Business and Globalization of India - Term Paper Example

Background of India India as a country covers an enormous geographical area even more than that Europe. Her inhabitants speak 16 official languages aside from other local dialects. It comprises 28 states; therefore, India is a diverse economy where it is hard to make generalisations. India presents a large market opportunity for those who want to globalise their business and expand their clientele (Manian, 2007: 57). It is the third largest economy by GDP in relation to purchasing power. It is grouped in the G-20 key economies. Business in India is controlled by a strong domestic market hence for a business to prosper in the highly diverse economy; it has to resonate with the cultural norms that drive the thinking of Indians (Makar, 2008: 36). International investment is at a high level since India is an important business destination. It has a vibrant middle-class one factor that makes it a covetable business destination (Bose, 2009: 125). In any economy, infrastructural development is the main facilitator of business. India boasts of The Golden Quadrilateral road network that connects main metros of Chennai, Delhi, Kolkata and Mumbai that is expected to facilitate business further. India is also rich in resources and has a readily established industrial system. Globalisation Globalisation is a ubiquitous term world over; it is synonymous to integration of ideas, telecommunications, and infrastructure throughout the world that involves lifting of certain barriers (Makar, 2008: 57). As a word, it has been in existence since 1960’s. It is a gradual process and it can be positive or negative. A consensus as to what the exact meaning of the term has never been reached. Globalisation is termed differently by different scholars, but all of them agree that, it is a continuous process. It involves integration and interconnectedness. Globalisation encompasses various aspects such as politics, environment, culture and economics. India is a highly globalised economy (Gesteland, and Gesteland, 2010: 266). India’s economic relations There had been a shift in the economic relations of India since the 1990’s at a time when most economies were growing rapidly. The myriad of political and economic interactions with other world economies has increased tremendously (Bose, 2009: 125). Various factors have facilitated this paradigm shift; one such is the end of the cold war that saw United States, Japan and the rest of Europe willingness to build trade relations with them. After a momentous economic crisis in India in 1991, the country embarked on reforms to address the causes of the crisis. The, main cause was limited integration with the rest of the world economies inefficient economy. The country’s efforts in nurturing a technical human resource and indigenous companies in pharmaceuticals have given it relevance in the global economy today. The keen interest accorded to international norms by its governments and acceptance of these norms by the population has given her an upper hand in business (Cappelli, 2010:453). Some of India’s neighbours she previously presumed as lesser developing countries have taken on the current and are threatening to overtake it (Devonshir, 2012: 225). This implies India has a task of staying relevant to the world economy. The state of India’s economic relations may have changed rapidly over the past period. India’s relations with the main economic power hubs like Japan, the United States and Germany has increased. The U.S is her current main trading partner. India is the nineteenth principal exporter and the tenth chief importer worldwide. Timeline of major changes in India’s ER. The economic history of India begins with the Indus Valley Civilisation that was enormously dependent on trade. The period was marked by urbanisation and developments in trade. Political harmony was also experienced. During that time, India is estimated to have had the largest economy of the ancient time. Central planning which included extensive public ownership regulation and trade barriers facilitated this development. The independence era Indian economy from 1947 to 1991 was based on a mixed economy combining both socialism and capitalism. This strategy contributed to widespread discrepancies and inefficiencies largely because of poor implementation. In 1991, after a major economic crisis, India adopted a liberalised free market economy under the guidance of Manmohan Singh who was the then finance minister. Radical reforms were introduced into the system that saw the development of national infrastructure and widespread economic growth. By 2000, it was one of the fastest growing economies in the world. The improvement was majorly due to increase in size of the middle class and a vast labour force. India has recorded a growth of over two hundred times the period between 1947 and 2011. Foreign Direct Investment in India Most of the sectors in the Indian economy have grown rapidly encouraging foreign direct investment. India’s liberalisation of trade policies, development in technology accompanied by efficient telecommunication has made it a hub for investors (Bose, 2009: 125). According to a recent survey by the United Nations Conference on Trade and Development (UNCTAD), India is the second preferred business destination in the entire world. Some of the direct investors in India include US, UK, Mauritius and Singapore. Global Jurix, one of the leading legal organisations of India various companies and other countries make foreign direct investment in India (Manian, 2007: 79). At present, the most lucrative business sectors for foreign direct investment in India are infrastructure, telecommunications, hospitality, education, retail, real estate, biotechnology and alternative energy. Foreign direct investment India is authorised through Automatic approval by The Reserve Bank of India or The Foreign Investment Promotion Board. Foreign direct investment could be; an individual, a group of related individuals, an incorporated or an unincorporated urgency, public company, a private company, a government body, an estate, trust or other social institution. FDI’s have created employment opportunities for many Indians (Makar, 2008: 89). They have also seen the entry of several international MNC’s directly through Indian companies. Moreover, it has sped up economic development in the Indian economy. Impact of globalisation the Indian economy. The Indian economy has experienced many changes as pertains to globalisation especially due to the new economic reform called Liberalisation, Privatisation, and Globalisation popularly known as the LPG model. It has come with change in the mindset of the Indian people such as self-reliance and socialistic policy of economic development. Globalisation has had mostly positive results; economic growth has improved, and exports have boomed poverty has reduced considerably; employment opportunities have been created. Inflation rate has also gone down lessening the impacts of the 1991 economic crisis by tackling the problem of scarcity of goods (Cappelli, 2010:453). The quality of products has also improved. Overall, the Gross Domestic Product of India has improved from 5.6% between 1980 and 1990 to 7% between 1993 and 2001. Globalisation has also led industrial growth in India with the value of manufacturing doubling almost every two years. The Indian economy is relatively stabilized after the globalisation with increased imports and entry of foreign Multinationals (Devonshir,2012: 235). India has also seen a long period of economic, social and political welfare since the dawn of industrialisation and globalisation in its economy. India has become one of the main exporters of service in the world since their exports are mainly to the EU and US. Their market share as of 2008 was 2.72% as compared to 0.6% in 1999. The number of billionaires in India has increased from 36 in 2006 to 40 in 2007 an indication of a fast growing globalised economy (Manian, 2007: 79). Globalisation has had a negative impact on the agricultural sector lowering the per capita income of farmers considerably. With more than half the population depending on agriculture, the low agricultural rate many people are excluded from the general growth spectrum. Rural to urban migration has surged since the rural economy and agricultural sector were left out in the reform strategy (Makar, 2008: 78). Impact of globalisation on India’s ER system Globalisation has ushered in a new world order of multilateralism and trans-nationalism. In the evolving world order with the US still at the helm of political and economic power, it is essential for India to forge relations with the US. Economics has been driving globalisation although politics has shaped it. Globalisation has opened up foreign investment in India. Globalisation has contributed to the formulation of secure interests of the export sector that ensures that India has a role in setting international product standards. It has expanded trade between India and the regional block ASEAN. India has integrated its political dynamics with the rest of the word. Ideas such as social justice, sovereign equality, democratic governance and global economy have also been passed on to India. The current state of India’s economic relations India as a country has logical industrial peace with a strong employment protection. This is because the Indian labour law require that government permission be sort for layoffs and retrenchments (Bose, 2009: 125). Indian trade unions are incredibly influential hence, they have a say on the politics of the nation too. Given their influence, much legislation to protect employees from layoffs, dismissals and retrenchments have been enacted. Competition is relatively weak in the Indian economy. General focus is being laid on numerical flexibility, aggressive management practices, and introduction of functional flexibility. A lot of emphasis is also laid on the change of industries more exposed to globalisation than the rest. Bibliography Bose, R. (2009). India: business checklists : an essential guide to doing business. Singapore, John Wiley & Sons (Asia). Cappelli, P. (2010). The India way: how India's top business leaders are revolutionizing management. Boston, Mass, Harvard Business Press. Devonshire-Ellis, C. (2012). Doing business in India. Berlin, Springer. Gesteland, R, and Gesteland, M. (2010). India: cross-cultural business behavior : for business people, expatriates and scholars. [Frederiksberg], Copenhagen Business School Press. JOSEPH, J. (2004). Industrial relations: towards a theory of negotiated connectedness. New Delhi, Response Books, a division of Sage Publications. Makar, E (2008). An American's guide to doing business in India: a practical guide to achieving success in the Indian market. Avon, Mass, Adams Business. Manian, r. (2007). Doing business in India for dummies. Hoboken, N.J., Wiley. http://www.contentreserve.com/TitleInfo.asp?ID={C90811DB-976C-4EE5-89DB-521314BF8C5A}&Format=410. Read More