Doing Business in India, Essay Example

Location, History, and Population

India is situated in Southern Asia between Pakistan and Burma and other countries that share border with India are China, Bangladesh, Nepal, and Bhutan. The country also borders the Arabian Sea and the Bay of Bengal, thus, enjoys access to important Indian Ocean trade routes. In terms of geographical area, the country is slightly more than one-third the size of the U.S(CIA).

India was being ruled by the Mughal Dynasty when they were replaced by Great Britain as the dominant political power in the 19^th century. Nonviolent resistance to British rule by Mohandas Gandhi and Jawaharlal Nehru led to India’s independence in 1947. The independence led to the creation of two separate countries, India and Pakistan that remain bitter political and military rivals to this day. India successfully tested nuclear weapons in 1998, causing Pakistan to conduct its tests as well the same year(CIA).

India’s population is slightly more than 1.2 billion, making it the second largest country by population in the world. The median age of Indian population is only 26.5 years, further increasing India’s appeal as an investment destination. The average life expectancy is slightly higher than 67 years. The citizens of India are called Indians and there exist three main ethnic groups which are Indo-Aryan, Dravidian, and Mongoloid(CIA).

Infrastructure

Despite being an emerging economic power, India’s infrastructure has failed to keep up with the economic growth. Power blackouts are common(The Economist, 2012). Power failures are common, even in developed cities like Delhi, Mumbai, and Bangalore, thus, many businesses maintain diesel generators to ensure back-up power supply.India’s roads also require upgrades on a huge scale. Most Indian roads have one or two lanes(Runckel) though situation may change with infrastructure investments if Indian Prime Minister, Dr. Manmohan Singh is able to achieve his goal of $1 trillion investment in infrastructure at any cost over the next five years. The prime minister has taken notice of the fact that poor infrastructure is adversely affecting India’s economic growth and international trade performance(Overdorf, 2012).

Political, Economic, and Legal Environment

The government structure in India is federal republic and the country’s current President, Pranab Mukherjee is the Chief of the State. The Prime Minister is the head of the government and the country’s current Prime Minister, Dr. Manmohan Singh has been in power since May 22, 2004. The President is elected by an electorate college consisting of members of both houses of Parliament and the legislatures of the states for a five-year term, with no term limits. The Prime Minister is chosen by parliamentary members of the majority party, also for a five-year term. The President elects the cabinet on the recommendation of the Prime Minister(CIA).

India’s GDP is approximately $4.5 trillion, making it the 4^th largest economy in the world. The economy’s growth rate was 7.2 percent in 2011, down from 10.6 percent in 2010 which may be a sign the economy is finally slowing down. The per capita GDP is $3,700. Services sector is the largest component of the economy, accounting for 56.4 percent of all economic activity in 2011 while industry comes second at 26.4 percent. The unemployment rate was 9.8 percent and inflation rate was 8.9 percent in 2011 though both rates were improvement over 2010 figures. India’s exports were approximately $300 billion last year while imports were approximately $461 billion. The country’s major export partners are UAE, U.S. and China and major export items include petroleum products, precious stones, machinery, iron, and steel. The country’s major import partners are China, UAE, and Saudi Arabia, and major import items include crude oil, precious stones, machinery, and fertilizer (CIA).

India’s common law system is based on the English model though citizens may be subjected to separate personal law codes on the basis of their religious background (CIA). But the rule of the law is still weak as compared to developed countries and international investors often feel frustrated with the difficulty to force parties to honor their contracts. In addition, the corruption is still widespread and there is also the problem of red tape which only increases confusion(The Economic Times, 2012).India does offer several benefits to foreign investors unlike its economic rival China. No government approval is required for investment in most sectors. Moreover, decisions on foreign investment proposals are usually delivered within 30 days(HSBC, 2010).

One of the economic laws and regulations that govern the conduct of international ventures in India include Indian Contract Act. Indian Contract Act addresses all the aspects of contracts from formation to implementation and conclusion. India is a party to GATT and TRIPS agreements and a member of WTO which requires the country to enforce protection of intellectual property but the intellectual property laws in India are still a work-in-progress though they are catching up with the standards in developed countries. India is also a member of International Labor Organization (ILO) and complies with the organization’s conventions. The country also has enacted other labor laws to protect workers’ rights including the Minimum Wages Act, 1948. Competition Act, 2002 is being gradually implemented to ensure fair competition and Consumer Protection Act protects the interests of the consumers(Ernst & Young, 2010).

Language, Lifestyles, Culture, and Values

Hindi is India’s official language and spoken by 41 percent of the population while other popular regional languages are Bengali, Telugu, Marathi, Tamil, and Urdu. English enjoys the status of subsidiary official language but is the most important language for national, political, and commercial communication. Hinduism is the largest religion, followed by 80.5 percent of the population while Islam and Christianity are practiced by 13.4 percent and 2.3 percent population, respectively (CIA).

Indian culture is family and community-oriented. The number of participants is always huge on both moments of joy and sadness such as weddings, traditional festivals such as Holi, and time of sorrow such as death of a family member or community resident. India is a secular country and citizens enjoy equal rights irrespective of their religious background though Hinduism is the most dominant religion. Even today, 70 percent of marriages are arranged marriages in India, proving the importance of family in Indian culture. The most popular dress for men in India is Kurtta and pajama though it is common to see western dresses in India. The most popular dresses among women are sari and shalwar-kameez (Proud To Be An Indian).

Even though India is a secular country with no official state religion, the influence of Hinduism is obvious in all aspects of life, especially the importance of hierarchical relationships in personal and professional settings. Indians are conscious of their status and social order in all kinds of settings including workplace, academic institution, and family(Kwintessential).

Indian greeting methods are rooted in their religious traditions. Men shake hands with men and women shake hands with women. Men and women often greet each other without shaking hands. It is customary to greet the senior or eldest person first and when Indians leave, they individually bid farewell to every person (Kwintessential).

Food in India is often eaten with hands though foreign guests may be offered spoons and forks. Indians usually eat with right hand and it is customary to wash hands both before and after eating the meal. It is also important to note the religious background of the guests because Hindus and Sikhs do not eat beef and Muslims do not eat pork. Thus, lamb, chicken, and fish are safe choices at non-vegetarian meals (Kwintessential).

Indians believe in gift-giving and gifts often include cash when the exchange is between family members or friends though non-cash gifts are more common in case of business gift-giving. Indians value the sentiment more than the actual value of the gift. Yellow, green and red colors are considered lucky in India and are recommended for gift-wrapping. Gifts are not usually opened in the presence of gift-givers and only after they have left(Kwintessential).

Foreign investors should keep in mind the fact that India is quite a diverse country, thus, they should research the specific region or state where they want to do business. There are sometimes huge variations in food, culture, language, and even religious practices among the 28 states. Thus, foreign investors should not take one-size fits all approach to investment in India but specifically learn about the state where they plan to do business (Goold, November, 2010).

Business Practices and Tips

Even though Indians are adopting western business best practices, their workplace culture continues to maintain traditional values. Indians do not explicitly express their disagreement so the foreigner has to look for non-verbal cues to get the message. Indians also do not like to give negative news, thus, their responses are often vague (Kwintessential).

Indians prefer to do business with someone they know or can trust. This is why Indians often prefer to build personal relationships before proceeding to business. One can also speed up the process by going through a third party which helps build up credibility. It is always a good idea to confirm appointments at the last minute because appointments do get cancelled on short notice. During meetings, Indians are usually non-confrontational and decision making processes are slow and often rest with the highest authority. Indians also have usual distrust for legal formalities and prefer personal trust over legal formalities. Indians use honorific titles before names such as Professor and Doctor and lack of title could be substituted with Mr., Sir, Ms. or Madam. Addressing others with first name, specifically those at the top of the hierarchy, is a sign of disrespect (Kwintessential). Indians avoid criticizing their colleagues during negotiations and usually the senior person speaks for the entire group. Indian workplaces also have conservative clothing rules, especially for women(Stylus Inc.).

Conclusion

India is one of the fastest-growing economies in the world but its infrastructure and bureaucratic reforms have been slow to respond to India’s economic rise. Indian leadership understands the importance of infrastructure to India’s long-term economic interest and Prime Minister Dr. Manmohan Singh is pushing for $1 trillion investment in infrastructure over the next five years. But at the same time, India offers several benefits to international investors such as limited restrictions on Foreign Direct Investment (FDI) and young population. In addition, English is the official language in commerce which helps ease the communication process. India has a stable political system but corruption and red tape does create an environment of frustration. Intellectual property laws are still a work-in-progress but India is gradually catching up with intellectual property standards in the developed countries.

At the same time, India shares several cultural characteristics with its eastern neighbors such as high emphasis on family and relationships and the importance of building trust before proceeding to official business. Indians are also flexible in terms of time etiquette and do not always follow time commitments. Hierarchical relationships are dominant in all aspects of Indian culture including family, work, and school and calling a senior person or an elder by first name is a sign of disrespect. India is a unique combination of western and eastern cultural traits and moreover, there are often wide variations in culture and food across its 28 states. Thus, foreign investors should not only learn about national culture but also take into account unique cultural aspects of the state they desire to do business in.

References

CIA. (n.d.). India. Retrieved November 2, 2012, from The World Fact Book: https://www.cia.gov/library/publications/the-world-factbook/geos/in.html

Ernst & Young. (2010). Doing business in India.

Goold, D. (November, 2010). Doing Business in India: Success, Failure and the Prospects for Canada. Canadian International Council.

HSBC. (2010). Doing Business in India. HSBC & PWC.

Kwintessential. (n.d.). India – Language, Culture, Customs, and Etiquette. Retrieved November 2, 2012, from http://www.kwintessential.co.uk/resources/global-etiquette/india-country-profile.html

Overdorf, J. (2012, November 1). India: Singh calls for $1 trillion in infrastructure investments “at any cost”. Retrieved November 2, 2012, from http://www.globalpost.com/dispatches/globalpost-blogs/india/india-infrastructure-investment

Proud To Be An Indian. (n.d.). Indian Culture and Lifestyle of India. Retrieved November 1, 2012, from http://proudtobeindian.net/indian-culture-and-lifestyle-of-india

Runckel, C. (n.d.). Infrastructure India: A Long Road Ahead. Retrieved November 2, 2012, from http://www.business-in-asia.com/asia/infrastructure_india.html

Stylus Inc. (n.d.). Doing Business in India: A Cultural Perspective. Retrieved November 2, 2012, from http://www.stylusinc.com/business/india/business_india.htm

The Economic Times. (2012, August 17). Doing business in India difficult: Dell. Retrieved November 2, 2012, from http://economictimes.indiatimes.com/tech/ites/doing-business-in-india-difficult-dell/articleshow/15533744.cms

The Economist. (2012, August 4). Blackout nation. Retrieved November 2, 2012