LEGAL ECONOMICS

• copyright  technology
• patents  education
• consumer protection  inflation
• forex management  exchange rate
 infrastructure

CULTURAL POLITICAL
 language FACTORS
 family  government system
 religion  political stability
 customs  trade barriers
 traditions
 food

Factors that change IBE

 Other Factors
 Demographic factors- population, age, sex,
fertility, mortality ratios.
 Public relations factors- suppliers, customers,
distribution channel members, rivals, welfare
groups etc.
 Internal factors- work & productivity standards,
team spirit, compensation systems, employee
standards, employee motivation, job design etc.
 Competitive factors- price-fixing, dumping,
discrimination, acquisitions, takeovers etc.
 Determinants of IBE
 World economy & distribution of world output
 International economic cooperation
 Economic institutions, laws, treaties, agreements, norms, practices and codes
( WTO, WHO, World Bank etc.)
 Political systems & cultural factors in different countries.
 Growth and spread of MNCs
 Technology growth and transfer , the way we communicate and exchange
information
 Ethical practices
 International market structure and competition
 Globalization
 Rise of new markets, powers
 Trade Blocs and agreements
 Forex rates, reserves
 Supply chains & routes
 Changes in the work force- multicultural, empowered women etc.
 Changes in consumer needs & wants
International Economic Growth
 Economic growth is the increase in value of
the goods and services produced by an
economy. It is conventionally measured as the
percent rate of increase in real gross domestic
product, or GDP. Growth is usually calculated in
real terms, i.e. inflation-adjusted terms, in order
to net out the effect of inflation on the price of
the goods and services produced.
 Japan's economy grew at a much faster than
expected 3.7 in the fourth quarter of 2007,
helped by solid exports and business
investment.
 Relationship between BE &
Economic Growth?
 After Independence, Indian Economic policy was influenced by the
colonial experience (which was seen by Indian leaders. Policy tended
towards protectionism, with a strong emphasis on import substitution,
industrialization, state intervention in labour and financial markets, a large
public sector, business regulation, and central planning.

 Jawaharlal Nehru, the first prime minister along with the statistician
Prasanta Chandra, carried on by Indira Gandhi formulated and oversaw
economic policy. They expected favorable outcomes from this strategy,
because it involved both public and private sectors and was based on
direct and indirect state intervention, rather than the more extreme Soviet
style central command system. The policy of concentrating simultaneously
on capital- and technology-intensive heavy industry and subsidising
manual, low-skill cottage industries was criticized by economist
Milton Friedman, who thought it would waste capital and labour, and retard
the development of small manufacturers.

 India's low average growth rate from was derisively referred to as the
Hindu rate of growth, because of the unfavorable comparison with growth
rates in other Asian countries, especially the “East Asian Tigers”
 After the economic policy
change of 1991…….
 In the late 80s, the government led by Rajiv Gandhi eased
restrictions, removed price controls and reduced corporate taxes.
While this increased the rate of growth, it also led to high fiscal
deficits and a worsening current account. The collapse of the Soviet
Union, which was India's major trading partner, and the first Gulf
War, which caused a spike in oil prices, caused a major balance-of-
payments crisis for India, which found itself facing the prospect of
defaulting on its loans. In response, Prime Minister Narasimha Rao
along with his finance minister ______________ initiated the
economic liberalization of 1991.
 The reforms did away with the License Raj (investment, industrial
and import licensing) and ended many public monopolies, allowing
automatic approval of FDI in many sectors. Since then, the overall
direction of liberalization has remained the same, irrespective of the
ruling party, although no party has tried to take on powerful lobbies
such as the trade unions and farmers, or contentious issues such
as reforming labour laws and reducing agricultural subsidies.
 Since 1990 India has emerged as one of the wealthiest
economies in the developing world; during this period, the
economy has grown constantly, but with a few major setbacks.
This has been accompanied by increases in life expectancy,
literacy rates and food security.

 While the credit rating of India was hit by its nuclear tests in
1998, it has been raised to investment level in 2007. In 2003,
Goldman Sachs predicted that India's GDP in current prices will
overtake France and Italy by 2020, Germany, UK and Russia by
2025 and Japan by 2035. By 2035, it was projected to be the
third largest economy of the world, behind US and China.
 International trade trends
 India whose share was 2.2% of world exports during independence
currently stands at 0.7%. This means that Indian exports have not kept
pace with other countries.

 India’s Trade Turnover increased from $95 bn in FY02 to $245 bn in

FY06. India’s Exports increased from $44 bn in FY02 to $103 bn in
FY06.

 India’s Imports increased from $51 bn to $142 bn.

 The world economy expanded by 3.3 per cent, slightly faster than the
decade average. Only Europe’s economy continued to record low GDP
growth.

 In contrast to Europe, Japan experienced a strengthening of economic

activity. The trade deceleration was most pronounced in the developed,
oil-importing regions.
 Regional breakdown of the present world economy
reveals that the sluggishness of the European
economy constituted the major drag on world trade
and output growth as Europe continued to report the
weakest trade and output expansion of all regions.

 Although the depreciation of the euro, the British pound

and the Swiss franc improved somewhat the price
competitiveness of European exporters in markets outside
Europe.. However, as three-quarters of Europe’s exports
are destined to European countries, trade growth can
only recover with stronger intra-European trade flows.
 The major net-oil exporting regions – the Middle East,
Africa and the Commonwealth of Independent States –
all recorded a very strong expansion of their real
merchandise imports by far exceeding world trade
growth.

 Asia’s merchandise exports and imports expanded by

9.5 per cent and 7.5 per cent respectively. Asia’s trade
developments are prominently shaped by China’s
performance.
 India is emerging as one of the stronger players in the
world market of the next decade.
 Indian overseas direct investments (ODI) have shown a
rising trend – both in terms of approvals as also in terms of
actual outflows.
 USA – India’s largest trading partner; but Asian countries
gaining significance
 China – increasingly becoming an important partner (has
become the largest source of imports)
 Direction of exports moving towards the Southern
countries, particularly Asia.
 IT & ITES exports rose from $4.0 bn in FY 2000 to $17.9 bn
in FY 2005.
 Projected growth – US$ 60 bn by 2010.
 USA – largest destination of India’s IT exports with a share
of 68%.