Macroeconomic Indicators in India and United Kingdom

Question: A major multinational corporation has appointed you as an economic advisor. You are requested to compile a report regarding the macroeconomic environment in two countriesIndia and United Kingdom where the firm operates and explain how it might affect the companys economic activity. Answers: Introduction www.samsung.co.uk (2015) reveals that Samsung Electronics is one of the biggest multi-billion dollar companies on the planet. In 2007 it surpassed the $100bn check in yearly sales without precedent for its history. This makes it one of the world's main three organizations in the industry for electronics where just two different organizations, Siemens and Hewlett-Packard, have posted bigger incomes. The name Samsung truly signifies Tristar or three stars in Korean, mirroring the Samsung Group's predominance in two further divisions: Samsung Engineering and Construction and Samsung Heavy industries. In the event that one talks about the development in Samsung, it has presently been the pioneer in the industry for electronics, giving a scope of leading edge premium products and, in their own particular words, pioneering the digital convergence revolution. In this manner Samsung has made an amazing change from being a copycat maker to turn into Asia's most profitable technological organi zation. Macroeconomic Indicators in India Krueger (2002) describes that the following are the main indicators of Indian macroeconomic demonstrates the period during 1999 to 2013: Inflation the greatest risk to the economy of Indian and in general for the Samsung Electronics. A diligently high inflation hampers the demand for consumers and influences the profitability. In the long run, it influences the monetary development and additionally the value of the cash. In India, inflation has stayed hoisted for quite a while. Ghate (2012) describes that the constrained the Reserve Bank of India to keep premium rates on the higher side. This inflation focusing on has figured out how to marginally ease the inflation. Headline retail inflation measured by the consumer price index CPI tumbled to 7.3% in 2014. This was fundamentally in light of the fact that easiness in the food inflation. Gross Domestic Product: It was on the lowest ever 3.99 % in the fiscal year of 2002 2003, and was on the highest 9.57% during 2006 2007 fiscal year . The World Bank anticipates India's GDP to grow to 7.5% in the current fiscal year because of expanded financial movement and more noteworthy stability. India's economic development is relied upon to ascend to 7.5% in 2015-16, trailed by further speeding up to 7.9 percent in 2016-17 and 8% in 2017-18. Reserve Bank of India (2014) reveals that Consumption by Demand was at its lowest in 2002 2003 at the percentage of 2.3 while it was at the highest level of 9.3 percent in 2007 2008. The WPI i.e. Wholesale price index, it is a measure of expansion on the supply side, likewise facilitated to a four-month low of 5.43%. This comes as uplifting news, particularly at once the economy hints at improvements. High rates of interest are awful for monetary development. It expands the borrowing cost. This affects corporate profitability and moderates the economic development. The business sector by and large cheers the cut in interest rates.. In any case, quick development is found to conditio nal on the development rate of speculation grabbing to 11% amid Fiscal Year 16 to Fiscal year 18. Farrier (2004) reveals that Foreign Direct Investment, India's legislature has started to execute changes to open the nation's venture potential to enhance the business environment, liberalize FDI, support both private and public investment, rapidly resolve corporate dispute, and streamline tariff and lower corporate taxes. Trade Deficit Balance was recorded on its highest in 2003 - 2004 at the percentage of 14.1 while very surprising it is at its lowest during the fiscal year of 2013 2014 in the percentage of -88.2. Macroeconomic Indicators in United Kingdom Anon (2014) Growth Rate of United Kingdom was higher in 2013 with the percentage of 1.8% rather compared with 0.3% in 2012 but the lesser of the percentage of 2.5 in the fiscal year of 2014. Most of the part of growth rate have been consisted on the demand of household, it leads a boost in the account deficit. On the other hand, in the fiscal year of 2013 contribution of domestic demand was 1.6 pps. There is a declining share contribution of the export market, but from recent period this decline has fallen. This decline may demonstrate the global economic crises, which results decline in exports. In 2008 -2009 the solid depreciation in Pounds sterling was the major cause to respond exports in negative trends.Schmidt, Schomann and Tessaring (2003) speculate that depreciation in sterling has a negative effect on export growth, and percentage of exports has been subdued. Most famous SMEs of British economy was playing a major role in structural challenges and constrained access of finan ce for these SMEs. Consolidation of Economy is in progress to mitigate the level of government debt which is almost 40 percent of GDP, during the international financial crises in 2008 2009 but in 2012 -2013 it was suddenly increased and reached up to 90% of GDP. Budget deficit, which was lesser than 3% of GDP during the year of 2007 -2008 but heavily increased in 2012 -2013 up to 11.4 percent at its highest. As government indebtedness declining, there is hope in the decrease in deficit budgeting in the United Kingdom, which is currently facing the Deficit Procedure on its excessive. Private Non Financial Corporations balance sheets are still strong and thus considers that PNFC is the main lender compared with the rest of the economy. Household Sector, Ong (2014) describs that which comparatively going to decline from highest values but still not below the risk indicator level. As a reflection of the level of confidence, house demands have been on its increasing trend, while on the other side the supply side of new properties are not considerably on a rising trend. This is leading to increase in house prices, and the figures of ending 2013 prices of housing were increased by 5.4 percent. Inflation was on its way back to decline from ending 2011, at that time it was at peak of 5.2%. While on October 2012 it was at 2.7 percent it swiftly reduced up to 1.9 percent in early 2014. This recent negativity may be the cause of falling oil prices in Gulf specific and in the rest of the world generally. Inflation rate (which is the most important for of Samsung Project) will expected around 2% (targeted ratio) by the Bank of England. Rate of unemployment, which was at its highest in 2011 at the rate of 8.4% was declined in the year of 2013 by 7.2%. This was happening due to the worst crises in the private sector. Public sector rate of employment has been dropped by 10.6%. Rate of Unemployment in youth was 21% in 2012, it is also indicated that 1/3 of youth was unemploye d almost for one year, while on the other hand the long term youth unemployment has been increased in the last decade and 2.7 % recorded in 2012. Overall Fiscal Consolidation is strengthened from 2010 all this was a result of a fall in the deficit of the budget up to 5.2% in 2012 2013 in Gross Domestic Product. Gross Government Debts are on the way to increase and was 88.1 % in 2013 of total GDP. Debt of Private Sector has been its highest in 2009 at the rate of 195% of Gross Domestic Product. While on the other hand household and corporate debts are also on the way to increase up to 2009. Saving of household was going on high indication in 2012 but again on declining mode in 2013. Net Export was not on growth indicator and have a contribution up to 0.1 pp to grow. While discussing about the direction of exports, so that in 2012 the largest export destination was the United States of America, having 13.7 of total export while export to China was only 3.5 percent of total exports. C apital Shortfall of building societies and banking sector in 2013 was eradicated by a special regulation Prudential Regulalation Authority in 2013 with the core help of the Bank of England. Both PRA and Bank of England prepared a framework called Stress Testing Framework, which basic cause was to achieve the assessment of resilience of United Kingdom Banking System regarding housing societies assortment. Analysis of Market Structure Spilsbury (2012) describes that there is no doubt in accepting it that any multinational company may leave a lot of effect in the host countrys economy and the likewise host country market also have may impact on the guest multinational company. The globalization of economies is reducing the distance in between social economics and cultures. The foreign export represented one third in 2011 in the total worlds export and other value added may demonstrate more than ten percent of total world gross domestic product. Through globalization, if we go further in depth, all the international production indicators are gradually increasing their rates. It all lead a new scenario that any multinational company may leave multiple kind of effects on the hosting countries such as in the field of technology, economic growth, creation of jobs, balance of payments and on various business performance. In the next lines we show the impacts of Samsung on the economies of India and United Kingdom. Elliot t and Atkinson (2012) posit in the view that one major impact, which may bear the host economic market, is increasing in the competition. One positive effect on the host countrys economy is that competitive activities may boost up in the local competitors. If we specifically discuss Samsaung in the market of India the local companies, similar business activities like Samsung, may smell a huge competition. Local companies like Havell (manufacturer of electronic goods and accessories in India) need to re-plan the local market otherwise strong wind of Foreign Direct Investment may kick them out from the market. This kind of activities may demonstrate a dual effect, positive as one side the host market fee the competition and there may be positivity in the market, while on the other hand emergence of FDI may create some negativity in different ways. Rodrick (2011) reveals that giving the exact answer while analyzing about the major determinants of a market structure is very complicated because many things are dependable which this analysis. Control of input resources, regulation and laws of host government, economy scales and technological advancement. The choice of the consumer is also playing a major role in the determination of the structure of the market, following are the vital categories of those determinants as below: a) Entry and exit in host economy is first detrminent, what rules and regulation have the host economy and under what laws there may possible to enter or exit, is very important. b) Product nature is second and also have an important role, if the products are homogenous (means identical) or there may some difference with the host market, and also to maintain the globalization impact there must be some divergence in those products which may the guest company want to launch. c) Supply and demand control, one other vital role is the proper control over the supply and chain management d) how local government has control over prices is our next poi nt, in some developing countries, there have some problems about fake shortage or weak control of government over price mechanism, this point need to be discussed and explored widely. e) What are the barriers and constraints to enter for local market such as India or United Kingdom market, there may some difference, but most the points, as an economic point of view not politicians, are almost same. Market Structure, Perfect Competition and Guest Company Samsung Sheetz-Runkle (2014) believes that in this structure of perfect competition there may be free entry and exit to any market, (local laws are may apply). In perfect competition the products are homogenous and there may not any consumer preference. While studying the perfect competition the number of buyers and seller are assumed as larger and there is no individual may influence the price. This market structure is relatively similar to Indian Stock Market, Bond Markets but not the struggling market of the United Kingdom, as recently all the Europe faced a worst economic crisis, when Bank of Lehman has been bankrupted in 2007. There may lot more benefits of this perfect competition that prices = marginal costs, firm need maximum efficiency and due to high grade competition, every company may need to allocate their resources properly. OHara (2002) describes that in Perfect Competiion there may includes new idea and there is also an opportunity that other firms are also want to enter into the industry with the core cause of taking the advantages of abnormal profit. In the long run point of view, there may normal profits and it also takes care of the consumer. Market Structure and Monopolistic Competition and Oligopoly In this market, there may different products and the number of buyers and seller are many. Enter y to this market may also free, and firms have control over prices, such as food chains of England and India, but mostly in England, building firms, small units or groups of plumbers and professions. Brakman and Heijdra (2004) explain that in oligopoly structure, there are food chains, supermarkets, oil products and broadcasting so it's much similar to England market rather than Indian markets. Industry may be divided into large firms (like supermarket chains) or a small number, secondly, there are many barriers to entry and have no price competitions. In the most cases the prices are may linked with demand curve and there may chances of abnormal profits under this kind of market. Monetary Facts of Indian and British Market Policies Indian Market British Market Projected GDP Rate 6.0% up to 2017 2.3 % up to 2017 Inflation Rate 1.7% up to 2016 5.2% up to 2016 Whole Sale Price Index (projected) 4.4% up to 2015 Feb 117 up to 2015 Feb Fiscal Deficit 4.1 % of GDP in 2014 6.6% of GDP in 2014 (lowest since crises year of 2007-08) Outlook Indian market is demonstrating on the smooth and recovery path, and enhancement in industrial sector shows the confidence level of the corporate sector on government policies. Both domestic and external demand increasing gradually. After 2007-08 crises period now UK market is showing some progress trends. Government takes some major steps in the industry along with in the SME sector and many reforms are in the pipeline also. Demand curve may on the rising position at current era. References Anon, (2014). [online] Available at: https://www.bankofengland.co.uk [Accessed 4 May 2015]. Brakman, S. and Heijdra, B. (2004). The monopolistic competition revolution in retrospect. Cambridge, UK: Cambridge University Press. Consumption in India now a days. (2014). [online] Available at: https://Reserve Bank of India [Accessed 4 May 2015]. Elliott, L. and Atkinson, D. (2012). Going south. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan. Farrier, J. (2004). Passing the buck. Lexington: University Press of Kentucky. Ghate, C. (2012). The Oxford handbook of the Indian economy. New York, NY: Oxford University Press. Krueger, A. (2002). Economic policy reforms and the Indian economy. Chicago: University of Chicago Press. O'Hara, T. (2002). The economy. Philadelphia: Chelsea House Publishers. Ong, L. (2014). A Guide to IMF Stress Testing. Washington: International Monetary Fund. Rodrik, D. (2011). The globalization paradox. New York: W. W. Norton Co. Samsung Electronics America, (2015). Electronics Appliances: Tablets, Laptops, Phones, TVs | Samsung US. [online] Available at: https://www.samsung.com [Accessed 4 May 2015]. Schmidt, S., Schomann, K. and Tessaring, M. (2003). Early identification of skill needs in Europe. Luxembourg: Office for Official Publications of the European Communities. Sheetz-Runkle, B. (2014). The Art of War for Small Business. New York: AMACOM. Spilsbury, R. (2012). Global economy. Chicago, Ill.: Heinemann Library.