MEPP-Lectures 1-2-3

Impact of Globalization
on the Indian Economy
Prof. Tarun Das, IILM, New India.
 Contents
I. What do we mean by globalisation?
II. Extent of Globalisation of India
III. Macro Economic Impact
1. Sustained Economic Growth
2. Improvement in External Sector
IV. Strengths, challenges and Prospects
1. Strengths
2. Constraints
3. Prospects

Dr. Tarun Das 2

 1.1 Globalisation means
 Worldwide intensive exchange of people,
knowledge, capital, goods and services.
 Globalisation helps in integration of the
world, and allows new ideas and
technological innovation to spread around the
globe.
 Globalisation is much wider than an
economic process and involves all human
relationships and civilizations.

Dr. Tarun Das 3

 1.1 Globalisation means
 Worldwide intensive exchange of
people, knowledge, capital, goods
and services.
 Globalisation helps in integration of
the world, and allows new ideas and
technological innovation to spread
around the globe.
 Globalisation is much wider than an
economic process and involves all
human relationships and
civilizations.
Dr. Tarun Das 4
 1.2 An Example of
Globalisation
 A British Princess and her Saudi Arabian
boyfriend died in Paris after being treated by
Swiss doctors with American medicines
while their German BMW car driven by a
drunken Turkish driver consuming excessive
French wine and chased by Italian Paparazzi
crashed against a river tunnel.
 This news is being sent as SMS by an Indian
journalist using a Chinese made Nokia
handset with a Singaporean Airtel simcard
smuggled from Korea and using Orange
network of Thailand.

Dr. Tarun Das 5

II. Extent of Globalisation In
India

Dr. Tarun Das 6

 2.1 Extent of Globalisation
Average GR in 1990-2004 (%)
Indicators India China
Overall GDP 6.1 10.3
Exports volume 11.5 15.6
Imports volume 10.8 15.1
Exports value 9.7 15.5
Imports value 10.3 15.4
Trade 10.0 15.5
(exports+imports)

Dr. Tarun Das 7

 2.2 Structure of merchandise
exports in 2004 (% in total)
Indicators India China
Merchandise exports 76 593
($ billion)
(a) Food as % to total 10 4
(b) Agricultural inputs 1 1
(c) Fuels 9 2
(d) Ores and metals 7 2
(e) Manufactures 73 91

Dr. Tarun Das 8

 2.3 Structure of merchandise
imports in 2004 (% in total)
Indicators India China
Merchandise imports 97 561
($ billion)
(a) Food as % to total 4 4
(b) Agricultural inputs 3 4
(c) Fuels 35 8
(d) Ores and metals 5 7
(e) Manufactures 53 77

Dr. Tarun Das 9

 2.4 Structure of service
exports in 2004 (% in total)
Indicators India China
Commercial service 40 62
exports ($ billion)
(a) Transport as % to 13 19
total
(b) Travel 17 42
(c) Financial services 4 1
(d) Computer, IT and 66 38
other business services

Dr. Tarun Das 10

 2.5 Structure of service
imports in 2004 (% in total)
Indicators India China
Commercial service 41 72
imports ($ billion)
(a) Transport as % to 37 34
total
(b) Travel 14 27
(c) Financial services 6 9
(d) Computer, IT and 43 30
other business services

Dr. Tarun Das 11

2.6 Balance of Payments-
Current Account in 2004 (US$
billion)
Indicators India China
Exports of goods & services 83 656

Imports of goods & 94 606

services
Net income from abroad -4.5 -3.5
Net current transfers 22.5 22.9
Current account balance 6.9 68.6
Total reserves 132 623
Dr. Tarun Das 12
 2.7 Globalisation Extent (% of GDP)
Indicators India China
1990 2004 1990 2004

Merchandise 13 25 33 60
trade 3.4 8.2 3 7
Services trade
Trade of goods & 16.4 33.2 36 67
services
Pvt. capital 0.8 5.9 2.5 10
inflows
FDI inflows 0.1 0.8 1.1 2.8
FDI outflows 0.0 0.2 0.2 0.1
Official dev. 0.4 0.1 0.6 0.1
assistance Dr. Tarun Das 13
External debt 29 18 17 15
 2.8 Extent of Tariff Barriers in
2004
Indicators India China

Ave.tariff rate(%)
All products 28.0 6.0
Primary products 36.9 6.2
Manufactured products 25.3 5.8
Share in world exports (%) 0.8 6.5
Share of tariff lines with 92 15
international peaks
Share of lines with specific 0 0
rates
Share of bound rate Dr.(%)
Tarun Das
95 10014
 2.9 Private Capital Flows in
2004
(US$ Billion)
Indicators India China

Foreign Direct Investment 5.3 54.9

Portfolio Inv. Flows- Bonds 3.7 3.7

Portfolio Inv. Flows- Equity 8.8 10.9

Bank lending -0.04 4.2

Dr. Tarun Das 15

 2.10 External Debt in 2004
(US$ Billion)
Indicators India China
1. Total external debt (a+b) 249 123
(a)Long-term debt 132 115
-- Public debt 91 89
-- Private debt 41 26
(b)Short term debt 17 8
2.Present value of debt/GNI 15 18
(%)
3.Debt service as % of 3.5 14
exports of goods and services

4. Short term debt asDr.% of

Tarun Das
47 6 16
total external debt
 2.11 Movement of People in 2004
Item China India
1.Net migration 1995-00 -2.0 -1.4
(mln)
2.Migration stock (millions) 0.6 5.7
3. Refugees by country of 1.3 0.01
origin (million)
4. Refugees by country of 3.0 0.2
asylum (million)
5. Remittances receipts ($ 21.3 21.7
bln)
6. Remittances paid Dr.($Tarunbln)
Das
2.1 1.1 17
 2.13 Travel and Tourism in 2004
Item China India
1.Inbound tourists (millions) 41.8 2.7

2.Outbound tourists 20.2 5.4

(millions)
3. Tourism Earnings in the 27.8 4.1
country ($ million)
4. (3) as % of exports 4.2 5.0
5. Tourism Expenditure in 21.4 4.8
the foreign countries
6. (5) as % of imports
Dr. Tarun Das
4.0 5.1 18
 2.14 Extent of Globalisation-
Transport in 2004

Indicators India China

Ports traffic (Million 4.3 74.5
TEUs)
Air flight departures 302 1216
(000)
Air passengers (million) 24 120

Air freight (billion tkm) 0.7 8.2

Dr. Tarun Das 19

 2.15 Mean Tariff Rates & NTBs
Country Ave.Tariff Ave.Tariff NTB (% in
1990 2004 all lines)

India 93.6 28.0 5.2

China 46.5 6.0 11.2
Indonesia 27.4 5.5 2.0

S. Korea 17.8 10.0 n.a.

Malaysia 14.4 4.1 2.4
Sri Lanka 22.2 6.7 4.0
Thailand 42.4 8.3
Dr. Tarun Das 4.2 20
 3.1 I ndia emerged as one of the fastest growing economies
in 1990-2001
12.0
10.0
10.0
Average growth rate in 1990s (% )

8.0 7.7
6.7
7.4
6.5
6.0
6.3
6.8
4.0
6.2 6.0 5.9
2.0

0.0

ia
i le
ina

ia

p
da

s ia
r

Ind
lan

ma

Re
er
Ch
i qu
Ch

an

l ay

Li b
Ire

m.
an

mb
Ug

Ma

Do
My

za
Mo

Country

Dr. Tarun Das 21

 3.2 India moved on a higher growth
path
9 (Real GDP growth rate
8.5 8.5
in per cent)
8 7.8
7.5
7 7.3 7.3

6 6.5
5.9 6.1 5.8
5.6
5 5.1 4.8
4 4.4 4.0

3
2
1.3
1
0
19 -96

19 -99
20 - 0 0
19 -98
19 - 97
19 -92

2 0 1-0 2
19 -91

19 -94

20 -01

20 -04
19 -95

20 -05
19 -93

20 -03

6
-0
96
90

00
91

99
95

98
93

97

03
92

94

02

04
05
0
19

Dr. Tarun Das 22

 3.3 Recovery in Industry
(Production growth rate in per
14.0
cent)
13.0
12.0
10.0
9.1
8.5 8.4 8.1
8.0
7
%

6.7 6.7
6.0 6.1 5.7
5.0
4.0 4.1

2.3 2.7
2.0
0.6
0.0
19 - 9 6

19 - 9 9
20 - 0 0
19 - 9 8

20 -0 5
19 - 9 2

20 - 02
19 - 9 7

20 -01
19 - 9 4

20 -0 4
19 -9 5
19 - 9 3

20 -0 3

6
-0
00
96

01
91

99
95

98
93

03
04
97
92

02
94

05
19

Dr. Tarun Das 23

3.4 Sectoral growth rates in India (%)
Sectors 1980-90 1992-2000 2002-
05
Agriculture 3.1 3.3 1.2
Industry 7.2 6.5 7.0
Mining 7.7 4.0 6.9
Manufacturing 7.4 5.9 7.4
Utilities 8.9 5.7 4.4
Construction 4.6 8.2 6.7
Services 6.5 8.3 8.6
Trade,hotels 6.2 8.5 9.4
Trans & Telecom 5.8 7.4 13.6
Financial services 9.4 8.8 7.6
Social ,personal 6.0 7.4 5.2
All Sectors 5.5 6.4 6.5
Dr. Tarun Das 24
 3.5 Sectoral shares in India (% in
Sectors GDP)2005-06
1993-94 2004-05
Agriculture 32.9 20.8 19.9
Industry 23.9 19.5 19.3
Mining 2.1 2.2 2.0
Manufacturing 14.9 15.1 15.1
Utilities 1.3 2.2 2.2
Services 48.8 59.7 60.7
Construction 5.6 6.5 6.7
Trade,hotels 13.8 15.5 16.1
Trans & Telecom 5.4 10.0 10.1
Financial services 11.5 13.4 13.5
Social 12.5 14.3 14.3
All Sectors 100.0 100.0 100.0

Dr. Tarun Das 25

 3.6 Trend of GDS as % of GDP
30.0

25.0

20.0
Ratio to GDP (%)

15.0

10.0

5.0

0.0

-5.0 1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003-
91 92 93 94 95 96 97 98 99 00 01 02 03 04

Household Pvt.Corp Public Total

Dr. Tarun Das 26

 3.7 Trend of GDI as % of GDP
3 0 .0
As % of GDP

2 0 .0 P vt.C o rp
P u b lic
1 0 .0 To ta l
0 .0
1
3
5
7
9
11
13
Ye a rs s inc e 1 9 9 0 -9 1

Dr. Tarun Das 27

 3.8 Trends of Inflation (%)
and GR of Broad Money (M3)
25
20
Growth Rate (%)

C PI
15
WPI
10
5 M3

0
1
3
5
7
9
11
13
15
Ye a rs s inc e 1 9 9 0 -9 1

Dr. Tarun Das 28

 3.9 Employment growth rate in India
(%)
Sectors 1983-1993 1993-2000
Agriculture 2.2 0.0
Mining 3.7 -1.9
Manufacturing 2.3 2.6
Utilities 5.3 -3.6
Construction 4.2 5.2
Trade 3.8 5.7
Trans & Telecom 3.4 5.5
Financial 4.6 5.4
Social 3.6 -2.1
All Sector 2.7 1.1

Dr. Tarun Das 29

 3.10 Sectoral Employment as % of
Sectors
Total
1983 1993-94 1999-2000
Agriculture 63.2 60.4 56.7
Industry 15.6 15.9 17.5
Mining 0.7 0.8 0.7
Manufac. 11.6 11.1 12.1
Utilities 0.3 0.5 0.3
Construction 3.0 3.5 4.4
Services 21.2 23.7 25.8
Trade,hotels 7.6 8.3 11.1
Trans/Telecom 2.9 3.2 4.1
Fin. services 0.9 1.1 1.4
Social /per 9.8 11.1 9.2
All Sectors 100.0 100.0 100.0
30
3.11 Composition of sectoral GDI (%)

1990-91 2002-03
A. Agriculture & allied 8.4 8.9
B. Industry 53.0 46.9
C. Services 38.5 44.2
--Trade, hotels 3.9 0.6
--Transport, comm. 11.7 10.8
--Finacial sectors 14.4 13.6
-- Govt, social 8.5 19.2
D. Total GDI 100.0 100.0

Dr. Tarun Das 31

 3.12 Sectoral GDI as percentage of
GDP
1990-91 1995-96 2002-03
A.Agriculture 2.4 1.7 2.1
B.Industry 12.1 16.1 10.9
C.Services 9.6 9 10.3
6. Trade, hotels 1 0.8 0.1
7. Transport & comm. 2.9 2.8 2.5
8. Finacial sectors 3.6 3.4 3.2
9. Govt., social 2.1 2 4.5
10. Total GCF 23.1 26.8 23.3

Dr. Tarun Das 32

 3.13 Industrial Growth
Rates
by Broad Sectors
Sectors 2002-03 2003-04 2005-06
(Weight)
Mining (10.5) 5.8 5.2 0.9
Manuf (79.4) 6.0 7.4 9.1
Elect (10.2) 3.2 5.1 5.2
OVERALL (100) 5.7 7.0 8.1

Dr. Tarun Das 33

 3.14 Industrial Growth
Rates
By Use-based
Classification
Sectors 2002-03 2003-04 2005-06
[Weight]
Basic (35.6) 4.9 5.4 6.7
Capital (9.3) 10.5 13.6 15.7
Intermed. (26.5) 3.9 6.4 2.3
Consumer(28.7) 7.1 7.1 12.0
-Durables (5.4) -6.3 11.8 15.2
-Non-dur (23.3) 12.0 5.8 11.0
Dr. Tarun Das 34
3.15 GR of Infrastructure
sectors
Sectors 2002-03 2003-04 2004-05 2005-06

Rail Traffic 5.3 7.5 8.0 9.5

Ports cargo 9.0 10.0 11.3 11.7
Cell phones 21.5 115.1 10.4 38.4
Air-Exp cargo 13.3 1.0 12.6 15.5
Air-Imp cargo 18.6 13.4 24.4 12.3
Air-Int.Pass 4.8 6.5 14.0 12.8
Air-Dom.Pass 9.6 13.1 23.6 22.5
Highways Up, .. -16.6 161 -5.9

Dr. Tarun Das 35

 3.16 Average Growth rates in
India (per cent)
Decade Services Services
exports imports
1950s 4.5 1.9
1960s 0.0 1.1
1970s 22.7 17.6
1980s 4.4 8.8
1990s 17.7 17.0

Dr. Tarun Das 36

 3.17 Composition of service
exports
of India (per cent)
Period Travel Trans Insurance Govt Misc
1950s 8.6 32.9 7.7 23.4 27.3
1960s 10.5 34.6 5.2 29.7 19.9
1970s 25.5 37.3 4.7 10.8 21.8
1980s 5.9 17.1 2.4 3.1 41.1 1990s 33.0 20.3
2.3 1.8 42.6
2000-01 21.5 12.6 1.7 4.0 60.3
2005-06 12.9 10.4 1.7 0.5 74.5
Note: Misc includes business, professional, financial, software and
other modern services.

Dr. Tarun Das 37

 3.18 Composition of service
imports
of India (per cent)
Period Travel Trans Insurance Govt Misc
1950s 18.3 22.6 6.7 22.6 29.8
1960s 9.5 29.5 2.4 16.9 39.0
1970s 7.5 36.9 1.1 9.4 40.8
1980s 11.8 31.5 0.5 4.2 49.6
1990s 14.6 30.6 0.3 2.7 49.8
2005-06 12.7 14.6 1.9 0.9 69.9
Note: Misc includes business, financial, software
and other modern services.

Dr. Tarun Das 38

 3.19 Impact on Financial Sectors
Item Mar-96 Mar-98 Mar-06
1.No.of foreign banks 33 42 29
2.New private banks 9 9 8
3.Gross NPA ratio 24.8 16.0 3.2
4.Net NPAs ratio 10.7 8.2 1.0
5.Op. profits ratio 1.6 1.8 2.1
6.Net profits ratio 0.2 0.8 0.9
7.CRAR (Cap.adequacy ratio) No. of Banks
-- Below 9% 31 6 3
-- 9 to 10% 10 16 3
-- Above 10% 43 71 79
8.Number of banks 84 93 85
.

Dr. Tarun Das 39

 3.20 Improvement in
Human Development
• Poverty ratio declined:
from 39% in 1987-88 to 36% in 1993-
94, further to 26% in 1999-2000.
• Infant Mortality rate declined:
from 94 in 1988 to 70 in 2001
• Literacy rate improved:
from 52% in 1991 to 65% in 2001
• Real wages for farm labour had
an increasing trend in 1990s.
Dr. Tarun Das 40
 4 Significant
Improvement
in External Sector

Dr. Tarun Das 41

 4.1 Manageable Current Account
3 Balance on External 2 .3Sector (as % of GDP)
2
1 .2
1 0 .7

0
-0 .3 -0 .4 -0 .5
-1 -0 .8
1 9 1- 9 2

19 7 -98
19 -9 7
19 -96

19 -9 9
20 -0 0
19 -9 1

20 1 - 0 2
20 - 0 1
19 -94
19 -95
19 -93

20 -04
20 - 0 3

20 4-05
6
-1 .0 -1 .0 -1 .0

-0
96
90

00
-1 .2

99
95
93

98
92

94

03
02

05
-1 .3
9

0
9

0
-1 .4
19

-2 -1 .7 -1 .7

-3
-3 .1
-4

Dr. Tarun Das 42

 4.2 Acceleration in
Export Growth Rate
3 0 .0 2 7 .5
2 3 .9
2 5 .0
20 2 0.8 21 2 0 .3 21 .1
2 0 .0 18 .4

15 .0
10 .8
9 .0
10 .0
5 .3 4 .6
3 .8
5 .0
0 .0
-1 .5 -1.6
-5 .0
-5 .1
-10 .0
199 8

200 2
199 7
1-92

20 0 1
199 4
199 5
199 1

199 3

199 9
20 0 0
199 6

20 0 4
200 3

20 0 5
6
0-0
0-9

6-9

1-0
3-9

7 -9

3 -0
2-9

4-9

8-9
9-0
5-9

2-0

4-0
5-0
199

199

Dr. Tarun. Das 43

 in US $ billion
19

0
4
6

2
10
14

90
12
1 9 -9 1
9

5 .8
19 1 - 9 2
92
19 - 93
93
6 .9 7 .3

19 - 94
94
19 - 95
95
8 .3 8 .3

19 - 9 6
96
19 -9 7
9
1 9 7 - 98
98
9 .1 8 .9 8 .7

19 - 99
99
20 - 0 0
8 .3 8 .4

00
20 -0 1
0
9 .9

20 1- 02
0
9 .4

20 2- 03
0
20 3 -0 4
0

Dr. Tarun Das

1 0 .61 0 .8

20 4- 0 5
05
1 1 .8

-0
6
1 3 .1
4.3 Steady Increase in
Export/GDP ratios (per cent)

44
 4.4 Stability in
Export/Import ratios
100
90 8 6 .7 8 4 .8 83 81
80 7 7 .6 78 79
7 4 .87 4
70 6 9 .76 9 .77 2 .16 7 .8 69 67
6 6 .2
60
in US $ billion

50
40
30
20
10
0
7

9
1

1
5
3

5
3
-9

-9

-0
-9
-9
-9

-0

-0
96
90

00
98
92

94

02

04
19

19

20
19
19

19

20

20

Dr. Tarun Das 45

 in US $ billion
19

0
5
10
15
20
25

90
1 9 -9 1
9

8 .8
19 1 - 9 2
92

7 .9
19 - 93
93 9 .6
19 - 94
94
1 1 .1

19 - 95
95
19 - 9 6
96
19 -9 7
9
1 9 7 - 98
98
1 2 .31 2 .71 2 .51 2 .5
1

19 - 99
1

99
.5

20 - 0 0
00
20 -0 1
0
20 1- 02
0
20 2- 03
0
1 2 .41 2 .71 1 .81 2 .8

20 3 -0 4
0

Dr. Tarun Das

1 3 .3

20 4- 0 5
05
1 7 .1

-0
6
1 9 .6
4.5 Steady Increase in
Import/GDP Ratios (per cent)

46
 in US $ billion
19

0
5

4
6

-1
90
19 -91
9
19 1 - 9 2

-0 .1
92
19 - 9 3
93
19 - 94

0 .7 0 .6
94
19 -95 1 .1
95
19 -96
1 .8

96
19 -97
1 .6

9
19 7 - 9 8
2 .7

98
19 - 99
2 .4

99
20 -0 0
2 .2

00
3

20 -0 1
0
2 0 1- 0 2
0
2 .2

20 2- 03
0
3 .1

20 3 -0 4

Dr. Tarun Das

0
3 .3

20 4 -05
4 .3

05
-0
6
4 .5
5 .1
4.6 Significant Improvement in
Invisibles/GDP Ratios (per cent)

47
 in US $ billion

19
20

-5
0
5
10
90 15
1 9 -9 1
91
19 -9 2
92
19 - 93
93
19 -9 4

0.1 0.1 0.6

94
19 - 95
4.2

95
19 -96
96
19 - 9 7
5.1 4.9

97
19 - 98
98
19 -9 9
6.0 5.4

99
20 -0 0
2.3

00
20 -0 1
5.1

0
20 1- 02
5.9

02
20 -0 3
6.7

03
20 -0 4
4.6

04

Dr. Tarun Das

20 -0 5
05
14.8

-0
6
12.5
18.2
Investment Inflows (US$ billion)
4.7 Substantial increase in Foreign

48
 4.8 FDI Outstanding (%)

Sectors Aug 1991 Aug 2003

1. Plantation & agriculture 9.5 1.4
2. Mining 0.3 0.1
3. Power 0.1 16.5
4. Manufacturing 84.9 50.4
5. Services 5.2 32.4
a)Financial & real estate na 6.4
b)Telecommunications na 19.8
c) Transport na 1.9
d)Hotels and retail trade na 2.7
e)Others na 1.6
Total 100 100

Dr. Tarun Das 49

 4.9 Significant reduction in External
Debt Service Ratio (at end March)
40 (% of gross current receipts)
3 5 .3
35
3 0 .2
30 2 7 .5
2 5 .4 2 5 .9 2 6 .2
25 2 3 .0
1 9 .5 1 8 .8
20 1 7 .1 1 6 .2
1 5 .8
15 1 3 .4
9 .7
10 5 .9
5
0
97
91

01
92

02
94

04
93

96

99

06
95

05
98

00

03
19

19

20
19

19

20

20
19

19
19

19
19

20

20

20
20

Dr. Tarun Das 50

4.10 Reduction in Concessional to Total
External Debt Ratio (end March)
50 4 5 .94 4 .84 4 .54 4 .44 5 .3 4 5
45 4 2 .3
3 9 .53 8 .53 8 .9
40 3 5 .53 6 .03 6 .83 6 .43 5 .53 4 .5
35
30
25
20
15
10
5
0
97
91

01
99
95
93

03

05
19

19

20
19

19

19

20

20

Dr. Tarun Das 51

 4.11 Reduction in Short Term Debt
to GDP Ratio (end March)
3 .5 3.2
3 .0
3 .0 2.7

2 .5

2 .0 1 .8

1.5 1 .3 1 .3 1 .4 1 .3
1 .0 0 .9 0 .9
1.0 0 .8 0 .7 0.6 5
0 .6 0.6
0 .5

0 .0
97
91
92

94

01

04
02
96
95

99

06
00

05
98
93

03
19

19

20
19
19

20

20
19

19
19

19
19
20

20

20
20

Dr. Tarun Das 52

 4.12 Reduction in Short Term Debt to
Total External Debt Ratio (end March)
12
1 0 .2
10
8 .3
8 7 .0 7.2 7
6.1
6 5 .4 5 .4
4 .3 4 .4 4 .4
3 .9 4 .0 4
3 .6
4 2 .8

0
97
91
92

94

01
02

04
96
95
93

99

06
00

05
98

03
19

19

20
19

19

20

20
19

19
19

19
19
20

20

20
20

Dr. Tarun Das 53

 4.13 Reduction in Short Term Debt to
Total Foreign Exch. Ratio (end March)
450
400 382

350
300
250
200
15 0 12 6
98
10 0
50 24 2 1 3 0 3 0 1 9 15
11 9 5 6 6 5 4
0
91

97
92

94

01

04
02
99
98
96

06
95

00

05
93

03
19

19

20
19

19

20

20
19

19
19

19
19
20

20

20
20

Dr. Tarun Das 54

 4.14 Substantial Build-up of
Foreign Exchange Reserves (end-March)
200
167
159
146
15 0
113

10 0
76
in US $ billion

55
50 4 2 .3
2 9 .43 2 .53 8 .0
2 1 .7 2 6 .4
1 9 .32 5 .2
5 .8 9 .2 9 .8
0
1997
1991
1992

2001
1994
1995
1996

1999
1998

2002
1993

2004
2000

2006
2003

6-Nov
Y-2005
-5 0

Dr. Tarun Das 55

 4.15 Steady Improvement in Import
Cover of FER (No. of months) (end-March)
20 18
18 16
16
1 3 .8
14
1 1 .3
12 11
in US $ billion

10 8 .6 8 .4 8 .2 8 .2 8 .6
8 6 6 .5 6 .9
5 .3 4 .9
6
4 2 .5
2
0
19 1-9 2

19 7 -98
19 -96

19 -99
20 - 0 0
19 -97

20 1-0 2
19 -91

19 -9 6
19 -94

20 - 0 1

20 3-04
19 -9 3

20 -03

20 4 - 0 5
6
-0
96
90

00
99
95

98
93
92

94

02

05
9

0
9

0
0
19

Dr. Tarun Das 56

V Strengths, Challenges
and Prospects

Dr. Tarun Das 57

 5.1 Strengths of Indian
Economy
 Fourth largest economy in terms of PPP-
adjusted GDP after USA, China and Japan
 Largest pool of technical manpower
 Demographic Dividends- Largest share of
working population
 Largest English speaking population
 Huge domestic market
 Rich natural resources, well established
financial system, wide spread infrastructure
dynamic private sector

Dr. Tarun Das 58

 5.2 Constraints to Growth
and Competitiveness-
Domesticconstraints
Growing infrastructure
High fiscal deficit
High inflation
Low real deposit rates
High energy intensity
Slowdown of reforms
Weak regulatory institutions
Outdated laws on business
Inflexible Land Dr.and
Tarun Das Labour markets59
 5.3 Constraints to Growth
and Competitiveness-
 Hardening ofExternal
international prices of oil,
minerals and metals
 Greater Risk- Fluctuations of exchange rate,
interest rate, commodity prices, volatility in
capital flows
 Money laundering, abuse of capital,
smuggling, international terrorism, drug
trafficking, immoral trade
 Geo-political issues and market risk
 Global warming and environmental
degradation Dr. Tarun Das 60
 5.4 Implications for Business
 World is a global village
 Knowledge and Information Technology
are the most valuable assets
 Wider choice of resources- domestic/
foreign, debt/ equity/ portfolio etc.
 Management of risk is an important task
 Emphasis on public-private partnership
and risk sharing

Dr. Tarun Das 61

5.5 Need to strengthen Systems for
 Management information system
 Asset-Liability Management
 Good corporate governance
 Identification, Assessment,
measurement and management of risk
 Strengthening audit and accounting
 Performance Audit
 Policy Audit
Dr. Tarun Das 62
 5.6 Concluding Observations
• As the first generation reforms take root and
second generation reforms unfold, India is
emerging as a favourite destination for
foreign investment, and a land of immense
opportunity for all.
• India should maintain its open door policy in
goods and services production, investment
and trade.
• Carried to their logical ends, reforms would
make India as one of the most dynamic and
fastest growing economies of the world.

Dr. Tarun Das 63

 6.1 Review Questions
1. (a) What are the major indicators
of globalization?
(b) How has India progressed
towards globalization in the post
reforms period?
2. What has been the impact of
globalization on India’s
production, investment and
trade?

Dr. Tarun Das 64

Thank you

Dr. Tarun Das 65