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Doing Business in India

Professor Seema Mahajan

Andromachi Fragkou
Aueb I-MBA PT10

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Q1. How do you perceive India as potential destination to invest, elaborate on Indian
growth and issues of concern?

India is the second most populous country and the largest democracy in the world. The far
reaching and sweeping economic reform undertaken since 1991 have unleashed the
enormous growth potential of the economy. There has been a rapid, yet calibrated, move
towards deregulation and liberalization, which has resulted in India becoming a favorite
destination for foreign investment. Undoubtedly, India has emerged as one of the most
vibrant and dynamic of the developing economics.

India has to offer the necessary conditions for growth and development. It is one of the
largest economies of the world, fourth largest economy in terms of purchasing power parity.
Large and rapidly growing consumer market-up to 300 million people constitute the market
for branded consumer products. From India there is also easy access to markets of the other
nations belonging to the South Asian Association for Regional Cooperation (Bangladesh,
Bhutan, Maldives, Nepal, Pakistan and Sri Lanka). Technology infrastructure provides a
promising future in the Information technology industry. What is more, there is large
manufacturing capability, spanning almost all areas of manufacturing activities combined with
low cost labor.

Furthermore there is abundance of natural resources (rich mineral base), and agricultural self-
sufficiency. Skilled manpower and professional management including engineers, managerial
personnel, accountants, and lawyers are available at competitive costs. We could say that in
India there is a conducive, foreign investment environment that provides freedom of entry,
investment, location, choice of technology, import and export. The policy environment
provides clear guidelines for entry, freedom of location, choice of technology, production,
repatriation of capital, dividends, etc., which is specifically aimed of enhancing the flow of FDI.
Furthermore, we must add to that a well-balanced package of fiscal incentives. In the country
there is a stable democratic environment fostered by over 53 years of Independence. English
is the preferred business language.

India, among the European investors, is believed to be a good investment despite political
uncertainty, bureaucratic hassles, shortages of power and infrastructural deficiencies. India
presents a vast potential for overseas investment and is actively encouraging the entrance of
foreign players into the market. No company, of any size, aspiring to be a global player can
for long ignore this country which is expected to become one of the top emerging
economies.

Success in India will depend on the correct estimation of the country's potential,
underestimation of its complexity or overestimation of its possibilities can lead to failure.
While calculating, due consideration should be given to the factor of the inherent difficulties
and uncertainties of functioning in the Indian system. Entering India's marketplace requires a
well-designed plan backed by serious thought and careful research. For those who take the
time and look to India as an opportunity for long-term growth, not short-term profit- the trip
will be well worth the effort.

The reason being, after independence from Britain 50 years ago, India developed a highly
protected, semi-socialist self-sufficient economy. Structural and bureaucratic impediments
were vigorously fostered, along with a distrust of foreign business. Even as today the climate
in India has seen a seachange, smashing barriers and actively seeking foreign investment,
many companies still see it as a difficult market. India is rightfully quoted to be an

Andromachi Fragkou, Aueb, I-MBA


incomparable country and is both frustrating and challenging at the same time. Foreign
investors should be prepared to take India as it is with all of its difficulties, contradictions and
challenges. We must not forget high risk means high returns.

Q2. Kindly specify the sectors which according to you are growing areas in India

India is the fifth largest economy in the world (ranking above France, Italy, the United
Kingdom, and Russia) and has the third largest GDP in the entire continent of Asia. It is also
the second largest among emerging nations (these indicators are based on purchasing power
parity). India is also one of the few markets in the world which offers high prospects for
growth and earning potential in practically all areas of business.

A series of incentives has been announced to promote investments. Since the initiation of the
economic liberalization process in 1991, sectors such as automobiles, chemicals, food
processing, oil & natural gas, petrochemicals, power, services, and telecommunications have
attracted considerable investments. Today, in the changes investment climate, India offers
exciting business opportunities in virtually every sector of the economy.

The sectors which present business opportunities and are growing areas are the following:

 INFRASTUCTURE
 Telecommunications (There exists an enormous demand-supply gap for basic
services, with the average waiting period for telephone connections exceeding one
year)
 Internet Services
 Basic Telephone Services
 Cellular Mobile Services
 National Long Distance Services
 Global Mobile Personal Communication by Satellite (GMPCS)
 Other Value Added Services
 Roads (Highway construction, Four-Laning of over 35,000 km of National Highways,
Highway related en route activities like restaurants, motels, and rest/parking areas as
may be decided by the implementing agency)
 Ports
 Civil Aviation & Airports
 Petroleum & Natural Gas
 Power and non conventional power sources (Investment by foreign investors in
renewable energy: Wind, Solar Photo-voltaic, Solar Thermal, Small Hydro, Biomass,
Co-generation, Geothermal, Tidal and Urban & Industrial Wastes based power
projects)
 Urban Infrastructure

 SERVICES
 Banking & Financial Services
 Insurance
 Real Estate & Construction
 Retail
 Tourism (hotel and restaurants)
 Social and personal services

Andromachi Fragkou, Aueb, I-MBA


 MANUFACTURING
 Metals: Steel & Aluminium
 Textiles & Garments
 Electronic Hardware
 Chemicals
 Automobiles
 Auto Components
 Gems & Jewellery
 Food & Agro Products

 NATURAL RESOURCES
 Coal
 Metal Ores
 Oil & Gas Exploration

 KNOWLEDGE ECONOMY
 Pharmaceuticals & Biotechnology
 Healthcare
 IT & IT Enabled Services (Communication Infrastructure, Optic Fiber Cable, Gateways,
Satellite based Communication Wireless, Software Development, IT-enabled
education, Data Centres & Server Farms)

India has long been known for the diversity of its culture, for the inclusiveness of its people
and for the convenience of geography. Today, the world's largest democracy has come to the
forefront as a global resource for industry in manufacturing and services. Its pool of technical
skills, its base of an English-speaking populace with an increasing disposable income and its
burgeoning market have all combined to enable India emerge as a viable partner to global
industry. Investment opportunities in India are today perhaps at a peak. Supported by India's
natural strengths, India offers many investment opportunities in the sectors mentioned above
over the next five years.

Resources

-case study and reports distributed in the classroom:

Harvard Business School case study “India on the move” by Richard H. K. Vietor, Emily J.
Thompson, Rev. March 12, 2007

“Economy Industry Monitor, India”, Cygnus Business Consulting and Research Pvt. Ltd., May
2009

-www.doingbusiness.org

- http://www.doingbusiness.org/subnational/exploreeconomies/India2009.aspx

Doing Business in India: The latest Doing Business subnational report surveys 17 Indian cities

Andromachi Fragkou, Aueb, I-MBA

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