International Business - Essay Example

? International Business Table of Contents Table of Contents 2 1a. 3 Introduction 3 India 4 Political 4 Economic 5 Technological 8 2b. 9 Reducing Income Disparity 10 Focusing on Technological Developments and Innovation 10 Focusing on Internal Growth and Development 11 Tackling Inflation Levels 11 Clearing Layers of Corruption 12 Reducing Current and Fiscal Account Deficits 12 References 14 1a. Introduction The world of 21st century is highly complicated and complex. The widespread increase and overall availability of information to the masses has meant the rise of high speed data communication services all over the world; along with the rise of open sources providing free information through the virtual world has changed the nature of competitive advantage to the organizations, governments and nations at large. Due to the widespread interconnectivity provided to the masses by the high speed internet services, the various geographical boundaries and barriers are becoming increasingly less important. As such, the world is turning into what can only be described as a type of global village where nations highly interconnected with one another and their strategies and plans have the power to impact millions of lives on the face of the earth (Desai 2012, p.115). Likewise, the economic, political, social and technological factors of a particular nation can prove to be beneficial as well as competitive to many other nations, who are developing and emerging at varying paces or have established themselves in a more secured manner over the time as compared to others. Talking in terms of more recent scenarios around the world, it should be mentioned that the prolonged macroeconomic challenges of that the economies of the West mean that businesses and governments are looking elsewhere as a means to provide their requisite economies with the skilled labor and finished products that high labor costs and raw material suppliers would necessarily entail domestically (Sing et al 2011, p.33). Talking in terms of emerging markets, various countries like Brazil, Russia, India, and China are been recognized as the emerging market economies which have the power to provide large amounts of potential growth to major corporations around the world (Upfnider 2011 p. 191). Even some of the African nations are starting to come up as an emerging market, closely following the Asian nations like India and China (Das 2011, p.172). India As such, this brief will consider the emergent case of the economy of India. India is comprised of one of the most attractive markets that fall in the category of the fastest emerging markets around the world. With a GDP of over $1.8 trillion, the Indian market looks extremely attractive for investments by foreign institutional investors (Mukherjee 2009, p. 59). Apart from that, because of the highly diversified population mix and increasing per capita income, India has emerged as a unique market for consumables for multinationals around the globe. This provides corporations with opportunities to acquire growth and generate revenue from such a high opportunity market. However, for a better understanding of the “India advantage”, as some commentators have called it, in terms of emerging market, a PEST analysis is required. Political The political parties of India have to help and to shape the development of the various factors that contributed to the process of economic development within India as an important emerging market in the global forum. The most important contribution that has been made by the political parties in the development of the Indian nation is the process of opening up of the Indian economy in the early 1990’s. The opening up of the Indian economies contributed to the a greatly in flow of foreign funds. These foreign funds and investment naturally contributed to the overall growth and development of the nation over the past two decades. Likewise, the various political powers played a large role within the process of formation of various favorable trade policies and agreements that led to the reduction and eradication of trade barriers. This resulted in transforming the nation’s economy into one that was very conducive to emerging markets in nearly all of their forms (Guarino 2012). A major benefit that India has gained from the political changes that have been described is the factor of achieving and maintaining stability in the governmental framework. This stability provided a great deal of advantage to the country in the process helped the economy position itself as one which was highly conducive for investment by businesses from the domestic as well as the international fronts. The political parties of India additionally helped the overall process of formation and continuous design and evolution of various socio economic policies that were in line with the changes in the global trade policies and regulations. This provided India with a great advantage that led to the process of greater recognition as an economic power both within Asia and within the world at large. Economic One of the most primary economic factors that provided a great deal of benefit to India as an emerging economy was the fact of increasing economic liberalization which was promoted by the government of India around the year 1991, by encouraging India an open economy and thereby ending the rule of the License Raj of the 80’s decade. Although this has been briefly referenced within the “political” section of this analysis, the two of these factors are both political and economic and must be given equal weight in both analytical observations (Kavida et al 2009, p. 26). A very critical point that has to be taken into consideration for helping to make India into a more competitive economic power is the process of investments coming from the foreign institutional investors (FIIs) like foreign multinational corporations. Also, the rise in the amount of foreign direct investments has led to the development of the prospects of India in terms of an emerging market (Sanghi et al 2012, p.88). Another main reason the increased economic attractiveness of the Indian economy is of course a result of the burgeoning population that the sub-continent exhibits. Such a high population and high population growth portends a host of opportunities for those multinational investors who would seek to tap into such a market for consumer goods and services. Apart from this factor, the rising purchasing power parity of the Indian consumers, as compared to other emerging markets, also makes the strength of the overall Indian economy one of the prime motivators for investors to seek out opportunities therein (Datta 2012, p. 989). It can be stated that the growth in purchasing power parity can be related to the development and investment in regards to policy planning which is directly sponsoring the growth of jobs and thereby raising the income and more specifically, the disposable income of the Indian consumers. As per McKinsey, the urban per capita GDP of India is expected to grow at a rate of around 6% for the period of 2005 to 2025. It has also been projected that the discretionary spending power of the Indian consumers will rise by around seven hold by the year 2025 (Bhigania, 2012 p.1). This will automatically contribute to the fact of positioning India as a highly valued emerging market, targeting which various businesses can achieve levels of growth as well as high returns of revenue as well as investment. Another factor of considerable importance that contributed to the promotion of India as an emerging market is the fact of continuous, effective and strict regulations of the interest rates, inflation rates, the reposition rate as well as other growth rates of the economy by various governmental agencies like the Reserve Bank of India (RBI), Planning Commission of India (PCI), and Securities Exchange Board Of India (SEBI) the name but a few. The effective monitoring of the various economic growth indicators and significant designing of various trade policies through joint collaboration by these government agencies in order to promote sustainable economic growth advantage and benefits to the country played an important part in making the country a fast emerging market in the global arena. The process of strict monitoring of the growth rates by the governmental agencies as well as the implementation of stringent measures and policy frameworks aimed at reducing the dependence of foreign capital thereby increased the ability of the state to weather the recession and other macroeconomic complications that the developed world experienced within the past several yeras (Batt, 2012, p.667). Technological The technological factor of growth of the nation has also contributed in promoting an amount of advantage in helping India to achieve the place and pace of a rapidly emerging economy. During the early part of the 21st century, the Indian software industry assisted the process of evolution and promotion of information technology. By the process of capitalizing on the currency differentials that existed at that point of time between the currency of India as well as that of the established economies, the country focused on the process of leveraging amounts of growth by catering to the information technology needs of the developed economies. This aided the growth and development of India’s IT infrastructure as a host of trained professionals were being generated to fill key market demands. This led to the process of evolution and growth of technology based Indian multinational corporations like Tata Consultancy Services (TCS), Wipro Technologies, and Infosys to only name a few. The growth and developments in the field of information technology led to the process of development and emergence of a highly skilled workforce. As such, the government of India has taken major steps in the process of implementing information technology in its various departments and processes. This assisted in the process of increasing the efficiency and productivity levels of the various government based department while helping in the streamlining of various departmental functions. It has also enabled the government to combat corruption and cut red tapes that previously led to the slower processing and clearance of various obstacles that business encountered. As of today’s date, the Indian government is focusing on the process of implementing information technology in various highly ambitious projects which will help better management and policy planning for the masses for such a vast and densely populated country. 2b. The economy of India has been one of the fastest growing economies in the world as well in the Asia Pacific Regions. However, it has to be considered that the high growth rate has been achieved through the synchronized collaboration of doing businesses with various other nations and communities around the world (Chakravarty 2011 p. 39). Before the period of global slowdown, the Indian economy has maintained a high GDP growth rate of around 8% and more. Source: Ministry of Statistics and Program Implementation In the times of economic instability around the world during the shaky period of 2008-09, the emerging economies and their markets proved relatively strong and helped the developed markets to surpass the period of slow growth (Adgaonkar et al 2012 p. 34)). However, the process of overdependence on the developed world for attaining growth of the nation may hinder the growth of India in the long terms. As of the development of the recent times, there is a high chance for the GDP growth rate of India to fall below 6% due to the possible spill over of related macro factors around the world like Euro Crisis of the West (Palakkeel 2009, p. 14). However, it can be stated that the economic progress of India is hindered by several factors which will require this author to further address these points within the proceeding analysis. Reducing Income Disparity One of the most important factors that have to be focused on for the purpose of maintaining sustainable growth of the nation is the process of attaining reduction in the income disparity levels of the masses of the nation (Prakhash et al 2011, p. 61). It has been widely noted that in the developing countries, the spread and distribution of wealth and income is highly uneven which becomes a growing threat to the steady sustainable growth of the nation. In the Indian context, it can be clearly highlighted that the there is high income inequality of the masses with heavy concentration of income in just four out of a total of fourteen major states (Enderwick, 2012, p. 5-6 ). Focusing on Technological Developments and Innovation Though India as an emerging economy has built itself a strong platform of technology, yet for the purpose of sustaining a competitive edge, India needs to invest in the process of development and innovation of technology (Rani et al 2011, p. 14). The emerging economy needs to sponsor the process of growth and development of various government, academic as well as technological institutions; which is supposed to be the hub of innovation and development in the western world (Singh 2011, p. 51). The development of the various governmental as well as individual institutions, which is focused towards the processes of research and development will automatically provide a significant amount of benefit in the process of innovation and diffusion of innovative processes and measures in the various industries, thereby generating an increase in productivity of the nation (Dossani et al 2009, p. 79). Focusing on Internal Growth and Development Over the years, India as an emerging economy was highly focused on the process of the growth and development of the nation by relying on an export oriented model of products and services by providing competitive exchange rates (Upadhyay, 2012). It would be right to draw focus in these regards that with the slowdown in the developed economies, the emerging economy needs to focus on the process of catering to the domestic needs and internal development of the nation and its process requirements, so as to attain a sustainable growth level in the upcoming years. Tackling Inflation Levels For promoting investments for the purpose of attaining growth in the economy, India over the years has gone for liberalization of various tax policies and lowering of interest rates, which has in return promoted high level of inflation over the years. It is of utmost importance for the government to control the inflation levels with regards to essential commodities and food prices (Business-standard.com, 2012). In order to provide sustainable economic growth levels in the future, the government of one of the fast emerging market of the Asian segment needs to focus on the process of checking the high levels of inflation without comprising on the rates and prospects of growth of the economy. Clearing Layers of Corruption One of the most vital factors that have to be taken in to consideration in the pursuit of sustaining of future economic growth is the clearing the layers of corruption that has stained the corporate and economic image of India in the recent times. It has been estimated by key industry leaders of the emerging economy that the process of clearing the levels of corruption by 50% in the Indian markets will contribute to a one percent growth of the gross domestic product (GDP) of the nation (Goh 2012, p. 342). As an effective measure, it can be highlighted that the development of transparent policies and frameworks by the governments as well as empowering the masses by providing them the right to information will automatically reduce the levels of corruptions in a phased manner, thereby enabling the process of sustainable economic development of the nation (Nag et al 2012, p. 19). Reducing Current and Fiscal Account Deficits As a result of the impact of the economic analysis which has been performed, it must be acknowledged that India’s growth progress currently faces a tremendous negative pressures due to the high deficits in the current and fiscal accounts (De 2012, p.380). For the purpose of achieving an amount of reduction in the amounts of current and fiscal account deficits, the government of India will need to focus on reducing the import of high value commodity goods like gold while focusing on the process of cutting subsidies (Indiatoday.in, 2012). 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