Pandit A. Kumar-Scott - Business Success in India: A Complete Guide to Build a Successful Business Knot with Indian Firms

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2020, Pandit A. Kumar-Scott, 2nd Edition

Herstellung und Verlag: BoD Books on Demand GmbH, Norderstedt

ISBN: 978-3-7494-0569-5

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Doing business with India includes buying goods and services from India or selling things to the Indian consumer. India is ranked 142 on the Ease of Business index, out of 189 economies included in the rating. The country rated number one in the index is Singapore. From this figure, it is easy to understand that it is quite difficult for a foreign company to do business in India.

Despite such a scenario, even presently, many companies have been doing business successfully in India. These include companies like Unilever, Nestle and Procter and Gamble to name a few. Unilever is a U.K. based company operating on the Indian soil through its Indian subsidiary, Hindustan Lever.

The Indian government had been following a closed door policy, for more than 40 years after independence. This was mainly to give a chance to the local industries, to develop without rivalry and competition from external forces. The domestic trade and industry at that time was in the infancy stage and did not possess the strength to race against participants from other developed economies.

However, at present, especially after the opening up of the economy in 1991, the business climate has improved a lot. Now, a number of foreign countries are eyeing India as a safe haven to multiply their money because of the developmental activities initiated, like construction of smart cities.

Prior to 1991, there was License Raj in India, which was characterized by excessive government control in all areas. This was influenced by the British rule under which India had been suffering. The autocratic nature of the oppressive rulers was carried down by the policy makers to shape the country. Immediately after the Indian independence in 1947, such regulatory measures implemented by the government were helpful to encourage the growth of local industries, by eliminating excessive struggle. The cottage industries of the nation benefitted enormously as a result of these policy regulations.

Jawaharlal Nehru, the first prime minister of India was the pioneer of the system where private people needed official government licenses to manufacture goods and products. The amount of goods produced did not depend upon the free market forces but upon the level of permission got. A planning commission was set up and there it was decide based on 5 year plans, what path the economy and the nation would take and how the country would progress. Although in the beginning this structure and method led to development and stability, going forward, trade was restricted and slow. In later stages, moreover, this only led to, the companies becoming complacent and non-competitive.

Basically, the Indian subcontinent had been ravaged by the invasion of the Portuguese, Dutch and British who finally overthrew everyone else and established the East India Company. It was the British who brought in the iron and steel industry, railways and textile industry into the country. Where India was predominantly an agro based country, slowly owing to the influence of the westerners, people started giving importance to education.

This educated middle class preferred a democratic system of government. The democracy continued and over the years people voted in favor of fiscal reforms. Thus the foundation was laid for an open market economy where the state control would be restricted to only minimal.

Seeing the examples of other countries like Singapore and Thailand, which zoomed ahead in the economic front after liberalization, the government of India also decided in favor of the move. Previously, the import duties and tariffs were extremely high, which created difficulty for the imported goods to reach the ultimate consumer. The main aim of the government of India, at that time was to squash imports and foster only the domestic trade and industry.

With the monetary and fiscal reforms of 1991 however, these regulations were relaxed which made it easier for foreign direct investment to flow into India. Say, for example, a company manufacturing and selling in the U.S. wants to open a factory in India and sell its goods there, that is foreign direct investment. The company will obviously need to construct a manufacturing facility within the nation and also make arrangements for the necessary machinery, to start production in earnest. The U.S. Company forms a joint venture with an Indian subsidiary and starts business in India. This is exactly what is meant by FDI. A liaison office or branch office can also be opened through which business can be conducted in India.

FII is the term used when a foreign national invests in the Indian stock market. Where FDI results in an increase in employment opportunities and the GDP of India, FII pumps more money and capital into the country.