The film industry in India has experienced positive growth; a factor which best explains the expansion of the service industry in the country. India is one of the largest film producers in the world the film industry is bigger that of the USA by size but generates very low revenues. Bollywood is considered one of the lucrative film clusters in India that produces the biggest of share of films. The cluster is the dominant producer that produces more than 40% of the films in Hindi language. The cluster which is located in the Maharashtra within the city of Mumbai is as one of the drivers in the economy of the region. The success of Bollywood cluster can be attributed to the unique product offering that is customized to inculcate the elements of romance and comedy that is coupled with symbolically illustrative songs. Bollywood has remained a major player in the Indian film industry capturing a bigger audience across the world. The initiative by the Indian government to recognize the film business as an industry that deserves good capital endowment has also lead to the expansion of the industry (Ernest & Young 2007a).
Overall Economic Performance
India economic performance has been very positive as significant developments have been realized in various sectors. Maharashtra where the Bollywood cluster is located is one of the largest economies in India. The GDP per capita of the state is one of the largest in India’s economy and statistics show that the GDP per capita of Maharashtra outmatched the compounded average of the Indian economy in 2008. The annual growth rate of the Maharashtra state is far much better than other states in India. The major propellers of economic growth in the state are the services models and increased development in knowledge intensive firms; it is therefore cognizance to recognize the contributions of the film industry to the growth of the economy. The state is one of the major industrial contributors to India’s economy, with cities such as Mumbai, Pune and Thane being recognized as the major industrial centers. Maharashtra also attributes its economic success to the element of political stability that has ensured peace necessary to boost investor confidence. It has been ruled by able leaders who are development oriented to foster growth of trade and economic development (Garwood, Ian 2006, p180).
Maharashtra is also one of the states with the highest level of industrial activities that ensemble infrastructure and structural developments. This has enabled it to create employment opportunities to its people. It is essential to note that the IT sector which plays a cardinal role in the Bollywood cluster film industry has enabled the city to increase its development in the service sector; the move has also seen emergence of knowledge based firms which have contributed to the economic growth of the state. However, the state needs to embrace the primary drivers of India’s economy such as agricultural productivity and irrigation management to enhance and sustain its economic development. This will ensure that other clusters other than the service industry are developed, clusters such as agribusiness are necessary to compliment the massive growth in the service industry within the state.
The trend of Foreign Direct Investment (FDI) shows that the adoption of certain acts as by the Indian government has facilitated the growth of FDI. Research shows that Maharashtra remains of the states that attract most investors. However the regulatory effects of the government tend to inhibit the growth of FDI. Investors investing in the Indian states are discouraged by unnecessary long procedures that tend to waste a lot of investors’ time and thus discourage them. This therefore calls for the need to change the procedures to ensure that investors have an easy time when investing. To ensure growth in FDI is to promote the growth of infrastructure by constructing better roads, railways, and air ports.
Labor productivity in India is still low as compared to the other countries such as U.S.A and China as the country has strict labor regulations that have greatly affected the growth of the sector. Maharashtra as a state in India has a better labor productivity than India, the state has more productive workforce that is well paid than the Indian workforce. It is the light of this fact the state has experienced significant growth rates in the employment patterns with more consumers moving to the middle class grade of the social setting. The move has also enabled the state to reduce the number of its citizens that are living below the poverty line. There has also a major improvement in life expectancy in Maharashtra than in India as shown in the table below
(Global Competitiveness Report 2007-2008).
FDI is also felt in the Bollywood cluster as foreign investors dominate some of the some of the parts of the value chain. International business organizations such as Warner and Sony have been incorporated at the distribution end; they also facilitate production of films and programs in Bollywood. FDI is very paramount for the development of Bollywood cluster to facilitate training and ensure development of quality films that can satisfy the consumers changing demands of the consumers (Garwood, Ian 2006, p180).
Bollywood cluster has revived the entertainment industry especially after the government recognized the film business as an industry that has a greater contribution to economic development starting from the production stage to the consumption end. Revenues are reaped from the sale of DVDs, commercials and movies. The cluster targets a consumer base of more than 30 million who consume the products through different avenues such TVs, videos, internets and through radio stations. The value chain of production in the cluster ensures that all these sources are exploited for its sustained growth. Exhibition and film production are still the most profitable segments of the value chain.
The Bollywood cluster not only contributes to the economic development of Maharashtra but also promotes the development of talents among the young people. The cluster contributes a significant portion of the economy and is one of the elements that best explains increasing development in the service industry. The development of the industry has ripple impacts on other related sectors such as music industry and IT sector. A trend which best explains the development of knowledge-based firms in the state and the development of trade in the service industry (Fitchard, Kevin 2007, p 169).
It is cardinal to take note of the fact that the move by the government to formalize the cluster has made it apply good strategies for trade development in the film industry. Such strategies include integration, corporatization and digitization. The element of integration has played a great role in the development of trade as firms are able to enjoy scaled economies that come with reduced cost of operation. Corporatization has led to significant development in trade as firms in the cluster can easily access funds for expansion and growth. Digitization in the industry is needed to cut the cost associated with film productions and enhance efficiency. It is also the tool that is needed to handle issue of piracy since it the element of patent is very important in trade setting. Digitization has the potential benefits to enable industry reap a lot of revenues and provide more tax income to the state. Digitization enables production of quality movies and pictures in the industry, for instance the picture below show a digitized picture of actors
Despite the cluster’s lucrative performance in the film industry, trade challenges tend to slow down its rapid growth. Such challenges include the issues of piracy, lack of qualified directors for film production, unpredictable demand patterns and competition emanating from the international front (Fitchard, Kevin 2007, p 169).
Global Competitiveness Report survey data
The inflation rate in India has been very manageable, and the country’s economic growth has shown significant changes. The economic development of major states such as Maharashtra has been very promising. The India is one of the countries in the world with best fiscal policies to ensure fiscal stability. The issue of patents has been seriously tackled by the government especially in the film industry where piracy has remained the major threat to the growth of the economy (Global Competitiveness Report 2007-2008).
The data from global research shows that development of business in India and especially in the service sector is taking place at higher rate than other economies that developed before India such China, South Africa and Italy. This can be shown in the diagram below.
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