1. Globalization and Its Impact on
Indian Industry
04 January 2005, New Delhi
Rajen Mehrotra
Sr. Specialist On Employers’ Activities For South Asia
International Labour Organization
India Habitat Centre, Core 4B (3rd Floor), Lodi Road, New Delhi 110 003
Tel: 011 24602101 - Extn. 265: E-mail : rajen@ilodel.org.in

2. Mile Stone Events That Have
Affected Business
• End of World War I (1918)
• End of World War II (1945)
• End of Cold War (1989)
• 9/11 (2001)

3. Economy
Movement Open Closed
Goods
People
Currency
Information

4. GLOBAL SITUATION
• Global GDP Growth 2% In 2003, 2002 And
2001 While 4% In 2000 And 1999
• World Trade Growth Has Slowed
• Every country wants to improve Global
Trade

5. Globalization & India
India Went Through Economic Reforms From 1991. The
major ones are:
• Reductions In Import Duty
• Removal of restrictions on imports
• Devaluation of Currency
• Removal of permissions on setting up enterprises and
expansion of capacity
• Removal of permission of Controller of Capital on Share
Premium Account on issues of Shares
• Privatization of Public Sector Units
• Membership of WTO
• Easier entry of multinationals

6. World Perception
• Visualization of Six Major Global Players (U.S.A.,
Japan, Europe, Russia, China, India)
• Goldman Sach’s Report (Brazil, Russia, India, China
– BRIC major players). Projects India as a potential
winner ahead of China and would overtake U.S.A.
and China by 2025 in terms of Real GDP.
• India huge market – population of 1 Billion with at
least 250 Million middle class with tremendous
buying power
• Economy with 6% Growth Post Liberalization

7. India’s Problem
• High growth but problem of unemployment.
• Need to generate 10 million jobs per year.
• Multi party rule, hence need to
accommodate political ideology with
economic reality (reservation, labour law
reforms).

8. Multinational’s History (Prior to
1991) in India
• East India Company the first one which also brought British Rule in India
• Large number of British/European Owned Companies set up prior to 1947
and continued till 1977 though certain restrictions got imposed when India
became free in 1947 and republic in 1950.
• FMCG (Lever Bros., Colgate), Tobacco (Imperial Tobacco), Packaging
(Metal Box), Banking (Grindlays, Standard Chartered, Imperial),
Tea/Plantation (Sterling Co.), Engineering (Siemens, Brown Boveri, Burn
Standard, Jessops, Richardson & Cruddas), Beverages (Coca Cola),
Computer (IBM), Pharmaceuticals (Glaxo, Burroughs Welcome, Sandoz,
Merck Sharp & Dhome, E-Merck, Many others), Chemicals (Imperial
Chemicals, Bayer).
• Period of 1977 to 1991 – Multinationals were asked to dilute equity,
restrictions on growth, price controls. Two Companies that closed and left
India in 1976 were Coca Cola and IBM as they had 100% foreign held
equity and refused to dilute their equity.

9. Large Number of Multinationals Have Moved to India
Post Globalization (Strategy 100% Equity, Collaboration,
Franchise, Importing, Manufacturing)
• Beverages (Coke, Pepsi)
• Fast Foods (McDonalds, Pizza Hut, KFC)
• Coffee (Barista, Café Coffee Day)
• Sports Wear & Goods (Nike, Adidas)
• Apparels & Garments (Levis, Reid & Taylor)
• Cosmetics (Revlon, Oriflame, Maybellene)
• Two/Four Wheelers (Honda, Toyota, Suzuki, Hyundai, General
Motors, Ford, Mercedes)
• Computers (Del, HP, IBM, Samsung, Sony, Compaq)
• White Goods (LG, Samsung, GE)
• Construction
• Engineering Companies
• Pharmaceuticals (US, Europe, Britain)
• Music (Sony, BMG, Warner)
• Entertainment Channels (Star, National Geographic, Discovery, Sony)
• Sourcing (IKEA, Adidas, Nike, many others)

10. INTERNATIONAL BUYERS APPROACH ON
COMPLIANCE OF CODE OF CONDUCT BY
SUPPLIERS
• COMPANIES HAVE DEVELOPED THEIR OWN CODE OF CONDUCT TO BE
FOLLOWED BY THE SUPPLIERS COVERING MAINLY THE FOLLOWING THREE:
- UNIVERSAL DECLARATION OF HUMAN RIGHTS (UN 1948)
- FUNDAMENTAL PRINCIPLES OF RIGHTS AT WORK (ILO 1998)
- RIO DECLARATION ON SUSTAINABLE DEVELOPMENT (UN 1992)
• LEGAL REQUIREMENT:
- SUPPLIER MUST COMPLY WITH NATIONAL LAWS AND REGULATIONS AND WITH
INTERNATIONAL CONVENTIONS CONCERNING SOCIAL AND WORKING CONDITIONS,
CHILD LABOUR AND THE PROTECTION OF THE ENVIRONMENT
• COMMUNICATION METHODOLOGY TO SUB-SUPPLIERS AND WORKERS. ALSO
CODE AVAILABLE ON WEB SITE
• AUDITS AND ACTION ON REDUCING/ELIMINATING DEVIATIONS IN TIME FRAME
• EXAMPLES OF IKEA, NIKE

11. ILO DECLARATION
FUNDAMENTAL PRINCIPLES AND RIGHTS AT
WORK
• ILO in 1998 adopted the following 8 conventions as core and has been
pursuing with each country to ratify them and even if a country has not
ratified ILO has been collecting annually a report from the country on its
present status:
- Forced Labour Convention, 1930 (C.29)
- Freedom of Association and the Right to Organise Convention, 1948 (C.87)
- Right to Organise and Collective Bargaining Convention, 1949 (C.98)
- Equal Remuneration Convention, 1957 (C.100)
- Abolition of Forced Labour Convention, 1957 (C.105)
- Discrimination (Employment and Occupation) Convention, 1958 (C.111)
- Minimum Age Convention, 1973 (C.138)
- Worst Forms of Child Labour Convention, 1999 (C.182)

12. Interests of Stake Holders
• Enterprises In Wealth Creation
• Government In Revenue And Employment
• Employees In Development And Increase In
Standard Of Living
• Customers - Value For Money (Choice,
Affordability And Speed)

13. GOI POLICY - FDI AND FII
• 1990 FDI $ 234 Million
• 1998-2003 FDI $ 2.5 Billion Per Year
• Target FDI $ 10 Billion Per Year
• Over 620 FIIs Compared to 500 in 2003 and
Earlier
• China FDI & FII
FDI $ 50 Billion Per Year
FII $ 20 Billion Per Year

14. FOREIGN INSTITUTIONAL
INVESTORS
• Capital International, Morgan Stanley, Templeton,
Goldman Sacs, Alliance Capital Management, Jardine
Investing And Merlion Investment in India
• Currently FII investment at $ 6.5 Billion Compared to $ 2
Billion In 2001
• Stock Market Booming (Sensex Around 6000)
• Learnings From Last 2 Scams (Harshad Mehta, Ketan
Parekh), SEBI Guidelines and Controls
• Hot Sectors For FIIs – Automobiles, Banks, Pharma,
Software, Energy, Telecom
• FII Favourites – Infosys, Reliance, ICICI Bank, Satyam,
MTNL, ONGC, Ranbaxy, ITC, SBI, Tata Motors,
Hindalco

15. WHY TNC’S BRING FDI
Market Seeking TNC’s (Consumer Durables)
• Market Size & Growth
• Per Capita Income
• Access To Regional Market
• Consumer Preference
• Market Structures
Resource/Asset Seeking TNC’s
• Raw Material Availability & Cost
• Low Energy Cost
• Low Cost Labour
• Fiscal Benefits

16. Efficiency Seeking TNC’S
• Freight Advantage (Host V/S Home Country)
• Membership Of Regional Block
• Bilateral Country Agreements
• Trans-shipment/ Port facilities
• Productivity Of Labour

17. IMPACT OF REFORMS IN INDIA
Positive :
• Easy Availability Of Imported/Foreign
Collaborated Locally Produced Consumer Items
Plus Consumer Durables.
• Reliable Communication System Of Telephone
(Landline And Mobile), E-mail
• Availability Of Large Number Of Qualified Youth
In Most Disciplines
• State Governments Trying To Attract Investment
By Offering Incentives / Benefits
Continued …

18. • Speedy Mode Of Travel And Transportation
• Economic Growth Of 6%
• MNCs Have Entered The Market Both For
Sourcing As Well As Selling Their Products
• Well Established And Developed Stock Exchange
• Growth In Automobile, IT, Construction, Pharma,
Telecom, Energy, Entertainment And Service
Sectors
• Foreign Exchange Reserves Presently At US$ 120
Billion With US$ Pegged Between Rs. 45/- And
Rs. 46/-

19. IMPACT OF REFORMS
Negative :
• Presently No Change In Existing Labour Laws
• Manufacturing Companies have restructured and
downsized (Engineering, Metals, Cement,
Electrical Machinery, Textiles)
• Lot Of Companies Offered Voluntary Retirement
Schemes (VRS) And Reduced The Number Of
Employees.
Continued …

20. • Shift In Employment From Large Companies To
Medium And Small Companies
• Shortage Of Power Continues In Spite of
Investment in Power
• Qualified Persons Are Prepared to Work at Lower
Level Jobs

21. Value Chain Migration
Problem for Indian Companies
• Professionally vs. Family Managed
• MNCs vs. Local Corporate
• Marketing/ Distribution vs. Manufacturing
• Branded vs. Commodity Products
• Low vs. High Capital Intensity

22. Challenges To Indian Industry
• Threat Of Imports
• Easy Availability Of International Brand
• MNC’s Have Deeper Pockets
• MNC’s R&D, Systems
• Pressure To Improve Operational Efficiency
• Business Houses Also Expanding (Reliance,
Adity Birla, M&M, Tata Motors, Asian Paints,
Ranbaxy, Cipla, Dr Reddy’s)
• Export Market Potential
• Innovative Marketing Strategy
• Innovative IR And HR

23. APPROACHES ADOPTED BY INDIAN
COMPANIES TO IMPROVE PROFITABILITY
Post Globalisation
1. Strategy To Be Effective, Price Sensitive, Market
Adaptive And Customer Friendly Through :
• Restructure Sources And Uses Of Funds
• No Place For NPAs
• Tight Control On Working Capital
• Efficient Management Of Raw Material, WIP, Finished Goods
• Suppliers And Subcontractors
• Utilization Of Manufacturing Plants
• Distribution Channel
• Manpower
Continued …

24. 2. Research Based Export By Pharma Companies
• DRF Licensed DRF 4158 To Novartis For $ 55
Million Plus When Drug Is Marketed
• Ranbaxy Ciprofloxacin For $ 65 Million To
Bayer
• Torrent, Wockhardt, Sun, Cadila, Orhid, Lupin,
Cipla With Potential
3. The BPO-ITES Industry in India revenue $ 3.6
Billion in 2004 expected to fetch $ 21 to 28
Billion in 2008

25. 4. Value Addition Approach by a Milk Cooperation
in India (i.e.Amul)
• Concept Of Value Added
• Milk, Flavoured Milk, Condensed Milk, Curd, Cottage Cheese
(Paneer), Khoya, Butter, Cheese, Ghee, Dairy Whitener, Baby
Milk Powder.
Market Share
Item Market Size Amul Share Britannia Others
Rs. Million Share
Butter 6500 85% 5% 10%
Dairy 2750 45% 15% 30%
Cheese 1400 60% 33% 7%

26. 5. Collaborations, Mergers, Acquisitions (Eg.
Pharma, Cement, Aluminium, Telecom)
6. Niche Markets
7. World Class Manufacturers (Titan, Sundaram
Clayton)
8. Tackled Onslaught Large Companies
(Reliance, Nirma, Piramal Health Care, Dr.
Reddy’s Laboratories, Ambuja Cement, Bajaj
Auto, Jet Airways, NTPC, BHEL, L&T,
Aditya Birla Group, Asian Paints)
9. Strong Brands (Wagh-bakri, Vadilal, Frooti,
Real, Rasna, Bisleri, Haldiram)

27. Conclusion
• Companies in India That Have
Successfully Met Competition by
Multinationals & Domestic Companies
Had A Spirit Of Innovation Not Only In
Their Products And Services But Also
With Reference To All Their Resources
And Effectively Restructured Them In A
Time And Cost Frame And Met
Customer Needs And Improved Their
Top And Bottom Line