india business scenario

8/8/2019 India Business Scenario

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Doing Business in India

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Business in India Prof. Ms. Simran A.Chawla


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y India is among one of the most preferred destinationsfor investors who are planning to set up shop oversees.

y According to the ATKEARNEY Business ConfidenceIndex of 2007, India is the second most attractive

destination for doing business.

y According to Goldman Sachs, the Indian economy isexpected to continue growing at the rate of 5% or moretill the year 2050.

y A PriceWater House Coopers report suggests that Indiawill be 90% of the US economy by the year 2050.

y All these predictions along with several others makedoing business in India a very viable option.

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Glance at the basicEconomic Statistics of India

y GDP at current prices (2007-08): $ 1.16 trillion

y GDP (PPP) (2006) = US $4156 (5th largest in theworld)

y

GDP growth rate (2007-08): 9%y Exchange rate: Rs. 46.45017/$ (as on November 10,

2009)

y Foreign Exchange reserves: $ 285.5 (Oct 2009)

y

Exports (2007-08): US $159 billion, Growth Rate: 25.8 %y Imports (2007-08): US $239.65 billion, Growth Rate:

29%

y Foreign Direct Investment (2007-08): US $32.44

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y Despite the turbulent market conditions, doingbusiness in India is an opportunity for investors tocapitalize on the huge opportunities available in thecountry.

y

The United Nations Conference on Trade andDevelopment (UNCTAD) in their new report on worldinvestment prospects titled, World InvestmentProspects Survey 2009-2011, India has been rankedthird in global foreign direct investments for

year 2009, following the economic meltdown.y Also India will continue to remain among the top five

attractive destinations for international investorsduring the next two years.

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y The huge spurt witnessed in the Indian economy haslargely been due to huge investments from investorsabroad.

y In 2008, these investments accounted for 39% of the

countrys Gross Domestic Product (GDP), which is anincrease of more than 20% from the last five years.y The Government has undertaken several steps to ensure

that the whole process of setting up and doing business inIndia is a smooth affair.

y

Reformed governmental policies provide investors withopportunities like freedom of entry, investment, location,choice of technology, production, import and export.

y Many multi national firms have set up their officesthroughout India, while there are several companies

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Business investments in the pipeline:

y German luxury car manufacturer, Audi, is looking to higher salesthis year than the previous target of 1,500 units. The Aurangabadplant is set to get a new assembly line as part of its US$ 42.83million investment in India.

y Japanese tyre manufacturer, Bridgestone is set to start a secondplant near Pune at an investment of about US$ 420.72 million.y PepsiCo is increasing investments in its Indian beverage business

in 2009 to over US$ 220 million.y Mexican cinema chain, Cinpolis, is set to invest around US$ 163.1

million in south India. The company has earmarked US$ 346.57million for its expansion plans in the country.

y German carmaker, Volkswagen will invest US$ 453.66 million forexpanding the Chakan plant.

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y Going by the market exchange rate statistics, Indiabusiness economy is the twelfth largest in theworld.

y On the basis of purchasing power parity (PPP)India occupies the fourth slot.

y Renewal of economic developments and improvedeconomic policy in the year 2008 has helped

y 2008 witnessed India occupying the second slot interms of world & a fastest developing economy.

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Indian Business Sectors

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Industrial and service sector

y Accounting for 29% of Indian GDP and 28% ofemployment, India ranks 16th worldwide in terms of

nominal factory output and 15th in services output.Service sector on the other hand accounts for 54% ofIndias GDP.

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Agricultural sector

y India stands second in global farm output. In theyear 2007, agriculture and related sectors likeforestry, fishing and logging accounted for 17% of

GDP and 60% of the employment.y The sector plays an important role in the socio-

economic up gradation of India, in spite the sturdydeterioration of its contribution in the GDP.

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Banking and Finance

y Money market in India is divided into two sectors the organized sector (constituting private, public andforeign owned cooperative and commercial banks)

and unorganized sector (constituting family orindividually owned bankers and non-bankingfinancial companies).

y The public sector banks possess around 75% of

overall assets of the banking sector, with the privateand foreign banks seizing 18.2% and 6.5%respectively.

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FDI in Indian economy

y India is the most favorable destination for the foreigninvestors who are willing to start their business in a nationwhich has a middle class population of 50 millions,indicating an expanding consumer market.

y The nations strength lies in Information technology,

chemicals, apparels, pharmaceuticals and jewellery.y Moreover, it has a large team of well-qualified and world

class business managers and executives.y According to the government's Secretariat for Industrial

Assistance, FDI infusion into India touched a benchmark of

$19.5 billion in fiscal year 2006-07 (April-March) whichwas reportedly double than the total of US$7.8bn in theprevious financial year.

y The FDI traffic for FY 2007-08 has been accounted as $24billion and for FY 2008-09 it has touched $35 billion.

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Economic trends to be pursued by India

y Based on improved growth and increased FDItraffic, Goldman Sachs forecasts that from 2007 to2020 Indias GDP per capita in context of US$ will

multiply and the Indian economy will supersedethe US by the year 2043 if the Indian governmentfollows few guidelines directed by Goldman Sachs.

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Few guidelines directed byGoldman Sachs.

y Develop authority

y Elevate educational realization

y Improve quality and quantity of educational institutes

y

Monitor inflationy Initiate a convincing economic policy

y Liberalize monetary markets

y Amplify trade relations with neighbors

y

Increase agricultural efficiencyy Perk up infrastructure sector and

y Develop ecological quality

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India Industry

y Over the years agriculture has been the major sourceof livelihood of the Indian population. However,after Independence the founding fathers saw the

nation progressing with a decent industrial base.This triggered the formulation of programs andstrategies to construct a proper infrastructure forspeedy industrialization.

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What steers the India Business?

y Imports and exports form the core elements of Indiabusiness.

y To substantiate the same, the figures of currents importsand exports are respectively, $287.5 billion and $175.7

billion.y India mainly imports crude oil, machinery, gems,

fertilizer and chemicals whereas its export basketincludes petroleum products, textile goods, germs

Jewelry, Engineering goods and chemicals.y India has a lower dependency on exports to foster its

growth thus in a way the exposure to global demandshocks are limited.

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y On the other hand, Foreign Direct investments(FDI), institutional investors and externalcommercial borrowing (ECBs) should again be themain driving force behind India's business growth,

but all these factors are let loose to some extent as ofnow.

y We need to understand that FDI would not onlybring in money but also better management systems,

enhanced corporate governance and newtechnologies all helping together to drive India's

business pattern.

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Highlights of India's business scenario -

y Massive young skilled work force, being cost effective, drivesthe production patterns in the country

y Improvement in the infrastructure and intellectual capital

y

Progressive tax reformsy Leveraging the economy to FDI inflows and outflows

generating business in turn

y Tailor made policies as per investor requirements.

y Introducing the concept of Public private partnership (PPP)

y More mergers and acquisitions to build brand value of theindividual companies and in turn creating the India brandvalue.

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y International Business in India looks really lucrative andevery passing day, it is coming up with only morepossibilities.

y The growth in the international business sector in India

is more than 7% annually.y There is scope for more improvement if only the relations

with the neighboring countries are stabilized.y The mind-blowing performance of the stock market in

India has gathered all the more attention (in comparison

to the other international bourses).y India definitely stands as an opportune place to explore

business possibilities, with its high-skilled manpowerand budding middle class segment.

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y With the diverse cultural setup, it is advisable not to formulatea uniform business strategy in India.

y Different parts of the country are well-known for its differenttraits.

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The eastern part of India is known as the Land of theintellectuals, whereas the southern part is known for itstechnology acumen.

y On the other hand, the western part is known as thecommercial-capital of the country, with the northern part

being the hub of political power.y With such diversities in all the four segments of the country,

international business opportunity in India is surely huge.

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Sectors having potential for Internationalbusiness in India

y Information Technology and Electronics Hardware.y Telecommunication.y Pharmaceuticals and Biotechnology.y R&D.

y Banking, Financial Institutions and Insurance & Pensions.y Capital Market.y Chemicals and Hydrocarbons.y Infrastructure.y Agriculture and Food Processing.

y Retailing.y Logistics.y Manufacturing.y Power and Non-conventional Energy.

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y Sectors like Health, Education, Housing, ResourceConservation & Management Group, WaterResources, Environment, Rural Development, Small

and Medium Enterprises (SME) and UrbanDevelopment are still not tapped properly and thusthe huge scope should be exploited.

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y To foster the international business scenario inIndia, bodies like CII, FICCI and the variousChambers of Commerce, have a host of services like

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These bodies work closely with the Government and thedifferent business promotion organizations to infuse more

business development in India.

They help to build strong relationships with the differentinternational business organizations and the multinational

corporations. These bodies help to identify the bilateral business co-

operation potential and thereafter make apt policyrecommendations to the different overseas Governments.

With opportunities huge, the International Business trend in

India is mind boggling. India International Businesscommunity along with the domestic business community isstriving towards a steady path to be the Knowledge Capital ofthe world.

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y It was evident till a few years back that India had amarginal role in the international affairs.

y The image was not bright enough to be the cynosure

among the shining stars.y The credit rating agencies had radically brought down

the country's ratings. But, as of now, after liberalizationprocess and the concept of an open economy international business in India grew manifold.

y Future definitely has more to offer to the entire world.

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