Friday, June 21, 2013

Portfolio Project on India

The current business world has become very competitive due globalization which has brought about increased interconnectivity. The number of firms has increased and international trade has become popular. Many large firms are expanding their operations across borders in order to increase their sales and attain a competitive advantage. However, there are several changes involved in international trade. A firm needs to carryout a market survey in order to understand the nature of a target market before making investment. This article analyzes the Indian market with an aim of identifying the potential for foreign investment.
General information

India is one of the largest countries in Asia with a huge economic potential. According to the World Bank statistics, India had a total population of 1,241.5 million as at 2011. The population has been increasing over years and this trend is expected to continue into the future. The Human Development Report published in 2013 indicates that the population stands at 1,258,351,000 (Human Development Report, 2013). The country has very high life expectancy at birth of 65.8 years according to figures published in the 2013 Human Development report. This is among the highest life expectancies across the world and it is mainly attributed to improved living standards. The human development indicators also show that the mean years of schooling for the Indian adults is 4.4 years. The level of technology and innovation is also fairly high. The Human Development report indicates that 64.3 out of 100 people are subscribed to either mobile or fixed telephone services.

India has undergone a steady economic growth in recent years. According to World Bank figures, the country`s GDP for the year 2011 stood at US$1,847, 976.7 million up from US$1,684,315.4 million the previous year (The world Bank, 2012). This represents an annual GDP growth of about 6.9 percent. According to the 2012 UN Human Development Index (HDI) rankings, India was ranked as having medium human development at position 136 out of a total of 187 countries (Human Development Report, 2013). The country`s HDI has increased at an annual average rate of 1.7% since the year 1980 to 2012. The HDI improved from 0.345 to the current figure of 0.554. This places India below the regional average since the entire South Asian region increased from o.357 to 0.558 over the same period.

India is considered to be the cradle of the globe’s chief religious beliefs. This means that a majority of Indians are very religious; the rule and tradition of India advocated for religious broadmindedness and variety. Although for a very long time the only religion in India was Hinduism, currently four fifths of the Indian population remains affiliated to Hinduism, with the other fifth belonging mainly to Islam and a few Christians and sikhists here and there. Due to the favorable beliefs and religious customs that the new religions that they encountered contained, many Indians were converted. Another area that the ‘counter-cultures’ greatly challenged the authority in India was to do with the caste system. Caste refers to the system that was developed in ancient India for purposes of social divisions and constraints or limitations between people considered to belong to different social classes (Mines & Sarah, 2002).

Traditionally, in the Indian system, there existed four major castes: the priests, soldiers, traders and artisans. Depending on the caste that one was born into, there were different economic, political and religious powers. People from certain castes enjoyed prestige, privileges and many other benefits from the society, while others from different castes could not even own property. The caste system was one filled with the highest levels of discrimination and segregation in the history of Indian civilization (Viramma & Jean, 2002). However, the current constitution prohibits discrimination on the basis of caste.
As regards gender, many speculations have been tabled about the woman’s place and role in ancient India, Lydia.Although it is argued by many scholars that the women and men in ancient India enjoyed similar status quo, the medieval period brought with it a change in which women were given the back seat; for a very long time since then, in the Indian society, women were viewed as being inferior or secondary to men.
Classification and structure of government

India practices a democratic system of governance where elections are held after every five years. The country gained its independence from Britain in the year 1947 when predominantly Muslim parts of the British India were cut off to Pakistan. The country was then ruled by the centrist and secular Congress Party at the federal level for a period of around 50 years. However, the situation changed in the mid 1990s when the Hindu nationalist Bharatiya Janata Party (BJP) took over power (Freedom house, 2010). There was also a shift from single-party politics to coalition governments which involved many parties. India also had a lot of economic reforms in the 1990s whereby congress government initiated market-oriented policies after a balance-of-payment crisis in the year 1991.

BJP was defeated in the 2004 elections after Congress Party formed a coalition with other regional parties and the premiership was given to the former minister for finance Manmohan Singh. The new government reversed many many policies that were previously implememnted by the former government including antiterrorism legislation and inclusion of the Hindu nationalist ideology in state-run schools. However, the new government faced a lot of resistance from some of the leftist allies about the economies issues like labor law reform and privatization.

India is generally an electoral democracy whereby members of the lower parliament house (Lok Sabha/ House of the people) are elected directly after every five years apart from two members who are appointed to represent Indians of the European descent (Freedom house, 2010). The composition and leadership of the government is determined by this lower house which has 545 members. The Upper house (Rajya Sabha) comprising of the council of states normally has 250 members who are elected by the state legislatures using the proportional-representation system and they serve a term of six years. Twelve members of this house are appointed. The executive power of the country is vested in the cabinet and the prime minister. The president plays a symbolic role as the head of state and he is chosen by the national and state lawmakers for a term of five years.

A federal system of governance is used and the constitution is a supreme law. The Election Council of India is a body that is responsible for supervising elections in the country. Recent elections were held in 2009 and they were fair and free. These elections were very peaceful although 17 people were killed during the first voting phase (Freedom house, 2010). Voting irregularities have been significantly reduced by the use of electronic voting machines. A large number of political parties in the country operate freely. The caste and regional-based parties have become popular leading to formation of coalition governments at a national level.
Competition, stability and civil society

The accountability and effectiveness of the Indian government has been undermined by weak state institutions, widespread corruption and criminality politics. According to 2009 Corruption Perception Index report by Transparency International, India was ranked position 84 out of the 180 countries surveyed (Cortes et al, 2011). The country`s electoral system mainly depends on the “black money” that is usually obtained from tax evasion. Civil servants and politicians are fond of receiving bribes and engaging in other forms of corrupt behavior. So many corruption offences go unpunished in India. People who attempt to report corrupt incidences receive threats and others are penalized in terms of their career prospects.

The private media in India are diverse and vigorous and they are able to carryout investigations and scrutinize politicians. This is because the country`s constitution protects freedom of expression and speech. However, the journalists still face difficulties since the constitution does not explicitly mention freedom of the media. The journalists are sometimes subjected to intimidation by government officials. Access to internet is generally unrestricted but some states have formulated legislations requiring internet cafes to register themselves with the state government and maintain visitors register. Under the country`s internet crime law, website operators are required to demonstrate their innocence.

Freedom of religion is guaranteed by the constitution and it is protected by the government. Majority of the population comprises of Hindus from different ethnicities and strains but the state is generally secular (Cortes et al, 2011). However, several cases of violence against members of religious minorities are normally reported but there has been inadequate prosecution. There are also some restrictions to the freedom of association and assembly. Authorities are empowered by constitution to impose curfews and restrict free assembly. Some officials use this provision to prevent demonstrations. Villagers and members of the nongovernmental organizations are sometimes harassed, beaten or detained by hired thugs and the police for protesting against forced relocation. Democracy in India has been growing over years and the country is politically stable. The voters are more concerned with performance over identity as opposed to the past where they voted on identity. Several parties in the past were formed on the basis of language, ethnicity, religion and caste (Tu & Lin, 2011). These tricks were very successful in the past but in recent years, statistics indicates that voters cast their ballots on the basis of performance.

The Congress party has been winning is subsequent elections leading to political stability in the country. However, the absence of other communist parties in the ruling coalition led to very little economic changes in the first budget announced in July. The attempts by Liberals to introduce reforms in the government were hindered by the country`s comparative success in the global economic crisis.
The Judiciary is clearly independent from the executive and the judges have shown considerable activism regarding public-interest litigation on environmental issues, official corruption among other things. However, judges have initiated various contempt-of-court cases in recent year against the journalists and activists that question verdicts or expose judicial corruption. Low levels of judiciary have been reported in corruption as many citizens have difficulties in securing justice in courts. Despite the legal reforms in the country in recent years, there are still some problems in the criminal justice system which does not provide equal protection to lower castes, tribal members and minorities. Workers are able to exercise their rights freely through collective bargaining and strikes. However, the government has powers to ban strikes within certain industries.

Economic environment
The Indian government has legislated laws that favor foreign investment. Several incentives including tax havens provision of financial assistance are issued to foreign companies in order to facilitate their operation in the country (Alamgir, 2008). Most of the foreign companies that have invested in the country post impressive performance which shows that the country is suitable for foreign investment. The high population in India forms good sources of cheap labor for the company and it also doubles up as the source of market for finished goods. The labor costs in the country are vey low which will enable the company to cut on the operation costs.
India has maintained a good relationship with the major global powers such as the United States, China, Europe and the Middle East (Clem & Mutjaba, 2011). This makes it a suitable country for investment. Peace talks between Pakistan and India that collapsed in 2008 as a result of several terrorist attacks that were attributed to the Islamic militants resumed in the year 2009 (Croucher et al, 2010). The two countries have vowed to maintain peace despite the acts of terrorism. As at now, India remains a vey safe and politically stable country which provides a good environment for investment.


India is one of the largest and fastest growing economies in Asia which has a great business potential. The diversity among its citizens, high population and friendly government legislations makes its suitable for foreign investment. However apart from the positive side, there are also negative things that may pose challenges to investment. One of the major challenges is security. There are security problems in some parts of the country. The security officers operating in regional insurgencies have been linked to disappearances, rape, arbitrary detention, extrajudicial killings, torture as well as destruction of homes. The recent growth and spread of Naxalites is the most serious concern. Reports have indicated that there are about 14,000 armed fighters who are supported by about 40,000 cadre members in organized groups allied to as Communist Party of India (Maoist). More than 998 civilians and security personnel were killed in 2009 by Naxalite-related violence. Both sides of the coin should be take into consideration when making investment decisions.

Alamgir, J. (24 December 2008), India's Open-Economy Policy: Globalism, Rivalry, Continuity, Taylor & Francis Clem, A H and Mutjaba, B G, 2011, Focus Factors: Exploring Across Business Dynamics of Making Deals and Building Relationships in India, Journal of Business Case Studies; 7, 1 ; ABI/INFORM Globalpg. 81 Cortes, A, Sindy, C and Akash, D, 2011, Approaching the Asian Elephant: Understanding Business to Business Relationships in India, The International Business & Economics Research Journal; Vol. 10, No. 4; ABI/INFORM Global, pp. 73 Croucher, S M, Holody, K J, Hicks, M V, Oommen, D and deMaris, A, 2010, An Examination of Conflict Style Preferences in India, International Journal of Conflict Management Vol. 22, No. 1, pp. 10-34 Freedom house, 2010. Accessed on 28th March, 2013 from Human Development Report, 2013. Accessed on 28th March, 2013 from Mines, D and Sarah Lamb. 2002. Selections from Part Three: Social Distinctions of Caste and Class”, In Everyday Life in South Asia. Indiana University Press: Bloomington. The world Bank, 2012. Accessed on 28th March, 2013 from Tu, Y and Lin, S, 2011, A Cross-Cultural Comparison by Individualism/ Collectivism among Brazil, Russia, India and China, International Business research, Vol. 4, No. 2 Viramma, Josiane, R. and Jean Luc. 2002. “High and Low Castes in Karani”. In Everyday Life in South Asia. Indiana University Press: Bloomington.