INDIA NEXT ECONOMIC SUPER POWER
INDIA NEXT ECONOMIC SUPER POWER
The following text of a talk given by Professor Williamson at a conference for history teachers presents historical background and detail on the striking rise of certain sectors of the Indian economy. He discusses, as well, the prospects for the near future: Is a six percent growth rate, once considered by economists to be remarkably good, too high in this still generally poor land? -- Ed.
In some ways India had a fully developed capitalist economy, and it had some of the oldest capitalist institutions in Asia, such as the Bombay Stock Exchange, founded in 1875.India in 1947 was characterized by very low per capita income. There were a lot of people, so there was always a big GDP, but per capita income was very low. So there was a modern economy, but it was very thin. The banking system was one of the later things to be nationalized, in the late 1960s and early 1970s.
Finally, in 1966, a year before the UK's famous devaluation, came India's. An attempt was made to undertake some liberalization of the economy at that time, and India sought U.S. aid. But since India wouldn't support the Vietnam War, President Johnson withheld aid. So the envisaged flow of aid that would help make it possible to liberalize the economy wasn't there, and India went back to slow growth for another 15-20 years. But in the early years, the economy grew rather slowly, at what became known as the Hindu rate of growth, merely 3-4 percent per year. At the time, the Indian population was growing at 2.5 percent per year. If GDP is only going up 3.5 percent a year, that doesn't give much scope for an improvement in living standards and cutting poverty, the ultimate objectives of economic growth.

Growth didn't in fact accelerate much from the 1980s average to the 1990s average. But the 1980s ended in a crisis because some factors were clearly unsustainable, and although some of us worry about some features of the present economy, there's no suggestion that the present growth rate is unsustainable. The 1997 East Asian financial crisis really stopped growth in its tracks in many countries. Those countries, some of them more voluntarily than others, had all liberalized their capital accounts, allowing money to flow in and out fairly liberally. In contrast, in India, if you brought money in, you could take it out again, but domestic Indians weren't allowed to take their money out freely, and India in any event hadn't borrowed a great deal. So it wasn't vulnerable to the 1997 crisis.
In the second half of the 1990s one also began seeing the rise of the IT sector. The Indian Institutes led to a flow of highly qualified manpower, many of whom found vocation in the IT sector. India at long last found its niche in the world economy, which wasn't in exporting manufactures, like the East Asian countries, but instead was in the services sector, and IT in particular. One important consequence of the 1990s is the sharpening of regional differences within India. The fast-growing states were in the south and west: Maharashtra, Haryana, Delhi, Gujarat, etc. The large states of the Ganghetic plain-- Bihar, Uttar Pradesh, Madhya Pradesh, and Orissa--became relatively poorer during the 1990s. Policy, which became more attuned to rewarding success over the 1990s, may have exacerbated these regional differences.
Finally, India is still a poor country. The average person still earns less than $2 a day. The figure is controversial, but the World Bank reckons that a quarter of the population are poor by its measure of $1/day in 1985 prices--that's a destitution level, rather than a poverty level.

The Three Sectors of Indian Economy
Agriculture : More than 58% of country's population depends on agriculture, a sector producing only 22% of GDP. The agriculture and allied sector witnessed a growth of 9.1% 2003-04, which fell steeply to 1.1% in the current fiscal year. Favourable monsoon facilitated an impressive growth rate of 9.6%. While acceleration in agriculture growth to 4 - 4.5% is imperative, even with such growth rate; share of agriculture in total GDP is likely to reduce further. Therefore, there is a need to absorb excess agricultural labour in other sectors, notably industry. , public investment in agriculture needs to be augmented, especially in rural infrastructure, irrigation, and agricultural research & development. Better access to institutional credit for more farmers, is also high on priority list. The New trade policy gives focus to agriculture and all the hurdles in Indian agriculture will be crossed gradually.
Industry :Index of industrial production which measures the overall industrial growth rate was 10.1% as compared to 6.2% in previous years. The double digit in IIP was aided by a robust growth of 11.3% in the manufacturing sector followed by mining and quarrying and electricity generation. But industrial production saw a decline in Dec 2004 when IIP dipped to 8 %. Thus one of the critical challenges facing Indian economic policy consists in devising strategies for sustained industrial growth. Final phase-out of the MFA and India's conformity with the international intellectual property system from Jan 1st Jan 2005, have been two significant developments in the world of commerce & industry. Textile industry is the largest industry in terms of employment economy from the current US $37 billion to $ 85 billion by 2010 creation of 12 million new jobs in the textile sector and modernization & consolidation for creating a globally competitive textile industry.
Automobile sector has demonstrated the inherent strengths of Indian labour and capital. The pharma industry and the IT industry are two sunrise sectors for India. Among the sectors that have experienced the greatest transformation in India, the pharmaceutical is perhaps the most significant. The three main sub sectors of industry viz Mining & quarrying, manufacturing, and electricity, gas & water supply recorded growths of 5%, 8.8% and 7.1% respectively.
Services: Service sector has maintained a steady growth pattern since 96-97, except into a fall in 2000-01. Trade hotels, transport & communications have witnessed the highest growth of level 10.9% in 2004, followed by financial services (With a overall growth rate of (6.4) % and community, social & personal services (5.9)% of all the three sectors, services have been the highest contributor to total GDP growth rate. the services sector's share of employment rose faster than its share of output in India there has been a relatively slow growth of jobs in the service sector. This is primarily because of the rise in labour productivity in services in sectors such as information technology that is dependent on skilled labour. Growth in tourism and tourism - related services such as hotels, holds a large potential for employment generation.
It is important that India sees BPO in a larger perspective, than the Internet, as India's share is just $ 3.5 billion compared to the global market of US $ 178 billion. Also India outsourcing companies need to work more closely with their customers. In the complex BPOs, customers would like to have hybrid processes to control value. Indian companies need the right mix of domain expertise and process expertise.
Finally impact of the globalisation, privatisation, liberalisation, influenced the three sectors
the rapid changes occurred in Indian economy. This helped Indian economy to grow faster in order to attain the chair of a super power
structural changes
In Indian economy the structural changes broadly divided in two types they are mainly govt sectors and private sectors mainly this structural changes occur by the impact of globalisation privatisation and liberalisation. The structural changes in govt sectors , the philosophy of govt has changed. why because, the impact of technology and rationalisation the govt has to give more importance to industrial sector .As a part from agriculture sector the govt support of financial availability to the industries the credits and norms and also provided to the development of industries.
Instead of developing the agriculture it shifted to the development of telecommunication, transportation, power etc; it also relaxation to establish the special economic zones in way of promoting the industrial development in Indian economy now a days income of the middle class also tripled. The level of income increased this is due to increase in population , which is a big asset to Indian economy.
As change in private sector mainly the enterprenual philosophy and corporate people are ready to take risk by mergers and acquisitions , take over’s , amalgamations etc; is occurring in Indain economy which is a good sign for India to become as a super economic power.
Structural changes in manufacturing sector of india brought about by liberalization and globalization. Structural changes in terms of employment of labour and capital, possibly indicated by replacement of the former by the latter. New Industrial in 1991 in India chose to open her economy to global economic forces and formulated the new economic policy (NEP) under the structural adjustment and reform programmes, the NEP aimed at promoting growth by eliminating supply bottlenecks that hinder competitiveness, efficiency and dynamism in economic system.
Changing Work Force
India has seen a dramatic shift in the public policy and expectations of the individuals. After independence, it was mainly a socialist country and the educated (and non-educated as well) wanted to have secure career, a job that they can continue to do for their whole life. Salary was not a deciding factor in choosing a job but the guarantee of life time employment was important factor (Private companies like TATA, Aditya and MP Birla Group, Godraj, Bajaj had to provide the same kind of commitment to recruit people). People wanted to work fix numbers of hours every day and spent quality time with the family. It was working fine till 20 years back and the new generation asking for different terms of employment and entrepreneurship and zest to become huge arose.
Mainly because of the high salaries in the IT sector in India, aspirations of the India youths have gone many-fold up then the previous generation. Today’s generation does not mind to work for 12 hours every day without any proper weekend if the salary is good and there are chances of getting further salary hike next quarter or semi-annually. These youth don’t even mind changing job if they see higher salary at another company. These youth don’t even care about stability in the career. They want to earn more and at a fast rate. If they are going on a motor bike this year, they want to buy a brand new Honda City (a brand of Honda car) next year. If by changing companies expectations are not met they can change the country too. They don’t have commitment to anyone, for them Money is all about honey.
Other change in the nature of the work place is the number of female employees is increasing at an astonishing rate. Among new recruits in some of the companies, number of females is same as the number of male. These young girls of emerging India are very vocal, open and career oriented. They are ready to work with or compete with anyone. Some of the companies are not ready to deal with such a high percentage of female work forces on their payroll. Some of the companies might not have some necessary facilities for the female employees. Some of the companies are providing childcare and working from home for the females with small babies.
Some of the biggest companies in India, Infosys, IBM, TCS and Mind Tree are trying to tame the rising aspirations of these youths by providing them global working standards, facilities and support for higher studies and certifications in the domain of the employees. For example, TCS and Infosys have proper internal programs to teach employees about PMP (Project Management Professional) certifications. They are also trying to let them go for MBA and give study leave. Companies also promote some of the high performing employees into the management rank much faster to keep them with them.The changing structure of the workforce in India based on census data collected from 1961 to 2007. The shares of agricultural labourers in India are found to be higher the 1990s has witnessed a substantial shift in favour of non-agricultural workers. The growth rate of agricultural workers have decreased continuously among males, females and all persons from 1971-81 to 1991-2007 while those of non-agricultural workers have increased.
The participation of woman in work tremendously increased in Indian economy. The women employees also participated in higher authority of jobs this has been increased due to the three forces (LPG). In industrial wide the training & development has played a major role to improve the skills and abilities of employees in Indian industries .There has been change in from labour intensive to capital intensive.
In India the majority of people is in between 25 to 40 which is a major strength which revokes the in Indian economy to move it into a super power.
Strategic partnership
Strategic partnership is a formal alliance between two commercial enterprises, usually formalised by one or more business contracts but falls shot of forming a legal partnership or agency, or corporate affiliate relationship.
Typically two companies form a strategic partnership when each possesses one or more business assets that will help the other but that it does n’t wish to develop internally one common strategic partnership involves one company providing engineering manufacturing or product development services, partnering with a smaller enterprenual firm or inventor to create a specialised new product. Typically the larger firm supplies capital, and the necessary product development, marketing, manufacturing, and distribution capabilities while the smaller firm supplies specialized technical or creative expertise.
Another common strategic partner ships involves a supplier/manufacturer partnering with a distributor or wholesale consumer rather than approach the transaction between the companies as simple link in product or service supply chain, the companies form a closer relationship where they mutually participate in advertising marketing branding product development, and other business functions as examples an automotive an manufacturer may form strategic partnership with its parts supplier, or a music distributor with record labels.
Strategic partner ship raise the questions concerning co-inventership and other intellectual property ownership, technology transfer, exclusivity, competition, hiring away of employes,right to business opportunities created in the course of partnership, splitting of profits and expenses, duration and termination of relationship, and many business issues. The relation ship are often complex as a result, and subject to extensive negotiation.
The Indo- US relation ship recently begun several initiatives that could lead to strong strategic partner ship. India visualises a major role for it self in the current world order, and US acknowledges this possibility. India seeks lasting partnership to help achieve its strategic ambitions.
Foreign Investment
FDI India was initiated in 1992. Streamlining of the procedures and substantial liberalization has been done since 1995. As of now, Indian corporate/Registered partnership firms are allowed to invest abroad upto 100% of their net worth and are permitted to make overseas investments in business activity. Here we have covered India's FDI performance over the world.
Inflows of Foreign Direct Investment during the financial year 2005-06 have followed a faster rate of growth. Both Manufacturing sector as well as the services sectors have attracted an impressive foreign direct investments to the country.The flow of Foreign Direct Investment to India in the month of March increased at a faster pace. The FDI Inflows to the country in the month of March 2006 was at US $1,244 Millions. FDI equity inflow during the financial year 2006-07 at nearly US $ 16 billion (US $ 15.7 billion) has been 2.8 times more than the inflow (US$5.5 billion) received during the previous year. This is the highest FDI equity inflow into the country during any financial year since the commencement of economic reforms. FDI equity inflow in the month of March 2007 was US$3.8 billion which is the highest inflow received so far in a single month.
MAJOR SECTORS RECEIVING INFLOWS AND TOP INFLOWS :The five sectors which have attracted highest FDI into India during 2006-07 are Services, Electrical Equipments (including computer software & electronics), Construction Activities, Telecommunications and Real Estate. The Construction and Rear Estate Sectors have together received US$ 1.45 billion during the year 2006-07 which is about 12% compared to 3.4% of the total FDI inflows received during the year 2005-06. The Services sector has received 38% during the year 2006-07 compared to 10.5% in the previous year. The share of the Electrical Equipment sector has been 22% in the year 2006-07 compared to 26.1% in 2005-06 and the Telecommunication sector has received 4% in 2006-07 compared to 12.2% in 2005-06.Though the services sector in India constitutes the largest share in the Gross Domestic Product, still it has failed to some extent in attracting more funds in the forms of investments. Important sectors of the Indian Economy attracting more investments into the country are as follows:
Electrical Equipments (Including Computer Software & Electronic)
Telecommunications (radio paging, cellular mobile, basic telephone service)
Transportation Industry
Services Sector (financial & non-financial)
Fuels (Power + Oil Refinery)
Chemical (other than fertilizers)
Food Processing Industries
Drugs & Pharmaceuticals
Cement and Gypsum Products
Metallurgical Industries.
By seeing the above statics the Indian industries are attracting the foreign investments very well which is a good sign for india to become a super economic super power.
OPPORTUNITIES
First, it is into the right things, the modern, skill-intensive service sectors like IT and outsourcing. Second, it has an entrepreneurial culture. Most Indians never fully subscribed to the non-acquisitiveness of the Congress consensus. Now that acquisitiveness has been given free rein, it's producing a big advantage. Third is the fact that they have a much younger population, which means that their saving rate is going to increase in the future. A young population with a lot of people who are in the high savings phase of their life cycle is going to save more than an older population as it moves into the retirement phase and may stop active saving. Finally, in many ways India has better institutions. It has a tradition of setting up thoughtful committees before it makes a reform. It has a democratic system, which is a really major advantage. As countries modernize, one of the things people want is a greater say in running their own life. India already has that democracy India is as yet a minor player in world trade, contributing less than one percent of world exports.
CHALLANGES:
As far as India is concerned, there is no evidence to date that the government is able to tackle the problems of the caste system, something the BBC has been reporting on in recent weeks. Energy is going to be a concern there is no evidence at the moment. Until India is able to resolve its problems with Pakistan it will always be a hampered situation. The vast majority of India's rural population remains illiterate and impoverished.


CONCLUSION
India is as yet a minor player in world trade, contributing less than one percent of world exports. The hordes of Indian software engineers, call-center operators, and back-room programmers supposedly hollowing out white-collar jobs in rich countries? The total number of workers in all possible forms of IT-related jobs in India comes to less than a million workers – one-quarter of one percent of the Indian labor force. India is the largest single-country contributor to the pool of illiterate people in the world. Lifting them out of poverty and dead-end menial jobs will remain a Herculean task for decades to come.
But in the long run we need to service our own industry, expand our domestic economy, increase standards of living within our own economy. We need to be able to withstand economic fall outs that will become more and more common in the globalized world economy. There are very few Management schools. Fewer still technology schools. Educational institutions that encourage youth to explore their own creative instincts are practically non existent in India. Primary education is supreme. On the optimistic side. Imagine 20% of the world's youth (not just teenagers) , all with basic education, Broadband connected, all exploring and connected globally. All coming from one country and one culture ! They will be the 'tipping factor' and change the cultural and therefore the economic and political dimensions of our planet. In their own favour.
While adjusting its economies to the new reality and utilizing the new opportunities, the West should not overlook the enormity of the economic gap that exists between countries (particularly India). There are many severe pitfalls and roadblocks which they have to overcome in the near future, before they can become significant players in the international economic scene on a sustained basiswe will truly be the Super Power that everyone talks about. That is our Gross Domestic Potential.