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India´s Grand Prix and the Global Economic Race

In the 2011 season, 17 Formula One Grand Prix auto races have been held across the globe, with India as the newest entrant to the circuit. Sebastian Vettal of Germany, reigning world champion and victor in the race held October 30, praised event organizers, noting “India has a way of doing things right.” But what implications does attracting an F1 race and putting it on successfully have for other parts of the Indian economy? In 2000, Colorado College professor Daniel Johnson researched the relationship between a country’s economy and its success in global sporting events. Johnson chose that year’s summer Olympics to test his model, which used five basic pieces of data for each participating nation: per capita GDP, total population, political structure, climate, and home-field advantage for hosting the event or being located nearby. When the games concluded, the country-by-country medal count showed a 95% to 96% correlation to Johnson’s predictions. For subsequent Olympic Games, his medal count predictions have also been remarkably accurate.

In June 2008, PricewaterhouseCoopers (PwC) released a study of the Beijing Olympics that were held in August of the same year. The report predicted that China, which in 2004 had come in third among other nations with 63 medals, would in 2008 be neck and neck with the U.S. for the top spot. In an article in The Economist, John Hawksworth, PwC’s London-based head of macroeconomics and the author of the report noted that “the study isn’t a prediction of Games performance — it’s more of a benchmark to judge a country’s performance.” In the final tally of the Beijing Olympics, U.S. athletes won 110 medals while China won 100. Chinese athletes won the most gold medals at 51; the U.S. was second with 36. India’s entry on the Grand Prix track was to be expected given the country’s growth, Boria Majumdar, a senior research fellow at the University of Central Lancashire in the U.K., wrote in the Times of India. “In many ways it was inevitable. It was only a matter of time before the world’s largest democracy with an ever-growing middle class was brought into the [orbit] of the F1 and, if the early signs are anything to go by, India is expected to become one of F1’s signature destinations in the coming years.”

In India, economic growth projections of around 8% — which would be welcomed by many recession-weary developed nations — were deemed “disappointing” recently by Indian finance minister Pranab Mukherjee, who had earlier predicted 9% growth this year.

But there are differing opinions as to how staging international sporting events really impacts the Indian economy, experts told India Knowledge@Wharton for a story about the 2010 Commonwealth Games held in Delhi. That event was marked by fears that it would have to be called off, charges of corruption and reports of below-grade facilities. Sandeep Bamzai, a journalist and author of Guts and Glory: The Bombay Cricket Story, noted that while the investment in public transportation, roads and other infrastructure may help the people of Delhi, “in the absence of a sporting culture, who is going to use the new stadiums and the ones that have been refurbished at great expense? So far, they were haunted by criticism and complaints. Now they will be ghost stadiums.”Harish Krishnamachar, senior vice-president for South Asia at the World Sport Group, a sports marketing, media and event management company, said the money spent on the Commonwealth Games could have been put toward more pressing issues. But he also acknowledged that “as a significant member of the world economy, it is imperative that we drive progress on multiple fronts. The ability to stage events of this scale is a signature that demonstrates to the world the strength and presence that we command.”


Source: Wharton News, Nov 2, 2011