India has long been integrated into the polity and economy of the wider world. Though the fashionable term ‘globalization’ ought to ring hollow in Indian ears, it echoes with a new resonance today because it is espoused by the category of Indian society which has more to gain from solidarity with its own class internationally than with its fellow countrymen (Hill, 2004). The Indian economy had been gradually liberalizing since Rajiv Gandhi’s regime (1984-89) and structural adjustment promised a package of market-orientated policies which were enthusiastically welcomed by substantial sections of the middle classes (Chaze, 2006). India’s population is fast approaching a billion; this fact is easy to read but much more difficult to absorb – one thousand million people, each of whom sees the world in a slightly or radically different way from the others.
India is a country with low political risk. It is a federal republic with stable and favorable political situations for foreign companies. The most often repeated argument for liberalization is that of freeing enterprise from the death grip of the bureaucracy and the associated ‘rent seeking’ (Chaze, 2006). A major justification of liberalization is the anticipation of an inward rush of foreign capital in the form of direct investment. It is assumed that this would bring rapid growth, reduction in unemployment, and rising personal incomes. This is then intended, through the percolation effect, to stimulate local demand for local products. Similar international asset stripping can be seen in agriculture, where the lifting of export controls has led highly capitalized farmers to look to overseas markets for higher profits. Indian legal system is based on English common the main but the risk in legal and regulatory fields are high. Legal laws are out-of-date based on old traditions and principles. They do not reflect democratic principles of laws and the criminal justice system. Since the late 1990s, India has seen a downturn in the rate of growth: a mere 3.6 percent for 1998-99 and a 5 percent decline in exports (Datta-Chaudhuri 1999). Some of this can be attributed to the economic sanctions which several countries imposed on India after the nuclear tests in May 1998 and also to the collapse of East Asian demand for Indian products, but a large part can be seen as the failure of the New Economic Policy to provide any deep-rooted benefits for the mass of the people of India. The consumer boom could not be sustained because it was limited to such a small section of society and even that fraction is now becoming uncertain of its future (Chaze, 2006).
Liberalizing the economy also meant that money could be brought quietly back into the realm of legality as the rupee became negotiable. The intended consequence is that larger amounts of capital should become available for investment in the authorized sector. It is widely acknowledged that a major block to India’s economic growth is an overstretched and unmodernized infrastructure; this can only be remedied by the state, given that there can be no immediate return on investment (Chaze, 2006). The docks are clogged – ships take on average five days to turn around in an Indian port because of antiquated technology, forcing up the real cost of exports and imports. The main principles of repatriation are: ”a person shall repatriate the same to India, namely, bring into, or receive in, India and (a) sell it to an authorized person in India in exchange for rupees; or (b) retain or hold it in account with an authorized dealer in India to the extent specified by the Reserve Bank; or (c) use it for discharge of a debt or liability denominated in foreign exchange to the extent and in the manner specified by the Reserve Bank” (Reserve Bank of India 2000).
In India, competition is fierce especially between foreign companies (SMEs and TNCs). Local competitors cannot resist foreign invasion and deliver the same quality of products and services. For instance, in the food industry, the price of many of the foods which Indian people see as treats, such as the fragrant Basmati rice of the Himalaya or the short season Alphonso mangoes, have entered the luxury class now that the world has become aware of them. Many farmers are switching from growing grains for local consumption to the major cash crops of cotton and tobacco, others are turning to the specialist cultivation of flowers and strawberries for newly-affluent urbanites and to be air-freighted abroad. Meanwhile, the state continues to subsidize irrigation, power, diesel, and fertilizers and underwrite the prices paid for essential foodstuffs. The inland freight service is groaning – there are too few wagons for trains which are too slow and infrequent (Chaze, 2006).
The main threat for foreign companies is taxation and double taxation. In India, the state is the ‘third actor’ between private capital and organized labor, serving to prevent the emergence of class-based politics. They were researching with the assumption of the steady ‘Hindu rate of growth (3.5 percent) in the background and the inevitability of the state as a major player in all aspects of life. Market risks include product development and place, promotion, and price. The main risks for international marketers are product development and price. Poverty and low education level will harden penetration into this country. Despite good economic results, India remains a poor country with 25% of its population still living below the poverty line” (India: FITA 2008). Place and promotions are not influenced by poverty and low economic growth rates, thus they depend upon cultural differences and geographical isolation of many regions. Road transport is slow and lorries remain small because the roads are too narrow, pot-holed, and congested to take the juggernauts. The current Government has promised a grandiose modern multi-lane highway system connecting the four major cities but no one really believes that the money will be found.
In sum, India has low political risks thus it hides many potential threats for foreign companies including double taxation, an underdeveloped legal system, poverty, and low purchasing power of potential buyers.
References
Chaze, A. (2006). India: An Investors Guide to the Next Economic Superpower. Wiley.
Hill, C.W.L. (2004). International Business: Competing in the Global Marketplace, McGraw-Hill/Irwin; 5 edition.
India: FITA (2008). Reserve Bank of India (2000). Web.