Zooming or Booming Indian Economy

The major media players as well as financial institutions world over are watching India moving in faster gear in the global competition. While Tata and CSN war over Corus is on, other Indian biggies are fully busy with their own acquisition projects. Even PSUs such BHEL are preparing to go for some big kills. Some of the reports and studies confirming the zooming booming Indian economy are here:

According to the reported assertion from global research firm Credit Suisse, India is set to surpass China as the fastest-growing economy in Asia next year on the back of increasing consumer demand and public investment in infrastructure. In its December forecast, the firm upgraded India’s economic growth rate to 9.5 per cent in 2006 from 8.5 per cent projected in September this year. The economy is predicted to grow by 10 per cent in 2007 and 10.5 per cent rate in 2008.

A report by McKinsey and Indian trade association Nasscom says India’s BPO export revenues will surge 37% by 2010, to touch $25 billion, from the current $7.5 billion. According to Sourabh Kaushal, who leads the ICT Practice at research firm Frost & Sullivan, of the 600 BPO companies in India, 65% are captive and 35% are third-party vendors.

India has progressively improved its ability to compete as measured by the Switzerland-based International Institute of Management’s (IMD) World Competitiveness Yearbook (WCY), jumping from 50th position in 2003 to 29th place in 2006. The ranking analyses the competitiveness of 61 economies on the basis of over 300 criteria dealing with economic performance, government efficiency, business efficiency and infrastructure.

India boasts the world’s largest population of qualified engineers, an impressive availability of IT skills, and one of the youngest demographic profiles. But competitiveness is enhanced with resourceful management of change, anticipating and adapting better and faster than competition. Here, India has a major asset, ranking fifth for its “resilience of the economy to economic cycles”.

In the global ranking, India ranks 29th this year. The WCY also gauges India’s performance within regional and peer group rankings based on population size and GDP per capita. India ranks ninth out of 15 economies in the Asia-Pacific region, 10th out of 30 economies with populations greater than 20 million, and its best ranking: fifth out of 25 economies with GDP per capita less than $10,000.

India gained on three of the four major factors that IMD uses to measure competitiveness. In Economic Performance, India rose an impressive five ranks from 12th to seventh, primarily due to a stronger domestic economy than last year. India’s real GDP growth in 2005 was a booming 8.1% and business confidence was more optimistic than in previous years. We are now starting to see the positive impact of economic reforms undertaken in the past.

The ranking for Government Efficiency progressed from 39th to 35th, with the best performance in Fiscal Policy (12th). India is in above average position for Business Efficiency, increasing from 23rd place last year to 19th; but there has been no change in the Factor ranking for Infrastructure (54th). This last measurement analyses the efficiency of basic, technological and scientific infrastructure, as well as health, environmental concerns and education. That the ranking has remained flat reflects lack of investment in basic infrastructure.

India is moving fast for development from a “working power” based on a supply of low-cost labour to a “brain power” comprising skilled and educated workers.

According to IDC, China will maintain its position as the largest IT market in the Asia-Pacific region, excluding Japan–making up 32 percent of the region’s IT spending. The Chinese market will be trailed closely by India at 23 percent, IDC said. Both countries are expected to account for the lion’s share of the region’s IT spending at more than 43 percent.

With the encouraging figure of the GDP for the first half of this fiscal year available, the confidence level is pretty high. The finance minister must be pretty happy, but for the higher inflation. Impending pressure of the pay commission and the political pressure for popular projects may be some unpredictable speed breakers worrying the FM that are to be smoothened to sustain the growth and boom.

2006-12-20 07:16:02
Steel And Textiles- Where Indian Business Houses Failed
India would have developed textiles as well as steel as ‘national’ industry just as we had national bird and national flag. Besides some failures of the government, the big Industrial houses too failed the country that could have become the largest producers of textiles as well as steel.

Most of the big industrial houses such Tata, Birla, DCM, and Wadia were in textile sector. Some of the entrepreneurs also started manufacturing textile machines too. India was the largest cotton producer of the world with a glorious history of textiles since the Harappan days. But the business houses didn’t keep the sector changing with the time, and couldn’t grow to the global scale and quality standard as the Chinese did. There was nothing to stop the industrial houses from doing that. But none demonstrated that acumen and zeal to become the big enough and global player. Gradually, the big houses kept textile only as marginal part of the business and many of them exited. Even, the tie-ups for manufacturing of textile machinery didn’t get upgraded and finally made exit.

After the US dropped the quota, the floodgate of opportunity for export of textiles and clothing opened. But the Indian manufacturers in the sector were neither big enough nor had up scaled to take the advantages. However, some of the new ones and some who have come to the manufacturing via trading route are trying to make up the losses with rapid expansion and even global acquisitions. For example, Welspun and Spentex are two among the new ones. I am opinion that India has some special advantages in the textile and apparel sectors. India can easily become the world leader because of its skill and low-cost manpower, its raw material and glorious history of developing unique texture and attractive design. And the future seems to be bright. As reported, the domestic textile sector is poised to attract Rs 2-lakh crore investment, to provide15 million jobs and to reach a $110 billion business volume by 2012. India would join the top five textiles markets (after the US, Germany, China and the UK) with a size of $55 billion by 2015. According to a World trade Organisation study, India’s share in clothing is projected to increase from 6% to 9% in EU and from 4% to 15%in the US.

In steel sector, Tate made a wonderful contribution to the nation by establishing the first steel plant at Jamshedpur. India had huge iron ore stock. The steel plants could always come with captive power plants too. But after independence, the sector didn’t grow much. Tata Steel couldn’t provide the lead. Nehruji had to come with the steel plants in public sectors that grew in size with number of additions, but that couldn’t match the best of the global steel companies in scale and product lines.

Tata Steel had its mines. Later on it came in power sector too. It had an excellent engineering and growth division to develop plant and machinery for the steel industry. Tata Steel claims the lowest cost steel producer of the world, but it didn’t expand fast to the world-class capacity or with product lines to meet the requirements of various sectors. Tata took all the advantages that the government came out with in interest of its own public sector steel plants and maintained very good profitability, but it miserably failed to add new plants and product lines to come in the list of the five biggest plants of the world. It was basically a lack of management strategy and ambition. It could have certainly come to the fifth position on its own what it is trying to do by buying Corus so frantically. Even today I ma not sure how serious Tata Steel and other entrepreneurs in the sector are to complete the green field projects of huge capacity in Jharakhand, and Orissa for which it has signed MOU. Many feel it is all for acquiring mines from the government. An expert in the sector commented, “The whole idea of announcing green-field projects is for mines. Now, with Corus acquisition, Tata Steel will not get additional mines, because Corus is not integrated backward. So they will require additional mines to feed Corus as well.” With so many years in steel sector, why should Tata Steel and others be apprehensive of the entry of Mittal, Korean Posco or Chinese steel manufacturers? Even Paswan today suggests that Steel Authority of India Ltd (SAIL) should emulate Tata Steel in expanding globally.

Why India can’t think of building a steel manufacturing capacity anywhere near to the Chinese one? Does India lack anything else but the support from the politicians and NGOs? Should Indians be happy that a total 116 MoUs have been signed with an intended capacity of 150 mt and an investment of Rs 3,57,000 crore? And the minister proclaims that production of steel will touch 80 million tonnes (mt) in India by 2011-12. What a low level of ambition for a country leader?

I am still of the opinion that the textile with apparel and the steel must become the national manufacturing sectors of India. And India must be its largest producer in the world.
Latest> Arcelor Mittal gets OK to build $9 bn India plant

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