International business has the potential to support the Gross Domestic Product (GDP) of every country. According to Sharma and Kaur (79), “many developing countries have designed effective trade policies and liberalization laws in order to achieve the best economic gains”. International trade opens up new opportunities for many entrepreneurs. Some policies and situations make it easier for nations to achieve the best economic gains.
Some of “these factors include proper political climate, favorable macroeconomic scenario, and effective trade policies” (Chandhoke and Priyadarshi 21). Throughout the 20th century, many economists believed that India was an underdeveloped nation. However, India has transformed itself to become one of the largest economies in the globe. This essay uses PEST Analysis to examine whether international business activities have decreased or increased in India within the past 10 years. The targeted international business activities include foreign direct investment (FDI) and trade.
PEST Analysis of India
There are many factors that support the economy of a nation. India is one of the nations that have benefited significantly from international trade. The country is also “known for its diverse culture” (Chandhoke and Priyadarshi 8). Majority of the citizens in the country are Hindus. Towards the end of the 20th century, the country began to embrace new economic practices. The nation also benefited from its Service Sector (SS). This sector was characterized by minimal regulations.
This situation encouraged more people to join the sector thus promoting the nation’s economic growth (Sharma and Kaur 82). A proper analysis of the environment will determine whether India has benefited a lot from international business practices. The PEST Analysis of India is presented below.
Political Environment
- The nation has a federal government that supports the rights of many entrepreneurs.
- According to Chandhoke and Priyadarshi (53), “India has developed to become one of the biggest democracies in the globe today”.
- The country’s political climate is also influenced by a wide range of factors. For instance, the government implements various policies to dictate the actions of different citizens.
- Some influential politicians also dictate the economic issues encountered in the country.
- The country has a number of powerful political parties. This situation explains why such political factors affect the country’s business environment.
- India also boasts of a proper taxation system.
- The government uses “different strategies to collect its income such as sales tax, services tax, and income tax” (Chandhoke and Priyadarshi 87).
- The Indian government is currently using various programs to promote the idea of privatization.
Economic Environment
- India has been enjoying a stable economy within the past two decades.
- The economy of a country can attract or repel many investors.
- In 1991, the government introduced the famous Industrial Reform Policy (IRP) in order to transform India’s economy.
- Such practices included “liberalization of foreign capital and reductions in business licensing” (Sharma and Kaur 84).
- The country’s GDP has increased within the past one decade.
Socio-cultural Environment
- India has a wide range of cultural practices and languages. These aspects have been attracting many tourists and investors into the country.
- The socio-cultural practices embraced in a specific country will affect its business activities.
- India has a population of over 1.2 billion.
- Many people in the country are also getting quality education.
- Some structures are also used to determine the socio-cultural environment of India. Such structures include “education, income distribution, and work attitudes” (Tian and Yu 29).
Technological Environment
- The country is currently producing many software applications and advancements.
- India possesses a strong Information Technology (IT) sector.
- The country is also working hard in order to launch several satellites.
- The nation is also serviced by 4G and 3G technologies.
- India has embraced modern technologies in order to support its industries (Chandhoke and Priyadarshi 87).
- Some of these products include medicines, machines, vehicles, software applications, and handheld devices.
India: Industry and Firm Analysis
Main Economic Activities
The economy of India is supported by a number of economic activities. India is one of the leading producers and exporters of various agricultural products. This fact explains why agriculture is a major economic activity. The major farm outputs include fruits, vegetables, cotton, rice, sugarcane, groundnuts, and legumes (Chandhoke and Priyadarshi 39). Fishing is also a common economic activity in the nation.
The country’s IT industry has been growing very fast. The country is currently providing numerous IT services to many global countries. The country boasts of many international call centers. The country also produces different minerals. India also produces “crude oil, coal, and other petroleum products” (Tian and Yu 30). The country has many retailing companies. The tourism industry has also been supporting the nation’s economy.
Main Export Industries
India trades with different nations such as Russia, Japan, the United States, Singapore, and Germany. The agricultural industry is one of the sources of the country’s foreign exchange. The country’s mining, manufacturing, and textile industries also support its economy. Some other exports include “iron ore, pharmaceuticals, paints, and plastics” (Chandhoke and Priyadarshi 46). The Indian software industry also produces different exports. The engineering industry also “exports various products such as electronics, steel, machines, and transport equipment” (Tian and Yu 34). The textile industry also produces carpets, artificial fabrics, cotton yarns, and garments.
Main Companies Involved in Generating Export Turnover
Several Indian companies generate export turnover in the country. One of these firms is Oracle Financial Services Software Limited (OFSSL). This firm provides both financial services and IT solutions to different global customers. Opto Circuits (OC) also produces numerous devices and medical products for many customers (Chandhoke and Priyadarshi 76). Infosys Incorporation is also a leading software exporter. Tata Group is another leading company that exports many products and services. Rajesh Exports Limited and Tech Mahindra have been generating export turnover in India. Sesa Goa is one the leading exporters of iron ore. These companies have been supporting the country’s GDP.
Role of the Government
Many industries and companies contribute a lot to the economy of India. Such businesses have been creating jobs for the country’s ever-growing population. The Indian government uses various bodies, programs, and ministries to support different companies. Different banks offer appropriate financial support and incentives to new investors. The National Commission for Enterprises in the Unorganized Sector (NCEUS) also generates new opportunities for many entrepreneurs. The liberalization of the 1990s also supported different economic activities (Tian and Yu 32). This policy has been supporting the nation’s agriculture, service, and automotive industries. Several ministries offer grants for different research and studies.
The government has also been using powerful policies and taxation practices in order to safeguard different industries. The government has been supporting different industries using proper infrastructures and energy distributions. The Indian government also offers grants in order to make such industries successful. Different “international relations and trade pacts have been promoting international trade activities” (Tian and Yu 29). The Indian government uses the above practices to enhance the competitiveness of its industries.
Has The Economy of India Been Growing Steadily Within the Last 10 Years?
The economy of India has been growing steadily within the last 10 years. India has also become a leading exporter of most of the above products. The country’s exports stood at 1.7 percent in 2000. The country’s “exports had increased to 2.5 % by 2011” (Chandhoke and Priyadarshi 102). The government has also been undertaking numerous measures in order to support the country’s international trade. Studies show clearly that there has been a gradual increase in India’s imports and exports. The country has also recorded a gradual rise in its foreign direct investment (FDI). This practice has also supported the country’s economy. In 2001, the country’s FDI stood at 4 billion USD. The country has recorded a GDP of over 1.3 trillion USD.
Many Indian companies have invested in different countries in order to achieve their potential. Many IT companies began to invest in different countries such as Germany, Russia, and China. Some leading manufacturers have also established new plants in different nations across the globe. The above PEST Analysis shows clearly that the country has been attracting more foreign investors. This development has made it easier for the country to achieve its economic goals. After the famous liberalization of the 1990s, the level of international trade increased tremendously (Tian and Yu 36). This international trade has also been supporting the country’s GDP. This development explains why India’s GDP has been growing steadily within the past 10 years.
Works Cited
Chandhoke, Neera, and Praveen Priyadarshi. Contemporary India: Economy, Society, Politics. New Delhi: Pearson Books. Print.
Sharma, Renu, and Mandeep Kaur. “Causal Links between Foreign Direct Investments and Trade: A Comparative Study of India and China.” Eurasian Journal of Business and Economics 6.11 (2013): 75-91. Print.
Tian, Wei and Miaoje Yu. “China and India: Trends in Trade over the Last Decade.” The Journal of China and Global Economics 1.1 (2012): 27-38. Print.