Sunday, March 05, 2006

Indian Economy -- Like a phoneix from ashes


The world stares at economy of India now .Itz on the news of every country and industry and on which it has not been ,make haste . Be it IT or Automobiles or Pharmacy ..India is making its road .Touch wood !!!
Lets discuss something on it ...
The Road to Glory

India was land in peace ,wealth and contended till the western nations discovered it.The Britishers with the grace of Industrial Revolution came ,saw and conquered it .After 200 long years of exploitation ,loot ,mayheam ,blood shed left the nation shattered ,in pieces ,in riots and as grossly underdevloped .The britishers had tried to loot away anything they could take to england and if not they destroyed it .The growth rate rose from -16 % to 3% to now 7%


Shape of Things to come
India's battle with China

Global IT outsourcing was estimated to be around $39.6 billion in 2004 India’s share amounting to nearly $17.2 billion while China garnered nearly $1.9 billion of the outsourcing revenues.

The Chinese Government and the IT service providers are working at various levels to compete with the dominant Indian participants in the global IT outsourcing market. India with its 44.0 percent share of IT outsourcing projects is considerably ahead of China in the global outsourcing market but this gap in revenues is estimated to reduce soon as China leverages on its advantages. Towards this end, the Chinese Premier, Wen Jiabao, visited several Indian IT outsourcing hubs such as Bangalore and also visited the premier Indian Institutes of Technology (IITs) in 2004. The Chinese Vice Foreign Minister, Wu Dawei, was quoted as saying "The Premier Wen would like to know more about the experience of India in developing science and technology." Some of the key success factors of an IT outsourcing destination have been: Abundance of technically skillful labor force Low cost workforce Quality of service Regulatory environment Robustness of infrastructure Knowledge of English Time zone attractiveness India has had tremendous advantage in most of these factors with around 813,000 knowledge professionals being employed in the IT software and ITES BPO sectors during the years 2003 and 2004. More than 65 IT companies achieved SEI CMM Level 5 assessment at the end of 2003 and many more companies are expected to follow. China shares many of India's advantages in the outsourcing market such as cheap labor costs and favorable government policies. However, the Chinese lack English language skills and the expertise in western business practices. The Indian Government has gained from years of investment in IT education and from lenient policies toward the IT industry. While the Chinese IT companies are increasingly bidding for international outsourcing projects, they are also leveraging on their proximity to markets such as Japan and South Korea, where they have an advantage both due to the geography and language. Nevertheless, China has to still gain expertise in project management as well as achieve economies of scale before it can compete with countries such as India in the global outsourcing market. Indian firms are increasingly setting up operations in China in order to capitalize on the future prospects that the country might offer in IT outsourcing. As of June 2005, nearly 18 Indian companies had operations in China and had a workforce of nearly 2000, with investments estimated to be nearly $ 50 million. By the end of 2005, Indian companies are expected to expand their Chinese operations as well as double their employee base in China. Frost & Sullivan’s recent report on the ‘Chinese Information Technology Industry’ analyzes the trends affecting the industry in view of the political policy and cultural environment as prevalent in China. Some of the trends in favor of Chinese expansion in the outsourcing market are the liberalization of government regulations, the growing middle class, large-scale investments in technical education, a vibrant economy, and the availability of cheap labor force. However, China needs to build its workforce capabilities in terms of English language proficiency and project management skills in order to emerge as a viable alternative to India in the global outsourcing market. Moreover, both China and India will also have to deal with the mounting competition from other low cost countries such as Russia, Philippines, Ireland, and Israel. >>

Indias pros :
*Respect for capital
China has very active central and local governments directing economic activity. It has taken the legacy of its planned economic system and modified it to suit the new environment, which it claims is "market driven."
*Respect for intellectual property

*Sound banking and monetary system
One out of two loans in China is probably bad. India, on the other hand, has net NPLs [non-performing loans] in its banking system of 3.5%. China's bad loan problem is a legacy of its state-directed lending practices. Interest rates are completely controlled by the PboC, and the big four banks that control over 95% of banking assets have no credit scoring or credit risk based pricing mechanisms in place. It's unbelievable. India on the other hand has a vibrant domestic credit market with an active corporate and government bond market and interest rate and credit derivative markets. Indian interest rates are market determined, and the banking system definitely knows how to price credit. China's asset markets are very similar to the Japanese. They are very heavily leveraged and are primarily fueled by property speculation. The Chinese property market coupled with its leveraged and insolvent banking system is a very big accident waiting to happen. India has no such issues.

*Entrepreneurship and profit motivation


*Goverment and its role

The goverment in india sadly hasnt done much for finance .Politicians are one big suckers in the system
and we cant do without them .The Laloos ,mulayams ,paswans are there in every city interfering in every one's
life and business .Corruption is rampant .Extract hard earned money from common folks and make inferior bridges
,roads .We cant change this politicians overnight ,what we can do is that youth should join it and clean it .
They should take up politics ,which now is in chaos ,and help in nation building .

No comments: