Republic of India: International Business

Republic of India
By
Christopher Pappas, Ruth White, SagarChuri and SouvikBiswas
MBA 6100
Dr. James M. McFillen
International Business and Management
Tuesday, August 4, 2009

Geographic Information
Political, Legal, and Economic Systems
Financial Information
Economic Data
Trade Information
Population and Population Characteristics
Culture and Key Business Practices
Agenda

Geography
Capital: New Delhi
Financial Center: Mumbai
Strategic Location: Access to domestic and South Asian Market
Borders:

West: Pakistan, Arabian Sea
North East: Myanmar (Burma), Bangladesh
East: Bay of Bengal
North: China, Nepal, Bhutan
South: Indian Ocean

Surface Area
Total Area:

1.3 sq. million miles
Almost one third of USA’s size
7% of total area consists of deserts
21.6% of total area consists of forests
9.5% consists of water
49% of land is used for arable purposes
2.8% of land is used for permanent crops
48% of land is used for other purposes
India is the 7th largest country in the world after Russia, Canada, U.S.A., China, Brazil, and Australia.
Coastline extends up to 4,340 miles.
54% of the land is vulnerable to earthquakes

Facts to Know
Kanchenjunga (8,598 m or 28,169 ft), 3rd tallest mountain in the world, lies on the border with Nepal

Natural Resources
Coal (4thlargest reserve in the world), Iron Ore, Manganese, Mica, Bauxite, Titanium Ore, Chromites, Natural Gas, Diamonds, Petroleum, Limestone

Agriculture & Industries

Facts to Know

India ranks 1st in the production of bananas and mangos. In 2000 it produced 11 million metric tons of bananas, while Brazil produced 6.3 million metric tons
In 2004 India ranked 1st in the land area under rice since 42 million hectares are used for growing rice, and ranks 2nd in the production of rice since it produced 89 thousand metric tons
India is the world’s largest producer of milk and 2nd largest producer of food, including fruits and vegetables. India accounts for 15% of world’s production of vegetables

Imports & Exports

Balance of Trade

Transportation

Infrastructure
$12 billion investment in Highways Development Program. Over 8,000 miles of Highways being developed
Upgradation of airports
$22 billion investment in developing ports and shipping sector
Major advances in telecommunications sector. Bandwidths of terabit available. Sharp decline in telecommunications costs

Population

India represents 17% of the world population

Cities by Population

Age Structure
Median age of the total population: 25.3 years

Work Force
Total Work Force: 516.4 million

60% work in agriculture
17% in industry
23% in service

Unemployment rate: 7.2%
Urban population: 28%
Population density: 368.15 people per sq. km

Sex Ratio

Religion
India is the only country with over 50% of its population practicing the Hindu religion

More Population Details

Human Capital

2nd largest English speaking population
2nd largest group of software developers after the U.S.
IT industry $14 billion; growing at 50% per year
Sends more students to the U.S. colleges than any other country in the world. In 2008, over 95 thousand Indian students enrolled in the U.S.
Strong pool of scientific and technical manpower
High quality, cost effective, competitive manpower with over 100 thousand IT professionals added each year
255 Fortune 500 companies getting services from India
100 of the Fortune 500 have R&D facilities in India
Global consultancy A T Kearney rated India as the most attractive destination for offshore business processing
Job creation: 1 million direct and 2 to 3 million indirect

Language
Hindi is the most widely spoken language and primary tongue of 41% of the people
English is the most important language for national, political, and commercial communication

Political System
The Constitution of India is the longest and the most exhaustive constitution of any independent nation in the world
The preamble of the constitution defines India as a sovereign, socialist, secular, democratic republic
The President of India is the head of state elected indirectly by an electoral college for a five-year term
The Prime Minister is the head of government and exercises most executive powers
The Prime Minister is by convention supported by the party or political alliance holding the majority of seats in the lower house of Parliament

Legal System
India has a unitary three-tier judiciary, consisting of the Supreme Court, headed by the Chief Justice of India, twenty-one High Courts, and a large number of trial courts
The Supreme Court has original jurisdiction over cases involving fundamental rights and over disputes between states and the Centre, and appellate jurisdiction over the High Courts
It is judicially independent, and has the power to declare the law and to strike down Union or State laws which contravene the Constitution
The role as the ultimate interpreter of the Constitution is one of the most important functions of the Supreme Court.

Economy
India is:

One of the fastest growing economies in the world and the 2nd fastest in Asia
The 10th most industrialized economy
Ranked 1st in prevalence of foreign technology licensing
Ranked 2nd in availability of scientists and engineers
Ranked 9th in quality of management schools
Among top 10 tourist destinations
Ranked 12th in firm level innovation
Ranked 16th in firm level technology absorption
Ranked 32nd in company spending on R&D

Facts to Know
India is
the world’s 2nd largest small car market
one of only three countries that makes its own supercomputers
one of six countries that launches its own satellites
the world’s 2nd largest pharmaceutical industry after China

Gross Domestic Product (GDP)

GDP – Composition by Sector

Currency
1 Indian Rupee (Plural: Rupees) = 100 Paise (Singular: Paisa)

Exchange Rate
Last 120 days:Latest (Jul 31) 48.062, Lowest (Jun 1) 46.9627, Highest (Mar 3) 51.9699

Inflation Rate

Facts to Know
The Bombay Stock Exchange (BSE), in Mumbai, is Asia’s oldest and India’s largest stock exchange
It lists 6,600 companies; only the NYSE has more
It is the 5th largest in terms of number of trades

Stock of Foreign Direct Investment
India is:

6th most attractive destination for FDI
Major destination for foreign venture capital funds
The best destination for outsourcing
Amongst the leading entrepreneurial hotbeds globally

Corruption Perception Index

India in Global Communities

Globalization Index Rankings2007Out of 72 countries
INDIA
CategoryRankingAmount/Percentage
Foreign Direct Investment 67 As share of GDP 1.02%
Gross Domestic Product 12 GDP in USD-780 Billion*
Total Trade 62 As share of GDP 43.9%
Memberships in Int’l Orgs. 66 8 memberships
UNITED STATES
CategoryRankingAmount/Percentage
Foreign Direct Investment 69 As share of GDP .90%
Gross Domestic Product 1 GDP in USD–12.4Trillion
Total Trade 71 As share of GDP 26.2%
Memberships in Int’l Orgs. 1 15 memberships
* As of 2008 – India’s GDP in USD rose above One Trillion at 1.29T

Trade Information
Profitability of US investments in India: 19.33% in 2000 (US Dept. Of Commerce)
Complete exemption from Customs Duty on industrial raw materials
Corporate Tax Holiday for five years for 100% export oriented companies, and companies in Export Processing Zones
Liberalized Trade Policy
Treaty Corporate Tax Rates:
Avoidance of double taxation exists
Pay lower of: tax applicable to foreign country or corporate treaty rate

Transnational Issues
India is a source, destination, and transit country for men, women, and children trafficked for the purposes of forced labor and commercial sexual exploitation
Largest concentration of poor people in the world
Highest rate of malnutrition among children under age of 3 (46% in 2007)
World’s largest producer of licit opium for the pharmaceutical trade, but an undetermined quantity of opium is diverted to illicit international drug markets
Transit point for illicit narcotics produced in neighboring countries and throughout Southwest Asia
Illicit producer of Methaqualone
Vulnerable to narcotics money laundering
Ranked 2nd after South Africa in number of deaths from AIDS during a given calendar year (310,000 in 2001)

Culture
India is the world’s most diverse country considering: culture, linguistics and genetics. Only Africa (as a continent) is more diverse.
India’s culture is marked by a high degree of syncretism and cultural pluralism

Cultural Dimensions
PDI - Power Distance Index India = Blue
IDV - Individualism US = Yellow
MAS - Masculinity
UAI - Uncertainty Avoidance Index
LTO - Long Term Orientation

Facts to Know
The Indian film industry is the largest in the world
Bollywood, based in Mumbai, is the largest film producer in India and one of the largest in the world

Business Etiquette
Do use titles to address your Indian counterparts, such as “Professor” or “Doctor”. If he/she does not have a title, use “Mr”, “Mrs”, or “Miss”.
Do wait for a female business colleague to initiate a greeting whether it is verbal or physical. Indian men do not generally shake hands with women out of respect.
Do remain polite and honest at all times in order to prove that your objectives are sincere.
Do NOT be aggressive in your business negotiations – it can be interpreted as a sign of disrespect.
Do NOT take large or expensive gifts as this may cause embarrassment. If you do take a gift make sure you present the gift with both hands.
Do NOT refuse any food or drink offered to you during business meetings as this may cause offence (sample small portions at least). Keep in mind that traditionally, and religiously, majority of Indians are vegetarians and do not drink alcohol or smoke.

Key Factors to do Business
Finding good partners who have knowledge of the local market and procedural issues
Good planning
Aggressive due diligence and follow up
Patience and commitment
“How to Do Business in India”

Porter’s Diamond Model
Major Industries
Coal mining, Steel, Petroleum, Chemical
Major Exports
Petroleum products, Gems & Jewelry, Chemicals
Natural Resources:
Coal, Iron core, Diamonds, Natural Gas, Petroleum
Major Industries
Dairy(Milk), Leather
Major Exports
Dairy Products, Leather goods
Structure & Strategy
Cattles
Factor Condition
Major Industries
Outsourcing
Demand condition
Manpower
Major Industries
Agriculture
Major Exports
Food Products
Availability of land
Major Industries
Tourism
Picturesque Locations
Related & supporting industries

Country Specific Advantage
English Speaking Country
Ideal for Outsourcing
Software Developers (2nd in world)
Ideal destination for FDI
Cheap Labor
Huge Market

Threat to Indian Service Industry
Service Industry
Service Industry
(Outsourcing)
Manufacturing Industry
Foreign Manufacturing Industry

India Rising

Questions?