Documente Academic
Documente Profesional
Documente Cultură
Dimensions of
Business in India
Abhinav Prakash (01)
Aditya Mehandiratta (02)
Akhil Kohli (03)
Amol Azad (04)
Contents of the Presentation
• Political Factors
Political Environment- Recent Developments
India’s Diplomatic relations with world- Recent Developments
• Economic Factors
Economic Development
Industrial Development
Inflation
Liberalization
Privatization
SMEs (Entrepreneurship)
India’s Global Competitiveness
Planning in India
10th Five Year Plan
11th Five Year Plan
• Social Factors
Corporate Social Responsibility
The Changing Cultural Environment
• Legal Factors
Direct and Indirect Taxes
Industrial Policy
Fiscal and Monetary Policy
Exim policy
• International Factors
Some latest International News
• Changing Demographic Environment
• Technological Factors
Business environment
• Meaning
• Internal and external environment
Environmental factors
• Political factor
• Economic factor
• Social factor
• Technological factor
• Environmental factor
• Legal factor
• Demographic factor
Significance of study
• Bangladesh
1. Stable government of Sheikh Hasina from February 2009.
2. India started providing duty free access to the exports from
LDCs in the SAARC including Bangladesh from 1 January
2008.
• Bhutan
1. Became a republic in 2008.
2. India will double the target of hydropower development in
Bhutan to 10,000 MW for export to India by 2020.
• Nepal
1. Also became a republic in 2008.
2. Nepal and India share friendly and close political, economic,
and social ties.
3. Promotion of investor-friendly business environment in
Nepal would help in realization of the potential for major
expansion of Indian investment in key areas like
hydropower, agriculture, tourism and infrastructure in Nepal
for mutual benefit.
• Pakistan
1. Relation with Pakistan are sour primarily because of the
Kashmir issue.
2. After a lot of confidence building measures(CBM) the
relationship again took a u-turn after Mumbai attack.
3. It has huge potential for trade, also it a N-11 group of
country as predicted by the Goldman Sachs.
• Sri Lanka
1. Suppressed LTTE successfully
2. Had election just a couple of days.
3. Mahinda Rajapaksa is the new president. (said to be pro-
indian)
4. Bilateral trade worth US$ 3.27 billion.
5. India also emerged as the second largest investor in Sri Lanka
in 2008.
6. Increasing relationship with China is a cause of concern.
• China
1. The widening trade deficit to over $11.2 billion with China is a
cause of concern. India’s imports from China are over three times
its exports to that country, according to the 2008-09 data.
2. Relationship to better after common stance at Copenhagen.
3. Bilateral trade in the calendar year 2008 reached US$ 51.8 billion ,
which is close to the target of US$ 60 billion by 2010 that has been
set by the two countries.
4. India would also seek access for its fruits and vegetables in the
Chinese market.
5. China, on its part, is likely to seek market economy status from
India and may reiterate its concerns on India resorting to large
number of anti-dumping cases against the neighboring country.
• India has competitive advantage on the following items
1. Rubber
2. Chemical
3. Textile
4. Auto
5. Minerals
SAARC
• Vision
1. Inclusive growth
2. Average GDP growth rate of 9%
3. Generating productive employment at a higher pace.
4. Robust agriculture growth at 4%.
Monitorable socio economic targets of
eleventh plan
• Accelerate growth rate of GDP from 8% to 10% and then
maintain the growth at 10% so as to double the per capita
income by 2016-17.
• Create 70 million new work opportunities.
• Reduce educated employment below 5%.
• Increase in agricultural GDP growth rate to 4%.
• Increase literacy rate to 85%.
• Reduce drop out rate from 52.2% to 20% at elementary
school level.
Industrial policy
• Areas covered :
1. Industrial licensing.
2. Foreign investment
3. Technology transfer and import of foreign technology
4. Public sector policy
5. Policy related to MRTP
6. An exclusive small sector policy
Recent Industrial Licensing Policy
• Policy liberalisation
Sector wise Regulation in Foreign Investment
i) Automatic route for specified activities subject to Sectoral cap and conditions.
Sectors Cap
Airports
74%
Existing
100%
Greenfield
o FM Radio 20%
o Cable network 49%
o Direct-To-Home (DTH) 49%
o Setting up hardware facilities 49%
o Uplinking news and current affairs 26%
o Uplinking non-news, current affairs
TV channel 100%
Defense production 26 %
The economic recovery and the urgent action to tackle climate change are complementary
and they have completely changed the way in which global businesses view sustainable
development.
Also the current economic turmoil has resulted in restructuring of the world’s economic
order rendering it a tri-polar nature with China and India joining United States at the helm of
economic power.
"As the new global economic order is redefined, I envisage India taking centre stage in
the 21st Century as the Global Knowledge based economy driven by world-class human
capital and exemplary entrepreneurship."
It encompasses and reflects the contribution of most other factors that play a vital role in
shaping the business environment
However, in light of the current economic recession and increasing ecological concerns the
frontiers of economic development are being reoriented with focus on inclusive and
sustainable growth.
"Our strategy today is not just to deliver rapid growth, but to deliver rapid and inclusive growth, a
growth that will provide productive employment to our young population and raise living
standards in rural areas across the country.”
The global economy is showing increasing signs of stabilisation. The growth outlook in
virtually all economies is being revised upwards steadily, with the Asian region experiencing a
relatively stronger rebound.
Global economic performance improved during the third and fourth quarters of 2009,
prompting the IMF to reduce the projected rate of economic contraction in 2009 from 1.1
per cent made in October 2009 to 0.8 per cent in its latest World Economic Outlook (WEO)
Update released on January 26, 2010.
The IMF has also revised the projection of global growth for 2010 to 3.9 per cent, up from
3.1 per cent (Table 1).
The pace and shape of recovery continue to remain uncertain. By far the biggest anxiety is
about the recovery losing momentum once the props of fiscal stimulus and monetary
accommodation are withdrawn.
In advanced economies, there are concerns about higher unemployment levels, growing
fiscal deficits and continued credit recession to productive sectors.
Emerging economies, which are already on the recovery path, face various challenges from
capital flows, potential inflationary pressures and credit revival.
INDIAN ECONOMY
As stated in the Second Quarter Review of October 2009, India‘s macroeconomic context is
different from that of advanced and other EMEs in at least four respects.
One, India is facing rising inflationary pressures, albeit largely due to supply side factors.
Two, households, firms and financial institutions in India continue to have strong balance
sheets, although there is a need to encourage domestic consumption and investment
demand.
Three, since the Indian economy is supply-constrained, pick-up in demand could exacerbate
inflationary pressures.
Four, India is one of the few large EMEs with twin deficits - fiscal deficit and current account
deficit.
Growth during Q2 of 2009-10, at 7.9 per cent, reveals a degree of resilience that surprised
many.
Strong industrial recovery has been the key underlying strength behind the recovery of
GDP in the second quarter. The core infrastructure sector also exhibited stronger growth
during April-December 2009.
Services activities (accounting for 64.5 per cent of the GDP) registered a growth of 9.0 per
cent in the second quarter of 2009-10. The recovery was largely driven by 12.7 per cent
growth in "community, social and personal services" reflecting payouts of arrears relating to
the Sixth Pay Commission award. Excluding the arrears, the services sector growth would
have been 7.0 per cent during the second quarter of 2009-10.
Lead indicators for services activities suggest that services dependent on domestic demand
exhibited robust growth during April-December 2009, and services dependent on external
demand have also shown some improvement in recent months.
“There are inherent strengths on the supply side that make it possible for India to grow, which implies
we can handle the constraints,”
Sharp deceleration in the growth of private consumption demand to 1.6 percent in the first
quarter of 2009-10 - in addition to subdued growth in investment demand - had emerged as
the key constraint to a faster recovery in GDP growth.
In the second quarter of 2009-10, however, private consumption demand registered a
growth of 5.6 per cent, which is the highest in last six quarters.
Corporate performance data up to the second quarter of 2009-10 indicate that despite the
persistence of dampened (y-on-y) growth in sales, sequential quarterly growth remained
positive. In the third quarter of 2009-10, partial data indicate significant (Y-o-Y) growth in
sales.
India is the second fastest growing economy in the world. India’s GDP has touched US$1.25
trillion. The crossing of Indian GDP over a trillion dollar mark in 2007 puts India in the elite
group of 12 countries with trillion dollar economy.
In the Second Quarter Review of October 2009, the baseline projection for GDP growth for
2009-10 was placed at 6.0 per cent with an upside bias. The movements in the latest
indicators of real sector activity indicate that the upside bias has materialised. Assuming a
near zero growth in agricultural production and continued recovery in industrial production
and services sector activity, the baseline projection for GDP growth for 2009-1 0 is now raised
to 7.5 per cent (Chart 1).
Following are some key findings of the World Development Report, 2010 with regards to
India’s economic development:
With the positive response and the degree of resilience exhibited by the Indian economy,
India can surely continue its growth story and pursue the targets of the Eleventh Five Year
Plan which are summarized as follows:
Accelerate GDP growth from 8% to 10% and then maintain at 10% in the 12th Plan in order
to double per capita income by 2016-17
Increase agricultural GDP growth rate to 4% per year to ensure a broader spread of
benefits
The industrial sector, which possesses a relatively high marginal propensity to save and
invest, contributes significantly to achievement of self sustaining economy, with continued
high levels of investment and rapid rate of increase in income as well as industrial
employment.
“Even with some amount of recovery taking place in industrial production, I think the key issue
virtually every country is facing is much higher unemployment. And a consequence of that is
protectionism, which we are seeing across the world.”
The pace of slowdown accelerated in the second half of 2008-09 with the sudden
worsening of the international financial situation and the global economic outlook.
The year 2008-09 thus closed with the industrial growth at only 2.4 per cent as per the
Index of Industrial Production (IIP).
However, 2009-10 have seen strong recovery in the industrial output with the latest IIP
figures suggesting that the industrial output rose 10.3% in October, 2009 from a year earlier.
Also India's manufacturing in January grew at its fastest pace in almost 1-½ years, boosted
by a sharp rise in new export orders that underpin a recovery in the industrial sector, a
survey showed.
The HSBC Market Purchasing Managers' Index (PMI), based on a survey of 500 companies,
rose to 57.7 in January, its strongest reading since August 2008 and up from 55.6 in
December.
The cumulative growth for the period April-November 2009-10 stands at 7.6% over the
corresponding period of the pervious year.
In terms of industries, as many as fourteen (14) out of the seventeen (17) industry groups
(as per 2-digit NIC-1987) have shown positive growth during the month of November 2009 as
compared to the corresponding month of the previous year.
The industry group ‘Transport Equipment and Parts’ have shown the highest growth of
38.3%. On the other hand, the industry group ‘Jute and Other Vegetable Fibre Textiles
(except cotton)’ have shown a negative growth of 11.4%.
“The IIP figures clearly establish that the Indian economy has recovered and can be hoped to
achieve a high growth trajectory provided the present policy parameters are not changed.”
So while conditions in the beginning of 2010 are significantly better than they were at the
beginning of 2009, the EMEs in 2009 were engaged in mitigating the adverse impact of the
global financial crisis on their real economies.
In 2010, the endeavour in the EMEs will be to strengthen the recovery process without
compromising on price stability and to contain asset price inflation stemming from large
capital inflows.
On year on year basis, WPI headline inflation in December 2009 was at 7.3 per cent,
whereas WPI inflation excluding food articles was 2.1 per cent, which suggests the
concentrated nature of the inflation so far.
Food items (i.e. primary and manufactured) with a combined weight of 27 percent in the
WPI basket have exhibited 21.9 per cent increase in prices.
In December 2009, there have been signs of emergence of generalised inflation.
Weekly WPI data on primary articles indicate that primary food articles prices have
increased by 17.4 per cent (y-o-y) for the week ending on January 16, 2010.
The concentrated pressure on headline inflation arising from high food prices entails the
risk of getting transmitted over time to other non-food items through expectations driven
wage price revisions, and thereby magnifying into a generalised inflation.
The inflation risk looms larger when viewed in the context of global price movements. As
already indicated, global commodity prices are showing signs of firming up, driven both by
the recovery in demand and the asset motive.
The IMF expects that in emerging and developing economies, inflation is expected to rise
to 6.2 per cent in 2010 from 5.2 per cent in 2009 due to low slack in resource utilisation and
increased capital inflows.
Keeping in view the global trend in commodity prices and the domestic demand-supply
balance, the RBI has now raised the baseline projection for WPI inflation for end-M a r c h
2010 to 8.5 per cent .
INDIA’S GLOBAL COMPETITIVENESS
Considering the industrial and economic development of India and keeping in mind the
underlying nature of Indian business environment India is being seen as one of the most
competitive business destinations.
"India, today, is one of the most strategically located and economically balanced countries
attracting investments from organizations, especially GGC's, across the world."
Further the government has set aside US$640.8 million for improving the condition of
ports, railroads, highways and airports over a period of 15 years.
The index for the six core industries-crude oil, petroleum refinery products, coal,
electricity, cement and finished carbon steel has shown a growth of 2.9 per cent for March
2009 in comparison to March 2008.
• PORTFOLIO INVESTMENTS
90000
80000
70000
60000
50000
40000
Series1
30000
20000
10000
0
GOVERNMENT POLICIES
• LIBERALISATION POLICIES
New Industrial Policy led to abolition of industrial licensing
system
Creation of a system of automatic clearance of FDI proposals.
Foreign ownership upto 100% in most manufacturing sectors
HOW SOURCES HAVE CHANGED
2002-03 44 51 95 -7
2003-04 53 61 114 -8
800
700
600
500
TOTAL TRADE
400 IMPORT
EXPORT
300
200
100
0
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10(till
december
09)
All this was the result of various EXIM POLICIES which had following objectives :-
The second stage witnessed the Second Oil Price Shock, which
hampered the export activities significantly and led the
establishment of a number of Export Processing Zones to boost
the export sector. Thus, Export Processing Zones were set up as:-
2005-06 22,839.5 5
2006-07 34,787.5 6
70,000.00
60,000.00
50,000.00
40,000.00
Series1
30,000.00
20,000.00
10,000.00
0.00
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
Demographic Environment
population ('09) - 1,156,897,766
2. Dependency ratio
Year Dependency Ratio %
1985 72
1995 68
2005 60
2015 52
2025 (estimated) 48
A social transition
Expansion of education, growth of urbanisation, breaking down
of the joint family, rise of the nuclear family, and women
taking to employment in large numbers…
Influence of media
Exposure to media such as Satellite TV, has given the consumer
an exposure to the lifestyles of the well to do and the
products used by them. It has kindled latent aspirations..
ORG MARG data shows that 75 % of Urban India watches
Television, in some states 1 out of 2 rural people watch tv,
Whereas in some states it is 1 out of 3.
Further the per capita TV watching is 100 minutes on weekdays,
and 150 minutes on weekends, with high viewing among
women, children and those in lower socio-economic classes.
Influence of IT
Internet is slowly shaping a new social environment in India
• IN - 1,156,897,766 population ('09)
• 81,000,000 Internet users i.e. 7.0% penetration, per ITU. (4 times the population
of Australia ! )
• 5,280,000 broadband Internet connections as of June/09, per TRAI.
Constructive Discontentment
Needs are on the rise. Earlier this ‘constructive discontentment’
was limited to the middle class but not any longer…
Consumer Market Projection
• CSR goes far beyond the old philanthropy of the past, it is not
an occasional act of charity.
• It is an ongoing commitment that is integrated into the
objectives and strategy of the core business.
• The trend of CSR has been rising rapidly in India.
• In India it has evolved to encompass, human rights, safety at
work, consumer protection, climate protection and caring for
the environment, and sustainable management
of natural resources.
Examples Of CSR in India
• Direct Taxes
• Indirect Taxes
Examples
• Atomic Energy
• Mining of atomic minerals
• Railways
Some International News
• www.livemint.com
• www.economictimes.com
• www.business-standard.com
• www.financialexpress.com
• www.ibef.com
• http://sezindia.nic.in/