDI
 Foreign investment in form of cash was raised.
What has prompted Indian firms to
operate abroad?
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Access to high-growth markets
Technology and knowledge
Economies of size and scale of operations
Tapping global natural resource banks
Leverage of international brands
MnAs and direct investments
Favourable policy changes
Introduction of FEMA
Areas showing liberalization in policy
towards overseas investment?
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Till 1991- low integration with the world
Export promotion with restrictions to conserve forex
In 1992 – Economy liberalized
‘Automatic Route’ for overseas investment
1995- further liberalization
Single window for approval
Leads to access to :
Technology sourcing
Resource seeking
Market seeking
How have Indian firms helped improve
the country’s balance of payment?
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Globalization
Leveraging competences
Expansion of markets
Capital outflow
returns
Capital a/c surplus
Increased foreign exchange inflows
THANK YOU!