1 II- The 3 factors of resistance: The Good Crisis ! a) Sound - - PDF document

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1 II- The 3 factors of resistance: The Good Crisis ! a) Sound - - PDF document

Dec 19, 2022 267 likes •330 views

Flashback: 2 scenarios shock/non-shock in 2008 INDIA In and Out of the Global Crisis CEPII-NICCT April 2010 Dr. Jean-Joseph BOILLOT Economist, CEPII & co-founder EIEBG No Shock With Shock Jjboillot@gmail.com 2008-09 7.5 5.8

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Beyond crisis -J.J. Boillot 1

INDIA In and Out of the Global Crisis

CEPII-NICCT April 2010

  • Dr. Jean-Joseph BOILLOT

Economist, CEPII & co-founder EIEBG

Jjboillot@gmail.com

Beyond crisis -J.J. Boillot 2

Flashback: 2 scenarios shock/non-shock in 2008

No Shock With Shock 2008-09 2009-10 H1 7.5 6.8 5.8 3.9

Beyond crisis -J.J. Boillot 3

I- The 3 transmission channels a) Financial

Beyond crisis -J.J. Boillot 4

I- The 3 transmission channels b) Commercial: shock and absorbers

Exports Trends - World and India

  • 33.0
  • 23.0
  • 13.0
  • 3.0

7.0 17.0 27.0 37.0 47.0 57.0 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 World India Commodity Price Indices 50 100 150 200 250 300 350 400 450 500 2003M1 2003M5 2003M9 2004M1 2004M5 2004M9 2005M1 2005M5 2005M9 2006M1 2006M5 2006M9 2007M1 2007M5 2007M9 2008M1 2008M5 2008M9 2009M1 2009M5 2009M9 Energy Food Metals India's Exports and Import y-o-y Growth Rates

  • 45
  • 25
  • 5

15 35 55 75 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09

Exports Imports Major Export Destinations of India (Total Share % ) 5 10 15 20 25

UAE U S A CHINA SINGAPORE HONG KONG U K GERMANY

2000-01 2007-08 2008-09 Beyond crisis -J.J. Boillot 5

I- The 3 transmission channels c) Confidence and Credit - Households

Beyond crisis -J.J. Boillot 6

I- The 3 transmission channels c) Confidence and Credit - private investment

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Beyond crisis -J.J. Boillot 7

The « Good Crisis »!

Beyond crisis -J.J. Boillot 8

II- The 3 factors of resistance: a) Sound financial structures and monetary prudence

CREDIT CREDIT QUARTERLY QUARTERLY

5 10 15 20 25 30 35 40 45 sept-97 janv-98 mai-98 sept-98 janv-99 mai-99 sept-99 janv-00 mai-00 sept-00 janv-01 mai-01 sept-01 janv-02 mai-02 sept-02 janv-03 mai-03 sept-03 janv-04 mai-04 sept-04 janv-05 mai-05 sept-05 janv-06 mai-06 sept-06 janv-07 mai-07 sept-07 janv-08 mai-08 sept-08 janv-09 mai-09 sept-09

Beyond crisis -J.J. Boillot 9

II- The 3 factors of resistance: b) Productive structure: i) a strong Services sector

Beyond crisis -J.J. Boillot 10

II- The 3 factors of resistance: b) Productive structure: ii) the consumption driver

  • 10

10 20 30 40 50 60 70 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10e 2010/11p 2011/12p Inv Ext Conso priv Conso Pub

  • 5

5 10 15 20 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10e 2010/11p 2011/12p FBCF totale C Pvte C totale

Beyond crisis -J.J. Boillot 11

II- The 3 factors of resistance: c) Economic Policy: i) Budgetary policy

  • 20
  • 10

10 20 30 40 50 60 70 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10e 2010/11p 2011/12p FBCF totale C Gov FBCF Prvt corp Beyond crisis -J.J. Boillot

12

II- The 3 factors of resistance: ii) Monetary policy and quick confidence return

5000 7000 9000 11000 13000 15000 17000 19000 21000 23000 25000

  • 6000
  • 4000
  • 2000

2000 4000 6000 BSE SENSEX FII USD million)

2 4 6 8 10 12 14 16 18 20 déc-01 déc-02 déc-03 déc-04 déc-05 déc-06 déc-07 déc-08 déc-09 FW6mois call rate 91j 10ans

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Beyond crisis -J.J. Boillot 13

iii) And Flexibility of the Monetary policy

**Qualified Institutional Programme 500 1000 1500 2000 2500 3000 3500 apr– Jan 2008/09 apr– Jan 2009/10 Increase in Credit to Commercial Sector Increase in bank holding

  • f Govt securities *

Capital Market- all Sources Debt (bonds) $ Capital Market Equity Raising (a+b+c) IPO and FPO (public) QIP ** Rights Bank Sources of Funds Rs Mds

Beyond crisis -J.J. Boillot 14

III- Outlook 2010 a) Uncertainty factors i) the inflationary pressures

Beyond crisis -J.J. Boillot 15

III- Outlook 2010 a) Uncertainty factors ii) Agriculture production

Unit: per cent Q1 Q2 Q3 Q4 apr-Jun July-Sep Oct-dec jan-10 all Products 0,5

  • 0,1

4,5 Primary Goods 6,5 7,9 11,8 Primary Food 9,3 13,9 16,3 Foodgrain 13,5 14,6 16 Energy

  • 8,2
  • 9,3
  • 1,3

Manufactured Goods 1,5 0,2 3,6 Manufactured Foods 12,6 11,4 22,8 Special combinations Manufactured goods Excl Foods

  • 1
  • 2,3
  • 0,6

Manufactured Foods Excl Sugar 6 1,9 12,4 Primary & Manufactured Food Items Wheat 6,6 3,7 12,2 14,8 Rice 16,2 18,2 13,3 12 Coarse cereals 16,7 19,5 17,5 17 Pulses 16,3 21,1 35 45,7 Fruit & Vegetables 10,3 12,7 13,3 8,4 Sugar gur & khandsari 31,6 38,3 48,9 Dairy products 3,8 5,8 11,3

Beyond crisis -J.J. Boillot 16

III- Outlook 2010 a) Uncertainty factors iii) Real income and demand

Beyond crisis -J.J. Boillot 17

III- Outlook 2010 a) Uncertainty factors iv) the budgetary soft-landing

Beyond crisis -J.J. Boillot 18

III- Outlook 2010 but do not overestimate the Public debt constraint

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Beyond crisis -J.J. Boillot 19

III- Outlook 2010 b) Because the Potential trend is on the upside

Beyond crisis -J.J. Boillot 20

III- Outlook 2010

with a specific Indian pattern in comparison with China

Post-Reform GDP Grow th Rates: China Vs India (t=1978 for China and 1991-92 for India) y = 0,2011x + 4,484 R2 = 0,365 y = 0,0076x + 9,7081 R2 = 0,0008 2 4 6 8 10 12 14 16 t t+2 t+4 t+6 t+8 t+10 t+12 t+14 t+16 t+18 t+20 t+22 t+24 t+26 t+28 % China India Linéaire (India) Linéaire (China )

Beyond crisis -J.J. Boillot 21

III- Outlook 2010 b) Sustainability and Attractivity as high as China

Table 5 Balance of Payments 2004-2010 USD 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 Total Merchandise Exports 85,2 105,2 128,9 166,2 189 168,7 Merchandise Imports 118,9 157,1 190,7 257,6 307,7 296,8 Merchandise Trade

  • 33,7
  • 51,9
  • 61,8
  • 91,5
  • 118,7
  • 128,1

Balance

  • 4,70%
  • 6,20%
  • 6,50%
  • 7,40%
  • 9,70%
  • 9,80%

Net Invisibles 31,2 42 52,2 75,7 89,9 98,6

  • /w Software & BPO

14,7 23,8 27,7 37,2 44,5 47,2 Private Remittances 20,5 24,5 29,8 41,7 44,6 55,7 Investment Income

  • 4,1
  • 4,1
  • 6,8
  • 4,4
  • 4
  • 4,1

Current account Balance

  • 2,5
  • 9,9
  • 9,6
  • 15,74
  • 28,7
  • 29,5

% GDP

  • 0,30%
  • 1,20%
  • 1,00%
  • 1,30%
  • 2,40%
  • 2,20%

Foreign Investment 13 15,5 14,8 45 3,5 47,3

  • /w FDI (net)

3,7 3 7,7 15,4 17,5 20,1 Inbound FDI 6 8,9 22,7 34,2 35 36 Outbound FDI 2,3 5,9 15 18,8 17,5 15,8 Portfolio capital 9,3 12,5 7,1 29,6

  • 14

27,2 Loans 10,9 7,9 24,5 41,9 4,1 7,2 Banking capital 3,9 1,4 1,9 11,8

  • 3,2

4,9 Other capital 0,7 1,2 4,2 9,5 4,5

  • 10,8

Capital account Balance 28 25,5 45,2 108 8,7 48,5 % GDP 3,90% 3,00% 4,80% 8,80% 0,70% 3,70% Errors & Omissions 0,6

  • 0,5

1 1,2 1,1

  • 1,4

accretion to Reserves 26,2 15,1 36,6 92,2

  • 18,9

17,6 % GDP 3,60% 1,80% 3,90% 7,50%

  • 1,50%

1,30% Forex rate (Rs per US$) 44,9 44,3 45,3 45,6 45,6 47,1 * fiscal years; source: Review of the Economy 2009/10, EAC, New Delhi, February 2010 Beyond crisis -J.J. Boillot 22

IV- Winning India a) a realistic estimate of the market potential

0% 5% 10% 15% 20% 25% 30% 35% USA China Japan Germany India India* France Brazil 2005 2025

Share in the World GDP at current exchange rate

* 2nd scenario India GS value + CEPII exchange rate valorisation

Beyond crisis -J.J. Boillot 23

IV- Winning India b) a well-targeted sectoral

approach: Transport/Energy/Food/Environment…

Beyond crisis -J.J. Boillot 24

IV- Winning India c) NO MISTAKE, the true challenge is the Human capital

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Beyond crisis -J.J. Boillot 25

1) The theoretical reference or the Indian Management tradition in the ancient treaties and present in the culture of every Indian leader ; 2) The Indian real world: mentalities and effective practices ; 4) The "Nano Capitalism" or the emergence of specific "business models" seen as " Indian models " ; 3) The structures and mindset of the Indian real capitalism: the family groups and their communities ; IV- Winning India d) The Indian Way of Management is the KEY!

Beyond crisis -J.J. Boillot 26

Nano Capitalism and Emergence of new business Models (a) The « Reverse Innovation » 1) Vijay Govindarajan*, and the concept of "Reverse innovation",

  • vertaking the « glocalisation » model of post-fordist

capitalism. * The product and process innovation took essentially its source in the advanced economies, then adapted locally; * this time, innovation starts at the local level, and at first in the emerging countries especially China and India with processes and products adapted to their constraints (resources & incomes) and abundances (labor & consumers).

*Read in the Harvard Review of Management 2009 his article co-signed by the CEO of GE himself, Jeffrey R. Immelt.

Beyond crisis -J.J. Boillot 27

(b) BoP or « Bottom of the Pyramid » market target 2) C.K. Prahalad, from the university of Michigan, with his concept

  • f " base of the pyramid " (BoP or Bottom of the Pyramid), aims at

the 4-5 billion human beings living with less than 2 dollars a day. *A Whole range of products, including housing & infrastructures (water or electricity) are emerging under the push of new innovations and retain more and more the attention of international agencies as the World Bank or UNDP. * Due to its consumption-led-growth and democratic structure, India looms more inclined to the BoP approach than China who has followed the typical set of western patterns due to its export-led- growth including inequalities.

Beyond crisis -J.J. Boillot 28

The Ganesh Attitude!

“A diamond with a few flaws is better than a common stone that is perfect.”

(Indian proverb)