BOOM: why India's economy can't be ignored

India has the world’s second largest population (after China). The country’s economy is growing at a rapid rate, causing many U.S. businesses to consider this market for future product sales. As India’s middle class rises, discretionary purchases will become much more prominent.

We often think of India as a location for outsourcing, particularly within the Information Technology industry. This is due to the “Y2K” scare at the turn of the century when U.S. businesses were frantically searching for enough IT experts to assist with the problem, at the lowest possible cost. Y2K was India’s opportunity to prove that their technicians could not only solve the IT issues involved, but to do so at a reasonable price.

Outsourcing customer service to India is also on the rise. Who hasn’t called a help line and spoken to someone with a foreign accent? This trend has ultimately resulted in less expenses for many U.S. companies, which is then passed onto the customer.

Should we be outraged because U.S. jobs are being transferred overseas? Many would say “YES”!!!! But, the reality of the situation is that many more jobs are created within our own market due to an increase in global trade. Furthermore, we save money when goods cost less. Additionally, the outsourcing phenomena has created much more disposable income throughout India. We should view this as an opportunity to sell our products within the Indian market.

To learn how to sell to India, visit www.identifyglobal.com or contact Kelly Kasic directly: kelly@identifyglobal.com

Regional Economic Integration

Regional Trade Agreements (RTA) were developed following the rise of Bilateral Agreements. RTAs are trade agreements that involve two or more countries confined to a common region. Countries in close proximity tend to form trade agreements because of similar consumer tastes and shorter travel distance. Two types of RTAs are Free Trade Agreements and the Customs Union. As regional economic integration reduces trade barriers; producing static and dynamic effects.

Static effects are efficiencies that are formed through trade creation and diversion. In trade creation, barriers are broken down and production becomes more efficient because of comparative advantage. Trade diversion occurs because trade shifts to the countries that are members of the RTA, even if non-member countries are more efficient with no trade barriers. Dynamic effects occur when the overall size of the market increases due to the elimination of trade restrictions. When RTAs are established, and trade barriers between the countries are eliminated, the size of the market for a particular company grows from its home country to include all of the RTA member countries.

By Carl Phelps, Research Associate for GLOBAL ID, LLC.

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