India is located in southern Asia, with the Bay of Bengal on the east and the Arabian


India is located in southern Asia, with the Bay of Bengal on the east and the Arabian Sea on the west. One-sixth of the world's population (approximately 1.16 billion people) lives within the country's 1.27 million square miles. Though Hindi is the dominant language in terms of number of speakers (it is the mother tongue to over 40 percent of Indians), India is essentially a multilingual nation with more than 10 other languages spoken by 20 million people or more. Most states are divided along linguistic lines, with different states accepting different "official" languages (one each). English serves as the national language among the educated Indians. The Indian economy derives only a quarter of its output from agriculture, with services contributing almost 55 percent. However, more than 70 percent of Indians are directly or indirectly dependent on agriculture. Three-quarters of Indians live in over 600,000 villages. Many of these communities lack infrastructure such as roads, power, and telecommunications. Hence, India's rural population presents a huge untapped potential for many marketers. The country has operated as a democratic republic since its independence in 1947. At that time, India was born of the partition of the former British Indian empire into the new countries of India and Pakistan. This division has been a source of many problems through the years. For example, much to the dismay of the world community, both countries have had nuclear tests in a cold war atmosphere. Also, many millions of Indians still live at the lowest level of subsistence, and per capita income is very low. India's misaligned central and local public finances have contributed to an overall fiscal deficit of more than 10 percent of GDP.
In the past, doing business in India has been quite difficult For example, it took PepsiCo three years just to set up a soft drink concentrate factory, and Gillette, the U.S.
razor blade company, had to wait eight years for its application to enter the market to be accepted.
In recent years, the government has been relaxing its bureaucratic rules, particularly those relating to foreign investments. In 2000, foreign direct investment exceeded $3 billion and by 2009 had reached $27 billion, making India the third highest recipient of FDI in the world. Although much of this investment has historically come from the United Kingdom and the United States, many Asian investors are also viewing India as an attractive location for new business investment. One reason for this change is that the government realizes many MNCs are making a critical choice: India or China? Additionally, foreign investments are having a very positive effect on the Indian economy. In 2006,GDP increased by more than 8 percent, although slowed to 7.3 and 5.7 percent in 2008 and 2009, respectively. Growth is predicted to accelerate again in 2010 and 2011.
With the disbandment of the "License Raj," a socialistinspired system that made government permits mandatory for almost every aspect of business, the climate for foreign investment has improved markedly. Coca-Cola was able to get permission for a 100-percent-owned unit in India in eight weeks, and Motorola received clearance in two days to add a new product line. Other companies that have reported rapid progress include DaimlerChrysler, Procter & Gamble, and Whirlpool. In addition, there are other attractions: 

(1) A large number of highly educated people, especially in areas such as medicine, engineering, and computer science; 

(2) Widespread use of English, long accepted as the international language of business; and 

(3) Low wages and salaries, which often are 10 to 30 percent of those in the world's economic superpowers. While these factors will continue to have a positive impact, the growing debate over jobs outsourced from the United States could dampen some of the impressive growth prospect for India. Also, the election upset of May 2004, in which the opposition National Congress Party defeated the ruling BJP Party, suggests Indians are concerned about attention to social needs, not just economic growth. However, the Congress-led coalition under Prime Minister Manmohan Singh has continued economic reforms as well. When terrorists who perpetrated violent attacks in Mumbai in November 2008, were traced to a Pakistani organization, there was concern that India's already delicate relationship with its northern neighbor would unravel. To date, the two countries appear to be committed to working toward stability across their long border and broader cooperation. Elections in May 2009 further solidified the Congress Party's coalition as the solid leader of the government.

1. What is the climate for doing business in India? Is it supportive of foreign investment?
2. How important is a highly educated human resource pool for MNCs wanting to invest in India? Is it more important for some businesses than for others?
3. Given the low per capita income of the country, why would you still argue for India to be an excellent place to do business in the coming years?

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