Business Environment - Essay Example

Introduction The United Kingdom and India has enjoyed warm and cordial relationship soon after its independence from the British rule. India is considered to be the country which offer better investment opportunities, the labor and the taxation policy of the country has always been encouraging, therefore the investors from the developed country in general, and the United Kingdom in particular, have always taken initiatives for the investment and the expansion of their business activities. Recently, the United Kingdom has reached an understanding with the Indian government, in which the British administration has requested for transparent and unconditional access to the Indian market for the launch and expansion of the British financial institutions. The segregation of the British companies in the Indian market is expected to strengthen the domestic sector of the India. India has always been a safe haven for the international investors, particularly from European Union and North America. The investment records have reflected that India has been successful to attract foreign investment in their country, and the rising proportion of the foreign investment has been responsible for the joint investment schemes. The United Kingdom has been successful in making huge returns, by hiring the cheap and skilled Indian labors, whereas the Indians have been able to explore the varieties and threshold of the business activities which can be regarded as the potential avenue, that were left explored in the Indian market. The economic policies and the Indian market have always synchronized with the interests and aspirations of the British investors. The British Deputy High Commissioner in South India Mike Connor revealed that the government of United Kingdom is willing to develop and strengthen economic ties with the Indian government, and has already adopted several such measures which were aimed at developing ground of economic and market convergence for both the countries. The deputy High Commissioner admitted the fact that India is considered to be the favorite and merging market in different sectors including insurance, banking and software development sectors, the potential of the country in these sectors has been globally acknowledged. The economic analysts considered India to have enormous potential in these avenues. The investment by the United Kingdom in the Indian subcontinent has been magnificent, the government of the United Kingdom and the private registered companies of the Kingdom have made magnanimous investment, and such investments have translated into the success of the HSBC, Standard Chartered Bank and a few insurance and software companies in the sub-continent. The United Kingdom is considered to be primarily a service industry based economy, therefore the requirements for the service market have been humbly fulfilled by the Indians, and the Indians have offered their credentials in exchange for reasonable charges. The recent statistics through private sources have revealed that the bilateral trade between the United Kingdom and India has crossed the level of eight billion pounds. Such unprecedented level has in achieved in the presence of the barriers which have restricted the access for the major British financial organizations into the Indian market. The financial agreements between India and United Kingdom are expected to get materialized which will provide relief to the enthusiastic investors from the United Kingdom, and will multiply the level the bilateral trade. Trade and Economic Developments between UK and India It has been observed, in banking there are still several regulatory barriers, although some banking reforms have been adopted, higher ceilings on foreign shareholding in banks would encourage transfer of expertise, strengthen Indias financial sector and benefit consumers with wide access to financial services. Therefore, there is a need for the removal of such barriers and restrictions through which the participation from the both sides can be unconditional, such nature of relationship require bilateral understanding. It can be recalled that the United Kingdom based law firms are not allowed to practice in India, it is belief that once such permission is granted the United Kingdom law firms are willing to support the improve the judiciary system of the country, which is regarded as among the leading corrupt country of the world. The arrival of the British law firms in the country is improve and expedite the accountability process of India, and such reforms are expected to bring with them expertise, business and major employment opportunities, it has been clarified that the British law firms do not want to deprive Indian lawyers of work, the United Kingdom based law firms probably have a strong tradition of employing Indian people to run their companies here in India right to the highest management levels. The Indian economy has emerged as diversified economy, and the roots of the diversification are much wide spread, therefore progress of the Indian society has a dynamic impact on the global economy. Previously, the terrorist attacks terrified the business activities and the entire business of the country was wrapped by curfew, such events adversely affected the economy of the neighboring countries, entire South East Asia reported decline in the stock market, and the regional economy recovered once the Indian economy was reconditioned (Financial Times, 2007). Element of Bilateral Trade: Opportunities The bilateral trade between India and United Kingdom has been phenomenal, and with the passage of time, the administration and corporate sector of both the countries have been able to identify and explore such areas where the vested interests of the respective country exist. India is in the list of the top twenty export markets for the United Kingdom, and is the second largest export market after China in the category of the developing countries. According to the public statistics revealed in 2004, the exports of the United Kingdom to India stood at slightly more than three billion pound, the export figure encompass the goods and services offered to the India. In 2005, the export of the United Kingdom to India was estimated to be slightly closer to four billion pounds that includes goods and services offered by the United Kingdom to India. The rising export figures have given the privilege to the India government, and India has been designated as one of UKTIs High Growth Market (Financial Times, 2007), the market that has potential, resources, skilled manpower, and the set of favorable conditions often required by the investors. The Indian economy is regarded as one of the fastest and expanding economy in the world (Financial Times, 2007), which has dominant signs of stability, consistency of policy and growth. India inherits all the essential and required features associated with the preferences and demands of the international investors. The India is home to more than one billion people, which accounts for more than one-eighth of the world population, therefore India is hope for the consumer products, and the industrial units of the consumer products in United Kingdom have focused upon Indian population, and different avenues have been explored to reach and access the Indian market. The government and the corporate leaders of the United Kingdom have develop strong understanding and improved relationship with the Indian government, and the nature and extent of such relationship has kept the United Kingdom based companies at better position to take advantage of the growing export and investment market in India (Financial Times, 2007), ‘liberalization of the economy continues apace, with trade barriers largely removed and the peak tariff down from 350% in 1991 to 20% in 2005’ (Financial Times, 2007), therefore there is a visible potential for the further expansion of the economic and trade relation. The participation and the involvement of the United Kingdom based companies soon gained momentum once selected private and public Indian companies registered their shares in the foreign stock market, particularly the London Stock Market, although ‘privatization programs are gradually reducing the still significant role of the public sector in the production and consumption of goods (Parekh, 2003)’. Areas of Interest The government of India and United Kingdom has identified vast areas of interest for each other, and the governments have been swift enough to provide relief and incentives to the respective government in exchange for the rising trade volume. The governments of both the countries have been involved in sixteen wide areas, in which proactive UK companies can increase their profitability and international competitiveness, the list of the companies include Aerospace, Automotive, Agribusiness, Biotechnology and pharmaceuticals, Construction, Creative and media, Education, skills and leisure, Engineering, Environment, Financial and legal services, Healthcare and medical, Information Technology, Oil and gas exploration and production services, Power generation and transmission, Transportation and Water Supply (Parekh, 2003). The interests of the United Kingdom public and private enterprises have never been voluntarily, it has been common observation that India is recipient of the worlds largest foreign direct investment, after China. The extent of the foreign investment has attracted the British companies into the region. India has always adhered to the democratic principles, and the rule of the law has always prevailed, therefore the political chaos that is threatening to the business activities never prevailed. The interests of the each democratic government of the India has been to attract the foreign direct investment, therefore the economic policies of the country has been on the right and consistent trajectory, without any deviation which might cause uncertainty. The consistency of the economic policies, and the implementation of the rule of law has provided enough safeguard to the investors, and their concerns have been resolved not through individual treatment and favors but rather through the implementation of the consistent and investor-friendly policies. The trade and investment ministry of the United Kingdom launched Indo British Partnership Network, which was aimed at the facilitation of the business concerns and queries with particular reference to the investment in India, the objectives of the IBPN are to provide a networking forum open to all British companies interested in trade and investment between the United Kingdom and India and to identify ways for British Small Medium Enterprises to better access trade and investment opportunities in India (Financial Times, 2007). Threats and Concerns The public and the private companies of the United Kingdom have developed strong repulsion against the emerging economies of the world, particularly China and India. The United Kingdom based companies has adopted offensive approach towards such countries, because China and India due to the availability of the cheap labor has always been successful in the manufacturing of the products on wide range of qualitative and quantitative scale. The manufacturing companies established in United Kingdom have so far failed to respond to the business gap owing to the cost-effective products of India, therefore the public of United Kingdom perceive the greatest immediate threat to UK competitiveness as coming from China and India (Financial Times, 2007). There has been a visible sign of uncertainty that exists among the population of the United Kingdom when it particularly comes to the growing prowess of India. A survey was recently conducted by the Deloitte/YouGov organization, which revealed that the United Kingdom based organizations fear that their global market share are likely to taken by the Indian market, therefore there is a strong need on the part of the authorities of the United Kingdom having public and private affiliation to increase the research and development expenses at substantial level. Business Environment The emergence of India as a land of economic opportunities has been responsible for the generation of the unemployment fear wide across Europe, in particular the United Kingdom. It has been observed that ‘personal concerns around job security appear to be driving the negative view of emerging markets’, and such anxieties have developed mainly due to the prevalence of globalization which is followed by the ‘growing awareness of the increased mobility of both resource and labor’(Parekh, 2003). It is therefore important to ensure that the governments of India and United Kingdom should develop public understanding so that market fluctuation can be absorbed in cordial atmosphere, ‘there needs to be a greater understanding among the public that the transfer of certain jobs to other locations is a trend that is likely to continue and brings with it opportunities as well as threats’ (Parekh, 2003). The local companies of the United Kingdom are therefore encouraged to avail possible returns from the market, and the threats pertaining to the ‘increasingly global nature of the product and services markets’ (Parekh, 2003) shall be deduced and overcome. The United Kingdom has been the victim of the worst tragedy, every year thousands of graduates from United Kingdom leave the country and are headed for better opportunities in North America and South East Asia. The economic reviews have highlighted over the fact that such schemes should be taken positively, the Indians are the major beneficiary of the degree programs offered in United Kingdom, therefore part of the United Kingdom’s competitive success is the steady flow into and out of the country of skilled people, This honey-pot economy should be one of the strengths of the United Kingdom, rather than a perceived threat (Financial Times, 2007). The general global market analysis has regarded India as efficient and effective investment location for the United Kingdom. Previously the higher level of the tariffs imposed by the respective governments on the list of the selected imports and exports item was responsible for the drastic reduction in the volume of the bilateral trade, but sooner it was realized that India is to be considered as a versatile land which has different flavors to offer. The nature of the trade relationship maintained between both the countries should focus more upon the non-popular items; the exchange of the common items is expected to severe affect the economy of the each country. In either case, the Indian economy has always been vulnerable to such threats, but the large variety of the exports items has placed the vested interests of the country in protection. The tariff between both the countries have reduced significantly, owing to the increase in the total trade volume between both the countries, and the formulation of the agreement as per which the percent tax has been either levied or reduction significantly in good number of products, ‘estimates regarding the average tariff imposed on imports from the United Kingdom into India presently range from 12.5 percent-16 percent, although the High Commission expect these to drop to under 10 percent in the near future’ (Financial Times, 2007). The business activities between the countries have further strengthened due to the establishment of the consulates in the business cities of the respective countries. In India, beside the capital New Delhi, the consulates of Britain are operational in Mumbai, Calcutta, Bangalore and Chennai. The business environment has further fostered by the implementation of the flexible and business friendly taxation policy. The bilateral trade agreement between the countries has expedited, and the forum has been established to discuss the feasibility of the Free Trade Agreement between the countries. Exports and Imports The Indians have been successful in capturing the market share due to the common understanding on aspects relevant to the economic and trade between both the countries. The major exports of the India to the Britain include textile goods, software, raw material, agricultural products and pharmacy. The Indians import parts of the industrial machinery, automobiles, petroleum and chemicals, processed foods. The trade volume between the countries have crossed the level of billion dollar, and is expect to reach five billion in next four to six years. Present Status There have been concrete recommendations from the economic advisory board of both the sides to agree over the free-trade. The United Kingdom and India have been urged to engage through mediums of World Trade Organization and European Union, and develop understanding over the concept of the free trade. The eventual beneficiary of such free-trade schemes will be the local population, which will be able to purchase international goods at nominal rates, the countries have been asked to explore such avenues through which the respective country can create financial incentives for their exporters and importers to trade. It is expected that the government and the enterprises of the united Kingdom can gain from sensible process of deregulating the export and import markets, which are currently over-burdened with paperwork and needless red tape on both the Indian and British sides, therefore the concept of over-regulation has to be improved or replaced so that participation of the Small Medium Enterprises can be assisted. The United Kingdom on its part should essentially focused upon the sensible reduction in the HMRC reporting requirements of exporting UK firms in order to stimulate an export drive which can ultimately improve the balance of payments (Financial Times, 2007). The United Kingdom government is further urged to domestic transport infrastructure, the purpose of which is to efficient import and export of goods to and from the United Kingdom. Certain gray areas have been identified, and it is expected that the government of United Kingdom will take favorable measures, in exchange for the timely departure and arrival of goods. Considering the example of the Felixstowe which is considered to be the largest port of the country, the port has been used by more than fifteen shipping companies, unfortunately the heavy congestion and failed traffic system has jeopardized the interests of the traders, who always uncertainty of the timely arrival. It is therefore essential for the United Kingdom to offer regular and efficient mode for communication, and ensure that the rights of the local and foreign traders are protected, the exploration of efficient and effective modes of transport is essential because ‘India is efficient and reliable gateways through which the country conduct a fluid system of trade’ (Financial Times, 2007). References 1. Bhikhu C. Parekh, Gurharpal Singh, Steven Vertovec. Culture and Economy in the Indian Diaspora. Routledge. 2003. 2. Financial Times. UK wants more access to Indian market for its financiers. 4 Aug, 2007. Read More