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Tuesday, December 13, 2011

indian economy in 2020

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Economy


After more than five decades of Independence, India stands at the cross-roads of history in the initial years of the new millennium. During the last five decades we have achieved self-sufficiency in food, created a strong and diversified industrial base and developed a high degree of resilience that could effectively withstand the onslaught of the East Asian crisis in 17 & 18, the Kargil War in 1 and the oil shocks in 1 & 000. None of these could push India into an economic crisis of the kind we faced in 11.


However, there are major weaknesses that still persist as we prepare ourselves for entering the new millennium. More than a quarter of India’s population lives in abject poverty, around 50% of the urban population lives in slums in unhygienic conditions and just under half of our vast population is illiterate. At this rate, by the year 010 we may perhaps earn the dubious distinction of having half of the whole world’s illiterate population, which shows that India is a country of spectacular paradoxes. We are the largest global supplier of highly skilled manpower and still we could be the reservoir of the world’s largest mass of illiterates. The vision for Indian economy in the year 00 needs to be viewed in this context.


My vision for Indian economy is that India emerges as a formidable global economic power with every Indian enjoying a decent living standard by 00 while maintaining the broad federal democratic structure of the nation as it has evolved over the last five decades. This vision sounds very ambitious but it is attainable if we can put our act together and pursue the goal relentlessly through well-coordinated hard work, total commitment and complete dedication.


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Basic ingredients of this broad vision would include demographic, economic and social aspects of national development strategy over the next two decades.


Population Growth


One of the main reasons why India has still remained a less-developed country with very low levels of per capita income in spite of being quite large in the global context in terms of physical volumes of output in both agriculture as well as industry is our failure to control the rapid growth of population during the last five decades.


Today, the absolute size of GDP is large enough to make India the 1th largest economy in the world However, our rank in termsof per capita living standards is way below at 16 out of 06 economies and even if we consider per capita GNP at purchasing power parity, India’s rank in 1 turns out to be 15 (World Bank, 001). Among the 0 largest economies in the world, India’s growth rate of population has been the highest and if this trend continues over the next two decades, it could spell disaster for any ambitious vision that the nation may try to evolve. Hence, it is necessary that we have an explicit demographic vision of attaining less than half per cent annual growth rate of population by the end of the next decade. The social dimension of this vision would involve significant upgradation of the status of women in the society and attainment of almost 100% literacy among adult females. Any vision of a fast developing progressive nation cannot be complete without involving the vision of cent per cent literacy level. If during the last five decades India’s population growth rate had been half of what it actually turned out to be, even with much lower growth rates of GDP during the pre-liberalisation period, India’s per capita income today would have been 6% higher than what we actually have and our rank in terms of living standards in the global context would have been 14 and still higher at PPP. Our national vision must necessarily focus on ensuring that this part of history does not repeat over the next two decades. If the current growth rate of population continues, India’s population would reach 1470 million by 00. But if we can reduce the growth rate of population in a phased manner to 0.5% by 010 and maintain it at that level thereafter, India’s population would not exceed 1170 million by 00, i.e., the country would succeed in avoiding a further addition of 00 million to our population over the next two decades. This by itself would increase the per capita living standard of the remaining population by 6%. Moreover, the scarce national resources required to bring up 00 million additional people could then be deployed productively to further enhance the living standards of the rest. We must recognize that the past trend by itself does not represent destiny. Conscious and persistent efforts could always reverse the past trends. What is required for evolving a people-centered population control programme is a fierce determination to succeed through a complete paradigm shift in our approach to managing population growth. The mind-set of not giving sufficient importance to the issue of population control needs to be radically changed. We must also recognise that population control is one of the most powerful means of reducing the incidence of poverty.


Vision of GDP Growth


The national vision of becoming a major global economic power by 00 can be accomplished only if we achieve a real GDP growth rate of more than 8% per annum consistently over the next two decades. Achieving further acceleration in economic growth and sustaining the accelerated growth performance over a fairly long time horizon are the main elements of this vision. Sustaining the high growth rate of more than 8% over two decades is a Herculean task but it is definitely well within our potential. Real GDP growth of around 8.5% per annum will enable us to emerge as the tenth largest economy in the world by the year 00 with a more than seven-fold increase in our GNP, which would translate into a per capita income of around 500 US dollars. It should be remembered, however, that our ranking in terms of average living standards would still remain significantly lower. But the per capita income in excess of around 500 US dollars, which would imply more than 7000 US dollars in terms of purchasing power parity would have enabled us to effectively and comprehensively remove mass poverty.


Visions of sectoral growth commensurate with the overall vision of 8.5% growth rate involve growth rates of 5% for agriculture, % for industry and .5% to 10% for services. In relation to the average growth rates observed during the last 15 years, the growth rates envisaged in the above vision of India’s GDP growth over the next two decades imply an acceleration in the growth rates by 1.8 percentage points in agriculture, .5 percentage points in industry, percentage points in services and .55 percentage points for the economy as a whole. A detailed projection of the sources of future growth of Indian economy based on my analysis of the sources of accelerated growth during the post-185 period reveals the possibility of augmenting the contribution of total factor input by 0.65 percentage points over the next two decades. A significant part of the higher growth of total factor input would be contributed by a faster growth of capital input resulting from an increase in the domestic saving rate from the current level of .5% to around 8.5% by 00. While the decline in the growth rate of population envisaged in the demographic vision would lead to some reduction in the growth of labour input measured in terms of man-years especially after 015, such a decline is likely to be more than off-set by a significant improvement in the quality of labour resulting from major changes in the skill composition of working force. Thus, the vision of 8.5% GDP growth over the next two decades requires acceleration in the TFP growth by 1. percentage points. Since improvement in capacity utilisation and structural change are not likely to contribute more than 0. percentage points to the accelerated TFP growth, the residual factor, which is a surrogate for technical progress indicating the improvement in the overall efficiency of resource utilisation in the economy, will have to increase significantly from the level of .5 percentage points during 185-000 to around 4. percentage points during the next two decades. Achieving such a massive increase in the overall efficiency of factor inputs is a formidable task and it would require a highly focussed strategy and a large scale effort in every sector of the economy. Let me make an attempt to highlight some aspects of the sectoral strategies required for accelerating the growth of agriculture and industry.


Vision of Indian Agriculture in 00


Higher growth of agricultural sector can be achieved only through a significant increase in the productivity levels through modernisation of the agricultural sector. Despite our low productivity levels, we have a distinct competitive advantage in several agricultural commodities. We are among the top three producers in the world for several agricultural commodities, but our share of world exports in agricultural commodities is barely 1%.


Traditionally the basic mission of India’s agricultural development has been to achieve self-sufficiency in foodgrains and also in major non-food crops. With rapidly changing global economic environment, it is now necessary to shift the focus from self-sufficiency to export orientation. My vision of the Indian Agriculture in the year 00 is as follows Agriculture will be the driving force behind the growth engine of Indian economy through contribution in our export earnings, absorbing a large part of our less skilled workforce, providing good quality raw materials for our industries at competitive rates, generating demand for industrial goods and services, and above all generating income, saving and investment in Indian economy. Indian agriculture should generate exportable surplus of foodgrains and non-foodgrains after meeting the domestic demand at the world prices. Labour productivity in agriculture should rise sharply to offset any increases in the cost of inputs including wages. Fulfillment of this vision would ensure that India will emerge as a major exporter of foodgrains by 00 with around 7% share of the world exports. Total foodgrains production is envisaged to touch 500 mn. tonnes by 00, which would not only ensure sufficient exportable surplus but would also be instrumental almost totally eliminating poverty defined as calorie deficiency on account of unaffordability.


The main factors which have created bottlenecks in our efforts to accelerate agricultural development during the last two decades are


a) Inefficient water management;


b) Poor supply-chain management arising on account of inadequacy of rural roads;


c) Market infrastructure & transportation facilities;


d) Inefficient rural credit delivery system;


e) Lack of proper education at the operating level;


f) Barriers to agricultural trade; and


g) Lack of focus on value addition. In order to accomplish the vision and achieve the targets set for Indian agriculture by the year 00, a carefully designed strategy of increasing total factor productivity growth in agriculture and simultaneously raising the growth of factor supplies to agriculture should be followed. The critical elements of the proposed agricultural strategy would include


ɨ High rate of technological progress in agriculture;


ɨ High rates of public and private investment in agriculture;


ɨ Significant growth in total cropped area, which can be achieved by increasing the area under irrigation; &


ɨ Increasing the effective application of high yielding variety of seeds in dry-land farming.


The policy initiatives required for this purpose should focus on the utilisation of the created irrigation capacity by putting in place a comprehensive irrigation management system. The policy initiatives required to implement the strategy to increase the yield rates would consist of encouraging regional specialisation in crops, developing most appropriate high yielding variety seeds for different regions, and various incentives to make modern farm inputs more viable to Indian farmers. In addition to these initiatives, there is an urgent need to involve the corporate sector formally in the cultivation of high value, capital intensive and modern technology based crops with potential for exports. Corporatisation of farming will not only facilitate technological upgradation, but would also ensure rapid growth of private investment in Indian agriculture. Corporatisation of the farm sector would also result in a significant quality upgradation and growth of value added products and, in the process, it would significantly enhance the export orientation of Indian agricultural sector.


Vision of Indian Industry


Having discussed various aspects of the vision of Indian agriculture, let me now turn to the industrial sector. My vision for the industrial sector is to achieve sustained annual growth of around % in real terms through international benchmarking of the productivity levels and attaining global competitive advantage in a large range of industrial products. India has already developed a strong industrial base and Indian industry is by now quite prepared to face the challenge of international competition. The radical changes in economic environment during the last decade have propelled Indian industry to bring about a major restructuring of its operations leading to mergers, amalgamations, joint ventures, strategic alliances and significant technological upgradation. Indian corporates have now learnt to focus more on enhancing core competencies instead of diversifying in unrelated areas. The transformation phase of Indian industry is nearing its completion. What is now required is to create the enabling conditions through a series of comprehensive second generation economic reforms to provide a strong fillip for rapid industrial growth. The major obstacles to accelerated industrial growth are


a) high incidence of domestic taxes;


b) outdated labour laws;


c) difficulties involved in dealing with industrial sickness;


d) continued existence of inefficient public sector enterprises; and


e) relatively rigid factor markets operating in India. The major policy initiatives to accomplish our vision for the industrial sector would include the following measures


ɨ Comprehensive reform of the existing indirect tax structure including excise, customs, sales tax and local taxes to ensure that the domestic firms in India carry the same overall tax burden as their global counterparts in the respective industries.


ɨ Adoption of new comprehensive labour legislation that would reflect the main characteristic features of best labour legislations observed globally.


ɨ Enactment of the bankruptcy law to facilitate closure of inefficient and non-viable units.


ɨ Effective divestment of government stakes in non-strategic public sector enterprises and utilisation of the proceeds of divestment to restore the country’s fiscal health.


ɨ Government business partnership to aggressively promote Made-in-India brand with a proper timeframe and benchmarks of progress achieved in that direction.


Vision of India as a Leading Exporter


A significant weakness of our process of economic liberalisation during the last decade has been the high degree of inconsistency in our export performance. During the period 185 to 1, the growth rate of exports has fluctuated widely from less than 0% to more than 0%.


This phenomenon is perhaps indicative of the high vulnerability of our exports to external shocks as well as internal constraints and bottlenecks. Failure to sustain high growth of exports is one of the main reasons why we have not been able to achieve high rates of economic growth in the past. Our failure to sustain the high rates of economic growth achieved during the mid-nineties could also be attributed at least partly to our failure on the export front since 16.


Global vision of Indian economy has to focus on massive export thrust during the next two decades. During the period 10 to 18 India’s commodity exports have increased from 18 billion dollars representing around 0.5% of world exports to 4 billion dollars representing around 0.6% of world exports. Currently, the top 0 products that we are exporting account for more than 70% of our exports and their share in the world exports is 1.%, while our share of world exports for the remaining products which account for less than 0% of our exports, is only 0.%. During the period 10 to 16, the average growth rate of our exports of top 0 products has been around 1% as against the world export growth of 8% for these commodities, while the average growth rate of exports of other products has been around 8% as against 7% growth of world exports for this category. If we ignore the experience of 17 & 18 as more of an aberration and apply the pre-16 trends to the post-18 period, India’s commodity exports would turn out to be around 45 bn. dollars by the year 00 accounting for about 1.% of the world exports. This shows that even if we can replicate what we achieved on the export front in mid-nineties in a sustained manner over the next two decades, India could still achieve a ten-fold increase in exports with a more than doubling of its share in world exports by 00. Global vision of Indian economy should actually aim at doing better than this.


Hence, my vision of India as a leading exporter is to achieve at least % share of world exports by the year 00. Based on the past trends in world trade and new developments in global economic scenario envisaged over the next few years, aggregate world exports are likely to cross 5000 billion dollars by 00. India’s exports should, therefore, exceed 500 billion dollars to accomplish this vision. To many, this target might appear to be too ambitious to achieve and one might dismiss it as an exercise in wishful thinking. However, while formulating this vision, let us not be guided by undue conservatism or pessimism. Let us not under-estimate the great export potential of our agricultural sector as well as our service sector. It should not be surprising if our IT exports alone cross 150 billion dollar mark by the year 00. What is required is to formulate a highly focussed strategy and its rigorous implementation to achieve the desired export thrust. Currently, India exports more than 7000 products through more than 00 thousand exporters both big and small. While the range of products as well as the exporter base could be expanded further, there is an urgent need for a focussed approach which involves selective intervention and targeting in specific sectors and product groups. The experience of several newly industrialising economies clearly shows that a focussed strategy for exports enables the country to carve out a significant niche in the global market. Our success on the export front will depend critically on our ability to control inflation and pursue a market-oriented exchange rate policy. The vision of export growth requires that the average rate of inflation over the next two decades is kept below 4% per annum which would help in restricting the average rate of currency depreciation to around % per annum and also in maintaining a relatively stable interest rate regime. Fulfillment of our export vision will raise India’s export GDP ratio to around 0% over the next two decades.


Infrastructure


Infrastructure is a crucial factor in the overall development of economy. In India, a comprehensive policy framework for infrastructure development has been lacking. As a result, private investment in the infrastructure sector has not taken off as per our expectations. My vision for the infrastructure sector is to ensure ready availability of basic infrastructure facilities at the lowest possible costs with standards of service comparable to those observed in the newly industrialised economies. To accomplish this vision, it is necessary to evolve a framework that would integrate macro-level policy issues, regulatory aspects and managerial aspects of infrastructure development in the field of power, roads, railways, ports and telecom.


Vision of India’s Education Sector


The 1st century will herald a powerful era of knowledge revolution. Vision for India’s education sector should be not only to achieve and sustain 100% literacy, but also to refocus our higher education to nurture centres of excellence that would acquire global standing and international recognition. The main source of competitive advantage in the 1st century is going to be knowledge rather than wealth per se. The focus should, therefore, be on more equitable distribution of knowledge to empower the people of India to create wealth. The key to success in India’s vision of dominating the knowledge industry lies in the ability of higher education system to quickly refocus and reorient itself to become a globally efficient provider of knowledge. One of the preconditions for achieving this goal is to significantly increase the public expenditure on the education sector to the level of at least 5% of GDP. Highly skilled manpower with a rare combination of hard work, sincerity, commitment and capability is our major strength. We must capitalise on this strength through a complete revamp of our education system to emerge as the most competitive force in the field of information technology, financial services and entertainment industry.


Emergence of New Areas of Economic Activity


The 0th Century has witnessed three distinct shifts in the basic forces driving global economic activity. Economic growth during the first half of the 0th Century was driven by industrial sector involving mass production of manufactured goods. As against this, the period from 160 to 10 has been marked by the emergence of what can be called the `era of services’. The rapid growth of the service sector has turned out to be the main engine of growth in the high and middle-income countries during this period. Finally, the last decade of the 0th century has witnessed the emergence of information age with emphasis on knowledge- based industries, which has proved to be the prime engine of growth during the post-15 period. The 1st century would, therefore, witness the emergence of new drivers of growth. A recent study by Graham Molitor argues that by the end of the next decade leisure time will dominate the total individual life-time activity in high income countries.


As a result, the business activity focussing on leisure time pursuits will emerge as the fastest growing business segment. According to Molitor’s estimates, leisure time businesses will account for almost 50% of American GNP before the end of 00. Determining the size of leisure time business essentially depends on what is included in this business segment. Leisure time entrepreneurial activities in the orbit of this next wave of economic activity include recreation, hospitality, entertainment, gambling, travel, tourism, pleasure cruises, adventure seeking, reading, hobbies, sports, exercising, games, computer games, outdoor activities, cultural pursuits, theatre, drama, arts, poetry, opera, symphony, disco & bands, night clubs, bars and taverns, country clubs, retreats, bird watching, gardening, movies & cinema, theatres, television & other broadcast media, visiting and socialising (with family, friends and neighbours), audio & video recordings (including production, distribution, retailing, sales,rentals, etc.) internet and on-line activities, etc. As we add up the income generating potential of these individual segments, the overall potential of the leisure time industry would assume staggering proportions. As society progressed through each of the previous great eras of economic activity, leisure time has increased. Leisure time, which continues to steadily increase, will very soon account for over 50% of lifetime activities in advanced countries. This offers big growth opportunities for India.


Foreign Investment


Achieving 8.5% growth of real GDP would require aggregate investment rate of around 0-% of GDP depending on the magnitude of efficiency gains achieved by the economy in terms of TFP growth leading to a corresponding decline in incremental capital output ratio.


Currently, our incremental capital output ratio is around 4. As a result of the process of structural change envisaged in our overall vision, the share of services in our economy is expected to increase from 48% in 18 to 58% by 00. This phenomenon coupled with technological improvements in agriculture and industry should lead to a reduction in the overall incremental capital output ratio to .6 over the next two decades. Our resource needs to achieve 8.5% growth rate could then be restricted to 0.5% of GDP of which around 8% to 8.5% could be contributed by the increased flow of domestic savings. The gap of around % to .5% of GDP that would remain could then be easily financed by attracting foreign investment. The aggregate flow of foreign investment required to finance our ambitious GDP growth target would be around 60 bn. dollars by the year 00. Given the recent experience of East Asian countries, we should not aim at a rate of foreign investment of more than % of GDP and should try to finance it by attracting foreign investment rather than external commercial borrowing. If we implement the second generation reforms and the macroeconomic scenario gathers enough strength and momentum, attracting 60 billion dollars of foreign investment per annum should not be a difficult proposition by the year 00.


Critical success factors


Before I conclude, I would like to emphasise that effective translation of the broad macro-level strategy and specific policy initiatives into tangible results at the micro-level leading to the fulfillment of the proposed vision for Indian economy in 00 depends on several critical factors. Some of these critical success factors are


ɨ Long term political commitment to the proposed vision and specific goals on the part of the Union Government;


ɨ Shared vision and cooperation from all State Governments in this national endeavour;


ɨ Sensitive technically well informed and administratively competent bureaucracy dealing with this Herculean task;


ɨ Effective and efficient coordination among various levels of government departments, agencies and institutions involved in the implementation of various policy initiatives;


ɨ Overall environment of mutual trust and respect between the government, the bureaucracyand the private sector; and finally


ɨ Organizational effectiveness and adaptability of the Indian corporate sector.


ɨ It would be necessary to strengthen and cultivate these factors during the course of our long journey to economic prosperity over the next two decades.


Services Sector


Services, the tertiary sector of the economy, covers a wide gamut of activities like trading, banking and finance, infotainment, real estate, transportation, security, management and technical consultancy among several others. The contribution from services sector today stands over 40 per cent of the total GDP in India. The sector currently employs close to 0 million people in India. The TIFAC study on services covered nine select sub-sectors ranging from advertising, HRD services, testing and certification to Government administration.


For all the aforesaid areas, IT plays the prime role in information processing, storage and access with a view to providing improved services to the consumers. Some of the typical IT applications in major services sector are outlined in the following sections.


Financial Services


Financial services have been the major users of IT and communication technologies. IT expenditure by US banks has recorded a compounded annual growth rate of 8.4 per cent. The management information system (MIS), distributed computing devices, open systems, high-speed data networks (LAN MAN, WAN, ISDN, etc.), related database management services (RDBMS) have been important development milestones in IT with major impact on financial services.


The development of optical fibre has greatly improved the communication speed, anticipated to touch trillion bits per second eventually. Packet switching transmission method like asynchronous transfer mode achieving a speed upto 6 million bits per second has been the major breakthrough in communication technology. CD-ROMS with storage capacity of 1.6 GB of data have been instrumental in fast information retrieval and access. Use of multimedia for storage of text, graphics, video, sound, etc. has immensely benefitted the information storage system. All these technologies are used extensively by the banking and financial services sector.


Automated Teller Machines (ATM)


ATMs, though operational in the country for quite some time, are expected to make a big head-way in India. It has been estimated that there are around 400,000 ATMs worldwide out of which 1,00,000 are located in Japan alone. The latest generation networked ATMs allow the user to perform upto 150 kinds of transactions ranging from simple cash withdrawals and deposits, to fund transfer to trading in stocks to buying mutual funds to something mundane like payment of electricity bills, booking air-tickets and making hotel reservations.


ATMs are synonymous with credit cards; 578 million credit cards issued worldwide were involved in a transaction of US $ 10 billion by June, 1. India is poised to become one of the worlds largest credit card users by 00.





Virtual Bank


Multimedia technology has been quite effective in bringing the banking services to the door-step of its customers. The customer activated terminal (CAT) or Kiosk is an interactive multimedia display unit, housed in a small enclosure, typically consisting of a computer workstation, monitor, video disk player and a card reader. It allows the customers to browse through information and use the available banking services at their own speed. Some banks are thinking of establishing virtual branches where a customer can walk through the door, explore services by touching parts of the screen and at any time call up a member of the bank staff by video conferencing. While the banks do not need to invest heavily in real estate for setting up such a branch, the customer gets the benefit of one-stop banking at a convenient location.


Home Banking





Smart phones with screen built-in modems and programmable microprocessors let the customer access a variety of financial services from home.


Electronic Funds Transfer at Point of Sale (EFTPOS)


While travellers cheques meant pay-now-buy-later and credit cards had buy-now-pay-later advantages, EFTPOS or debit cards signify buy-now-pay-now but without cash transaction. The user presents his ATM card when he buys goods and the EFTPOS system immediately debits his bank account.


Smart Cards





The Processor type smart cards with in-built integrated circuits (ICs) or micro-chips offer a wide range of transactional opportunities even from remote areas. The smart cards are extensively being used for employee clocking in, withdrawing cash from ATM, using pay-phones, payment of various bills, etc.


Electronic Data Interchange (EDI)


EDI typically denotes paperless financial transactions across the locations. EDI is fast becoming the norm for inter-company transactions and also for procurement of boughtout items from the suppliers. The companies can now operate their bank accounts through corporate banking terminals in their own offices which are linked to the bank computers. Companies can thus carry out transactions like transferring funds, managing its cash flow, opening letters of credit,etc. without any paper work. Singapore has established trade-net to facilitate electronic submission of trade documents by traders to various Govt. agencies and the response of these agencies to the sender. It has reduced document processing time from one day to 15-0 minutes and the estimated saving are of the order of $ 1 billion annually.


Image Processing


As financial services including capital markets and banking are highly document intensive, image processing technology can have a far reaching impact for such applications for its Less paper handling characteristics. In banks, image technology could be used for automatic identification or character recognition to read text and diagram wherein the cheques or documents can be scanned.


Expert System


The financial services sector is increasingly using decision support systems (DSS) or expert systems for functions such as credit risk appraisal, forecasting loan delinquencies, investment decisions, etc. One of the most promising developments in this field is the use of neural network approach to build an expert system which lets the software literally learn from example and experience. Several banks today are using neural network programmes to detect credit card fraud. It is also being used by some leading investment banks to track stock price patterns and predict their movements.


Advertising, Media & Infotainment


The areas of advertising, media and infotainment are interrelated and their growth and momentum are closely linked with economy, demography, life-style and simultaneously with technological innovations. The levels of literacy and poverty alleviation also have direct bearing on mass media. And again IT applications would have far reaching impact on these services sectors.


International Scenario


The Deloitte delphi survey of more than 100 industry executives (comprising chairmen/presidents/CEOs, VPs, directors/managers) from telecom, broadcasting and cable TV, consumer electronics, computer industry, publishing and advertising agencies in USA has predicted the following future scenario.


ɨ 40 per cent of the key residential and business markets across the USA would be served by cable TV network based on optical fibre


ɨ Most popular mass market services as expected


ɨ Movies and music on demand


ɨ Home shopping


ɨ Video games via network


ɨ Participatory TV


ɨ Distinction between telephone and cable entities are expected to become blurred


ɨ Direct broadcast satellites (DBS) would emerge as a potent delivery factor


ɨ Affordable mass market for multimedia products and services are predicted by 18 - 000 time-frame


ɨ Potential new products


ɨ PCs for scheduling appointments or displaying an electronic book


ɨ Digital camera for still photographs stored on disk for viewing and editing


ɨ Multimedia CD player desired as a compact disk attached to a TV


Internet has already revolutionized the media and advertising scenario all over the world. The companies in USA had spent US$ 70 million in 1 (that was easily doubled in 14) for advertising in the Internet. Internet usage is growing @ 15 per cent a month, thats 45 per cent a year ! Currently more than 00 magazines are available online in USA. Time, Money and Entertainment Weekly provide full-text articles through their home-pages in the Internet. Newsweek on Prodigy enables advertisers use high quality graphics, video and sound. It is expected that 0-50 per cent of the magazines earnings are from the advertisement whereas download fees from the users provide the rest.


The commentators have predicted some more interesting technological innovations. The most important of them all is interactive television, this is expected to be available by another ten years in advanced countries. This would provide the impetus for user controlled on demand interactive advertising services. The interactivity reduces the time gap between image advertising and tactical promotions. Interactivity further allows the advertisers to target or address the audience with absolute precision. It is expected that 55-60 per cent of US households would be served by interactive networks by another ten years.


Future Ahoy! - India


Television would forge ahead with its domineering role in mass media relegating the print media much behind. With more and more channels getting available coupled with strong emergence of cable networks for localized programmes, TV would pave the way for multi-million rupees entertainment, advertisement and allied business. While rural sector would account for nearly 50 per cent of TV ownership, it is predicted that not more than two-thirds of all the households across the country would own a TV by 00. TV (including satellite and cable transmission) would account for 40 per cent of advertisement outlays in 00 against per cent at the current level.





Online electronic newspapers may become a reality in India with the advances in telecom services but such dramatic changes are unlikely for at least another five years. Steep rise in input costs, declining advertisement support (anticipated to reduce by 0 per cent) and shortage of trained manpower would pose major threats to the newspaper industry.


Multimedia technology enabling simultaneous exhchange of voice, text and data would prove to be a major medium of advertisement. Spending on advertisement is expected to be around 5 per cent by 000 and to reach 1-15 per cent by 00 AD. Ultimately the market would see an increase from Rs. 50 million to Rs. 10-150 billion by 00. Around 50-75 million household are expected to be potential users of multimedia by 00.


Information Technology & Services Sector Key Issues


While the technological possibilities of IT may be unlimited, their applications and adoption in INdia need a conscious approach towards business process reengineering of existing practices and procedures to take the fullest advantage of IT. Continuous training and skill upgradation of human resources assume critical importance towards absorption of new technologies.


The elimination of manual records, the introduction of electronic fund transfer, ATMs, etc. raise the important issue of security and integrity of data. This includes issues relating to confidentiality of information, preventing data corruption and prevention of fraud. Appropriate technologies for encryption of data for secured transaction, regular and multiple backups, extensive use of passwords and other forms of authorization would need to be adopted.


For paperless and electronic financial transactions in India, a host of legal aspects need to be looked into. As in case of EFT, a cheque is not required to be presented physically for making payment as per the current practice. Also the legal liabilities of banks and customers in case of loss of ATM cards, ATM frauds, etc. are not quite understood in the present system. The adoption of new technologies would warrant a thorough review of the system towards changed legal stipulations.


Finally, the most important aspect of costs involved and benefits expected need a closer scrutiny. Expenditure on IT has always not been in tune with the returns envisaged. The American example of spending US $ 100 billion on IT applications in financial services during 170-80 has been a pointer. With 100 per cent more expenditure on IT per worker, it increased productivity by only 0.7 per cent per year. Hence, proper implementation programme and technology management aspects assume much importance.


This article attempts to touch upon the emerging IT applications in a few select services sectors. The TIFAC study covers in details the IT aspects in diverse sectors like marketing, logistics and distribution, technical and management consultancy to even in the Government administration.


The services sector covers a vast range of occupations involving comparatively little capital investment leading to gainful employment and has a very good potential for export revenues. The sector calls for continued induction and infusion of knowledge-based technologies with cutting edge applications of information technology. With the highly skilled manpower and excellent entrepreneurship qualities, India can truly emerge as a global player in the services sector.





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