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Global: Why India would matter more! - Views on News from Equitymaster
 
 
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  • Oct 25, 2004

    Global: Why India would matter more!

    Post the beginning of the liberalisation process in the early 1990s, India has steadily made its presence felt in the global economy. There are several factors that have helped the cause of India over these years. Let us take a look at three key factors that are likely to bring greater attention to India going forward.

    Large talent pool: Indian institutes of high learning (management, medicine and engineering) churn around 2.5 lakh graduated every year, providing the Indian (and global) industry with a huge talent pool to choose from. What more, the English language, a legacy of the British, has provided our countrymen with a long-term competitive advantage. Combining this with other advantages like low cost structure and time differences, India has emerged as a country with a large resource of talent. This provides a strong platform for fast growing sectors like IT, pharma and manufacturing, which now service clients worldwide. Not only has this benefited India as a whole in adopting global corporate practices and governance, it has also aided the country's objective to move up the value chain.

    High potential demand: The population mix in India is changing for the better. Already, the country has a larger proportion of the population mix under the age of 15 as compared to major developed and developing countries. Considering the fact that jobs are likely to be created for this younger lot, income levels in the country would improve, thus improving the overall standards of living for the populace. As per NCAER, the household mix is also changing. By FY07, the consuming class will form around 46% of the country's total households as compared to around 17% in FY95. The combination of both these fundamental factors, in itself, could lead to the emergence of a huge consumer base for the various products and services. Of course, the government has to frame policies so that this young population can find jobs easily!

    Emerging player in the commodity markets (read crude oil): While India is still to be 'noticed' in the global commodity markets for steel, aluminium and other metals, we now find place amongst the fastest growing consumers of crude oil. The table below makes this point clear. As per the 'BP Statistical Review of World Energy (June 2004)', the consumption growth of crude oil in India is among the fastest in the world. More importantly, the share of India's consumption in world consumption has increased from 1.8% in 1990 to 3.1% in 2003.

    World's oil consumption: India rising!
    (`000 barrels per day) 1990 % of world 2003 % of world % change
    China 2,384 3.6% 6,254 8.0% 162.3%
    India 1,211 1.8% 2,426 3.1% 100.3%
    US 16,988 25.7% 20,071 25.7% 18.1%
    Brazil 1,274 1.9% 1,817 2.3% 42.6%
    World 66,227   78,112   17.9%
    World (excluding India & China) 62,632   69,432   10.9%
    Source: BP Statistical Review of World Energy (June 2004)

    The Institute of International Economics says in a recent report that India and China have emerged on the global energy scene as major buyers just as they have begun to make a mark on the global economic scene. Increased industrial output in these countries and a more affluent citizenry have boosted energy demand, particularly for petroleum.

    While the above factors make a case of India to be a more prominent player in the global economy, a lot of other things have to fall in line before we take a step towards strong and sustainable growth. Bureaucratic hurdles need to be lessened (if not removed) and the institutional framework needs to be strengthened. Also, the fiscal mess (high fiscal and revenue deficit) needs to be cleared, as that would leave a lot more resource to be spent towards growth and development of the populace. If the present government, and the one to follow, is able to make progress in these areas, this century could indeed turn out to be India's!

     

     

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