Economic Recession: The Worst Is Behind Us

After the bleak condition of Indian economy, there has been tremendous growth in industrial production. In fact, commerce minister has indicated that production rates in most industries are in double digits, reaching the highest point in the last two years.

It is being speculated that the worst is definitely behind us. All hopes are now pinned to a normal monsoon next year, which may bring with it a promise of an increased growth rate. The prime minister predicts an increase in the growth rate of 5% to about 7% in the next year. Also, with this wishful thinking, there will be concerted efforts towards raising the growth rate once again to 9%.

The fiscal stimulus package that was promised to be injected into the near comatose economy, is expected to be released early in 2010. This stimulus package is estimated to be between $50 billion to $80 billion. Though with this package, India’s deficit will grow to 12% of the GDP, it will provide a temporary relief to the recovering economy.

The Economic Summit And The Milestones It Reaches

Association has always been the buzzword in Indian economy and today, India is finally ready to reap its benefits. FICCI and Assocham were never able to make a lasting association with many of the foreign economic institutions of their kind. However, the lasting partnership or the association between the CII and the WEF has seen many a ideas springing.

Even in 1985, when India was a relatively closed economy, the World Economic Forum or the European Management Forum as it was then called, wanted India to open its door to them. This was perhaps because India’s huge potential as the second largest market of the world was evident even back then.

Modern India however, with its open economy later became more receptive of international organizations eyeing such associations. Even as the first India Economic Summit happened in India with bigwigs like Assocham, FICCI and AIEI in association with the European Management Forum, Indian organizations were still not content. The next summit saw both Assocham and FICCI dropping off it. Finally, the EMF became today’s World Economic Forum and AIEI became CII.

The summits that they arranged and participated in together, forged deep ties between the two and today, even though there are country specific summits, WEF continues to support India in international forums because of it’s ties with the CII. The economic summits in India bean quite modestly. However, over the years they have seen many highs and lows. After the 1990s though, the summits have not looked back and India continues to enjoy the benefits of foreign interest and mingling of political forces with it. The summits have ever since been the sowing bed of important economic policies which not only affects India as a nation but also the world economy.

Health Conscious Indians Drive the Dietary Supplement Market

Dietary supplements which were conventionally sold by medical stores have become a huge market in India. Growth is driven mainly by increasingly health conscious urban consumers. Vitamin and dietary supplement market during 2008 was valued above Rs.2550 Crore (about $510 million) and is set to grow to Rs.3400 Crore (about $680 million) by 2013. Some of the major players in this market are Amway, Dabur, Heinz, Pfizer and Ranbaxy. Recognizing the huge potential, Swedish cosmetics major Oriflame plans to introduce its wellness products like protein shakes in India. Other Indian company which has announced its entrance in this market is Emami. Emami plans to launch a range of over-the-counter (OTC) drugs for stress relief, diabetes and blood pressure.

Some of the growth drivers for this market are higher spending power of people, ageing population and growing awareness of the advantages of dietary supplements. In India there is sharp rise in chronic diseases which can be attributed to growing fast food culture, lack of physical activity, people restoring to high fat, high cholesterol diet which makes them susceptible to lifestyle diseases. Escalation in cost of medial treatment drives people to resort to preventive measures such as intake of dietary supplements. Growth in the pharmacy chains and organized retail outlets gives opportunity to merchandise a wide range of dietary supplements to the consumers. Promotions, display, counseling further drives dietary supplement market. With organized retail sector poised to grow by 15 percent of the retail sales by 2011, we can expect huge growth in dietary supplement market in India.

Corruption – Where Will It Take India?

Our country is known for two “C”s – colorfulness and corruption. In June, when the Corruption Perceptions Index (CPI) took out its annual report on the corruption index in the 180 countries of the world, India slipped two positions to rank at 74. (CPI is made by an independent international agency called International Transparency).

Since the practice of corruption is a deceitful act, the Indian population is largely seen as dishonest. While there are many honorable and noble people as well in the country, greediness and dishonesty is driving the remaining. Sometimes people have to get involved in corruption due to the compulsion of getting their work done.

Another reason of this country wide corruption is that we are surrounded by countries which themselves are so poor and continuously try to destabilize our economy in one way or another. Countries like Pakistan and Nepal rank at 140 and 135 respectively in the index. Iran and Libya are also not very far with 133th and 134^th position.

Meanwhile, China which was ranked jointly with India on 72 in 2007, slipped a step above to occupy the place higher that its neighbor this year. Russia has extremely high level of corruption, even after the Putin’s era and ranks at 145 in the index. Sri Lanka is on 96th position while Maldives is ranked 90.Bhutan is the least corrupted country in the Asian region which could be due to the nascent democracy in the country. New Zealand, Denmark, Singapore, Finland and Sweden have retained the top five spots this year as well. Myanmar and Somalia occupy the bottom position in the index. USA has retained its position on 20 and is just below Ireland, Germany, Japan and France.

Indian Global Trade Engagement Rises Even As Recession Subsides

India’s economy has finally come of age. In the last five years, there has been phenomenal change in the global trade of goods and services in India. In fact, today the global trade makes up for almost fifty percent of the gross domestic product of the country. This, of course, is good news considering the fact that even after being isolated for years after independence, Indian economy is finally integrated with the global economy.

This growth in the contribution to the GDP itself is a giant leap considering that about five years ago, the goods and services sector made up for only 30.9% of the entire gross domestic product.

There has been a greater openness in the world as far as Indian services are concerned. The trade of merchandise has seen a 57% increase in the last five years. The services trade has also seen a significant growth. Though the ongoing global economic slow down has caused some unrest and has also interrupted India’s growth story, it is believed that this interruption is only temporary and brief. The continuing economic reforms and the government’s proactive interest in improving international trade and bringing India on to the map of global trade

India Emerges as a Top Sourcing Hub

India is increasingly emerging as a hub for global sourcing. Almost every multinational company is focusing on India. It is generally agreed that, India as a low cost country sourcing market is one of the most interesting but also challenging markets in the world. This trend not only pertains to FMCG products but across all industries. India is among the world’s top three suppliers of home textile products. Almost 80% of its US$1.2 billion worth of exports annually is shipped to the US and the EU. Knowledge-based manufacturing has put India on the global sourcing map with multinational companies increasingly positioning the country as a low-cost, high quality sourcing hub for products ranging from consumer electronics to toothpaste and boilers to printing machinery.

Wal-Mart’s sourcing operations were estimated at $1 billion, Tesco around $100 million and Marks and Spencer around $145 million. Unilever sources majority of their FMCG products from their Indian subsidiary Hindustan Unilever Limited. Some other companies who are either planning to set up manufacturing units or expand their sourcing from reliable suppliers in India are Amway, GAP, Newell Rubbermaid (Makers of Parker Pens), Adidas, Next and Calvin Klein. Other than Textiles and FMCG, India has emerged as one among the top two sourcing hubs for the global pharmaceutical industry. Some of the major drivers for the sourcing activity are low cost of raw material, low labor cost, highly skilled labor, high quality products, low R & D cost, bulky export and Government Policies. From FMCG to Aerospace, India is set to grow in a phenomenal pace as a global outsourcing hub.

Income and Consumption: Per Capita Income

Today, India fares among the fastest growing nations in the world and has secured the 12^th slot, in the terms of the size of its economy, as per the market exchange rates. However, it falls behind even its peers among the BRIC (Brazil, Russia, India, and China) countries. According to the World Trade Organization (WTO), India stands 142^nd in the terms of per capita income (adjusted for inflation) of USD 940, in 2007.

Nevertheless, rapid industrialization and spurt in the services industry has helped India increase its income in the last couple of years. According to the national income estimates released in February 2009, the per capita income in the current fiscal year is expected to rise by 5.6%, taking inflation and population growth into account. Expectations that are more futuristic were revealed in the June 2009 report of the Emerging Markets Forum, sponsored by the Washington based Centennial Group. As per the report, the Indian economy is expected to grow by an average of 9.5% and is likely to surpass that of the US by the year 2039! The Forum estimates Indian per capita income (adjusted for inflation) to exceed $22,000 over the next thirty years.

Looking at the regional distributions, Karnataka leads in the terms of per capita income growth of 9.3%. As many as 17 states, including Bihar, out of total 28, have a growth rate much lower than the average of 8.4%. This is a clear indicator of the serious disparity in the distribution of wealth in India. This is mostly explained by the lower industrial penetration, high population density, and the lack of educational facilities. Unless, the State Governments rise to the occasion, the great Indian success story is likely to remain confined to less than half of the country.