the history of globalization is probably as old as the history of human civilization

8/14/2019 The History of Globalization is Probably as Old as the History of Human Civilization

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The history of globalization is probably as old as the history of human civilization. The history ofglobalization can be traced back to the Harappan civilization era. During that period, farming was the mainlively hood and these farmers mainly grew wheat, rice, and cotton. The people in coastal region of Indiaproduced salt. These farmers of India had transnational business relations with West Asian countries andthe most prominent of them being Iraq (then Mesopotamia). They traded articles like gold, silver, metals,potteries, gems, cotton, silk, food grains, honey, and spices like cinnamon and pepper. The history of

globalization also suggests that the economy of ancient India had a strong cross border trade andcommerce relation with China and they mainly traded food grains, spices, cottons, gold, silver, andmetals. Further, a more organized form of trans-world trade has been in force from the mid of 14thcentury and it started as a means to explore new business destination and opportunities. Furthermore,Chandragupta Maurya who reigned during the period 325 BC popularized expansive trade and economy.

Alexander the Great forges eastward link with Chandragupta Maurya for overland routes between theMediterranean, Persia, India, and Central Asia. During the 1st century CE the trans-world trade makes itsfirst major appearance in China under the Han dynasty and successfully established trade relations withAsian and European countries. The period from 650-850 AD records the expansion of Islam and traderelations with the west Mediterranean region with the Indian sub-continent. The Rise of Genghis Khanduring 1100 AD gave rise to the integration of overland routes across Eurasia. The 1650s marks theexpansion of the slave trade and it sustained the expansion of Atlantic Economy, giving birth to integrated

economic and industrial systems across the Ocean. The period from 1776 to 1789 AD marks the US andFrench Revolutions and the creation of modern state as a fall-out of military and business interests. Theseintegrated empires expand during the industrial revolution. The eighteenth century marks the merging ofthe modernity with globalization and it also marks the foundation for the creation of international tradelaw.

The modern day Indian economy (1900) had taken cue from the history of globalization and structured itsforeign trade policy accordingly. The liberalized economic policy adapted and implemented by theGovernment of India, finds its root back to the rich history of globalization.

The latest effects of globalization with respect to Indian markets are as follows -

Industrial Growth - for the first time has exceeded 10%. Manufacturing growth rate has exceeded12 % in 6 months (April-September 2006). The mining and quarrying sector has registered agrowth of 4%. The electricity sector recorded a double-digit growth of 12% during September 2006as compared to September 2005. Consumer durables and non-durables have also recordedupswings. The use-base economic sub-groups, intermediate goods have registered an impressivegrowth of almost 15% during September 2006 over September 2005. Consumer goods haverecorded a high growth of 13%. The National Manufacturing Competitiveness Council has targeted12 to 14% growth in the 11th Plan period

Foreign Institutional Investors (FIIs) - net investments in equities crossed US$ 7 billion in calendar2006. FII net investment till 6 November 2006 has been US$ 7.08 billion, according to theSecurities and Exchange Board of India. 151 new FIIs have opened their offices in India during first10 months of 2006. The total number of FIIs in India stands at 974 as on November 2006

Foreign Direct Investment (FDI) - India envisage of attracting $10 billion of foreign directinvestment (FDI) this year as inflows have nearly doubled to US$ 4.4 billion in April-September2006. In September 2006, FDI inflows grew 225% to US$ 916 million as compared to US$ 282million in the same month last year. Services attracted maximum investment of US$ 1.5 billionrecording growth of 350%. Telecommunication sector with inflows of US$ 405 million hasregistered the maximum growth of 950%. Corporate India has recorded its highest rise in salariesat 22% in the first half of 2006-07 against increase of 17% in 2005-06


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India's Balance of Payments - is expected to remain comfortable Merchandise Exports - recorded strong growth The Invisibles Account - remained positive during last financial year and financed 2/3 of the trade

deficit India's Foreign Exchange Reserves - were US$ 166.2 billion as on October 2006, showing

increment of US$ 14.5 billion over end-March 2006

India's economy grew at 9.3% in quarter April-June and it was driven by manufacturing,construction and services sector and agriculture sector

GDP factor for the first quarter of 2007-08 was at Rs 7,23,132 crore, registering a growth rate of9.3% over the corresponding quarter of previous year

Manufacturing industry registered 11.9% growth The passenger vehicles sector grew by 11.61% during April-May 2007 Electricity, gas & water supply performed well and recorded an impressive growth rate of 8.3% Construction growth rate rose to 10.7% Trade, hotels, transport and communication registered a growth rate of 12% Financing, insurance, real estate and business services recorded an impressive growth rate of at

11% during the 1st quarter of this fiscal Community, social and personal services maintained a decent growth rate of 7.6%

The growth rate of agriculture, forestry & fishing' and 'mining & quarrying' are estimated at 3.8 percent, and 3.2 %, respectively during the 1st quarter of 2007-2008 Exports grew by 18.11% during the 1st quarter of 2007-2008 and the imports shoot up by 34.30%

during the same period India's FOREX reserves (excluding Gold and SDRs) stood at $219.75 billion at the end of July ' 07 The food sector is estimated to be of US$ 200 billion and it is expected to grow to $310 billion by

2015 Stocks of food-grains grew by 13.1% to 17.73 million tons The annual inflation rate was 4.45% for the week ended July 28, 2007 India's Balance of Payments is expected to remain comfortable Merchandise Exports recorded strong growth

Impact of Globalisation on Developing Countries and India

Impact of Globalisation on Developing Countries and Indiaby Chandrasekaran Balakrishnan

Chandrasekaran Balakrishnan for The 2004 Moffatt Prize in Economics

Introduction:

Globalisation is the new buzzword that has come to dominate the world since the nineties of the lastcentury with the end of the cold war and the break-up of the former Soviet Union and the global trendtowards the rolling ball. The frontiers of the state with increased reliance on the market economy andrenewed faith in the private capital and resources, a process of structural adjustment spurred by the
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studies and influences of the World Bank and other International organisations have started in many ofthe developing countries. Also Globalisation has brought in new opportunities to developing countries.

Greater access to developed country markets and technology transfer hold out promise improvedproductivity and higher living standard. But globalisation has also thrown up new challenges like growing

inequality across and within nations, volatility in financial market and environmental deteriorations.Another negative aspect of globalisation is that a great majority of developing countries remain removedfrom the process. Till the nineties the process of globalisation of the Indian economy was constrained bythe barriers to trade and investment liberalisation of trade, investment and financial flows initiated in the

nineties has progressively lowered the barriers to competition and hastened the pace of globalisation

Definition:

Globalised World - What does it mean?

Does it mean the fast movement of people which results in greater interaction?

Does it mean that because of IT revolution people can be in touch with each other in any part of theworld?

Does it mean trade and economy of each country is open in Non-Intrusive way so that all varieties areavailable to consumer of his choice?

Does it mean that mankind has achieved emancipation to a level of where we can say it means a social,economic and political globalisation?

Though the precise definition of globalisation is still unavailable a few definitions worth viewing, Stephen

Gill: defines globalisation as the reduction of transaction cost of transborder movements of capital andgoods thus of factors of production and goods. Guy Brainbant: says that the process of globalisation notonly includes opening up of world trade, development of advanced means of communication,

internationalisation of financial markets, growing importance of MNC's, population migrations and moregenerally increased mobility of persons, goods, capital, data and ideas but also infections, diseases and

pollution

Impact on India:

India opened up the economy in the early nineties following a major crisis that led by a foreign exchangecrunch that dragged the economy close to defaulting on loans. The response was a slew of Domestic andexternal sector policy measures partly prompted by the immediate needs and partly by the demand of the

multilateral organisations. The new policy regime radically pushed forward in favour of amore open andmarket oriented economy.

Major measures initiated as a part of the liberalisation and globalisation strategy in the early ninetiesincluded scrapping of the industrial licensing regime, reduction in the number of areas reserved for the

public sector, amendment of the monopolies and the restrictive trade practices act, start of theprivatisation programme, reduction in tariff rates and change over to market determined exchange rates.


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Over the years there has been a steady liberalisation of the current account transactions, more and moresectors opened up for foreign direct investments and portfolio investments facilitating entry of foreign

investors in telecom, roads, ports, airports, insurance and other major sectors.

The Indian tariff rates reduced sharply over the decade from a weighted average of 72.5% in 1991-92 to24.6 in 1996-97.Though tariff rates went up slowly in the late nineties it touched 35.1% in 2001-02. India

is committed to reduced tariff rates. Peak tariff rates are to be reduced to be reduced to the minimumwith a peak rate of 20%, in another 2 years most non-tariff barriers have been dismantled by march

2002, including almost all quantitative restrictions.

India is Global:The liberalisation of the domestic economy and the increasing integration of India with the global economyhave helped step up GDP growth rates, which picked up from 5.6% in 1990-91 to a peak level of 77.8% in1996-97. Growth rates have slowed down since the country has still bee able to achieve 5-6% growth rate

in three of the last six years. Though growth rates has slumped to the lowest level 4.3% in 2002-03mainly because of the worst droughts in two decades the growth rates are expected to go up close to 70%

in 2003-04. A Global comparison shows that India is now the fastest growing just after China.

This is major improvement given that India is growth rate in the 1970's was very low at 3% and GDPgrowth in countries like Brazil, Indonesia, Korea, and Mexico was more than twice that of India. Though

India's average annual growth rate almost doubled in the eighties to 5.9% it was still lower than thegrowth rate in China, Korea and Indonesia. The pick up in GDP growth has helped improve India's globalposition. Consequently India's position in the global economy has improved from the 8th position in 1991

to 4th place in 2001. When GDP is calculated on a purchasing power parity basis.

Globalisation and Poverty:

Globalisation in the form of increased integration though trade and investment is an important reason whymuch progress has been made in reducing poverty and global inequality over recent decades. But it is notthe only reason for this often unrecognised progress, good national polices , sound institutions and

domestic political stability also matter.

Despite this progress, poverty remains one of the most serious international challenges we face up to 1.2billion of the developing world 4.8 billion people still live in extreme poverty.

But the proportion of the world population living in poverty has been steadily declining and since 1980 theabsolute number of poor people has stopped rising and appears to have fallen in recent years despite

strong population growth in poor countries. If the proportion living in poverty had not fallen since 1987alone a further 215million people would be living in extreme poverty today.

India has to concentrate on five important areas or things to follow to achieve this goal. The areas liketechnological entrepreneurship, new business openings for small and medium enterprises, importance of

quality management, new prospects in rural areas and privatisation of financial institutions. Themanufacturing of technology and management of technology are two different significant areas in the

country.

There will be new prospects in rural India. The growth of Indian economy very much depends upon rural
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participation in the global race. After implementing the new economic policy the role of villages got its ownsignificance because of its unique outlook and branding methods. For example food processing and

packaging are the one of the area where new entrepreneurs can enter into a big way. It may be organisedin a collective way with the help of co-operatives to meet the global demand.

Understanding the current status of globalisation is necessary for setting course for future. For all nationsto reap the full benefits of globalisation it is essential to create a level playing field. President Bush'srecent proposal to eliminate all tariffs on all manufactured goods by 2015 will do it. In fact it may

exacerbate the prevalent inequalities. According to this proposal, tariffs of 5% or less on all manufacturedgoods will be eliminated by 2005 and higher than 5% will be lowered to 8%. Starting 2010 the 8% tariffs

will be lowered each year until they are eliminated by 2015.

GDP Growth rate:

The Indian economy is passing through a difficult phase caused by several unfavourable domestic andexternal developments; Domestic output and Demand conditions were adversely affected by poor

performance in agriculture in the past two years. The global economy experienced an overall decelerationand recorded an output growth of 2.4% during the past year growth in real GDP in 2001-02 was 5.4% asper the Economic Survey in 2000-01. The performance in the first quarter of the financial year is5.8% and

second quarter is 6.1%.

Export and Import:

India's Export and Import in the year 2001-02 was to the extent of 32,572 and 38,362 millionrespectively. Many Indian companies have started becoming respectable players in the International

scene. Agriculture exports account for about 13 to 18% of total annual of annual export of the country. In2000-01 Agricultural products valued at more than US $ 6million were exported from the country 23% of

which was contributed by the marine products alone. Marine products in recent years have emerged asthe single largest contributor to the total agricultural export from the country accounting for over one fifthof the total agricultural exports. Cereals (mostly basmati rice and non-basmati rice), oil seeds, tea and

coffee are the other prominent products each of which accounts fro nearly 5 to 10% of the countries totalagricultural exports.

Where does Indian stand in terms of Global Integration?

India clearly lags in globalisation. Number of countries have a clear lead among them China, large part ofeast and far east Asia and eastern Europe. Lets look at a few indicators how much we lag.

Over the past decade FDI flows into India have averaged around 0.5% of GDP against 5% for China 5.5% for Brazil. Whereas FDI inflows into China now exceeds US $ 50 billion annually. It is only US $

4billion in the case of India

Consider global trade - India's share of world merchandise exports increased from .05% to .07% over the pat 20 years. Over the same period China's share has tripled to almost 4%.

India's share of global trade is similar to that o f the Philippines an economy 6 times smaller according toIMF estimates. India under trades by 70-80% given its size, proximity to markets and labour cost


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advantages.

It is interesting to note the remark made last year by Mr. Bimal Jalan, Governor of RBI. Despite all thetalk, we are now where ever close being globalised in terms of any commonly used indicator of

globalisation. In fact we are one of the least globalised among the major countries - however we look at it

As Amartya Sen and many other have pointed out that India, as a geographical, politico-cultural entityhas been interacting with the outside world throughout history and still continues to do so. It has to adaptassimilate and contribute. This goes without saying even as we move into what is called a globalised worldwhich is distinguished from previous eras from by faster travel and communication, greater trade linkages,

denting of political and economic sovereignty and greater acceptance of democracy as a way of life.

Consequences:

The implications of globalisation for a national economy are many. Globalisation has intensified

interdependence and competition between economies in the world market. This is reflected inInterdependence in regard to trading in goods and services and in movement of capital. As a resultdomestic economic developments are not determined entirely by domestic policies and market conditions.Rather, they are influenced by both domestic and international policies and economic conditions. It is thus

clear that a globalising economy, while formulating and evaluating its domestic policy cannot afford toignore the possible actions and reactions of policies and developments in the rest of the world. This

constrained the policy option available to the government which implies loss of policy autonomy to someextent, in decision-making at the national level

Globalization- Opportunities And Challenges(with impact on Indian Economy)

Indian economy had experienced major policy changes in early 1990s. The new economic reform,popularly known as, Liberalization, Privatization and Globalization (LPG model) aimed at making theIndian economy as fastest growing economy and globally competitive. The series of reforms undertakenwith respect to industrial sector, trade as well as financial sector aimed at making the economy moreefficient.

Globalization has many meanings depending on the context. In context to India, this implies opening upthe economy to foreign direct investment by providing facilities to foreign companies to invest in differentfields of economic activity in India, removing constraints and obstacles to the entry of MNCs in India,allowing Indian companies to enter into foreign collaborations and also encouraging them to set up jointventures abroad; carrying out massive import liberalization programs by switching over from quantitativerestrictions to tariffs and import duties, therefore globalization has been identified with the policy reformsof 1991 in India.


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Impact of Globalization of Indian EconomyAt the present, we can say about the tale of two Indias: We have the best of times; we have the worst oftimes. There is sparkling prosperity, there is stinking poverty. We have dazzling five star hotels side byside with darkened ill-starred hovels. We have everything by globalization, we have nothing byglobalization. Though some economic reforms were introduced by the Rajiv Gandhi government (1985-89), it was the Narasimha Rao Government that gave a definite shape and start to the new economic

reforms of globalization in India. Presenting the 1991-92 Budget, Finance Minister Manmohan Singh said:After four decades of planning for industrialization, we have now reached a stage where we shouldwelcome, rather fear, foreign investment. Direct foreign investment would provide access to capital,technology and market.

In the Memorandum of Economic Policies dated August 27, 1991 to the IMF, the Finance Ministersubmitted in the concluding paragraph: The Government of India believes that the policies set forth in theMemorandum are adequate to achieve the objectives of the program, but will take any additionalmeasures appropriate for this purpose. In addition, the Government will consult with the Fund on theadoption of any measures that may be appropriate in accordance with the policies of the Fund on suchconsultations.

The Government of India affirmed to implement the economic reforms in consultation with theinternational bank and in accordance of its policies. Successive coalition governments from 1996 to 2004,led by the Janata Dal and BJP, adopted faithfully the economic policy of liberalization. With ManmohanSingh returned to power as the Prime Minister in 2004, the economic policy initiated by him has becomethe lodestar of the fiscal outlook of the government.

The Bright Side of GlobalizationThe rate of growth of the Gross Domestic Product of India has been on the increase from 5.6 per centduring 1980-90 to seven per cent in the 1993-2001 period. In the last four years, the annual growth rateof the GDP was impressive at 7.5% (2003-04), 8.5% (2004-05), 9% (2005-06) and 9.2%(2006-07).Prime Minister Manmohan Singh is confident of having a 10% growth in the GDP in the Eleventh Five YearPlan period.

The foreign exchange reserves (as at the end of the financial year) were $ 39 bn (2000-01), $ 107 bn(2003-04), $ 145 bn (2005-06) and $ 180 bn (in February 2007). It is expected that India will cross the $200 bn mark soon.

The cumulative FDI inflows from 1991 to September 2006 were Rs.1, 81,566 crores (US $ 43.29 bn). Thesectors attracting highest FDI inflows are electrical equipments including computer software andelectronics (18 per cent), service sector (13 per cent), telecommunications (10 per cent), transportationindustry (nine per cent), etc. In the inflow of FDI, India has surpassed South Korea to become the fourthlargest recipient.

India controls at the present 45% of the global outsourcing market with an estimated income of $ 50 bn.

In respect of market capitalization (which takes into account the market value of a quoted company bymultiplying its current share price by the number of shares in issue), India is in the fourth position with $894 bn after the US ($ 17,000 bn), Japan ($ 4800 bn) and China ($ 1000bn). India is expected to sooncross the trillion dollar mark.

As per the Forbes list for 2007, the number of billionaires of India has risen to 40 (from 36 last year)morethan those of Japan (24), China (17), France (14) and Italy (14) this year. A press report was jubilant:This is the richest year for India. The combined wealth of the Indian billionaires marked an increase of 60per cent from $ 106 bn in 2006 to $ 170 bn in 2007. The 40 Indian billionaires have assets worth about


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Rs. 7.50lakh crores whereas the cumulative investment in the 91 Public Sector Undertakings by theCentral Government of India is Rs. 3.93 lakh crores only.

The Dark Side of GlobalizationOn the other side of the medal, there is a long list of the worst of the times, the foremost casualty beingthe agriculture sector. Agriculture has been and still remains the backbone of the Indian economy. It plays

a vital role not only in providing food and nutrition to the people, but also in the supply of raw material toindustries and to export trade. In 1951, agriculture provided employment to 72% of the population andcontributed 59% of the gross domestic product. However, by 2001 the population depending uponagriculture came to 58% whereas the share of agriculture in the GDP went down drastically to 24 per centand further to 22% in 2006-07. This has resulted in a lowering the per capita income of the farmers andincreasing the rural indebtedness.

The agricultural growth of 3.2% observed from 1980 to 1997 decelerated to two per cent subsequently.The Approach to the Eleventh Five Year Plan released in December 2006 stated that the growth rate ofagricultural GDP including forestry and fishing is likely to be below two per cent in the Tenth Plan period.The reasons for the deceleration of the growth of agriculture are given in the Economic Survey 2006-07:Low investment, imbalance in fertilizer use, low seeds replacement rate, a distorted incentive system and

lo post-harvest value addition continued to be a drag on the sectors performance. With more than half thepopulation directly depending on this sector, low agricultural growth has serious implications for theinclusiveness of growth.

The number of rural landless families increased from 35 %in 1987 to 45 % in 1999, further to 55% in2005. The farmers are destined to die of starvation or suicide. Replying to the Short Duration Discussionon Import of Wheat and Agrarian Distress on May 18, 2006, Agriculture Minister Sharad Pawar informedthe Rajya Sabha that roughly 1, 00,000 farmers committed suicide during the period 1993-2003 mainlydue to indebtedness.

In his interview to The Indian Express on November 15, 2005, Sharad Pawar said: The farmingcommunity has been ignored in this country and especially so over the last eight to ten years. The totalinvestment in the agriculture sector is going down. In the last few years, the average budgetary provisionfrom the Indian Government for irrigation is less than 0.35%.

During the post-reform period, India has been shining brilliantly with a growing number of billionaires.Nobody has taken note of the sufferings of the family members of those unfortunate hundred thousandfarmers.

Further, the proportion of people depending in India on agriculture is about 60 % whereas the same forthe UK is 2 %, USA 2 %and Japan 3 %. The developed countries, having a low proportion of population inagriculture, have readily adopted globalization which favors more the growth of the manufacturing andservice sectors.

About the impact of globalization, in particular on the development of India, the ILO Report (2004) stated:

In India, there had been winners and losers. The lives of the educated and the rich had been enriched byglobalization. The information technology (IT) sector was a particular beneficiary. But the benefits had notyet reached the majority, and new risks had cropped up for the losersthe socially deprived and the ruralpoor. Significant numbers of non-perennial poor, who had worked hard to escape poverty, were findingtheir gains reversed. Power was shifting from elected local institutions to unaccountable trans-nationalbodies. Western perceptions, which dominated the globe media, were not aligned with local perspectives;they encouraged consumerism in the midst of extreme poverty and posed a threat to cultural andlinguistic diversity.


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Social Services: About the quality of education given to children, the Approach to the Eleventh Five YearPlan stated: A recent study has found that 38 per cent of the children who have completed four years ofschooling cannot read a small paragraph with short sentences meant to be read by a student of Class II.About 55 per cent of such children cannot divide a three digit number by a one digit number. These areindicators of serious learning problems which must be addressed. The less said about the achievements inhealth the better. The Approach to the Eleventh Plan concedes that progress implementing the objectives

of health have been slow. The Report gave the particulars of the rates of infant mortality (per 1000 livebirths) for India as 60 against Sri Lanka (13), China (30) and Vietnam (19). The rate of maternal mortality(per 1, 00,000 deliveries) of India is 407 against Sri Lanka (92), China (56) and Vietnam (130).

Growth of Slum Capitals: In his 2007-08 Budget Speech, Finance Minister Chidambaram put forth aproposal to promote Mumbai as a world class financial centre and to make financial services the nextgrowth engine of India. Of its 13 million population, Mumbai city has 54 per cent in slums. It is estimatedthat 100 to 300 new families come to Mumbai every day and most land up in a slum colony.

The cumulative FDI inflows (until September 2006) to the New Delhi region were of Rs. 27,369 crores andto Mumbai Rs. 24,545 crores. The two spots of New Delhi and Mumbai received 46 per cent of the totalFDI inflows into India. The FDI inflows have in no way assisted in improving the health and environment

conditions of the people. On the other hand, the financial capital of India and the political capital of Indiaare set to become the topmost slum cities of the world.

To make Globalization WorkUnder the phenomenal growth of information technology which has shrunk space and time and reducedthe cost of moving information, goods and capital across the globe, the globalization has broughtunprecedented opportunities for human development for all, in developing as well as developed countries.Under the commercial marketing forces, globalization has been used more to promote economic growth toyield profits to some countries and to some groups within a country.India should pay immediate attention to ensure rapid development in education, health, water andsanitation, labor and employment so that under time-bound programmes the targets are completedwithout delay. A strong foundation of human development of all people is essential for the social, politicaland economic development of the country.

Though at present India appears to be dominant in some fields of development as in IT-ITES, thisprosperity may be challenged by other competing countries which are equipping themselves with betterstandards of higher education. As detailed earlier, our progress in education has been slow and superficial,without depth and quality, to compete the international standards.

The government should take immediate steps to increase agricultural production and create additionalemployment opportunities in the rural parts, to reduce the growing inequality between urban and ruralareas and to decentralize powers and resources to the panchayati raj institutions for implementing allworks of rural development. Steps should be taken for early linking of the rivers, especially in the south-bound ones, for supply of the much-needed water for irrigation.

It should be remembered that without a sustainable and productive growth of the agricultural sector, theother types of development in any sphere will be unstable and illusory. Despite the concerteddevelopment in manufacturing and service sectors, despite the remarkable inflow and overflow of foreignreserves, agriculture is still the largest industry providing employment to about 60 per cent of theworkforce in the country.

Mere growth of the GDP and others at the macro level in billions does not solve the chronic poverty andbackward level of living norms of the people at the micro level. The growth should be sustainable with


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human development and decent employment potential. The welfare of a country does not percolate fromthe top, but should be built upon development from the bottom

India Globalization Capital, Inc. - Financial and Strategic Analysis Review

Summary

India globalization capital, Inc. (IGC) is a blank check company engaged in acquiring operating businesseslocated in India within heavy construction, mining and quarrying and civil construction and engineering ofhigh temperature plant sectors. The company carries out its operations through its wholly ownedsubsidiary India Globalization Capital, Mauritius, Limited (IGC-M). The company operates in India, the U.S

and Mauritius. IGC is headquartered at Maryland, the U.S.

Global Markets Direct, the leading business information provider, presents an in-depth business, strategicand financial analysis of India Globalization Capital, Inc.. The report provides a comprehensive insight intothe company, including business structure and operations, executive biographies and key competitors. Thehallmark of the report is the detailed strategic analysis and Global Markets Directs views on the company.

Scope

The companys strengths and weaknesses and areas of development or decline are analyzed. Financial,strategic and operational factors are considered. The opportunities open to the company are considered and its growth potential assessed. Competitive or

technological threats are highlighted. The report contains critical company information business structure and operations, the companyhistory, major products and services, key competitors, key employees and executive biographies, differentlocations and important subsidiaries It provides detailed financial ratios for the past five years as well as interim ratios for the last fourquarters. Financial ratios include profitability, margins and returns, liquidity and leverage, financial position andefficiency ratios.

Why India is Cautiously Confident About GlobalizationPublished: October 24, 2001 in Knowledge@Emory


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The past 10 years of economic transformation in India suggest that globalization is not hazardous to the

health of developing countries, says Montek Singh Ahluwalia, a former finance official in the Indian

government and one of the architects of Indias current economic policy.

Speaking last week at Emory Universitys Goizueta Business School, Ahluwalia, who is a director at the

Independent Evaluation Office of the International Monetary Fund, detailed the challenges of openingIndias markets amid internal and external dynamics. In addition to the Goizueta Business School, the

Claus M. Halle Institute for Global Learning and the Asian Studies department of Emory University co-

sponsored the lecture.

Ahluwalia spent nearly 20 years in the Indian government as an economic advisor to the Prime Minister

and a secretary in the Ministry of Finance. During that time, India went from being a relatively closed

economic system to an open one able to compete in a globalized world market. India began aggressively

to open its economy after a severe foreign exchange crunch during the early 1990s. In the process,

according to Ahluwalia, Indias gross domestic product (GDP) and per capita income growth nearly

doubled. Ahluwalia believes that if the Indian government follows the path of the last 10 years andimplements more reforms, GDP growth could grow to 8% or more.

On the other hand, Ahluwalia noted, the signs of a backlash against globalization the riots in Seattle,

Washington and Genoa as well as continuing protests against new world trade accords could make it

difficult for Indian politicians to make the case for continuing to open Indias economy. "It has been a

painful debate in many developing countries to participate in globalization, so it is puzzling to see protests

coming from developed countries that many believe are the ones that have benefited most from

globalization," Ahluwalia said. "I think it is extremely unfortunate.

"But I think the attitude in India toward globalization is cautiously confident and the perception is that

economic reforms have worked but could have done better. I believe we can move faster. Enough people

have seen what is to be gained. Barring unexpected changes, there is a good chance India will continue

down this path and do better," Ahluwalia said, noting that the government has recently increased GDP

growth targets to 8%.

The roots of the economic crisis that struck India in the early 1990s lie in decisions the country made

more than 50 years ago after it gained independence from Britain. Convinced that unfettered capitalism

would not work in a country where poverty abounded, Indias leaders emphasized a mixed economy

where private enterprise existed but was heavily regulated by government. The public sector dominated

economic decisionmaking. Foreign investment was allowed but viewed with suspicion, trade was

discouraged through mechanisms like import licenses and the central government attempted to direct all

domestic private investment. The results were pitiful, with per capital income growth of less than 1.5%

annually and GDP growth barely edging over 3.5%, leaving India lagging behind other developing

countries.

In contrast, neighbors like China were growing GDP at an 8% clip or better. Even East Asian economies

like Malaysia, Indonesia and Thailand were growing faster. No longer could India make excuses. "It was a


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very important globalizing influence," Ahluwalia observed. "We didnt contemplate our navel, we looked

around and saw what was happening."

During the 1980s, Ahluwalia said, a wide-ranging debate inside the Indian government produced a

consensus that an overhaul was necessary along the lines of what other, more successful, developing

countries were doing. "We dont deserve any great intellectual credit for having come to this conclusion. Itwas not India that changed its mind; it was the whole world that changed its mind," Ahluwalia said.

Countries from Latin America to Europe had begun to rid themselves of their state-led economic systems

during the late 1980s and were being rewarded with faster growth rates.

Matters came to a head after the end of the Gulf War in 1991, a time of economic crisis for India. The

countrys foreign exchange reserves dropped so sharply that they could have barely paid for a few months

of imports. P.V. Narasimha Rao, Indias prime minister at that time, argued that major changes in

economic policy would be needed to steer the country out of the crisis. The previous years of discussion

had produced a consensus about what needed to be done and the collapse of the Soviet Union had

widely demonstrated the weakness of socialist planning models. India began to embrace capitalist policieswith vigor. Over the next 10 years, import licenses were dropped and tariffs were reduced to the level of

Indias East Asian neighbors. Foreign investment was actively wooed. Government controls on domestic

investment were largely abolished and it was agreed that the public sector needed to stay out of any

endeavor that could be accomplished by private firms.

In Ahluwalias opinion, the economic reforms of the 1990s could have been accomplished far quicker were

it not for the messy realities of Indian democracy. "What was done in 10 years could have been done in

five with no damage to the economy if we hadnt had to deal with adversarial politics."

But he noted the slower pace also had some political advantages. Because of Indias penchant for

periodically throwing out its governments, the economic reforms of the 1990s took place during three

separate governments that spanned the entire Indian political spectrum. Even though opposition parties

dutifully criticized whatever the party in power was doing, once in power themselves they often continued

and extended the same policies.

"I think this is very healthy," Ahluwalia said. "It shows we can have politics but still respect a professional

consensus."

According to Ahluwalia, plenty of work remains to be done. India, he says, is only three-quarters of the

way to fully liberalized trade. Foreign investment is up from $100 million in 1991 to $3 billion in 1999

but hasnt approached the level achieved by much smaller Asian competitors. The financial sector is only

partly liberalized, with much of the banking system still controlled by the government. The privatization of

public enterprises has so far been limited.

In particular, India has had trouble improving its infrastructure. In this area, Ahluwalia said, the public

sector must continue to play a large role, but it also has to perform better. The modernization of the


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telecommunications system has gone well and Indian industries that use it have become competitive on

the world stage. On the other hand, the countrys power grid needs major improvement.

Will India be able to maintain its momentum toward globalization? It depends on how several trends play

out, Ahluwalia said. The Indian public must be convinced that globalization is reducing poverty in the

country. Ahluwalia says the data clearly indicates poverty rates have gone down, but not as fast as thegovernment would like. In addition the nature of poverty in India is changing, from concern about whether

there is enough to eat to whether there is enough decent health care. "To me," said Ahluwalia, "this is a

success. The target gets set higher as your capacity improves."

Not all the states of India are benefiting equally either. Some states are prospering, others are stagnant.

That produces a creative tension, something Ahluwalia also views as a positive. "Will the incentive to

emulate success overwhelm the frustration of not getting anywhere? In my judgment it will."

Ahluwalia cited one sobering statistic that suggests how far India has yet to go. In 1950, Indias share of

world trade was 2%. By 1990, its share had fallen to 0.4%. "Thats what the old economic model did tous," Ahluwalia said. "Economic reform has improved that number to 0.6%, but if it took 40 years to come

down, it may take 40 years to get back up. We may never reach 2% again, but clearly we are not being

squeezed out of the world market anymore."

1. Since its foundation in 1980, Syntel becomes a global provider of Information Technology (IT) andKnowledge Process Outsourcing (KPO) solutions, with global development centers in India and US.What is your vision for the next five years?

Ans: Globalization of services is an irreversible mega-trend. Our vision over the next five years isto leverage this trend by helping our clients become more competitive in their respectivemarketplaces. This would include helping our clients to reduce costs, focus on core competencies,leverage technology for competitive advantage, and provide thought leadership as a strategicpartner. We believe our size, flexibility and deep experience uniquely position us to be this partnerand work closely with our clients to provide customized solutions.

2. How do you see India as a growth indicator? What distinguishes India from other emerging

economies as it is the fastest growing region in the world?

Ans: India is distinguished by its availability of a robust infrastructure (telecom, power and roads).Telecom facilities and regular, reliable power availability are important prerequisites to supporteconomic growth. In addition, roads and highways must be able to support transportation growthto enable commerce.These differentiators are driven by the Indian Government, which understands the importance ofinfrastructure to industries such as IT and has created an environment to facilitate its developmentand expansion.


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3. Please discuss some of the sectors or industries to which Syntel serves. How do you define yourrelevance to KPO industry?

Ans: Syntel has a deep vertical profile, delivering domain expertise with differentiated services

addressing industry challenges head on. These targeted solutions are in addition to our coreofferings of application development, maintenance, migration, and testing. We have dedicatedvertical practices in Banking & Financial Services (including specialized units for cards & paymentsand capital markets), Insurance, Healthcare & Life Sciences (including specialized units forproviders, payers, and pharma), Retail, Logistics, Manufacturing, and Telecom.

Our intimate understanding of the vertical business and how technology drives processes makesSyntel extremely relevant to the KPO industry as we integrate and optimize the applications thatmake business run.

4. Please shed some light on Syntel's Global Delivery Service approach, which enables thecompany to drive speed-to-market, with the best technology at a very competitive price point.

Ans: With mature processes to execute Global Delivery better than anyone, Syntel marries theinherent time-to-market and economic efficiencies with an array of other benefits that bring withthem long-term value.

FLEXIBILITY: Syntel deploys a custom hybrid delivery model that fits your business goals.Decisions on how and where solutions are delivered are made based on what is best for yourbusiness objectives and culture. A "stepped" approach can be deployed for organizations new toglobal delivery. A proprietary knowledge transfer methodology guarantees knowledge continuity.The Syntel team is "on-site-centric," working beside you and with you, day after day, learning yourbusiness and reaching your goals. And each project involves the best combination of Syntel'sresources-on-site and offshore - to form a seamless extension of your own IT operations. The poolof India resources created by Syntel with its ongoing US Healthcare University focus enables rapid,

flexible transitioning and ramp up of projects and processes.

RELIABILITY: The effectiveness of Syntel's Project Managers is built on a unique, rock-solidinfrastructure and reflected in our customers' abilities to sleep well at night. Global DevelopmentCenters are outfitted with robust, secure, data communications networks, enabling project teamsto pass complex information between centers across the globe - securely and seamlessly. Ofcourse, the processes at the Centers themselves conform to SEI CMMi Level 5 for applicationdevelopment, maintenance, and production support as well as ISO 27001 certification.

LEADERSHIP: When you bring projects to Syntel, you are not "throwing them over the wall," youare bringing valuable intellectual capital and skills into your business, along with a set of processesthat ensure a non-disruptive transition to the outsourcing model. Syntel helps manage the changeand its complexities with proven tools, approaches, and models, taking the entire ecosystem into

account. Factors such as business user education and comfort, cultural training, clear roles andresponsibilities, and rules of engagement are considered in developing a customized, balancedprogram for you. For example, our customers regularly leverage our healthcare leadership in termsof U.S. regulatory updates affecting payers, providers and life sciences. This acceleratescompliance since customers don't have to start from scratch since they can leverage Syntel'sexisting re-usable assets.

Other firms have attempted to mimic Syntel's approach to Global Delivery, but no other companyhas the ability to execute it like Syntel does.


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5. What are your different products available for the SMBs and what are the benefits of yourproduct range over the competitors?

Ans: SMBs can leverage the full range of Syntel's capabilities - from architecture to development totesting. The strength of every Syntel service is in its customization. While Syntel provides an

extensive range of services for our customers, there are no cookie cutter solutions. Every solutionis tailored to our customers' business challenges and objectives. That is the key advantage ofworking with Syntel - our consultative solution development. We deliver repeatable, qualityprocesses and output, but each engagement is delivered a unique solution in tune with thecustomer priorities.

6. What are the various programs that enable your partners' growth?

Ans: Syntel offers cost-savings solutions like technology consumption management, testingautomation, and portfolio rationalization as well as targeted business solutions in alignment withthe indicators of success in their vertical industry that will lead to market leadership and growth

SHIMOGA: Former ambassador to India, the Philippines and Australia, and Professor Emeritus at theXavier Institute of Management and Entrepreneurship, Bangalore, CP Ravindranath, said Friday pointedout, however, that the growth prospects in India and the cycle of globalization Considerably.

But to put it into reality requires a combination of measures, institution building and good governance onthe part of government, strategic thinking and a high level of competitiveness on the part of a sustainableeconomy and industry and improving the quality on the part of our education system, he said.

He gave the floor to the programming of the national conference on New growth cycle in the context ofglobalization: Lessons for India Inc Organized by the Division of management studies Jawaharlal NehruNational College of Engineering (JNNCE ).

He said: For the economy as a whole around to see the most of the growth cycle, these are the words ofeconomist Dani Rodik, the combination of the opportunities offered by global markets, with a domesticinvestment and the establishment of institutions such as the National Strategy for the Advancement ofanimals ghosts of the entrepreneur.

Mr. Ravindranath said that in the historical perspective, globalization can be seen as the last phase in theevolution of the world by the Industrial Revolution.

The history of globalization, wrote today in two colours: a color of the technological developments intransportation and communication, and secondly, by government measures, the nature and the way inwhich governments have intervened the reduction of barriers to trade and investment flows around theworld.

He asked: Now, with all this in perspective, what are the missions of India Inc see how we theopportunities and challenges of globalization? He said, As India Inc` Includes Government Our politicalclass and the industry, including workers, answer to this question, a wide range of opinions. however, it


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should be possible to project some ideas on how we should react approach to globalization and what is thebest and what he asks.

Mr. Ravindranath said the GDP of India, which has stagnated at 3.5 per cent in the first three decades ofplanning and rose to 5.5 percent in 1980, took an average of 6 percent in 1992 -93, may be due forreforms. But the logic of globalization dictates the continuation of reforms in several areas, the markets

of the element for the public sector and financial sector restructuring and tax reform, he said.

He said, without radical economic reforms of the increase in the annual growth rate of 9 percent to 10percent and to eradicate poverty and to achieve developed country status by the year 2020 has not beenpossible.

Well, it is a major challenge for India Inc In a globalization of the world, our will and capacity toimplement the part of the basis of economic reform, he added.

The fact that the repeal of the economic performance of our hinge, except for more economic reforms, themarked improvement of infrastructure, attracting more foreign direct investment and better governance ,he said, it is also an overview of the prospects for India in the sharing of knowledge and sectors of

manufacturing to a global economy is the general assessment that the country, the potential of force isthe capacity scalability.

The Rector of the University of Kuvempu, K. Chidananda Gowda, who opened the conference, spoke indetail of India on the strengths, weaknesses, opportunities and risks associated with economicglobalization. He said that India was opened by the third phase of globalisation, and added that, while

India has also in the first phase of globalization during the first century after Christ about their economiccontacts with Rome with the Kerala is a major trading centre, it is not much work to do, the second phaseof globalization, between 1870 1914, when, after the British Regime.

However, it is appropriate to ponder India on the question whether it the necessary political will to take

the opportunities of globalization threw overcome its threats and vulnerabilities to attain, the greater theeconomic growth, he said

The former ambassador to India and Australia, the Philippines and professor of management, CPRavindranath, provide the address to the national conference on the theme "New growth cycle in thecontext of globalization: lessons for India Inc Shimoga to Friday. SHIMOGA: Former ambassador to Indiaand Australia, the Philippines and professor emeritus at the Xavier Institute of Management andEntrepreneurship, Bangalore, CP Ravindranath said Friday that prospects for India in the growth cyclearising of globalization are considerable. "But to implement requires a mixture of politics, institutionbuilding and good governance from the government, strategic thinking and a high degree ofcompetitiveness

Accomplishing management training
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In line with its service to the cause of management training and its overall goal of a real school, XavierInstitute of Management and Entrepreneurship (XIME), Bangalore, is organising an internationalconference on "Managing the Education - Land prospects in a Globalisierenden World, "" In collaborationwith the Association of Indian Management Schools. The Hindu and The Hindu Business Line, the mediaare partners in the Conference, the third of the series on XIME is hosted since 2005. Globalization haslaunched management training, more than any other field of higher education. The theme of this

conference is that the management of training

To be or not to be an entrepreneur

How are final year students of MBA from the contractor? While most of them hard and continue to darethe absence of a single window clearance and financial support limited their prospects. The government isready to create a favourable climate for businesses? Looking for a job or work-Provider ": students of theBharathidasan Institute of Management to discuss the options before them. -- Photos: M. MoorthyBharathidasan students at the Institute of Management (BIM), a leading Business School, very interested,take the jump as entrepreneurs compete in the global market for small industries, if the

Malkani demand for the positive attitude

October 18 The Pondicherry Lt Governor, KR Malkani, brushed today, next to the negative evaluation bythe pessimists in the country, achievements and said it had made rapid progress in the industry, 'Agriculture and animal protection. An opening three-day annual Institute of industry interface of theSchool of Management at the University of Pondicherry, under the banner of "synapse 2002" on thecampus of the University, he said, the country n is not the opening of too much and too quickly in theglobalization process. It should not be comparisons between India and other countries such as China, as

Careers, trends and alternative options

Some of us are somewhat confused, according to the study, as well as many opportunities, "said a publicasset, when two weeks, I have three hours over a career to speak before a group composed of hundreds

of students and parents. It was a presentation aimed to shed light on the many possibilities with regard toacademic programs and more than two careers. At the beginning, not the public knew that somethingthere of engineering, medicine, civil services and law was possible. An effort has been made for nearly 50with career options and courses that lead them. As usual, there were many

Definition Globalization

A new lease of securitization.

Globalization has highlighted the need for greater liquidity and the granularity of investment in the realestate market. Securitization - transformation of society assets and prospects in the securities market -has become an important element of finance and insurance, banks, the possibility of extending theirservices and an increase in lending . UNDER the wealth of investment options, real estate, a strong

position of command. However, they are of great disadvantage is the poor liquidity. Globalization hashighlighted the need for greater liquidity and the granularity of investment in the real estate market. Theneed for higher revenues and lower

GE Chief Executive globalism talks with the Indian authorities ancient technology

Chairman and CEO of General Electric Jeffrey Immelt only provided a remarkable speech on the promiseand perils of globalization, several thousand graduates of the elite technology schools in India, the IndianInstitute of Technology (IIT), Santa Clara reunion for former event. Let me your blog some of his
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comments, before I walk around more substance to a story of newspaper Saturday. "I am here todaybecause I am a big consumer of this product you," said GE chieftan with laughter and applause. Readnotes, but appear willing to facilitate, Immelt said GE employs around 1500 100000 people India were of

NZ finger Indians

Make sure before it, follows a course in India and at the end of the academic year, you get a conclusionforeigners. Voila, it opens up new prospects and means employment opportunities abroad. On thesidelines of the Asian Development Bank currently meet here, the economic development of New Zealand,Trevor Mallard, the minister presented Thursday his country for training and research efficiency.Hyderabad was the last station. Having already turned Chandigarh, Delhi and Bangalore, his team onceagain their attention on the two cities to come tie-ups with the University of Hyderabad (HCU) and IndiaSchool of Business. In an interview with

Economy has huge growth prospects.

CHENNAI, June 12 The Indian economy has huge prospects for growth, according to Mr S.Venkitaramanan, former Governor of the Reserve Bank of India. Delivering the keynote address at a

function to release a book containing articles written by him and organised by ICFAI Business School,Chennai on Thursday, he said, "I am not an economist but I am certainly a keen student of economics.The Indian economy is growing at 5-6 percent per annum ". The two-volume book, Indian Economy:Commentaries and Reviews, comprising articles written by him in various dailies, was released by Dr. RajC Besant, Chairman of ICFAI. Mr

The economy has made enormous growth prospects

Chennai, June 12. The Indian economy has made tremendous growth prospects, says P. Venkitaramanan,former Governor of the Reserve Bank of India. Speaking time a function of sharing a book with articles,organized by him and by ICFAI Business School, Chennai, on Thursday, he said: "I am not an economist,but I am certainly a great science student economic. Indian economy is growing at 5-6 percent per year. "

The two-volume book, the Indian economy: criticisms and comments, made to articles in variousnewspapers, was created by Dr. Besant C Raj, chairman of the ICFAI. Mr. Venkitaramanan is known forgold from the

Fine prospects await artists

I am a Plus Two (arts) student and would like to pursue a career in fine arts. Please advise. Shalini Toapply for the five-year integrated bachelor of fine arts (BFA) programme, you have to clear theIntermediate Grade Drawing Exam. This course offers excellent employment prospects. With mediaspending increasing by the day of late, ad agencies are always on the lookout for creative people. Some ofthe reputed schools offering BFA are J.J School of Arts, Mumbai; Faculty of Fine Arts, M.S. University,Baroda; College of Art, New Delhi; J.J. Institute of Applied Arts, Mumbai; Government College of

Exports on the back foot: Montek

Member of the Planning Commission Montek Singh Ahluwalia asked today, completes the modernization ofexport procedures in the country, described as one of the priorities of field, the country should be. On theoccasion of the celebration of convening a symbiosis between the Institute of Foreign Trade, the formersecretary of finance complained that in recent years, exports have been disappointing. `` All thishappened because we are focusing our efforts on exports of before,''he said and added that the
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procedures of exports was archaic and are not adapted to modern times. He said, `` we have a great lookat the whole

Hands-on feast Manager

The fourth Globsyn Business School, Serendipity'07, was a feast of fun-filled, presented to the

management skills and creative abilities of the young B-students. What is outside the campus routinecustoms lies in the fact that students, regardless of the responsibility of the entire event. From market todevelop and host the event, Serendipity was the idea of Globsyn students in the Business School. Thisyear's celebration took place at a complex in Salt Lake Bharatiyam, 6 And on Jan. 7. The eclectic mix offorms of appearance started with a summit of the League, the stranglehold that illustrious trends in therapidly

Prescribe expert strategy for growth

BANGALORE Dec. 16. Technological progress associated with the utilization of human resources can makeIndia an economic superpower in the new world order, said experts attending a seminar on "Globalization- The challenges and opportunities for Germany" here Tuesday . Abid Hussain, Vice-Chancellor, University

Rai, Chhattisgarh, R. Natarajan, Chairman, All India Council for Technical Education, V. BalaBalachandran, JL Kellogg Distinguished Professor of Information and Accounts Management, NorthwesternUniversity, Evanston, Illinois, USA, Sarosh And J. Gandhy, chairman of the Board of Directors, XavierInstitute of Management Entrepreneurship (XIME), spoke at the seminar. Mr. Hussain said, dass, it is notnecessary for India

The tsunami of the global economic downturn continues to impact the foundation of the outsourcingindustry both near and long-term. Service providers are already feeling the effects of decreased marginsand employee downsizing, while service buyers are reducing IT budget allocations for outsourcingengagements. This in turn has caused a cascading effect across the industry evidenced by dryingpipelines, cancelled bookings and increased pressure to deliver value beyond cost.

Decreasing margins and headcount will push providers to better utilize existing resources. Serviceproviders need to implement new technologies in a more efficient manner to differentiate themselves andimprove service delivery processes. Clients, with reduced IT budgets, will be forced to be more selective demanding far more stringent Service Level Agreements, greater contractual flexibility and output/resultbased payment schemes.

These shifts will significantly induce a high degree of consolidation that will be felt across the outsourcingecosystem.

Paul Santos, Managing Director at Tholons Capital says: It's an opportune time for the larger players tocontinue their string of strategic, niche acquisitions. In an increasingly competitive market, andimprobable economic state, the mantra of only the strong will survive has never been more relevant.
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Smaller and less efficient providers may face difficulties in tapping new revenue streams and will be proneto acquisition or outright dissolution.

Undeniably, 2008 was a tumultuous year for outsourcing, and though we continue to advise clients toremain cautious in the year ahead, we do not discount the opportunities and potential still very muchevident in the market. We consider the current struggles of the industry as a driver for positive change

and expect the outsourcing industry to develop in the coming years, becoming more mature, efficient,dynamic, and ultimately more resilient. With prudence, heightened focus and a more adaptive approachtowards outsourcing in 2009 can in fact be a watershed moment for the global outsourcing industry.

These Tholons Top Ten Trends in Services Globalization 2009 will have a significant impact on GlobalOutsourcing for buyers, investors, providers and on emerging centers of excellence:

1. The market downturn will impact revenues during the first 2-3 quarters.

There are strong headwinds for vendors in the outsourcing space. We expect the worldwide marketdownturn to impact growth and margins for the first 2-3 quarters of 2009 before picking up and endingthe year on a stronger note as clients seek to cut costs and generate more revenues. During this period,

we see a reduced number of start-ups in the services sector as the focus shifts on sponsoring hard asset-intensive businesses. Moreover, it has become increasingly clear that the downturn is impacting revenuesand we expect most large firms will see a decline in Quarter over Quarter earnings.

2. Focus on domestic market to increase.

As Western economies continue to hurt, service providers will shift focus to domestic markets for growth.We are already seeing increased focus by vendors towards large (and growing) domestic markets such asfound in India, China, Argentina and Brazil. Fulfillment of customer support and back office servicestargeted for retail, Telco, and Financial Services verticals will be among the hot spots for providers lookingto tap the surging local demand of outsourced services.

3. Global economic downturn and financial sector consolidation will lead to increased outsourcing inHealthcare, Education, Retail, Telecom and Legal Process Outsourcing (LPO).

Global economic downturn is motivating service providers to focus on recession-proof industries likeHealthcare and education. Other sectors like manufacturing, retail and telecom will have to make asignificant shift and reduce cost drastically to survive. These sectors will be attractive industries as theylook for opportunities to cut cost. It is more a question of survival than being just competitive in suchturbulent times.

Consolidation in the financial sector is inevitable due to the global financial crisis. This will create M&Aopportunities which will generate further business for LPO firms. We expect strong growth for LPO firms.Increased M&A activity in the financial sector would also mean that merging companies would want to

integrate their existing outsourced services leading to increased spending for integration projects. Theprocesses will revolve around integration of software applications, data center consolidation and tighterintegration of other operational platforms.

With financial institutions such as Lloyds TSB/HBOS and Bank of America/Merrill Lynch merging, serviceproviders will also find themselves bidding against incumbent transnational rivals like IBM, Accenture andHPEDS for several large-scale integration contracts (valued anywhere between US$500 million and US$1Billion over 5 years).


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4. Governments to take special initiatives in promoting destinations.

Emerging outsourcing destinations still trying to establish their brands will find the going tough, as clientslook for safer choices.

Cebu City, Shanghai, Beijing, Ho Chi Minh City and Krakow make up the top five spots in the recent

Tholons study of Top 50 emerging global outsourcing cities. We see significant government and industrysupport for these cities along with some other more popular emerging destinations like Cairo, Sao Paulo,Buenos Aires and Dalian.

5. Clients will increase geographic diversity in their service delivery locations.

Newer service delivery geographies are emerging with niche capabilities. The Philippines has exhibitedspectacular growth, with BPO export value aggregating close to 50% of India's Business ProcessOutsourcing (BPO) export.

Similarly, Vietnam has emerged as a solid alternative to India on the IT side, and we are seeingaggressive strategies from Vietnam-based players to increase traction in the global market. In the comingyear, we will see more clients asking for alternatives to India to de-risk their service delivery models thatare otherwise geographically limited.

Nearshoring as a low cost alternative to domestic sourcing will assume greater importance for processesrequiring the same time zone presence. Latin America with superior cost dynamics will emerge as a neartime zone alternative to Europe/US business adding Spanish language capability. In the near-term, thetop Indian firms are predicted to expand global footprints and open delivery centers in China, LatinAmerica, Eastern Europe and North America.

6. Pricing pressures will result in reduced rates and new measures to achieve cost savings and higherproductivity.

Pricing pressures will kick in as suppliers scramble to meet their quarterly targets through the year. Wewill see clients negotiating hard with suppliers to reduce costs, while suppliers will try to protect rates butoffer more value added services.

Large providers are expected to see EBITDA margins plunge below 20% over the next three years, as theymove more IT projects offshore mostly to India and struggle to balance operations with rising wages.The situation could aggravate if the Rupee continues to appreciate during this period.

On the delivery front, supplier movement from high onsite to low onsite deployment will be visible andnew tactical measures for cost savings and higher productivity towards clients and internal operations willmark new industry standards.

7. Consolidation imminent for small players focus away from large deals.

On the M&A front, large deals will slow due to a more tepid market. Challenges related to integration andmaintaining liquidity (as opposed to acquisition), will also be primary concerns for 2009.

Cross-border, inorganic investments are expected to increase in Japan and China with increased marketconsolidation seeing small to medium players being likely targets. We also see difficult times for small,non-differentiated players over the next 12 months. As clients look to reduce spends and rationalize costs,


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new business generation will be very difficult. Also, some of the existing engagements may come up forre-negotiation as clients look to vendor consolidation for better pricing and reduced program managementcosts.

With Tier One firms witnessing flat to negative Quarter over Quarter revenue numbers, smaller players wilfind the going tougher, and will be more open to mergers or takeovers to survive. We believe a large

proportion of sub-1,000 (employee) companies will either close shop or be acquired.

8. Outsourcing revival by 2009 end driven by small to mid sized (SME) clients.

The fundamental motivation for offshoring has not diminished in fact it has actually become stronger.We expect to see a revival in outsourcing, and we are already seeing an uptick in outsourcing relatedactivity for engagements that will come to fruition in 9-12 months.

The mid-market swing will also be aided by providers developing market specific, full service solutionscatering to this space.

9. Strong focus on innovation, R&D and technology adoption will be key differentiators for providers.

We expect increased pressure to differentiate one's service offerings. Companies that focus on solution-based selling will weather the storm. Companies that do not innovate will lose market share.

Otherwise, they run the risk of being an also ran compared to larger, feature-rich Multi-National Company(MNC) vendors.

10. Sourcing deal sizes will increase for large clients.

Large clients will move towards single vendor sourcing to get volume based price discounts, as opposed tothe best of breed solutions for specific sourcing requirements, which tend to cost more, and carry a higherprogram management overhead.

They will also look for opportunities to group an asset sale with a sourcing contract, as vendors showreadiness to use their balance sheet strength for top line gains. As a result, we anticipate the average deasizes to go up, even as the overall deal volumes remain depressed.

Globalization, Poverty, and Inequality since 1980David Dollar

David Dollar is country director for China and Mongolia at the World Bank; his email address is

[email protected] .

One of the most contentious issues ofglobalization is the effectof global economic integrationoninequality and poverty. Thisarticle documents five trends in the modern era ofglobalization,startingaround 1980. The first trend is that growth rates inpoor economies have accelerated and are higher thangrowth ratesin rich countries for the first time in modern history. Developingcountries per capita incomes
mailto:[email protected]:[email protected]


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grew more than 3.5 percenta year in the 1990s. Second, the number of extremely poor people in theworld has declined significantlyby 375 millionpeople since 1981for the time in history. The share ofpeople in developing economies living on less than $1 a dayhas been cut in half since 1981, though thedecline in the shareliving on less than $2 per day was much less dramatic. Third,global inequality hasdeclined modestly, reversing a 200-yeartrend toward higher inequality. Fourth, within-country inequalityin general is not growing, though it has risen in several populouscountries (China, India, the United

States). Fifth, wage inequality

is rising worldwide. This may seem to contradict the fourth

trend, but itdoes not because there is no simple link betweenwage inequality and household income inequality.Furthermore,the trends toward faster growth and poverty reduction are strongestin developingeconomies that have integrated with the globaleconomy most rapidly, which supports the view thatintegrationhas been a positive force for improving the lives of peoplein developing areas.

GLOBALISATION OF THE ECONOMYA disaster for India and other developing countries

by Acharya Krtashivananda Avadhuta

Supporters of capitalism make vociferous campaigns in favour ofglobalisation of the economy. Multinational corporations (MNCs), with thecollaboration of Bretton Woods institutions (World Bank, InternationalMonetary Fund) and the World Trade Organisation (WTO) have imposed theirstrategic plan through the General Agreement on Tariffs and Trade (GATT).The strategy is to allow MNCs free access to all countries, removing alltrade restrictions. The similarities amongst the "standard menus" of allthese institutions is obvious:

STANDARD GLOBALISATION MENUS

IMF AND World Bank* Reduction of budgetary subsidies* Removal of subsidies for agricultural inputs* Removal of food subsidies* Pursuance of liberal economic policies* Promotion of foreign investment* Import liberalisation* Privatisation of the banking sector

WTO* Reduction of subsidies* Reduction of support for domestic agriculture

* Removal of PDS (food subsidies)* Pursuance of free trade by developing countries* Removal of restrictions on MNCs in utilities industries* Removal of barriers on imports* Lifting restrictions on entry of foreign investors

In his speech as outgoing chairman of the Group of 77, Luis FerdinandJaramillo of Colombia presented a sweeping critique of North-Southrelations. He traced the decline of the U.N., multilateral programmes and


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the Third World in global affairs to the rising power of Bretton Woodsinstitutions, which are under the control of Northern countries. He commented,

"The Bretton Woods institutions for their part continue to be made thecentre of gravity for the principle economic decisions that affect thedeveloping countries. We have all been witness to the conditionalities of

the WB and IMF. We all know the nature of the decision making system insuch institutions. Their undemocratic character, their lack oftransparency, their dogmatic principles, their lack of purism in the debateof ideas and their impotence to influence the policies of theindustrialised nations. We all know the way structural changes are imposedand how projects are formulated. And how subsequently, when many of thosepolicies and projects fail their authors disappear from the facilities ofPennsylvania Avenue. Nobody is then accountable for anything...."

Dubious BenefitsThe question may arise whether globalisation is justifiable for countrieslike India.

An audit of the performance of the Indian economy after reforms wereinitiated in July 1991 fails to reveal any spectacular achievements. Theopening of the economy to foreign capital has not succeeded in attracting asignificant flow of capital or technology into the country, especially intothe productive sector. Exports have picked up, partly as a result ofdevaluation of the rupee and partly because of general improvement inworld trade.

But after an initial slump, imports have grown rapidly, and presentindications are that there is likely to be a huge trade deficit by the endof the present financial year. Foreign debt has increased significantly andthe WB has cautioned that the servicing of the debt and repaymentobligations may begin to exert pressure on the international balance ofpayments in 1996-97 and beyond.

It may be asked whether an increase in foreign investment will lead to ahigher growth rate and better absorption of rural labour innon-agricultural employment. Employment in the private industrial sector,which stood at 7.55 million in 1982-83, was only 7.67 million in 1990-91 -that is, after nine years. This is only a 1.5 percent increase. At the sametime, gross capital formation at current prices rose by four times - 400 percent.

Modern industry is knowledge intensive. It may result in jobs for thehighly educated, but it is unlikely that jobs will be generated for the

poor, especially the surplus agricultural force of rural India, even whenthe growth rate of investment is high in the private sector.

Majority UnbenefittedThe failure of the reform process is evident from the speech of G.V.Ramakrsna, member of the Central Planning Commission, for the Garg MemorialLecture at the Institute of Naval Architects, New Delhi in April 1995:


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"Where are we now and how far have we come in the reform process....? Afterthree years, different people are looking at the reforms from their ownperspectives. They have more colour TVs, more channels on cable, moreimported goods, and so on. Nobody is any longer ashamed of conspicuousconsumption. Then we have the middle class, which is seeing this as anopportunity for its advancement to the upper class. Many feel making money

one way or the other will get them into the high consumption category. Thenwe have the lower class. They are worried as they ask: 'What is there inthis for us? We don't know what liberalisation is. We don't know what thecapital market is. What is our net gain in the package? We want jobs, lessinflation,' and they ask, have we got any of these?"

Even former Prime Minister P.V. Narasimha Rao, while speaking to his partyworkers in July 1995, attempted a similar audit of the reforms. The reportsaid: "He began by delineating the social structure's three segments. Thecrust according to him consists of about 60 million people (6.5 percent),who do not need to be canvassed about the economic reforms.

"The next layers he believes contain about 250 to 300 million people (27 to33 percent) belonging to the middle class, who are beginning to appreciatethe benefit of liberalisation.... It is the next segment, of 550 to 650million (60 to 71 percent) of lower income and poor people who remainunappreciative of the changes in the economy." (The Hindu Standard)

Amongst these lower income groups the largest consists of agriculturallabourers, who constitute 26 percent of the labour force. It is a sad commentaryon economic and political policies that almost half a century after Indianindependence more than half of her people are in that kind of plight.

To allow globalisation of the economy via financial markets, without anappreciation or analysis of its implications, is bound to be disastrous.

Preparation RequiredOne can cite the example of Taiwan, which has recently opened up itsmarkets to imports, as proof of the merit of following reforms likeIndia's. But that country prepared for this for over 30 years. The same isthe case of Japan and South Korea. India needs to modernise its financialinstitutions gradually before she throws the system open. It must berealised that by this measure, India will lose control over her domesticinterest rate policy. In a primarily agricultural country, opening theeconomy to large inflows and outflows of "hot money" moved around to takeadvantage of quarter percentage point interest rate gains would be disastrous.

Also, Taiwan has an annual trade surplus of approximately US$40 bn andsound foreign exchange reserves. India has a trade deficit, weak foreignexchange reserves and huge debts (about $70 bn). Its industrial base isalso weak. Is it judicious at this moment to open up the stock exchange tointernational capital movements? Before embarking on globalisation, Indiashould strengthen its village economy on a decentralised basis, moderniseits entire economic and financial system and strengthen her internationalcompetitiveness.


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It has been claimed that allocation of resources is best when done under afree market system. Unfortunately, with the present distribution of incomeand wealth, there is no such thing as a free market in India. Theglobalisation of India's financial sector would put the bulk of it into theclutches of money lenders.

India at present needs to expand and strengthen its basic industrialsector. Small scale industries, artisans, farmers, handloom weavers andcottage industries should be encouraged through decentralised planning,just allocation of resources and increasing credit facilities and training.

Without basic preparation, the introduction of so-called globalisation ispassing economic control on to MNCs, and whatever basic economicinfrastructure exists will be ruined instead of enhanced.

General mass reaction to such policies has thrown the previous Congressgovernment out of power. In the present "rainbow" coalition, FinanceMinister Cidambaram and Industry Minister Murasoli Maran are advocating

policies recommended by Harvard economist Michael Porter.

Chidambaram is a former Harvard scholar, and was Commerce Minister in theprevious Congress Party government. He is a strong supporter of the freemarket and liberalization of the economy. There is no reason to believethat he has radically changed his ideas and policies. The presentquasi-nationalistic coining of words - done at the insistence of hiscommunist colleagues in the present government - is only to camouflage thereal policies, which indiscriminately open India to the international economy.

Porter has show in his book Competitive Advantage of Nations that thecompetitive edge acquired by specific industries in various countries inglobal markets has not come from mere "laissez faire". Advantage is ratherthe outcome of deliberate policies of governments that develop thosespecific industries in a competitive way.

But this policy does not at all address the basic problems of strengtheningthe village economy, decentralisation of industrial development andstreamlining of financial institutions. It is incorrect to say that presentgovernment policy is radically different fr

the history of globalization is probably as old as the history of human civilization

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