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Business Environment in India

2020-03-04 来源: 51Due教员组 类别: Essay范文

下面51due教员组为大家整理一篇优秀的代写范文- Business Environment in India,供大家参考学习。这篇文章讲述的是印度是世界上人口最多的国家,也是最大的经济体之一。历史上,印度的影响遍及亚洲。本文将从法律和政治的角度探讨印度的商业环境。确定了在制造业、建筑业、互联网和电子商务方面的机会。接着分析了在印度经营的外国公司面临的两个最突出的风险,并提出了相应的缓解策略建议。

Business Environment in India

 

India is the world’s most populated country, and one of the largest economics. In history, the influence of India has been all over Asia. India is considered a country with high potential of development as well, due to its pivotal location connecting Asia, the Middle East and Africa. Although India is still lacking on infrastructure and average income, it is rapidly catching up with the developed world in information technology and manufacturing. In this essay, the business environment of India will be discussed, from the legal and political perspectives. The opportunities in manufacturing, construction, internet and e-commerce are identified. This is followed by an analysis of two most prominent risks for foreign companies operating in India, and corresponding recommendations for mitigation strategies.

 

As one of the four ancient civilizations of the world, India has a long history and prosperous culture. In the past, India was once a colony of the Great Britain, as the “jewel in the crown.” In 1947, India became independent, and the Republic of India was founded in 1950 (Knutson 2009, p.326). The political system of India is checks and balances designed, making it the largest democratic country in the world. although the President is the head of the state, it does not have any administrative power. India’s cabinet is built around the Prime Minister. In 2014, Narendra Modi was elected the prime minister of India (Wallace 2015). Although there are multiple active political parties in India, BJP, BSP and INC are the dominant ones. The current prime minister Modi is also the leader of BJP. In India, religion and politics are intertwined. Most of the major religions in the world have a large crowd of followers in India. In history, the revolution in religion have contributed to the economic development and social evolvement of India. Meanwhile, violent conflicts between religions have also occurred multiple times (Baber 2004, p.705). In addition to politics and religion, there exist a third type of social rules, the Caste system. This system traces back to thousands of years, and is deeply rooted in India’s society. It categorizes people into four different types, establishing rigid social levels and reinforcing control of the ruling class. Although this system has been abolished officially, India’s society is still largely structure by it. The Caste system has also become the major reason holding back the economic growth in India.

 

Legally, one of the guiding principles of India’s legal system regarding foreign investment is that foreign companies are regulated the same way as local companies (Goswami 2015, p.57). This means that although there are no specific hurdles that prevent foreign investment, there are no extra benefits for foreign companies in India, either. India has developed a series of laws targeting foreign investment management, including The Industries Development and Regulation Act of India (1951), The Companies Act (2013), The Competition Act (2002), The Trade Marks Act (1999), The Patents Act (1970), etc. (McArdle 2015, p.467), accompanied with the labor laws to protect the welfare of the common workers. In 2014, the Government of India has launched the plan of “Make in India,” with reduced the standards and requirements for the domains and share percentages of direct foreign investment (Mukane 2014). Basically, a foreign company is able to invest in all industries and businesses except gambling, nuclear energy, land development, risk funds and cigarette. There are other industries where a 100% foreign company is not allowed to enter, and foreign investment must seek to use joint venture with local companies in order to enter the Indian market. The legal system cannot construct the business environment alone, and needs the support of enforcement. In the past, the Indian government has been complained about its notorious inefficiency, taking around 9 months to a year for paper work before foreign investment entrance. In response, the Modi administration has been pushing for more efficient administrative process throughout the government (Jain 2015). International companies such as Siemens have also developed effective communication strategies to motivate the government to become more efficient, by threatening to withdraw the investment and relocate to other countries.

 

The biggest opportunities for India originates from its economic ambitions and the urgent need to improve the living standards of its people. Based on these needs, India has opened more industries to foreign companies, lifting some of the previous restrictions that held them back. The first major field of opportunity is in the manufacturing industry. A strong manufacturing industry will not only be an economic power engine, but also increase the employment rate, reinforcing the power of the ruling party. In the past two decades, India’s growth in the manufacturing industry is around 13%, which is higher than most of the countries (Nath 2014, p.473). This trend is expected to continue, especially with the policy support from the government. Since the launch of the special economic zone program in 2006, there are 389 zones established in India. However, only 185 of them are actively operating (Anwar & Carmody 2016, p.124). To change the situation, the Indian government has partly opened the domestic market to companies in these zones. India is also hoping that an improved transportation system can contribute to economic growth. Therefore, India is beginning to seek direct foreign investment to upgrade its railways system, establishing collaboration between the government and private foreign companies. This is unprecedented in Indian history. This has created great opportunities for foreign construction and manufacturing companies, since a comprehensive service system must be built surrounding the railways, including bridges, stations, elevators, etc.

 

In addition to construction and manufacturing, India also has huge potential in e-commerce. India has over 10% of the world’s internet users (Tehelka 2015). The need for online business is only taking off. From 2007 to 2010, the number of internet users in India increased from 50 million to 100, and reaching over 300 by 2004 (Tehelka 2015). This makes India the second largest internet market in the world, secondary to China only. With the popularity of mobile phones, the number is going to double very soon. In the future, e-commerce in India will break free from PCs and fully embrace the age of mobile devices. There are also unexplored markets in smaller city and rural areas, with similar levels of need. Although logistics can be a major problem hindering the development of e-commerce in India, the gradually improving infrastructure will be the solution for this problem. There are multiple industries that are associated with e-commerce. For example, online payment. Recently, the Chinese e-commerce giant Alibaba has invested $575 million on an online payment company from India, Paytm (Zacks 2015). Amazon and eBay are also busy establishing their bases in India, setting up the logistic network and getting ready for the future market. The need for affordable mobile devices have also nourished foreign mobile phone companies, especially emerging Chinese ones. The mobile devices sold will then become the hardware basis for the development of future e-commerce in India.

 

Based on the previous analysis of the legal and political environment of India, the biggest risk for foreign firms and investment would be the inefficiency caused by the political system, social structure and government. In addition to the central laws of India, there are also local laws that foreign firms need to check before entering India. Under the federation system, all 28 states of India have the power to make their own laws and elect their own governments (Khemani 2007, p.691). This scattered way of legislation means that foreign investment must conform to both the federal and local business law terms. Every investment must obtain local approval on land use, environment protection, energy and water consumption, etc. Due to the different levels of economic development, different cultures, religions, and even languages between and within states, foreign companies must go through detailed research and preparation before making an entrance. This risk is made worse with the relatively inefficient administrative system, which is often complained by foreign investors. When there are business disputes, foreign companies may have to wait for months, even years, for a legal resolution.

 

Social disturbances are the second largest risk for foreign investment. Since India is a place where multiple religions co-exist, the differences in beliefs and practices have led to frequent conflicts, especially between Islam and Hinduism. In India, Hindus make up for 82% of the entire population, while 12% of the population are Muslims (Baber 2004, p.703). It has been a tradition for Hindus to feel animosity against Muslims. In 1992, extremists among the Hindus demolished the Mosque of Babur (Babri Masjid), which caused a series of violent conflicts between the two religions nationwide. Over a thousand died within a week. In 2002, such conflicts started once more, with dozens of deaths and hundreds of villages burned down (Baber 2004, p.702). Such conflicts have become the major source of disturbance in Indian society, and also a major risk for foreign investment. There are also social disturbances that are country-specific. For example, the negative factors have become increasingly dominant in recent years, in the relationship between India and China. Fueled by social media and rise of nationalism feelings, many Indians are beginning to perceive China negatively. The boarder controversies have continued to be the source of conflicts between India and China. Although a war is not likely in the foreseeable future, the situation will indeed create more uncertainties for Chinese companies intending to enter India. Years of effort from these companies can be destroy overnight, with the hostile feelings between the two peoples. This may be a problem for Chinese companies alone, but companies from other countries must evaluate the impact of nationalism and be prepared for its expansion, to avoid collateral damage.

 

To mitigate the risk of scattered and multi-layered legal system, a company should conduct comprehensive research before entering the Indian market. Such research is not only conducted from the national perspective, but also the local perspectives. Since different states in India have different degrees of development, regulations, and social norms, the political, economic and cultural background should be fully understood during the research. An overestimation must be applied considering costs and schedules, based upon the previous entrance experiences from other companies perhaps. During the construction and manufacturing phases, a profound understanding of the local conditions will also contribute to more precision in schedule control and resource allocation. Contracts should be as detailed as possible, and anticipate the potential problems that can occur during later phases, so that there are contractual terms to refers to when in trouble. A clear contract will also mitigate the inefficiency of the law enforcement. in communication and negotiation with the government, a stronger position can be held by the foreign investors, especially when there are potential delays caused by government inefficiency. To mitigate social disturbances, operating companies must keep a close watch with local and national news, and be able to prepare for potential conflicts and minimize the losses of both human lives and property. Buying insurance from reliable and trusted insurance companies is another way of risk mitigation.

 

In conclusion, opportunities and risks coexist in India, and foreign companies must be well-informed of both to succeed in the Indian market. The opportunities of India lie in infrastructure and manufacturing, as the government has emphasized their importance by lifting the hurdles for foreign investment and opening the domestic market to foreign companies for the first time. E-commerce and internet is another major opportunity, but it may be hindered if there is no efficient logistic system established first. The risks discussed in this essay come from two aspects: political/legal system and social disturbance. The different layers of the political and legal system mean extra work for foreign companies. Government inefficiency makes things even worse. This risk can be mitigated with market research and negotiation skills. The other risk originates from social disturbances and religious conflicts, which can be mitigated through continued attention on domestic affairs, quick response to real time disturbances, and adequate insurance.

 

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