IMT-79: ECONOMIC ENVIRONMENT OF INDIA

PART - A

Q1. 'A business does not function in a vacuum. Like any other organic entity, it is in constant interaction with, and duly impacted by, its environment.' Comment.

Q2. What do you understand by e-commerce? What are its objectives and how does it benefit businesses?

Q3. Briefly discuss the economic objectives of planning in India.

Q4. What is globalization? What are its objectives and what measures have been taken to attain these objectives?

Q5. Describe the features of the New Industrial Policy of 1991.

PART - B

Q1. Write a note on the MRTP Act of 1969.

Q2. Explain the rationale behind the emergence of the public sector in India.

Q3. 'Business is not an end in itself. It is only a means to an end.' Explain the social responsibilities of business in light of this statement.

Q4. Describe the methods of technology transfer.

Q5. What are the tools of fiscal policy? How do they affect business decisions?

PART - C

Q1. Write a note on IMF.

Q2. Describe the main constituents of the Indian capital market.

Q3. What do you understand by the term 'monetary policy'? Examine the objectives of monetary policies in India.

Q4. Briefly analyse India's trade policy

Q5. Discuss the concept of balance of payments.

CASE STUDY - 1

Balsara Hygiene Products, which had some fairly successful household hygiene products introduced in 1978 a toothpaste, Promise, with clove oil (which has been traditionally regarded in India as effective deterrent to tooth decay and toothache) as a unique selling proposition. By1986, Promise captured a market share of 16 per cent and became the second largest selling toothpaste brand in India. There was, however, an erosion of its market share later because of competition from multinationals. Hindustan Lever's Close-Up gel appealed to the consumers, particularly to the teens and young, and toppled Promise from the second position. Supported by the Export Import Bank of India's Export Marketing Finance (EMF) programme and development assistance, Balsara entered the Malaysian market with Miswak..The emphasis on clove oil evoked a good response in Malaysia as well. Miswak's promotion focused on the fact that the miswak plant had been used for centuries by Muslims as a tooth-cleaning twig and was mentioned in the Koran. Quoting from Faizal-E-Miswak, it was pointed out that the Prophet Mohammed used 'miswak before sleeping at night and after awakening'. The religious appeal in the promotion was reinforced by the findings of scientists of antibacterial properties of clove and its ability to prevent tooth decay and gums.

Market intelligence revealed that there was a growing preference for nature based products in advanced countries. Balsara tied up with Auromere Imports (AAII), Los Angeles, which was established by US followers of Aurobindo, an Indian philosopher saint. Eight months of intensive R&D enabled Balsara to develop a toothpaste containing 24 herbal ingredients that would satisfy the required parameters. Auromere was voted as the Number 1 toothpaste in North Eastern USA in a US Health magazine survey in 1991.

The product line was extended with the introduction of several variants of Auromere. A saccharine free toothpaste was also introduced. It was found that mint and menthol were taboo for users of homeopathic medicines. So a product free of mint was developed. Auromere Fresh Mint for the young and Auromere Cina Mint containing a combination of cinnamon and peppermint were also introduced. When the company realized that Auromere was not doing well in Germany because of the forming agent used in the product, it introduced a chemical free variant of the product.

Questions:

Q1. Explain the economic environmental factors that Balsara used to its advantage?

Q2. What were the main strengths that enabled AAII to market ayurvedic toothpaste in the US?

CASE STUDY -2

Opportunity

The Indian economy is on a bull run and has recently achieved a landmark Gross Domestic Product (GDP) of US$ 1 trillion. After witnessing a lull in the initial years of the current decade, India staged a comeback. Over the last five years, India's GDP more than doubled to US$ 1 trillion, at a Compound Annual Growth Rate (CAGR) of 16 per cent. A higher GDP growth rate combined with a lower population growth rate has led to an accelerated growth in per capita GDP. The economy today is strong and vibrant owing to the liberalization of government policies, an increase in foreign direct investment, increased global competitiveness, investment in infrastructure and growth in domestic as well as international demand for Indian goods and services. India ranks fourth in terms of Purchasing Power Parity, after the USA, China and Japan. India is home to the youngest population in the world where half its citizens are under the age of 25. This growing working population in India is providing the "fire- power" to the growth of our economy.

The Next Trillion Dollar (NTD) era: 2007 to 2012

According to Motilal Oswal's 12th Wealth Creation Study, released in December 2007, in the next five years India's GDP will hit US$ 2 trillion (assuming the current rate Re/US$ parity). The growth rate in the NTD era will almost be same as that of the last five years. However, given the high base, the GDP added in the next five years will be more than that added in the last 30 years, and twice that of the last five years. The report talks the three types exponentialities in the NTD era:

1. The Macroeconomic Exponentialities

• Consumption, government expenditure, private capex and the external sector

2. Exponential Growth in key industries

• Engineering and construction, financial services, wireless telecom, cars, cement and steel.

3. Exponentiality in Corporate Profits

With all the capex plans, India is taking the much-needed firm step forward to sustain its GDP growth rate. Rising private sector participation in the Indian economy and easy access to capital (both domestic and foreign) are the two key drivers of exponentiality in India's corporate sector sales and profits. The report expects corporate profits as a per cent of GDP to rise from 5 per cent in 2007 to 7.8 per cent in the NTD era.

Questions:

Q1. Define GDP and per capita GDP. How are they measured?

Q2. 'A higher GDP growth rate combined with a lower population growth rate has led to an accelerated growth in per capita GDP.' Analyse the statement in view of the growth rate achieved by the Indian economy since 1994.

Q3. Explain the 'exponentialities' in the NTD, as stated by the Motilal Oswal's 12th Wealth Creation Study. Do you believe there are certain macroeconomic issues to be resolved to achieve a high growth rate? Why?