international business in india

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International Business in India looks really lucrative and every passing day, it is coming up with only

more possibilities. The growth in the international business sector in India is more than 7% annually.

There is scope for more improvement if only the relations with the neighboring countries are stabilized.

The mind-blowing performance of the stock market in India has gathered all the more attention (in

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

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

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

Different parts of the country are well-known for its different traits. The eastern part of India is known

as the 'Land of the intellectuals', whereas the southern part is known for its 'technology acumen'. On the

other hand, the western part is known as the 'commercial-capital of the country', with the northern part

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

international business opportunity in India is surely huge.

Sectors having potential for International business in India :

Information Technology and Electronics Hardware.

Telecommunication.

Pharmaceuticals and Biotechnology.

R&D.

Banking, Financial Institutions and Insurance & Pensions.

Capital Market.

Chemicals and Hydrocarbons.

Infrastructure.

Agriculture and Food Processing.

Retailing.

Logistics.

Manufacturing.

Power and Non-conventional Energy.

Sectors like Health, Education, Housing, Resource Conservation & Management Group, Water

Resources, Environment, Rural Development, Small and Medium Enterprises (SME) and Urban

Development are still not tapped properly and thus the huge scope should be exploited.

To foster the international business scenario in India, bodies like CII, FICCI and the various Chambers of

Commerce, have a host of services like :


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These bodies work closely with the Government and the different business promotion organizations to

infuse more business development in India.

They help to build strong relationships with the different international business organizations and the

multinational corporations.

These bodies help to identify the bilateral business co-operation potential and thereafter make apt

policy recommendations to the different overseas Governments.

With opportunities huge, the International Business trend in India is mind boggling. India International

Business community along with the domestic business community is striving towards a steady path to

be the Knowledge Capital of the world.

It was evident till a few years back that India had a marginal role in the international affairs. The image

was not bright enough to be the cynosure among the shining stars. The credit rating agencies had

radically brought down the country's ratings. But, as of now, after liberalization process and the concept

of an open economy - international business in India grew manifold. Future definitely has more to offerto the entire world.

India is now the 10th largest economy in the world and the fastest growing economy, next only to

China. As per the Goldman Sach Report 2004.India accounts for a small share in world trade, its exports

and imports constitute major economic activities for the country. India is poised to be the second largest

economy by 2050. Despite these features, India's involvement with international business is not very

impressive. India's share in world trade in 2003 was abysmally low i.e., just 0.8 per cent as compared to

those of other developing countries such as Hong Kong (3.0 per cent),China (5.9 per cent), , South Korea

(2.6 per cent), Singapore (1.9 per cent),Malaysia (1.3 per cent), , and Thailand (1.1 per cent) . Due to

faster growth achieved at the external front, share of foreign trade in the country's Gross DomesticProduct (GDP) has considerably increased from 14.6 per cent in 1990-91 to 24.1 per cent in 2003-04. In

absolute terms, both the exports and imports have witnessed phenomenal growth over the years.

India's total merchandise exports were Rs. 606 crores in 1950-51 which got increased to Rs. 2,93,366

crores in 2003-04, representing an increase of around 480 times over the last five decades or so.

Composition wise, textiles and garments, jewellery and gems, engineering products and chemicals and

related products and agricultural and allied products are India's major items of India's exports. India

even holds the distinct position of being the largest exporter in the world in select commodities such as

basmati rice, tea, and ayurvedic products. So far as imports are concerned, products likes crude oil and

petroleum products, capital goods (i.e., machinery), electronic goods, pearl, precious and semi-precious

stones, gold, silver and chemicals constitute major items of India's imports. Data relating to India'sforeign investments - both inward and outward.It can be seen that there has been a phenomenal

increase in foreign investments flow into and from India. While the inward foreign investments have

grown more than 750 times from just Rs. 201 crores in 1990-91 to Rs. 1,51,406 crores in 2003-04, India's

investments abroad have also increased over 4,926 times- from Rs. 19 crores in 1990-91 to Rs. 8,3,616

crores in 2003-04. India's trades in services have also grown diverse over the years. Both the exports and

imports of services relating to foreign travel, transportation and insurance have increased spectacularly


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during the last four decades. What is more remarkable is the change in the composition of services

exports. Software and other miscellaneous services (including professional technical and business

services) have emerged as the main categories of India's exports of services. While the relative share of

travel and transportation has declined from 64.3 per cent in 1995-96 to 29.6 per cent in 2003-2004, the

share of software exports has gone up from 10.2 per cent to around 49 per cent in the corresponding

period.

A. Composition of India's Exports

Britishers strongly believed that India was a country well suited to supply raw materials and other

primary goods and a good market place for British manufacturers. So at the time of our independence

our exports were predominantly of primary goods and imports were of manufacturers. At the time of

independence agricultural commodities and light manufactured consumer goods dominated India's

export basket. During the post independence period India's composition of exports changed.

Now exports of India's are broadly classified into following four categories.

The composition of India's export can be summarised as follows :-

1. Agricultural and Allied Products

The share of agriculture items in the total exports of India has declined between 1990-91 to 2005-06.

The share of agriculture exports was 19.5% in 1990-91. It came down to about 10.2% in 2005-06.

The top items of agriculture exports include :-

Fish Products,


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Rice,

Oil Cakes,

Fruits and Vegetable.

2. Ores and Minerals

The overall export performance of ores and minerals is not satisfactory. In percentage terms, the export

performance of ores and mineral has increased from 4.4% in 199091 to 5.2% in 2005-06.

A major share of ores and minerals exports comes from the export of iron ore.

3. Manufactured Goods

The share of manufactured items in the total export earnings of India is on the increase. In 1990-91, the

share of manufactured items in the total export earnings was about 73% of the total export earnings.

In 2005-06, the share of manufactured items in the total export earnings of India remained stagnant at

72%.

The top manufactured export items include :-

Engineering Goods,

Gems and Jewellery,

Chemicals and Allied products, and

Readymade Garments

4. Mineral Fuel and Lubricants

There has been an improvement in the export of mineral fuels and lubricants both in terms of value and

in terms of percentage. In percentage terms, its share has increased from less than 2.9% in 1990-91 to

11.5% in 2005-06.

Some other facts regarding structural change in India's export since 1991 are as follows :-

There are indication that during 1990s, some of Indian exports have moved upwards in value addition

chain whereby instead of exporting raw materials, the country has switched over to export of processed

goods.

There were significant compositional shift within the major manufactured product groups such as

engineering. goods, chemicals and allied products, etc.

B. Composition of India's Imports


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In 1947-48 the main items of India's imports were machineries, oil, grains, cotton, cutlery, hardware

implements, chemicals, etc. They constituted 70% of India's imports. After that due to the emphasis on

industrialisation during the second 5-Year plan necessitated the imports of capital goods.

Now imports of India's are broadly classified into following four categories.

Table below shows composition of India's import from 1990-91 to 2005-06.

The composition of India's imports can be summarised as follows :-

1. Petroleum Products

Imports of petroleum oil and lubricants rose significantly from $ 5364 millions in 199192 to $ 43,963

millions i.e. more than eight times.

Due to high price of crude oil, the POL imports jumped to $ 15,650 millions in 2000-01. In 1990-91,

petroleum products accounted for nearly 25% of total imports of India. In 2005-06, it has further

increased to nearly 31% of the total import bill of India.

2. Capital Goods

The imports of capital goods was $ 3,610 millions in 1991-92. In 1995-96 due to sharp rise in non-

electrical machinery imports, the imports of capital goods jumped upto $ 8,458 millions. However due

to slowing domestic demand imports of capital goods fell subsequently. The capital goods and related


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items were 24.1% of the total imports of India in 1990-91, which has come down slightly in 2005-06 to

about 22.3%.

3. Pearls and Precious Stones

To meet the requirements of the gems & jewellery industry pearls and precious stones are imported in

large quantities. In 1990-91, the share of pearls and precibus stones was 8.7% which has reduced in

percentage terms to 6.4% in 2005-06.

4. Iron and Steel

The imports of iron and steel have declined over the years in percentage terms. In 1990-91, the share of

iron and steel imports was 5%, which has come down to 3% in 2005-06. This is because, a good amount

of iron ore is now extracted in India which has reduced imports.

5. Fertilizers

Import of fertilizers in 1991-92 stood at $ 954 millions. In 2003-04 expenditure on import of fertilizers

was $ 635 millions.

The import of fertilizers have declined, which indicates less dependence of India on imported fertilizers.

The share in total imports of fertilizers was 4.1% in 1990-91, which came down to 1.5% in 2005-06.

Conclusion on India's Foreign Trade

Composition of India's foreign trade has undergone a positive change. It is a remarkable achievement

that India have transformed itself from a predominantly primary goods exporting country into a non-

primary goods exporting country. Under import too India's dependence on food grains and capital goods

has declined.

The trend indicates structural transformation of Indian economy.

Trade in services (% of GDP) in India was 13.93 as of 2010. Its highest value over the past 35 years was

16.08 in 2008, while its lowest value was 1.95 in 1975.

Definition: Trade in services is the sum of service exports and imports divided by the value of GDP, all in

current U.S. dollars.

Source: International Monetary Fund, Balance of Payments Statistics Yearbook and data files, and

World Bank and OECD GDP estimates.


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TRADE IN SERVICES (% OF GDP) IN INDIA


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international business in india

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