kashif_24

New member
hi plzzz plzzz plzzz i am in very desparate need of it.. the topics are... The role of Rbi in regulating banking sector, Indian financial system-money market and capital markets-stock exchanges and stock market reforms in india. Institutions finance in india - role of development financial institutions and commercial banks and NBFC'S. financing of exports and imports-EXIM AND ECGC. Issues in taxation and government expenditure- FRBM act,the problem of fiscal deficit..

plzz plzzz try to get me some notes.. if there are any ebooks available plz give their links...:bigsmile:
 
hi plzzz plzzz plzzz i am in very desparate need of it.. the topics are... The role of Rbi in regulating banking sector, Indian financial system-money market and capital markets-stock exchanges and stock market reforms in india. Institutions finance in india - role of development financial institutions and commercial banks and NBFC'S. financing of exports and imports-EXIM AND ECGC. Issues in taxation and government expenditure- FRBM act,the problem of fiscal deficit..

plzz plzzz try to get me some notes.. if there are any ebooks available plz give their links...:bigsmile:

plz search properly in d forums in d financial management, exports-imports, managerial economics sections .............>>>
 

nastiya_m

New member
Something more on Indian Business Environment:

Content

1. Introduction
2. The Political System
3. The Economic System
4. The Legal System
5. Culture
6. Geography
7. Conclusion

1. Introduction
In recent decades, globalization plays an important role in integrating and emerging different countries’ economy and culture. For instance, the economic potential of BRIC (Brazil, Russia, India and China) is such that they may become the four most dominant economies by the year 2050.
India is claimed to be the fastest growing country in Southeast Asia, even some people said that India will be the second China. In this project, we are going to analyze the opportunities and challenges of the business environment in India through the politics, economics, legal system, culture and geography.

2. The Political system
A. Parliamentary government
India operates under a Westminster-style parliamentary system. The legislature of India is the bicameral Parliament, consisting of two houses: the directly-elected 545-member Lok Sabha ("House of the People"), the lower house, and the indirectly-elected 250-member Rajya Sabha ("Council of States"), the upper house.
B. Democracy
Democracy has been developed in India due to the high religion and cultural diversity. India voters can shift support from time to time, so the political parties have to do their best to retain their supporters. India legislation have to go through discussion involving different political parties holding different stances and core value, which obviously shows high capability of accepting different voices within the society.
C. Multiparty system
India has been ruled by the India National Congress (INC) for 48 years since India's independence. Between 1996 and 1998, due to political movement, the government was firstly formed by the right-wing nationalist Bharatiya Janata Party (BJP). However, in 2004, the INC won the majority seats in the election and formed the United Progressive Alliance (UPA), and was supported by left-parties and those opposed to the BJP.
D. Transition from national parties towards narrowly-based regional parties
The formation of coalition government like UPA reflects the politics in India move from national parties towards more narrowly-based regional parties.
Some regional parties in South India are ideology-oriented which have different values from the national parties and thus the relationship between the central government and the state government in various states may have social conflicts. The contradiction may lead to severely uneven distribution of resources between states.
Since 1995, the Indian government unites of a dozen of parties and this trend will probably continue. It may help a better deal of policy continuity and institutional stability, meanwhile, higher turnover of governments may appear.
E. Implication
Actually, bringing different regional parties into the parliament helps solving the great conflict between different religions and castes and also avoiding large scale violence revolution. A high elasticity of democratic system contained the ability to stabilize the politics even during the political instability period within 1980s. The central government was still being supported and the political environment did not fluctuate very much. This is an advantage of India to have such stable democratic system to attract foreign investors.
However, the regional political parties play an effective role in forming and deforming the government which lead to political instability and frequent elections. Their influence in national politics will increase if they widen their support base of political power. This prepares the trend of demanding a greater decentralization and state autonomy.
Honestly, these different regional parties hold different stances and interests; for instance, the construction of a new factory of Tata Nano, an automobile company, was banned by serious opposition from local farmers. Obviously, interest conflicts between different parties and government may lead to political and social instability.

3. The Economic System
India had undergone profound changes of its economic structures in the past decade and moved towards a mixed economy that contain mixing characteristics of market economy and planned economy. By integrating itself into the global economic mainstream, more business opportunities were found in India.
A. Reduction in government controls
One of the competitive advantages India possessed was the reduction in government interventions. By abolishing a series of domestic investment licensing and trade controls, reducing tariffs and removing Quantitative Restrictions on import, foreign direct investments were encouraged. Most goods, except certain items on grounds of national security, defense and health, can be freely imported upon payment of the specified customs duty. Special investment and tax incentives were even given for exports and certain sectors such as power, electronics, telecom, software, oil and gas, and research and development activities. So, with this favorable environment, trading opportunities were found in India.
B. Leading centre of IT and software business
Cost-effectiveness, world-class quality, and high reliability in IT and software industry were unique competitive advantages of India. It is one of the leading centers of IT and software in the world and possessed a sophisticated scientific, technical, and financial infrastructure. In 2006, US customers bought about 60 per cent of the software that Indian companies exported worldwide. In addition, with the world's second largest labour force, 516.3 million people, India has a large pool of trained, English-speaking IT professionals. The wages of those IT professionals were relatively lower than the global standard and thus are very attractive to many multinationals. For example, Microsoft picked the Indian city of Hyderabad to house their first ever development centre outside the US. So, there are business opportunities in outsourcing IT and software requirements in India.
C. Accessibility of regional international markets
With the membership of some regional cooperation frameworks such as SAARC, Indian Ocean Rim countries (IOC-ARC), and dialogue partnerships with EU and ASEAN, doing business in India can access the regional international markets. Also having Memoranda of Understanding/Cooperation partnerships with most African and Latin American regional groupings, India nowadays is one of the most important trading partners of the United States and the European Union. So, doing business in India can enjoy the advantage of accessing the regional international markets.
D. Implication
However, like China, India was losing her competitive advantage on wages recently. According to a study by the Towers Perrin consultancy, “employers will increasingly look to even lower-cost countries for their operations” because of the inflation and increase in exchange rate. In India, salaries are expected to rise 13% on average next year, which are 1% above the increases in 2007. Besides, the appreciation of Indian Rupee against the US dollar becomes the cost disadvantage of India. So, some low-skilled-labor required work in areas like manufacturing and call centers will move away from India and this trend is expected to expand.
4. The Legal System
India has a well-developed legal system framework to encourage the foreign investment. It adopts Common Law system which is based on British ones with independence of judiciary. It also establishes Constitution, which is the supreme law of India. It provides good fundamental protection for investors. However, there are some problems which discourage foreign investment, for example, the problem of corruption and property rights.
A. Common law
The legal system in western style, which favors the foreign investors, is used in India. Common law has been adopted in India, which is a system based on tradition, precedent and custom. Common law provides the flexibility for the judges to deal with the changing environments. Furthermore, constitution is established and it guarantees the human right which enjoys justice, equality, and liberty. As it is a supreme law, the government act must respect the human right. The law system provides an opportunity for investors.
B. Independence judiciary
The independence of judiciary is developed and enhances fairness which is important to foreign investors. The independence ensures that the judicial decisions will not be easily affected. The Supreme Court of India is the highest judicial body. Constitution authorizes a supreme power of final judgment. Chief Justice and other justices are all appointed by the President. The independence of judicial system is attractive to foreign investors.
C. Weakness
The legal system framework seems to be an opportunity for foreign investors in India. However, in reality, some problems discourage the investors. The most significant ones are the problems of corruption, property rights and the inefficiency practice of judiciary.
D. Corruption
India has a high level of corruption which significantly reduces the foreign investment because the corrupt government would reduce the return to business investment. According to the 2006 Transparency International Corruption Perceptions Index, India scored 3.5 out of 10 and ranked 72nd same as China. The cost, including money and time, of dealing with corrupt bureaucrats is high and thus reduces the incentive of investment. Therefore, serious corruption discourages the investment to India.
E. Property rights
There are serious problem of property rights. Although India signed the agreement of Trade Related Aspects of Intellectual Property Rights (TRIPS), it does not mean that it can then enforce the actual protection to intellectual property. According to the Business Software Alliance, in 2004, U.S. software companies lost over US$250 million because of piracy in India. The lack of protection towards property rights hinders the foreign investment in India
F. Inefficiency of judiciary
Inefficiency of judiciary leads to failure in assuring protection of foreign investors. The present court system cannot solve cases within a reasonable time because of the complicated procedures. More fundamentally, there is a serious low ratio of judges, for example, 50 judges serve million people. A more extreme example is that in 1994, the International Intellectual Property Alliance criminal copyright enforcement statistics show 861 copyright cases were delayed in Indian courts. 46 cases relating to piracy of business software have been pending even for several years. So, the inefficiency discourages the foreign investors to invest in India.

5. Culture
India is a multi culture nation where various culture, religions and language exist altogether. Religions play the most important role in Indian culture. Religion is a way of life of which influences public daily life of Indian. It has a large implication in business sense.
A. Religions
Hinduism, accounts for 80% of the population, is the largest religion in India. As the major religion, Hinduism becomes the tradition throughout India. However, Hindus values cause some barriers to foreign investors when they do business in India.
Hinduism believes that an individual should be judge by spiritual achievement rather than material achievement. An ascetic lifestyle of material helps them to complete a spiritual perfection. Such belief has a negative impact to economic development in India which discourages business activities which aim at wealth creation. The Hindus value contradicts the western capitalism and consumerism. Indian is narcissistic about their culture. Violation to their traditional value would lead to strong resistance, for instance, the protest against Valentine's Day celebration.
In addition, another Hindus culture is the reverence for the cows. Hindus sees cows as the God’s gift to the human race and so they do not eat cow. Besides, many Indians are vegetarians. It causes a big challenge to the entrance of foreign food industry to India. The failures in entering India market in the 1990s of KFC and McDonald due to the contradiction between American fast food culture and the Hindus culture are good examples.
Moreover, the effect brought by religion will limit creativities. As a foreigner, we do not know to what extent would violate the traditional values and the level of acceptance of local people. Uncertainty arises and may probability lead to excessive self censorship. The attractiveness of doing business in India is thus lesser.
B. Caste System
For the past 3000 years, India adopted the caste System. Supported by the reincarnation in Hinduism, Indians accept the system. Under the caste system, people are divided in to different classes. Change in social status is usually not possible within a person’s lifetime. After the independent of India, the caste system has already been abolished in India. However, the effect of caste system still exists although is weaken in the recent years.
Overall speaking, the caste system influences economic progress negatively. The system limits an individual’s opportunities and ability. The lower-caste people are being discriminated and can rarely take up important role in the society. Also, the practice of caste system still exists in the rural villages. The jobs one can take and his behavior are restricted by the caste system. A sweeper and his offspring can only be a sweeper in their life. It is in lack of social upward mobility. The people living in villages would never go to the big cities to find new jobs and new opportunities. It restricts the economic growth in India. In the long term, the business return and future development will be limited.
C. Education
The education level in India is satisfactory. According to the UNESCO Institute for Statistics in 2006, 65.2% of adults and 81.3% of youth in India are literate. The education system in India is a well-established 12 years schooling, following the "10+2 pattern".
The government also launched an education scheme, Sarva Siksha Abhiyan, to ensure all children have committed elementary education. It provides competitive advantage to India as a choice of international business. The education system provides skilled and knowledgeable labors. It is also one of the reasons leading to the trend to outsource IT jobs to India.
D. Language
22 different languages are recognized as commonly spoken in different parts in India. Among them, Hindi and English are the official languages. Hindi is the most spoken one in urban cities .English acts as a "subsidiary official language", which is used in addition to Hindi for most official purposes. Given that English as the co-official language in India, there are less communication barriers when doing business in India.

6. Geography
India is located at Southern Asia and is the 7th largest country in the world. In March 2008, it has 1.13billion population which counts for approximately one-sixth of the world's population. The country can be divided into three region accoding to its distinct geographic characteristics: the Himalayan region, the Gangetic Plain and the plateau region.
A. Climate
The climate in India varies greatly among different regions. Tropical rainforest, desert and alpine tundra can all be found in India. There are four seasons in India, namely Winter (Jan and Feb), Summer (Mar to May), Monsoon season (Jun to Sept) and a Post-monsoon period (Oct-Dec). Excluding those areas laying on highland, like on the Himalayas, the average annual temperature of most area in India is above 20°C. It receives most precipitation during the monsoon season. However, it becomes very dry after the monsoon season and some area may even receive zero precipitation during the winter.
B. Natural Disasters
Natural disasters in India are mostly associated with its seasons. During wet seasons, flash flood, cyclones, landslide etc. are the common disasters that mostly happened. In dry seasons, drought and dust storm influence India a lot. Others like avalanches, snowstorm, earthquake and tsunami also pose great threads to India. All these disasters always lead to a great death toll and economic lost.
C. Developed Cities
Though India is still regarded as a developing country in the globe, there are several cities in India which are relatively developed when comparing with others in the region, for instance, Delhi, Mumbai, Bangalore and Hyderabad.
Delhi is the capital city of India and is an important gateway into the country. It is well planned by Edwin Lutyens and equipped with good infrastructure. It is easy to access to the rest of the country from Delhi by road, rail and air.
Mumbai is the largest city and the technological, industrial and commercial hub in India. It has the highest population among all Indian cities. It contributes 5% of India’s GDP and accounting fro 70% of capital transactions to India’s economy.
Bangalore and Hyderabad are now two fast growing cities in India due to their remarkable contribution to the IT industries. Both of them have well planned infrastructure and there are already a number of well-known IT corporations settled in these two cities. For Bangalore, it is known as the Silicon Valley of India world-widely. For Hyderabad, the Indian government has established a HITEC city in it so as to further develop the IT industry.
D. Implication
From the facts that we can know that there are abundant labor force in India. Those developed cities provide many business opportunities to us, especially IT relating business. It is also a proper choice of out-sourcing location since the telecommunication network in developed cities is already reliable and stable. However, the climate in India is quite different from that in Hong Kong. Besides, it is always influenced by the natural disaster, this may cause some unexpected lost in business.

7. Conclusion
In previous sections, we have discussed in different aspects affecting the business environment in India. Obviously, there are some comparative advantages in India.
Firstly, India government relieves the government intervention for foreign investment. Reduction in tariffs and quotas attract foreign investment in terms of cost reduction while tax incentives can encourage foreign investors to start their business in India. These can definitely attract foreign capitals and technologies to flow in.
Moreover, India is famous for its large pool of highly-skilled labor force. As we all know, English is the second official language in India, both proficiency and literacy in English are high in India. Furthermore, the wage rate in India is low when comparing to that of the developed countries. These are very outstanding and attractive advantages to multinationals for outsourcing and developing branch offices.
However, there are many potential challenges that would affect the stability of business environment of India. First of all, the contradiction between different religions and culture is a very serious and probably unsolvable problem. Undoubtedly, the interests of businessmen and the public may go into contradiction and finally lead to social conflicts. This may be a complicated difficulty for foreign investors and it cannot be easily overcome.
Lastly, the extreme between rural and urban cities may hinder the ability to capture the whole Indian market. Certainly, India is a great potential market, but the urban and developed areas are quite limited. Those rural citizens mostly refuse to accept new ideas and they cannot afford the new technologies or products as well. It may be a serious problem that a foreign investor has to consider the potential demand before entering market of India.
To conclude, there are both opportunities and challenges in India’s business environment and market. Foreign investors should consider carefully whether their industries are easy to be accepted by Indian beforehand.
 
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