History: Caste System

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Presented by Chan Lai Ming 98-4254-L-07
Wong Mui San 98-4489-A-07 Andy Tay
Hu-Kang 97-4157-Y-07 Tan Tuan Leng
98-4260-L-07
INDIA
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India

• 6th largest country
• 2nd largest population
• Started out as a British colony
• Gained independence in August 1947
• Separated from Pakistan and Bangaladesh
• Self-ruling democracy
• Current ruling party Bharatiya Janata Party
  (BJP) headed by Atal Behari
  Vajpayee
• Practice Hindutva

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History Caste System

• Lifelong social stratification
• Existed for almost 3,000 years
• Ritual pollution

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History Caste System (cont)

• Caste Occupation
• Braham Priests or scholars
• Kshatriya Nobles and warriors
• Vaishva Merchants and skilled artisans
• Shudra Common labourers
• Harijan Outcastes degrading labour
• Abolished in 1949
• Industrialization and urbanization

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Indian Business Model Swardeshi

• After independence, India's economic policies
  were driven by her leaders' deep distrust of
  foreign trade and admiration for the Stalinist
  Soviet Model of Self-reliant industrialization
• Practised Swardeshi (self-reliance)

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Indian Business Model Swardeshi

• Policy of export pessimism
• Based largely on Indian political aversion to
  foreign trade and investment
• Domestic competition limited
• Centralized government planning
• -- 5-year plans

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Strengths of Swardeshi

• High Tariffs and Licenses for Imports
• - discourage foreign trade
• - policy of protectionism
• - gain economies of scale and efficiency
• Local Licensing and Quota Schemes
• - ensure no powerful local enterprise
• - granted licenses became monopoly devices

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Strengths of Swardeshi

• Guaranteed Profits
• - domestic licensing scheme
• Rent Seeking
• - setting up License Rajs (King of Licenses)
• Institutional Framework
• - more developed
• - inherited common-law system of justice from
  Britain

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Weaknesses of Swardeshi

• Inefficient
• - disastrous impact in domestic industries
• - uncompetitive for exports
• Lack of Innovation
• - no local or foreign competitors

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Weaknesses of Swardeshi

• Corruption
• - entry barrier for new businesses
• - expensive business cost
• Labour Laws and Unions
• - outdated labour laws
• - unions play prominent role in labour market
• - low skilled labour and low productivity

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Need for Economic Reforms

• Rapid and sustained improvement in the quality of
  her citizens life
• Increase the productivity of capital, land and
  labour
• Unprecedented economic crisis and socio-political
  turmoil in July 1991
• Defaulting on her international commitments

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Need for Economic Reforms (cont)

• Denial of foreign funds and downgrading of her
  credit rating from Moodys
• Resort to borrowing against their gold reserves
  from the International Monetary Fund (IMF)
• Need to restore international confidence in the
  economy and to redress the imbalances that had
  emerged in external and domestic financial
  conditions

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Technology

• Introduction
• Under British Rule -- Tightly controlled
  and depleted Indias resources
• Post Independence -- Inward looking Strategy

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Information Technology
Post Independence Ignored by government, most of
it in Foreign control Change in policy in 1965
-- Bhabha Committee formed to reinvent the
industry and have self reliance Department of
Electronics (DoE) former in 1970 Electronics
Corporation of India Limited (ECIL) formed in
1971 (monopolistic)
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Before 1991

• Computer Maintenance Corporation (CMC) formed
  in 1975
• Stagnation of import volume from 1977- 1986
• Slashed duties on imported computer component
  in 1986
• The polices were impeding Indias IT industry

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After 1991

• Liberalisation of Economy
• Removal of barriers to Foreign Investment
• Implemented income-tax exemptions on profits
  from software exports
• Granting of more Internet Service Provider
  (ISP) licenses in 1998
• National Task Force on Information
  Technology and Software Development was set
  up on May 22, 1998

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Advantages of India in IT Industry

• Abundance of cheap skilled software personnel
• Relatively unregulated by government
• Access to top quality western management

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Advantages of India in IT Industry

• English is widely spoken
• Experienced software engineers who have worked
  in the Silicon Valley and came back
• Lower Operating Costs

Weaknesses

• Poor Telecommunications Infrastructure

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Nuclear Technology

• Indias Nuclear Policy -- World Free of Nuclear
  Weapons
• Began in 1969 with help from Canada and USA
• First Nuclear Test in 1974 -- End of Foreign
  Assistance
• Refusal to sign Non-Proliferation Treaty in
  1968
• Safety concerns at Nuclear Plants

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Other ways of harnessing Nuclear Technology

• Nuclear Energy
• Applications in Agriculture
• Medicine / Healthcare
• Spin of Technologies
• Water Management
• Space Technology

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Nuclear Tests of 1998

• Conducted 2 Nuclear Tests in May 1998
• Received Worldwide Condemnation and Economic
  sanctions were enacted
• Did not revoke any Treaties because none were
  signed in the first place
• Remained Defiant
• Refused to sign the Comprehensive Test Treat
  Ban but is negotiating for total disarmament

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Reasons for Adoption of Nuclear Weapons

• Aggressive stance of Neighbours, Pakistan and
  China

• But.
• Possible Real Reasons??
• Need for recognition
• Breaking out of Colonial Legacy
• To be a force to be reckoned with

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Indias Financial Markets

•  6 Broad Institutions
• 1.     Commercial banks
• 2.     Specialized banking institutions
• 3.     Mutual credit organizations
• 4.     Informal financing organizations
• 5.     Organized securities exchanges
• 6.     Insurance and pension funds

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Financial Reforms

• Liberalization of Capital Markets
• -- Foreign Institutional Investors (FIIs)
  are permitted to invest in Indian capital
  markets on registration with the SEBI
  (Joint Business Council, 1994)
• -- Simplified common application forms

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Financial Reforms
-- Foreign brokers are permitted to assist
investors -- All mutual funds are
allowed to apply for firm allocation in public
issues -- These funds are also exempted
from income tax regardless of whether they are
in the private or public sectors
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Financial Reforms (Contd)

• -- Consolidated payment of stamp duty
• -- The Securities Contract (Regulations) Rules
  have been amended to enable widely held stock
  broking companies to become members of the stock
  market.
• Reduction in Statutory Liquidity Ratio (SLR)
• -- Set to be reduced to 25 from a high 47

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Financial Reforms (Contd)

• Liberalization of interest rates
• -- Banks are now able to set their own
  prime lending rates.
• -- The banks prime lending rates have to
  be declared and be uniformly applicable at all
  branches

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Financial Reforms (Contd)

• Unified exchange rate
• -- Introduced in March 1993
• -- Provides a powerful incentive for exports
  including services, exports and remittances
• -- Greatly reduced the incentive for forward
  remittances flowing to the illegal hawala
  market

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Financial Reforms (Contd)

• Convertibility of the Rupee
• -- Full convertibility of the rupee on the
  capital account in the 1995-1996 budget
• New private sector banks
• -- The restrictions on the formation of new
  banks in the private sector have been removed
• -- Existing private banks are also allowed to
  expand without the fear of nationalization

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Financial Reforms (Contd)

• -- Banks can raise capital contributions from
  foreign institutional investors up to 20, and
  up to 40 from non-resident Indians (NRIs)
• -- permitted to close non-viable branches other
  than in the rural areas
• Elimination of government access to RBI
• -- Government deficits will not be automatically
  monetized
• -- Easier to control the growth of the money
  supply as well as inflation

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Financial Reforms (Contd)

• Strengthening of the SEBI
• -- Armed with the necessary authority and power
  for the regulation and reform of the capital
  market
• -- To improve trading practices, disclosure and
  investor protection
• Incorporation of International Accounting
  practices
• -- implemented in 1992-1993

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Financial Reforms (Contd)
-- ensures that the banks balance sheets reflect
an accurate financial position, which is a
prerequisite for effective monitoring and
improving performance -- improve the
transparency of the capital markets to protect
investors and boost greater market efficiency In
25 December 1997, Indias investment rating was
raised to that of the lowest investment grade
rating level, Baa3 by Moodys.
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Indias Service Industry

• Telecommunications
• -- Indias telecommunication sector has the
  highest proportion of unfulfilled demand
  among all service sectors
• -- Indias burgeoning middle class has kept
  demand for telephones far ahead of
  availability
• -- Widely considered as a strategic investment
  to maintain and develop competitive advantage
  at all levels national, regional and firm

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Government Organization in the Telecom Sector

• Videsh Sinchar Nigam Limited (VSNL)
• Mahanagar Telephone Nigam Limited (MTNL)
• Department of Telecommunications (DOT)
• Indian Telephone Industries (ITI)

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New Telecom Policy

• Availability of telephones on demand and in all
  villages in 1997
• Providing a PCO for every 500 people
• Opening up of the sub-sector of value-added
  services to private investors in July 1992 for
  electronic mail, voice mail, data, audio text,
  video text, video conferencing, radio paging and
  cellular mobile telephone services

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New Telecom Policy

• Delicensing the manufacture of telecommunications
  equipment
• Granting licences on the basis of circles
• Allowing foreign equity participation up to 49
• Setting up of a regulatory body (TRAI)
• Reducing custom duties on mobile phones

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Private Sectors MNCs

• ATT
• Singapore Telecoms
• Australian Telecoms
• CIT Alcatel of France
• Siemens
• Ericsson
• Fujitsu

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Indias Service Industry

• Railways
• -- The 150 year old Indian railways employs 1.6
  million people and carries some 13 million
  passengers and 1.2 million tones of goods on
  13,500 trains a day
• -- Fifty years ago, it carried most of the
  countrys freight but today road transport
  carries more.
• -- The freight trains are profitable but its
  market share is shrinking.

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Performance of the Railways
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Modernization Programmes

• Electrification
• Heavier and faster passenger and freight trains
  are designed
• Bringing computers and modern telecommunication
  systems into freight management
• Tapping in the capital markets through the Indian
  Railway Finance Corporation
• Build-Own-Lease-Transfer (BOLT) and
  Own-Your-Wagon Scheme (OYWS) to encourage private
  participation and also to supplement resources

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Year 2000 Railway Budget

• Highlights
• -- Introduction of at least 19 new trains
• -- Free travel for girls going to school
• -- Information Technology
• -- 5 hike in some already high freight rates

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Indias Service Industry

• Airlines
• -- 4 international airports New Delhi, Bombay,
  Calcutta and Madras
• -- Its flag carrier, Air India is largely
  restricted to international operations
• -- The domestic carrier Indian Airlines operates
  to some neighbouring countries
• -- A feeder route airline, Vayudoot links remote
  or low traffic areas to nodal points
• -- Helicopter Corporation of India providing
  access to mountain areas and to handle the
  offshore personnel transport requirements

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India Aviation Reforms

• Indias Dis-investment Commission has proposed
  that 60 of Air India equity should be sold off
  to the private sector and that a foreign airline
  should take the lions share of that as a
  strategic partner
• Plan is to sell off 51 of Indian Airlines
  equity, with the most of that going to a major
  Indian business or to financial institutions

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India Aviation Reforms

• Govt. to inject loans and equity of up to US475
  million to offset the airlines past losses and
  to provide funds for new aircraft
• Proposed open skies for all routes with
  private-sector investment in both airlines and
  airports
• Creation of an independent regulatory authority
  like the USs Federal Aviation Administration

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Future of Indian Economy

• Eradication of Poverty

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Poverty Alleviation and Employment Plans

• Integrated Rural Development Programme (IRDP)
• Training Rural Youth for Self-Employment (TRYSEM)
  
• Development of Women and Children in Rural Areas
  (DWCRA)

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Performance of Special Employment and Poverty
Alleviation Programmes




(In lakh)
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Education

• Increase Literacy and Improve Education System
• (i) Education for All
• Free and compulsory primary education up to
  5th standard and total eradication of illiteracy
• (ii) Education of prioritised groups
• Girls, SCs/ STs and Backward classes and
• educationally backward minorities

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Education
(iii) Access and quality Equal access and
opportunity for all up to school stage and
improvement of quality at all levels.
(iv)  Financing of education Increase in
government and non-government spending on
education, and bringing this up to 6 GDP
level.
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Foreign Direct Investment

• Encouraging FDI
• 
  FDI by Host
  Region (US Million)
• Country
  1994 1995
  1996 1997 e
• China
  33787 35849
  40800 45300
• India
  973 1964
  2382 3264
• Indonesia
  2109 4348
  6194 5350
• Korea, Rep. 809
  1776 2325 2341
• Malaysia
  4342 4132
  4672 3754
• Philippines
  1591 1459
  1520 1253
• Thailand
  1322 2002
  2268 3600
• All developing countries including China
  95582 105511 129813
  148944
• Share of India in developing countries ()
  1.0 1.9 1.8
  2.2
•  
• Source World Investment Report, United Nations,
  1998.
• e estimates.
• Note Figures for India in this table may not be
  comparable with those in other tables because of
  differences in coverage and
• source of information

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Foreign Direct Investment Actual Flows vs.
Approvals
1994 1995 1996 1997
1998 Total

(91 to
98) Approvals Rs crore
13590 37489 39453 57149 25103
189968 US million 4332
11245 11142 15752 6132
54268 Actual Inflows Rs crore
3009 6720 8431 12085
8433 41490 US million
958 2100 2383 3330
2073 11806 Actual Inflows as of
Approvals 22.1 18.7
21.4 21.1 33.8
21.7 (In US terms) Source RBI Upto
September, 1998. Figures are provisional. Note
The approval and actual inflows figures include
NRI direct investments approved by RBI.
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Conclusion

• India has potential to be the top economies in
  the world
• Must manage bilateral relations with Pakistan
  and rid the stigma of a nuclear pariah
• Uphold financial reforms
• Crack down on corruption, reduce poverty,
  increase literacy

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Thank you and The End