Business Environment INDIA

8/7/2019 Business Environment INDIA

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The Business

Environment of India


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Introduction

1. India act of 1858 Establishment of India as a crown colony.

2. 1947

In almost 90 years Indias political, social and economic fate was in its

own hands. Indias first prime minister, Jawaharlal Nehru.

3. 1951 Just 4 years after independence the countrys foreign exchange reserves

were among the worlds largest, at $ 2.1 billion

4. Six decades later Has India realized the great triumphs and achievements ?

Indias Foreign exchange levels at a record level.

Indias competitive advantage Indias Services sector?


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Post Independence

Building a Socialist Democracy

1. 1948 Government implemented the Industrial Policy Resolution

2. 1950 India became a republic adopting a parliamentary democracy

3. 1951 Indias first Five-Year Plan (1951 through 1956)

Focus on self-sufficiency, fiscal conservatism and increased national savings

4. 1956 Indias second Five-Year Plan (1956 through 1961)Focus on rebuilding rural India, industrial progress and balanced

development.


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Government Intervention

1. License Raj severely inhibited progress of public and private enterprises.

2. Sick unit regulations. Indias government was subsidizing 90,000 sick units by

1980.

3. Greater direct control through nationalization of key industries

4. Government exerted significant Influence over private sector investment and this

government regulation and dependence lead to corruption.

5. Isolationist economic policies resulted in exports declining from 6.5% of GDP in

1950 to 3.6% GDP in 1970.

6. Erratic FDI policies from 1960 to 1980.


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Attempts to Revive the Economy

1. Indira Gandhis pro business outlook

2. Rajiv Gandhi initiated more economic liberalization which lead to a record

growth of 10.5% in fiscal 1988-89

3. Narasimha Rao elected as Prime minister in 1991 at which time India was at

the verge of an economic catastrophe.

4. Major programs of pro market economic reforms

Fiscal and monetary tightening Overhaul of foreign trade and investment regulation

Reduced state control of industry

Financial sector liberalization and decreased central control of investment

Elimination of microeconomic regulations


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Indias Foreign Relations

1. Relations with UNITED STATES

2. Relations with PAKISTAN

3. Relations with CHINA


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India Today

1. The conservative approach

2. But per capita income at $1,000

3. Global Competitiveness Index (GCI)- The World Economic Forum ranked

national competitiveness, listed India 50th out of 134 nations.

4. Country highlights:

Highs

Ranked 50th in GCI

Ranked 27th in strong business sophistication

Ranked 3rd for availability of scientists

Ranked 27th for its quality of business institutions

Lows

Ranked 109th in macroeconomic stability

Ranked 127th in highest deficits in the world

Ranked 113th in unsustainable government debt

Ranked 105th for poor health indicators


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Society and Culture

Highs

1. India is the worlds most culturally, linguistically and genetically diverse

country

2. Growing service industry, the employees of which tend to live in urban areas

3. Indian constitution guarantees equal rights of women4. Home to three of the worlds ten largest cities

Lows

1. Diversity leads to tension and occasional violent outbreaks

2. 71% live in rural areas and 60% work in agriculture and 75% live on less than

$2 per day.3. 25% live below poverty line

4. Ranked only 113th in the gender gap report

5. Caste continues to play a role


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Markets

Product/ServiceMarket

Highs

1. India generated 53.7% of GDP from services through only 28% of labor force

2. Emergence of Outsourcing and IT services as the fastest growing form of exports

3. Success of IT leads to the emergence of new breed of young professionals and thedevelopment of the middle class

4. Demanding domestic market in which local and foreign companies were forced to

compete

Lows

1. With 60% of labor force agriculture contributed only 17.2% of GDP2. Salary disparity, entry level salaries of IT professionals 20 times those of

agricultural workers

3. Indias consumer market remained fickle and sensitive to economic realities


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MarketsFactor Markets

Highs

1. Emergence of clusters as a result of local demand. (Panipat produced 75% of all

blankets made in India, world-famous Bangalore software cluster)

2. Ranked 4th

in quantity of local suppliers, 37th

on quality of local suppliers and 41st

on production process sophistication

3. Rich in natural resources

4. Indias capital markets

Lows

1. Plagued by Out-of-date technology, relatively poor product quality, informationdeficiencies, and poor market linkages

2. Low participation of women in the workforce (31.6%, 122nd in female participation)

3. Education gap leading to 90% of labor force working in low-skilled, low

productivity jobs

4. Only 16% of Indian manufacturers offered training compared to over 90% in China.

5. Healthcare system and poor hiring and firing practices


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Technology

Highs

1. Improvements in information and communication infrastructure

2. Ranked 19th globally in number of patents generated

Lows

1. India requires improvements in infrastructure such as roads, power supply

2. Technology penetration (Indias broadband connectivity is less than 1% of

china, Korea, US and the EU countries)

3. R&D expenditure less than 1% of GDP


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Institutions

BUSINESSES

1. Delayed embrace of foreign investment

2. Employment laws

3. Corruption was a serious problem

GOVERNMENT

1. Inefficient bureaucratic government

2. Less number of elite civil servants

3. Poor stability and financial health4. Increased deficits by the government

5. Conflict regarding focusing on reducing deficit or increasing growth


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Measures

1. Improvement of the educational institution and healthcare system which will

improve the standard of living of individuals

2. Huge investments in infrastructure developments

3. Adopt technology

4. Privatization of government owned companies

5. Reduce corruption by introducing stringent laws and setting up an independent

anti-corruption agency free from the influence of government.

6. Better system of taxation and improved tax collection


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Business Environment INDIA

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