Indian Economic Reform

7/31/2019 Indian Economic Reform

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Presented by:-

1.Bijayananda Sahoo2.Jibesh Kumar Mohapatra

3.Naresh Kumar Sahoo

4.Soumya Surajit Biswal


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Contents History Of Indian Economic Reform

Statistics And Data Of Indian Economy Foreign Direct Investment

Different Types Of FDI

Methods For FDI

FDI In India

Fascinating Data Of Indian Economy Due To FDI

Sectors Of FDI

Impact Of FDI And LiberalizationOn Bop

Impact Of FDI On Employment And Poverty

Retail FDI In India: A Win-win Move


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History Of Indian Economic

Reform


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Indian economy In Colonial era (1773-1947)

Pre Liberalization (After independence 1947-1991)

Post Liberalization (1991-till today)


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Pre-liberalization period (19471991)

Indian economic policy after independence was

influenced by the colonial experience, which wasseen by Indian leaders as exploitative .

Influenced by planned economy of the soviet

union. Domestic policy tended towards protectionism.

With a strong emphasis on import substitutionindustrialist, economic interventionism, a large

public sector, business regulation, and centralplanning.

Trade and foreign investment policies were

relatively liberal.


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Post-liberalization period (since 1991)

India asked for a $1.8 billion bailout loan from theinternational monetary fund(IMF), which in returndemanded reforms.

In response, prime minister Narasimha Rao, along with his

finance minister Manmohan Singh, initiated the economicliberalization of 1991 .

The reforms did away with the license raj, reduced tariffsand interest rates and ended many public monopolies,allowing automatic approval of foreign direct investment.

Reforming labour laws and reducing agriculturalsubsidies. By the turn of the 20th century.

India had progressed towards a free-market economy.

Increased financial liberalization.


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The Economy of India is the ninth largest in the worldby nominal GDP .

The third largest by purchasing power parity (PPP). The country is one of the G-20 major economies and a

member of BRICS.

In 2011, the country's GDP PPP per capita was $3,703 .

According to IMF, 127thin the world, thus making alower-middle income economy.

STATISTICS


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Statistics

GDP

$1.846 trillion (nominal: 9th

; 2011)$4.469 trillion (PPP: 3rd; 2011)GDP growth

8.5% (2009-10)GDP per capita

$1,527 (nominal: 135th; 2011)$3,703 (PPP: 127th; 2011)

GDP by sectorAgriculture: 18.1%, industry: 26.3%, services: 55.6% (2011

est.)

Inflation(CPI)6.95% (February 2012)

Population below poverty line37% (2010)

(Note:42% live less than $1.25 a day)


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Labour force

487.6 million (2011 est.)

Labour force by occupationAgriculture: 52%, industry: 14%, services: 34% (2009

est.)

Unemployment

9.8% (2011 est.)Average gross salary

$1,330 yearly (2010)

Main industries

Telecommunications, textiles, chemicals, foodprocessing, steel, transportation equipment, cement,mining, petroleum, machinery, software, pharmaceuticals

Ease of Doing Business Rank

132nd (2011)


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External Exports$298.2 billion (2011 est.)

Export goodsPetroleum products, precious stones, machinery, iron and

steel, chemicals, vehicles, apparelMain export partners

US 12.6%, UAE 12.2%, China 8.1%, Hong Kong 4.1% (2010)Imports

$451 billion (2011 est.)Import goods

Crude oil, precious stones, machinery, fertilizer, iron andsteel, chemicals

Main import partnersChina 12.4%, UAE 6.5%, Saudi Arabia 5.8%, US 5.7%,

Australia 4.5% (2010)FDI stock

$19.42 billion (2010-11)Gross external debt

$267.1 billion (31 December 2011 est.)


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ore gn rec nves men

Foreign direct investment (FDI) refers to the net

inflows of investment to acquire a lasting managementinterest (10 percent or more of voting stock) in anenterprise operating in an economy other than that ofthe investor. It is the sum of equity capital, other long-

term capital, and short-term capital as shown thebalance of payments. It usually involves participationin management, joint-venture, transfer of technologyand expertise.


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DIFFERENT TYPES OF FDI

FDI ARE FOUR TYPES:Inward foreign direct investment

Outward foreign direct investment,resulting in a net FDI inflow (positive or negative)

Horizontal FDI arises when a firm duplicates its homecountry-based activities at the same value chain stage in ahost country through FDI.

Vertical FDI takes place when a firm through FDI moves

upstream or downstream in different value chains i.e.,when firms perform value-adding activities stage by stagein a vertical fashion in a host country.

Whereas Horizontal FDI decrease international trade as

the product of them is usually aimed at host country, thetwo other t es enerall act as a stimulus for it.


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METHODS FOR FDI

By incorporating a wholly owned subsidiary or company By acquiring shares in an associated enterprise Through a merger or an acquisition of an unrelated

enterprise Participating in an equity joint venture with another

investor or enterprise... Foreign direct investment incentives may take the

following formsLow corporate tax and individual income tax ratesTax holidays

Other types of tax concessionsPreferential tariffsSpecial economic zonesEPZ export processing zones


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FDI IN INDIA Foreign direct investment in India

Starting from a baseline of less than $1 billion in 1990,a recent UNCTAD survey projected India as the secondmost important FDI destination (after China) .

Mauritius, Singapore, the US and the UK were among

the leading sources of FDI. In the first two months of 201011 fiscal, FDI inflow

into India was at an all-time high of $7.78 billion up77% from $4.4 billion during the corresponding period

in the previous year. The worlds largest retailerWalMart has termed Indias

decision to allow 51% FDI in multi-brand retail as afirst important step


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ECONOMY DUE TO FDI

THIRD LARFGEST ECONOMY IN PPP ,INDIA IS

PREFFERED DESINATION FOR FDI.

1. TELECOMMUNICATION

2. INFORMATION & TECHNOLOGY

3. CHEMICAL4. PHARMACEUTICALS

5. APPAREL

6. JEWELLERY


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Share Of Top Five

Nation On FDI InvestmentRank Country Inflow in

million us $Inflow in %

1 Mauritius 50164 42.00

2 Singapore 11275 9.00

3 USA 8914 7.00

4 UK 6158 5.00

5 Netherland 4968 4.00


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SECTORS OF FDI


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Agriculture

India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging

and fishing accounted for 15.7% of the GDP in 200910.

Employed 52.1% of the total workforce, and despite asteady decline of its share in the GDP, is still thelargest economic sector and a significant piece of theoverall socio-economic development of India.

Steady improvements in irrigation, technology,application of modern agricultural practices andprovision of agricultural credit and subsidies since thegreen revolution in India.


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Industry Industry accounts for 28% of the GDP .

Employ 14% of the total workforce.

In absolute terms, India is 12th in the world in terms of nominalfactory output.

The Indian industrial sector underwent significant changes as a

result of the economic reforms of 1991. Import restrictions.

Foreign competition.

Led to privatization of certain public sector industries.

Liberalized the FDI regime.

Improved infrastructure production of post-liberalization, theIndian private sector was faced with increasing competition.

It has since handled the change by squeezing costs, revampingmanagement, and relying on cheap labour and new technology


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Service India is 13th in services output. The services sector provides employment to 23% of the work

force. Growth rate is 7.5% in 19912000, up from 4.5% in 195180. It has

the largest share in the GDP I.E 57.3%. Information technology and business process outsourcing are

among the fastest growing sectors, having a cumulative growthrate of revenue 33.6% between 199798 and 200203 . Contribute to 25% of the country's total exports in 200708. The growth in the it sector is attributed to increased

specialization, and an availability of a large pool of low cost,highly skilled, educated and fluent english-speaking workers.

The share of the Indian it industry in the country's gdp increasedfrom 4.8 % in 200506 to 7% in 2008.

In 2009, seven Indian firms were listed among the top 15technology outsourcing companies in the world.


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Banking And Finance

The indian money market is classified into. The organized sector, comprising private, public and

foreign owned commercial banks and cooperativebanks, together known as scheduled banks, .

The unorganized sector, which includes individual orfamily owned indigenous bankers.

Prime minister indira gandhi nationalised 14 banks in1969, followed by six others in 1980, and made it

mandatory for banks to provide 40% of their net creditto priority sectors like agriculture, small-scaleindustry, retail trade, small business.


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Since liberalization, the government has approved

significant banking reforms. India's gross domestic saving in 200607 as a

percentage of gdp stood at a high 32.7%.

The public sector banks hold over 75% of total

assets of the banking industry, with the privateand foreign banks holding 18.2% and 6.5%respectively.

Other reforms have opened up the banking andinsurance sectors to private and foreign players.


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IMPACT OF FDI AND LIBERALIZATION

ON BOP Since independence, India's balance of payments on its

current account has been negative

Since economic liberalization in the 1990s, precipitated by

a balance of payment crisis, India's exports roseconsistently, covering 80.3% of its imports in 200203, upfrom 66.2% in 199091

However, the global economic slump followed by a general

deceleration in world trade saw the exports as a percentageof imports drop to 61.4% in 200809.

India's reliance on external assistance and concessionaldebt has decreased since liberalization of the economy.


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The debt service ratio decreased from 35.3% in

199091 to 4.4% in 200809.

Under the foreign exchange management act of1999.India's foreign exchange reserves have

steadily risen from $5.8 billion in march 1991 to$283.5 billion in December 2009.

Attracted 178 billion $ through FDI

FDI policy 2005 allows 100% FDI in venture capital

Through the liberalized regime of FDI equityinflow into India in 2008-09 is 24.52 billion $

Growth of Indian currency is about 25%


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IMPACT OF FDI ON EMPLOYMENT

AND POVERTY FDI promote growth and poverty reduction and

generate employment in host countries in four ways.

(i) MNE employment has a direct and indirect impacton domestic employment:

FDI often generates new employment (direct

employment is higher in green filed investments) andcreates jobs (indirectly) through forward andbackward linkages with domestic firms.


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(ii) MNE employment boosts wages in host countries

(iii) MNE employment fosters technological transfers:

One of the most common and least expensive ways bywhich foreign technology diffusion.

(iv) MNE employment enhances the productivity of the

labor force in host country:Several studies have shown that workers in foreign ownedenterprises (FOEs) are more productive than workers indomestic owned enterprises.


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Retail FDI in India: A win-win

move Permitting FDI in multi brand retail has been one of

the most debated issues over the last few years at thepolicy level. It has been placed on the back burner by

successive governments in response to fears about itsimpact on small retailers, who are large generators ofemployment.

But gradual penetration is highly appreciated among

the think-tank and policy makers.Allow of FDI in Multi brand retail sector under single

banner will depict the future repercussion onemployment generation and domestic production.


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CONCLUSION

It Helps To Relax The Domestic Constraints It Helps To Overcome The Foreign Exchange

Barrier Thereby Increases Capital Flow

It Provides Access To The Superior Technology,

superior Managerial Skills & Bigger Markets It Provides Risk Sharing Capital Financing

It Furnishes The Funds Needed For The FullUtilization Of The Exiting Production Capacities

It Promotes Efficiency & Productivity ThroughInternational Competition Of Superior QualityProducts


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THANK YOU


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Indian Economic Reform