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CASE STUDY ON: THE BUSINESS ENVIRONMENT OF INDIA

INDIA HAS GAINED THE PLOT BUT IT IS UNFOLDING EXCRUCIATINGLY SLOW

THE BUSINESS ENVIRONMENT OF INDIA: A NEW MANDATE FOR REFORM


INTRODUCTION
FIRST TIME IN 90 YEARS, INDIAS POLITICAL, SOCIAL, AND ECONOMIC FATE WAS IN ITS OWN HANDS.

BY 1951, COUNTRYS FOREIGN RESERVES WERE AMONGST THE LARGEST, AT $2.1 BILLION, WHILE INDIA ACCOUNTED FOR 2.4% OF GLOBAL TRADE.
BUT. INDIA GENERATED ONLY 4.7% OF GLOBAL GDP, THOUGH IT CONTRIBUTED 17% OF THE WORLDS POPULATION. PER CAPITA GDP < $3000 PER YEAR.

INDIA WAS ON TRACK OF BECOMING THE WORLDS 3RD LARGEST ECONOMY INDIAS FOREIGN EXCHANGE RESERVES WERE RECORDED AT ABOUT > $250 BILLION EXPORTS SURGED INFORMATION TECHNOLOGY SERVICES WERE THRIVING

EXHIBIT 1 GIVES US DATA ON THE COUNTRY PROFILE.


GEOGRAPHY GOVERNMENT ENVIRONMENT, INFRASTRUCTURE TELECOMMUNICATIONS PEOPLE NATURAL RESOURCES, MEDIA

INDIA V/S CHINA 2007-2008, GCI


TOTAL 131 COUNTRIES: OVERALL RANKING: INDIA 48 (07-08) AND 50 (08-09)

THE REFORM YEARS


MANMOHAN SINGH INITIATED A MAJOR PROGRAM OF PRO MARKET ECONOMIC REFORMS DESIGNED TO MOVE INDIA TOWARD A MORE OPEN, MARKET ORIENTED ECONOMY.

KEY PROGRAMS INCLUDED


FISCAL AND MONETARY TIGHTENING OVERHAUL OF FOREIGN TRADE AND INVESTMENT REGULATION REDUCED STATE CONTROL OF INDUSTRY FINANCIAL SECTOR LIBERALIZATION AND DECREASED CENTRAL CONTROL OF INVESTMENT ELIMINATION OF MICROECONOMIC REGULATIONS

INDIAS FOREIGN RELATIONS


US RELATIONSHIP STRATEGIC DEFENCE PARTNERSHIP, TRANSFER OF TECHNOLOGY FOR CIVILIAN NUCLEAR POWER PAKISTAN REMAINED STRAINED, CHINA - BOTH PARTNERS AND RIVALS. THEY ACCUSED EACH OTHER OF ILLEGAL TRADE PRACTICES (PLASTIC TOY IMPORTS). INDIA TODAY 2008- GLOBAL RECESSION DECLINE IN PRICES OF OIL AND OTHER RAW MATERIALS CONSUMER PRICE INFLATION UPWARD TREND WORLD ECONOMIC FORUMS GLOBAL COMPETITIVENESS INDEX 50TH OUT OF 134 NATIONS IN 2008-2009 2000S-BRIC NATIONS

INDIA PERFORMANCE
Real GDP %
15 10 5 0 -5 -10 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Real GDP %
-15 -20 -25 -30 -35 -40

INDIA PERFORMANCE
CPI
9 8 7 6 5 4 3 2 1 0 2000 2001 2002 2003 2004 2005 CPI 2006 2007 2008 2009 2010 2011

INDIA PERFORMANCE
Unemployment
10 9 8 7 6 5 4 3 2 1 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Unemployment

To keep pace with labor force expanding at 2% per year and to make up for past development failures, India needed to sustain a high rate of annual GDP growth, while preventing its economy from overheating. Although growth had averaged just under 9% from 2009-2007, it slowed to 6% in 2008, due to the global economic downturn.

INDIA PERFORMANCE
Current Account Balance
15 10 5 0 -5 -10 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Current Account Balance


-15 -20 -25 -30 -35 -40

INDIA PERFORMANCE
Exchange Rate
50 48 46 44

42
40 38 36 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Exchange Rate

FDI COMPARISON- INWARDS


FDI IN INDIA COMPARED TO DEVELOPING COUNTRIES AND WORLD- INWARD
5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 1985-1995 2000 2001 2002 % OF DC 2003 % OF WORLD FDI 2004 2005 2006

GLOBAL COMPETITIVENESS INDEX


GCI INDIA RANKINGS
108 109 120 101 100 96

72

67

63

60

20

0 Infrastructure Macro-economic stability Healthcare Education 2007-2008 2008-2009 Labour Technology Innovation

28

32

40

55

62

69

80

89

100

PROBLEMATIC FACTORS FOR DOING BUSINESS IN INDIA


PROBLEMATIC FACTORS FOR DOING BUSINESS IN INDIA
TAX REGULATIONS, 8.80% LABOUR REGUALTIONS, 9.90%

CORRUPTION, 10.10%

INFRASTRUCTURE, 25.50%

BUREAUCRACY, 14.60%

PROBLEMATIC FACTORS FOR DOING BUSINESS IN CHINA


PROBLEMATIC FACTORS FOR DOING BUSINESS IN CHINA
INFALTION, 10.80% TAX REGULATIONS, 8% PROBLEMATIC FACTORS FOR DOING BUSINESS IN CHINA, 0.00%

FINANCING, 13.70% GOVT. BUREAUCRACY, 11.50%

POLICY INSTABILITY, 13%

TOP EXPORTED COMMODITIES IN 2006


Top exported comodities in 2006
60 55 50 45 59.4

40
35 30 25 20 15 10 5 0 mineral fuels,mineral oils natural pearls,precious stones organic chemicals % of total india iron and steel % of total global apparel and clothing accessories other commodities 1 14.9 12.7 6.8 4.5 4.4 4.1 3.3

1.9

1.7

TOP IMPORTED COMODITIES IN 2006


35 33.3

30

25

20

15 12.1 10 10 10 7.8 3.4 1.2 0.9 electrical electronic equipment 3.3 1.8 0 iron an steel other commodities 1.5

0
mineral fuels,mineral oils natural pearls,precious stones boilers,machinery,nuclear reactors

TOP EXPORT PARTNERS OF INDIA


Top EXPORT Partners of India

united states, 16.9 united arab emirates, 8.3

other partners, 60.1

china, 6.6

singapore, 5.3 uk, 4.9

TOP IMPORT PARTNERS


Top import partners

areas,not elswhere specified, 29.7 other partners, 48.3

china, 7.3

german y, 4

united states, 6.3 switzerland, 4.4

MARKETS
WERE BECOMING LARGE AND SOPHISTICATED YET REMAINED FICKLE TO SENSITIVE ECONOMIC REALITIES. E.G. AIRLINES INDUSTRY IN INDIA, STARTED AS LOW COST CARRIERS BUT LATER DUE TO ECONOMIC BAD TIMES, FORCED TO PUSH THE PRICES UP. INDIAN MARKETS WERE MORE DEPENDED ON DOMESTIC INDUSTRIES THAN FOREIGN.
INDICATED COMPETITIVE PRICES AVAILABILITY

SEZS WERE ESTABLISHED TO PROVIDE COMPETITIVE AND NON BUREAUCRATIC ENVIRONMENTS. WOMEN EARN 38% OF WHAT MEN EARN. 90% OF THE LABOR FORCE WORKS IN LOW SKILLED, LOW PRODUCTIVITY AND OFTEN INFORMAL JOBS.

INDIAN SCENARIO
EDUCATION WAS ALWAYS A WORRY IN INDIA. ALONG WITH EDUCATION ITS HEALTHCARE WAS ALWAYS A MAJOR ISSUE.
MALNUTRITION TUBERCULOSIS

INDIAN LABOR LAW ARE HIGHLY PROTECTIVE OF LABOR.


LACK OF GOVERNMENT SPONSORED SOCIAL SAFETY BENEFITS.

STOCK MARKET AND BANKING


8TH HIGHEST MARKET CAPITALIZATION IN THE WORLD. INDIAN BANKS USED MEASURES SUCH AS TIGHTER RESTRICTIONS ON LEVERAGE, RESTRICTIONS ON USAGE OF CERTAIN DERIVATIVES, STILL INDIAN INDUSTRIES WERE STARVED OF CAPITAL.
REASONS: INDIA WAS DEPENDENT ON FDI.

TECHNOLOGY
ROAD NETWORK WAS THE 2ND LARGEST IN THE WORLD ITS ESTIMATED THAT INDIA NEED TO SPEND ANOTHER 3-4% OF GDP ON INFRASTRUCTURE TO SUSTAIN ITS GROWTH. INFRA IS THE BIGGEST PROBLEM IN INDIA, 40% OF THE VEGETABLE PERISH BEFORE THEY REACH MARKET. FURTHER NEEDED TO DEVELOP TECHNOLOGY TO ACCELERATE ITS PENETRATION
DUE TO TECHNOLOGICAL DEVELOPMENTS INDIA REGISTERS 700 PATENTS ANNUALLY.

DEVELOPMENTS
BETTER SYSTEM OF TAXATIONS AND IMPROVED TAX COLLECTION. DECENTRALIZATION FROM STATE TO VILLAGE LEVEL. ELECTRONIC KIOSKS FOR SELF SERVICE. AADHAR CARD UNDER THE ADMINISTRATION OF NANDAN NILEKANI, TO PREVENT MISUSE OF FUNDS.

GOVERNMENT INTERVENTION
SET PRICES IN MANY INDUSTRIES TO HELP LIMIT INFLATION AND PROMOTE PROFITABILITY IN THE PUBLIC SECTOR INTENDED TO LIMIT UNEMPLOYMENT

FREQUENT LOANS FROM GOVERNMENT-OWNED BANKS TO ENTERPRISES IN ORDER TO DISPOSE OR REALLOCATE NON PERFORMING ASSETS.
1980S- GOVERNMENT SUBSIDIZED 90000 SICK UNITS 1960S- HOPING TO INCREASE FOREIGN CURRENCY

GOVERNMENT ENCOURAGED JOINT VENTURES.


1973- OIL CRISIS, IT PROHIBITED FOREIGN EQUITY OWNERSHIP FROM EXCEEDING 40%

CONCLUSION
TO BE ACHIEVED RAISING STANDARD OF LIVING NATIONAL PRODUCTIVITY INCREASE COMPETITIVENESS REDIRECT ITS DEFICIT AND PUBLIC SPENDING IN MORE PRODUCTIVE INVESTMENTS SUCH AS HEALTH CARE AND EDUCATION AND INFRASTRUCTURE MINIMIZE BUREAUCRACY AND OPEN COUNTRY TO PRIVATE INVESTMENT.

CONCLUSION
ACHIEVED JUST DEMOCRATIC ECONOMICALLY DYNAMIC SOCIETY PLAY AS A COUNTERWEIGHT TO CHINA CHALLENGES INDIA STILL FACES TERRORISM POVERTY STRAINED RELATIONSHIP WITH PAKISTAN