MTI Business in India
Transcript of MTI Business in India
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Business in India
& CapINDIAlism
GROUP 5
AAKASHDEEP - PGP/14/126, AMEYA - PGP/14/004, ARIFUDDIN - PGP/14/014, EMILIA - IE/14/05, GERHARD - IE/14/06, GOUTHAM - P
KUMARESAN - PGP/14/150, MORTEN - IE/14/10, OBULESU - PGP/14/156, TOBIAS - IE/14/11, UMESH - PGP/14/310
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HistoryInward Looking Era (GDP growth 3 %)1950-1991
1991 - 2003
2003 - Today
Indias own attempt trying to grow without foreign investment
Mild Liberalization Era (GDP growth 5 %)
Relaxation of industrial regulations & quantitative restrictions;
reduction of tariffs; enabled import of capital goods & increase oflabour productivity
Extensive Liberalization Era (GDP growth over 6 %) India as IT service hub & backoffice of the world
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Current Headers & Forecast
Current Headers
The Economic Times
New York Times
The Economist
Handelsblatt
"Optimists believe that India's entrepreneurialspirit will make it a superpower over the nexttwo decades"
The Economist
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India & Capitalism
Definition Capitalism
Capitalism describes an economic system where the means ofproduction are privately owned, operated for profit from investment, and incompetitive markets.
Dictionary of Economics
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Structure of Indian Economy
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Indian Family GroupsTata Group Reliance
IndustriesAditya Birla
Sales: $ 84 bn. Sales: $58 bn. Sales: $35 bn.
Generation: 5th Generation: 2nd Generation: 4th
Industries:
Chemicals
Steel
Consumerproducts
ServicesEnergyICT
Industries:
Oil & Gas Textile
Telecommunicationsproducts
Petroleum
RetailInsurance
Industries:
Metals Cement
Wind power
Textiles
ChemicalsMining
InsulatorsRetail
Telco
Agriculture
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Indian Family Businesses - CharacteristicsComplexity
Reasons
Intricate chains of holding companies & subsidiaries
Outside capital can be brought in at multiple levelswithout weakening family control
Response to family spats
Like to do business with friends
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Indian Family Businesses - CharacteristicsConglomerate
Reasons
1 or 2 core activities Long & growing tail of other activities
History: British before 1947 & socialist era with restrictions
Culture: Marwari & Bania communities famous for trading
Tax
rather put money into new business than a bank account
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Role of Government & State in Indian economy 41 % of BSE 100 value is state-controlled;
Reserve Bank of India frowns upon bank loans for takeovers
In finance, energy & natural resources state controls 2/3 of production
Public-private partnerships are common on big infrastructure projects, but
private part suffers from low margins
State is partner and enemy, unlike e.g. in Korea
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Capitalism vs. CapINDIAlism India is neither following a Chinese way nor European way Going their
own way successfullyuntil now - CapINDIAlism
Family conglomerates have been merely a phase of capitalism in other
countries like e.g. in Europe, but have declined of their own accord
Should it also happen in India?
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CapINDIAlism
Family conglomerates arepowerful and internationalrecognized companies
State & conglomerates arespotting new opportunities &compensate eachother
India is still growing with this
system - Stable economicconditions
State-owned companies are notefficient & profitable by sufferingfrom inertia
Entreprenuerial spirit declined overlast decade (only 2% of IIM-Astarted own businesses)
Conglomerates are only middleweights in global context (e.g.compared to China)
Poor educational system &corruption
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Recommendations
Secure foreign investment without selling out Indian companies
Retain innovators & entrepreneurs within India, e.g. Mittal Steel
Profitability within all subdivisions of family conglomerates
Build companies that are global heavyweights Spread capitalism in geographical terms
Ensure inbound/outbound deals add value domestically rather than destroy it
Simplify access to funding (domestic & foreign)
Fight corruption & improve educational system (from primary school on) Invest in infrastructure
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