Marketing In Indian Economy

Marketing Management Module-1 Lesson#7 Marketing in the Indian Economy Implications of Liberalization

Marketing in the Indian economy Since 1991 India has been going through a process of economic reforms and liberalization. These reforms aim at modernization of the country’s industrial system, removal of unproductive controls, strengthening of private investment, including foreign investment, and integration of India’s economy with the global economy. In short, all round opening up of the country’s economy has been the essence of the reforms.

Marketing in the Indian economy The reforms can be classified into two broad categories: • Liberalization measures • Macroeconomic reforms and structural adjustments

Marketing in the Indian economy The first part of liberalization is the New Industrial Policy whose main components are: De-licensing De-control Liberalization of industrial licensing De-regulation Broadbanding Abolition of registration FERA Liberalization Liberalization of foreign investment Liberalization of technology import MRTP liberalization

sector Curtailment of Public Sector

Abolition of threshold assets limit No MRTP clearance needed for expansions, mergers. Several industries hitherto reserved for public sector opened up to private Only eight core industries remain Reserved for the public sector. Purview of BIFR extended to the public sector

Marketing in the Indian economy -Macroeconomic Reforms

Fiscal/Monetary reforms Reduction of fiscal deficits. Reforms of tax systems Interest rate reforms Inflation control Banking reforms Banks to operate as commercial institutions Phasing out priority sector lending Deregulation of deposit interest rates Operational freedom in lending rates Adherance to norms on capital adequacy, Income recognition and provision for bad debts. Disinvestment in public sector banks Permission for new private sector banks

Marketing in the Indian economy - Macroeconomic Reforms (contd.) Capital Market Reforms Abolition of CCI and introduction of free pricing Strengthening of SEBI Opening up of Indian capital markets to FIIs. Allowing foreign brokerages in Indian capital markets. Allowing private sector into mutual funds Allowing Indian NBFCs to align with global finance cos Allowing Indian firms to raise capital abroad.

Marketing in the Indian economy - Structural Adjustments Market-driven price Phasing out of subsidies. Dismantling of price-controls Axe on fertilizer subsidy Abolition of sugar subsidy Axe on petro-product subsidy Partial decontrol & parallel marketing of kerosene & LPG Abolition of export subsidy Steel price decontrol

Marketing in the Indian economy - Structural Adjustments (contd.) Public Sector Restructuring No new PSUs; no expansion of PSUs with govt. equity Budgetary support for PSUs to be phased out Preference to PSUs in govt. tenders abolished Disinvestment of govt. equity in PSUs Sick PSUs to be referred to BIFR Exit Policy Support to VRS Creation of NRF

Implications of Liberalization measures: Sea-change in the industrial, business and marketing environment. 1.Entrepreneurial freedom vitalizes the industrial scene: Rush of entrepreneurs Spate of mergers/acquisitions/takeovers; Corporates enhance size and energy.

Implications of Liberalization measures: 2. FDI goes up and influences investment pattern in industries 3. Ascendancy of multinationals in the Indian markets MNCs acquire majority equity in their Indian enterprises and JVs Many MNCs enter India anew MNCs become big players even in core industries

Implications of Liberalization measures: 4. Banking Sector comes under competitive environment Competitive existence foisted by deregulation. Onslaught from New Private Sector Banks with superior Technology and aggressive marketing Capital markets, FIs, MFs and NBFCs compete with banks Public sector banks in particular come under severe pressure;They are compelled to operate as viable, commercial Institutions.

Implications of Liberalization measures: 5.Insurance sector too experiences competition, with new private players: Constituted IRDA IRDA issues licenses/in-principle clearance to several private players and many of them start operations.

Implications of Liberalization measures: 6.Capital markets undergo radical change: FIIs enter Indian capital markets in a big way Foreign brokerages closely follow the FIIs NBFCs register growth and form alliances with global finance Companies. Growth of private mutual funds. Indian firms raise capital globally and form alliances with global Finance firms India’s capital markets get integrated with global capital markets

Implications of Liberalization measures: 7.Financial services emerge as a major business: Emergence of many new financial services and financial service companies. Business firms spot financial services as a business and float financial service companies of their own.

Implications of Liberalization measures: 8.Private sector becomes the dominant component of the economy. Even in core/infrastructure areas, sector after sector, opened up to Private enterprise; Oil, mining, telecom, road construction, Railways, ports, civil aviation, EPZ/SPZ, defense Production – all now open to the private sector.