1. © Swaminathan 2007 India- A Future Economic Power Jayashankar M. Swaminathan Kenan-Flagler Business School University of North Carolina, Chapel Hill

2. © Swaminathan 2007 India - At a Glance One of the oldest civilizations in the world Seventh largest country in the world Largest democracy in the world with over 1 billion people Blessed with natural landscape and wildlife More than 300 dialects Most English speaking in a single country outside US Secular with multiple religions One of the largest country in terms of number of people below poverty line

3. © Swaminathan 2007 India and the Global Economy Spices and Precious Material Cotton and Silk Cow, Elephant, Rhino and Tiger Yoga and Spirituality Call Centers and Software

4. © Swaminathan 2007 India - At a Glance One of the oldest civilizations in the world

5. © Swaminathan 2007 India - At a Glance Seventh largest country in the world

6. © Swaminathan 2007 India - At a Glance Largest democracy in the world with a population of over 1 billion people

7. © Swaminathan 2007 India - At a Glance Great geography and wild life

8. © Swaminathan 2007 India - At a Glance More than 350 dialects Most English speaking people in a country outside of US

9. © Swaminathan 2007 India- At a Glance Multiple Religions

10. © Swaminathan 2007 India – At a Glance Poverty One of the largest country in terms of number of below poverty line High percentage of illiterates in rural parts

11. © Swaminathan 2007 India: At a Glance Cows and Snake Charmers

12. © Swaminathan 2007 India: At a Glance Saree, Bindi and Jewellery

13. © Swaminathan 2007 India: At a Glance Spirituality and Yoga

14. © Swaminathan 2007 India: At a Glance Call Centers

15. © Swaminathan 2007 India and the Global Economy From ancient days India has been known for its spices and craftsmen –Marco Polo, Vasco De Gama and Columbus traveled long distances searching for India In the early part of 19 th century India was the major producer of cotton for the globe In the most recent times, India has emerged as a popular destination for knowledge intensive work

16. © Swaminathan 2007 India and the Global Economy Indian Economy (2005) –Population 1.08 billion (Growth- 1.5%) –GDP: $797.5 billion ($738 per capita) –GDP (PPP): $3.79 trillion ($3508 per capita) –Inflation: 5% (approx) –Foreign Direct Investment: 0.9% of GDP Source: The Economist

17. © Swaminathan 2007 India and the Global Economy Transformation from a underdeveloped to an emerging economy

18. © Swaminathan 2007 India and the Global Economy One of the fastest growing economies in the world (average growth rate of over 7%)

19. © Swaminathan 2007 India and the Global Economy Major Exports (2005-06) –Engineering goods: 21% –Textile and Textile Products: 15.6% –Gems and Jewellery: 15.1% –Petroleum Products: 11.2% Major Imports (2005-06) –Petroleum Products: 30.9% –Electronic goods: 9.9% –Gold and Silver: 7.9% –Machinery: 6.9% Leading Markets –US: 17.6% –China: 8.7% –UAE: 7.7% –UK: 4.5% Leading Suppliers –China: 6.9% –US: 6.1% –Belgium: 4.9% –Singapore: 4.6%

20. © Swaminathan 2007 India and the Global Economy Indian Market –200 million people in the middle class –India’s retail market projected to be $300 billion in 2010 –Only 2% of retail sector is organized retailing – rest is mom and pop stores

21. © Swaminathan 2007 India and the Global Economy Emerging as Multinationals

22. © Swaminathan 2007 India and the Global Economy Indian Workforce –More than 100000 professionals engineers and doctors from universities –More than 50% of population is under 25 years –Large pool of english speaking workers –Cultural mindset geared towards knowledge and skill related work

23. © Swaminathan 2007 India and the Global Economy Indian Manufacturing Sector –In the recent years, manufacturing sector is picking steam –5 Deming quality prizes for Indian firms (largest outside of Japan) –Major investments by US, European and Asian firms - POSCO, Dell, Motorola, Flextronics, BMW, Ford, Intimate Apparels

24. © Swaminathan 2007 India and the Global Economy Indian BPO Sector –The domestic BPO sector is projected to increase to $4 billion in 2004 and reach $65 billion by 2010 (McKinsey) –There are over 200 call centers in India with revenues over $2 billion and a workforce of over 150,000 –Offshoring activities are moving towards higher value added activities such as legal, consulting, healthcare processing and insurance from technical support and airline reservations

25. © Swaminathan 2007 India and the Global Economy Indian Software Sector –Bangalore has become a synonym for best software off-shoring –80 of the World’s 117 highest quality certified firms (CMM- Level 5) are based in India –From cost to quality to innovation Source: McKinsey Nasscom

26. © Swaminathan 2007 Offshoring to India Global demand for information technology $847 billion India is among the top spot in offshore outsourcing –ITES: $ 0.6 billion in 2000 to $8.4 billion in 2007 –Software: $5.3 billion in 2000 to $31.4 billion in 2007 Growth from simple low end activities to high end R&D outsourcing 347 institutes of higher education Only 10-15% of the workforce is directly employable on a global platform Shortfall of 500,000 by 2010 (Nasscom)

27. © Swaminathan 2007 Key Offshore Models Third Party –Economical for smaller teams (<100) –Responsiveness to client requirements –Bench strength to accommodate rapid growth –Staff rotation to add and create more variety –Dedicated offshore centers to emulate a captive center Captive –Economical for larger teams (>100) –Greater liberty in deciding incentive pattern of employees –More leeway in hiring, retention and training of employees –Possibility of utilizing cutting edge technology

28. © Swaminathan 2007 Dissatisfaction with Offshoring Client Contributions –Systemic problem in Managing the Offshoring Process –Unreasonable Expectations –Lack of Awareness of How to Make Offshoring Succeed Supplier Contributions –Ineffective Project Management –Lack of Communication –Inadequate Investments towards Improving Employee Productivity –Ineffective Management of Operational Challenges

29. © Swaminathan 2007 Operational Challenges Hiring –Challenge in recruiting and training talent Training –Large training budgets required Turnover –15% to 30% of team turnover Quality –Scaling the quality processes in the BPO sector is a considerable challenge Communication and cultural differences –Manage both written and verbal communication Protecting client intellectual property rights –NASSCOM “4E Framework” and India IT Act

30. © Swaminathan 2007 India and the Global Economy India's GDP will reach $ 1 trillion by 2011, $ 2 trillion by 2020, $ 6 trillion by 2032, $ 10 trillion by 2038, and $ 27 trillion by 2050 Will become the 3 rd largest economy after USA and China In terms of GDP, India will overtake Italy by the year 2016, France by 2019, UK by 2022, Germany by 2023, and Japan by 2032 Source: Goldman Sachs

31. © Swaminathan 2007 India and the Global Economy Some recent news –Two of the biggest acquisitions in steel by Mittal (Arcelor for $32b) and Tata (Corus for $11b) last year –Fastest growing market for cellular phones in the world –3 rd most number of billionaires in the country after USA and Russia (Forbes 2007) –The stock market is at an all time high

32. © Swaminathan 2007 Hurdles to Cross

33. © Swaminathan 2007 Indian Economy: What’s stopping it? Infrastructure –Transport, Power and Water supply inadequate

34. © Swaminathan 2007 Indian Economy: What’s stopping it? Divide between Rural and Urban India –Poverty and Education

35. © Swaminathan 2007 Indian Economy: What’s stopping it? Democracy and Market Economy –Coalitions and Strong Regional Parties –Finance, Retail, Insurance and Power Sectors still partially controlled

36. © Swaminathan 2007 Indian Economy: What’s stopping it? Inadequate Planning for Rapid Growth –Inflation rose above 6% –Financial lending high –Educated labor pool limitation –Cities and urban areas choking

37. © Swaminathan 2007 Indian Economy: What’s stopping it? Potential Religious and Regional Tensions –Hindu Muslim Conflicts –Threat of War with Pakistan –Violence in Sri Lanka and Nepal

38. © Swaminathan 2007 India and the Global Economy What will India’s economy look like in the future?

39. © Swaminathan 2007 India and the Global Economy What will India’s economy look like in the future? Title: Indian Economic Power: Fiction or Future Jayashankar M. Swaminathan Publish Date: Summer 2008 Publisher: Imperial College Press, London and World Scientific, Singapore

40. © Swaminathan 2007 Thank You !

41. © Swaminathan 2007 Questions Contact: msj@unc.edu