Global IssuesTeam India

Anand ChandramohanAshutosh AgrawalPriyanka MunipallePalvannaNathan Subramani

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India | History

● Home to one of the oldest civilizations-Indus Valley

- 500,000 years back

● Mauryan and Mughal civilization

● British Kingdom-East India Company- began as trade and lead to conquering

of India

● Free in 1947, established itself as a democratic secular republic

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India | Culture

● Variety of cultures-Unity in diversity

● Patriarchal society-Family based culture

● Rapid Urbanization-changein culture

● Unity in Diversity-Food, Language change based on geographic region

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India | Political | Legal | HR System● Legal system similar to British

● Laws-State Specific/Central

● Continuously modified based on the changes in society

● Managing diversity in the new age a major challenge

● Predominantly middle class- monetary compensation important

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India | Business Model

● Initial focus of the Govt. wason Public Sector-Improve infrastructure & implement planned growth

● Recent growth due to the focus in private sector

● Understanding the diverse cultureessential for business

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India vs US Accounting (Gray based Comparison)

• US Accounting: Professionalism, Flexibility, Optimism & Transparency

• India Accounting: Statutory Control, Uniformity, Conservatism & Secrecy

HighProfessiona

lism

HighUniformity

HighConserva

tism

HighSecrecy

Power Distance Low High  NA HighIndividualism High Low Low LowMasculinity  NA  NA Low LowUncertainty Avoidance Low High High High

Cultural Dimensions

Accounting Dimensions

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India vs US GAAP IFRS based Comparison

• US GAAP: Accounting principles adopted by the US Securities and Exchange Commission (SEC)

• Indian GAAP: Accounting principles are adopted by the Indian Ministry of Corporate Affairs, Schedule VI to the Companies Act, 1956

• IFRS needed for companies having subsidiaries in different countries so that the accounting statement for the company have the same standards everywhere.

• In India, MCA published 35 Indian IFRS standards (“IND-AS”) in late February 2011. India GAAP planning to converge to IFRS by fiscal year 2016-2017.

• US GAAP also have plans to converge to IFRS but no time limit fixed yet.

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India vs US GAAP IFRS based Comparison contd.

• Presentation of Final Statement:• Under Indian GAAP, non-compliance with the standards can be

permitted in some case. US GAAP doesn’t allow non-compliance.

• Under Indian GAAP, small & medium sized companies have some relaxation related to compliance with standard. US GAAP doesn’t permit this.

• In India, financial statements need to be prepared in accordance with the presentation requirement of Schedule VI to the Companies Act, 1956. In US, no specific format for preparation of financial statemtments.

• Cash Flow Statement• In India, certain companies can escape from preparing cash flow

statements based on certails rules. In US, every company has to prepare cash flow statements for three years (current and preceeding 2 years).

• Depriciation of Assets• In India, depreciation of assets is done based on the rates prescribed in

Schedule XIV of Companies Act, 1956. In US, depreciation of assets is done based on the use life of the asset and there are no prescribed rates.

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India|Non - State Actors● Multinational companies

○ Positives - Access to innovative technology and homogenization of markets, increased minimum wage, boosted new skills, increased efficiency and production capabilities

○ Negatives - emergence of inappropriate products, crowd out domestic industries, cultural issues associated with free flowing money

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India|Non - State Actors● Financial Institutions

○ Positives - emergence of equity culture, microfinance, microsavings, financial literacy, easy capital raising opportunities, convenient repayment options, advice on planning

○ Negatives - prolonged periods of investigation, formalities, tedious documents, convertibility clauses

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India|Non - State Actors● Non-Government Organizations

○ Positives - operate on non-profit basis, access to non-rigid, locality-specific, need-based, beneficiary oriented, provide information

○ Negatives - dependency on government for sustenance, expectation to perform tasks to get funds

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India | Globalization

● India was a rich nation - 22.5% of world GDPo 1600 - India and China accounted for 50% of world GDP

● Christopher Columbus set sail to find Indiao Stumbled into the land we now call as USA

● British came to trade with Indiao Formed first MNC in the world - East India Companyo Eventually, controlled India’s entire tradeo Ruled India Illegally

● 1947 - left India impoverished - 1% of world GDP

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India | Globalization (The role of IMF)

Economic Crisis - Three separate events in the 1980’s brought Indian economy to the brink of a crisis.

● Soviet Union Turmoil - India’s biggest trade partner.

● Oil crisis o The oil price shock in 1990

● Political crisis

In exchange of loan, IMF demanded –

● Indian market access to West● Privatize public sector

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India | Globalization - Impact

Economic development● Increased attractiveness for investment - FDI and FII

○ Highest - $ 5,670 Million (Feb 2008) ○ Latest - $ 3,089 Million (Feb 2015)

● Forex reserve○ 1991 (Jan) - $ 1.2 B○ 2015 (Apr) - $ 344.6 B

Poverty Alleviation - Success story of globalization ● Sustained economic growth and substantial reduction

of income poverty● The rate of reduction of poverty slowed after 1991

globalization● As govt spending in public sector reduced● Privatization led to increase in costs

● Increasing Inequality

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India | Globalization - Impact

Offshoring● Skilled workforce, english proficiency encouraged MNC to set

up operation in India● Type of Jobs

o Business Process outsourcing (Call center)o Information Technology Serviceso R&Do Knowledge process outsourcing

Environmental destruction● Mining and deforestation - displaced Tribal and village

population● Agricultural distress - Chemical and unsustainable process● Forced Migration of people

o Pushing slum people in citieso Increasing cost on government

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India|Globalization - Impact

Cultural imperialism● Often referred to the proliferation of Western moral concepts,

products, and political beliefs around the globe

● Howo Hollywood movies, o American TV channels, o American news and print media, o American consumerism - fast food and clothing

● A key danger of cultural imperialism is the possibility that American tastes will crowd out local cultures around the globeo McDonaldization - characterized by efficiency, calculability,

predictability, and control.o These four attributes—more than any specific cultural ideas—are

the primary features of globalized American businesses

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India|Globalization – Cultural Imperialism 18

India|Globalization - Cooperation

Defense and Trade

● 2001 - Indian parliament was attacked

● Despite the growing public anger, pressure from India’s high-tech industry on politicians helped to avert a possible war

● Interdependence between indian companies and global economy

When the emphasis is more on interdependence and co-operation, and less on consumerism and cultural imperialism, the resultant whole will be greater than the sum of its parts.

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