Research Paper on "International Business Environment of India Spread"

Research Paper 9 pages (2971 words) Sources: 20

[EXCERPT] . . . .

International

Business Environment of India

Spread over three million square kilometers and located entirely in the northern hemisphere, India is the seventh country in the world in terms of geographical size. India's neighbors are Bangladesh and Myanmar in the east, Bhutan, China and Nepal in the north, Pakistan in the west and Sri Lanka in the south (Doing in Business in India, n.d.).

When entrepreneurs put together a business plan and try to get off the ground, the first obstacle that they often face are the actions required to incorporate and register the new firm before they can legally do business. Economies fluctuate greatly in how they control the entry of new businesses. In some the process is straightforward and affordable. In others the actions are so troublesome that entrepreneurs may have to bribe officials in order to speed up the process or may decide to run their business unofficially. Analysis often shows that troublesome entry regulations do not boost the quality of products, make work safer or reduce pollution. Instead, they limit private investment; push more people into the unofficial economy; increase consumer prices and fuel dishonesty (Doing Business 2010 India, 2010).

The Indian market with its one billion plus population, offers profitable and diverse opportunities for exporters with the right products, services, and promise. India's requirements for equipments and services for major sectors such as energy, environmental, healthcare, high-tech, infrastructure, transportation, and defense will exceed tens of billions of dollars in the mid-term as the Indian economy further globalizes and expands. India's GDP, which usually grows at 6.7% rate, makes it one of the fastest growing economies in the world and the second fastest in Asia. India has the possibility for a sustained growth of 8-10% for the next couple of years. So now is the time for foreign companies to enter the growing Indian market (Doing Business in India, 2010).

Country Profile

The republic of India has an area of 3.29 million sq. km. (1.27 million sq. mi.) which makes it about one-third the size of the U.S. The Capital is New Delhi which has a population of 12.8 million, according to the 2001 census. Other chief cities include Mumbai, which is formerly known as Bombay (16.4 million); Kolkata, which is formerly Calcutta (13.2 million); Chennai, which is formerly Madras (6.4 million); Bangalore (5.7 million); Hyderabad (5.5 million); Ahmedabad (5 million) and Pune (4 million). The landscape varies from Himalayas to flat river valleys along with deserts in the west (Background Note: India, 2010).

The estimated 2010 Population 1.17 billion of which 29% is urban. The population has an annual growth rate of 1.376%. Ethnic groups in India include: Indo-Aryan 72%, Dravidian 25% and others 3%. While the national census does not distinguish racial or ethnic groups, it is thought that there are more than 2,000 ethnic groups in India. Religions include: Hindu 80.5%, Muslim 13.4%, Christian 2.3%, Sikh 1.9% and other groups including Buddhist, Jain and Parsi at 1.8%. Languages in India include Hindi, English, and 16 other official languages (Background Note: India, 2010).

Although India inhabits only 2.4% of the world's land area, it supports over 15% of the total world's population. Only China has a bigger population. India's median age is 25, which is one of the youngest among large economies. Almost 70% live in more than 550,000 villages, and the rest in more than 200 towns and cities. Over many thousands of years in its history, India has been attacked from the Iranian plateau, Central Asia, Arabia, Afghanistan, and the West; Indian people and culture have immersed and customized these influences to produce a remarkable racial and cultural synthesis (Background Note: India, 2010).

Economy

India has the world's 12th largest economy, and the third largest in Asia behind Japan and China, with total GDP in 2008 of around $1.21 trillion ($1,210 billion). Services, industry, and agriculture make up for 54%, 29%, and 18% of GDP respectively. India is capitalizing on its huge numbers of well-educated people skilled in the English language to develop into a major exporter of software services and software workers, but more than half of the population depends on agriculture for its living. 700 million Indians live on $2 per day or less, but there is a huge and growing middle class of more than 50 million Indians with throwaway income ranging from 200,000 to 1,000,000 rupees per year ($4,166-$20,833). Approximations are that the middle class will grow ten-fold by 2025 (Economy, 2009).

Trade relations between India and Australia can be traced back to when the first Australian ship loaded with coal came to India in 1801 as a part of the East India Company. India Australia trade relations are lively today but their full potential has still not been realized. There is substantial scope for development in India Australia trade relations. The India Australia trade revenue between the two countries reached a record A$7.25 billion in 2004-2005. The quantity of total trade saw an increase of about 23.7% or A$1.39 billion over the equivalent figure of A$5.86 billion in 2003-2004. In 2004- 2005, India's export to Australia was at A$1.22 billion or increased by 22% than the matching figure of A$999.7 billion in 2003- 2004. In 2003- 2004, India's import figure stood at A$4.87 billion and it increased by 24% in the next year to stand at A$6.05 billion. India ranked sixth in Australia's export market in the year 2004- 2005. Throughout this period, India's share of Australia's total export was 4.8% and import was 0.8% (India Australia Trade Relations, 2010).

India's tariff system has long had a reputation of being complex and opaque. Besides having a comparatively high average tariff rate, India also had a more dispersed range of tariff rates, even among similar types of products. Moreover, India had many exemptions or exceptions to the standard most favored nation (MFN) tariff rate, making it difficult for foreign companies to determine the correct tariff rate for their exports. Finally, there were frequent reports of uneven enforcement of existing tariff laws, as well as claims of arbitrary evaluation of imported goods (India-U.S. Economic and Trade Relations, 2007).

Political System

As a federal republic, the Republic of India incorporates the United Kingdom's as well as other democratic countries, like the United States constitutional system and has a constitution which rules it. The government's power can be separated into three branches: executive, judiciary and parliament. Just like with the United States, India is made up of individual states. India's central government has power over these states and even has the authority to alter the boundaries of the states (India's Politics, 2000).

India is a Sovereign, Secular, Democratic Republic with a Parliamentary form of Government. The Constitution was accepted by the Constituent Assembly in November 1949 and came into power in November 1950. The Constitution supports the trinity of justice, liberty and equality for all the people. The Constitution was developed keeping in mind the socioeconomic progress of the country. India pursues a parliamentary form of democracy and the government is federal in arrangement (India's Politics, 2000).

In the Indian political system, the President is the constitutional leader of the executive of the Union of India. The real executive power lies with the Prime Minister and the Council of Ministers. According to the Article 74(1) of the constitution, the Council of Ministers under the leadership of the Prime Minister is accountable to aid and assist the President in implementing the Presidents function. The Council of ministers is accountable to the House of People. In states the Governor is the delegate of the President, though the real executive power is with the Chief Minister along with his Council of Minister. A documented political party has been classified as a National Party or a State Party. If a political party is recognized in four or more states, it is thought to be a National Party (India File - Political System, 2010).

Legal and Regulatory Environment

While India lacks specific laws on privacy and data protection, there are proxy laws and other indirect safeguards, which provide adequate protection to companies off shoring work. The Indian Government is proactively increasing the existing legal system to cover data protection issues. A few of the proxy laws are Section 65, 66 and 72 of the Indian IT Act, the Indian Contract Act, Section 406 and 420 of the Indian Penal Code, and the Indian Copyright Act (Regulatory Environment In India, 2006).

The legal situation in India plays a major role in supporting an environment, which is favorable for many stakeholders. Legal framework is thought to be an important infrastructure element that needs to be user-friendly and implementable at all levels for the purpose of conformity. The Indian legal system though healthy and based on a strong historical custom is proving somewhat unproductive for the growth and development of advancing technologies. There does not appear to be a legal framework in India that identifies health services, captures usage, or stores health information. The legal framework lacks the structure and… READ MORE

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