Economic and Geographic Characteristics of India and Business Opportunities

free essayIndia is one of the oldest civilizations in the world. Until the middle third millennium BC, Dravidian civilization was developing in India. In the period from 2500 to 1500 BC, India was conquered by the Indo-Aryan tribes. Islam began to penetrate to India in the 8th century. Muslim rule lasted until 1398, when the country was conquered by the army of Tamerlane. In 1526, descendant of Tamerlane, Babur, won almost all of India and founded The Mughal Empire, which lasted until 1857. Full political leadership passed to Britain in 1828-1835, and India has become virtually a British protectorate in 1857. On August 15, 1947, India gained independence, but was divided into two parts: India and Pakistan. On January 26, 1950, India was proclaimed a democratic republic.

Population

Today, India is home to over 1 billion people. The largest cities in the country are Mumbai (15 million inhabitants), Calcutta (13 million), Delhi (11 million) and Madras (6 million). Since time immemorial, India invaded the territory of waves of conquerors and settlers. The earliest memory of the tribes that has reached us was the memory of the tribes of the Aryans. Numerous newcomers gradually penetrated to the South and East, mingling with the Dravidian populations of the South and the Tibeto-Burman people, which penetrated India from the Himalayas. Modern India has a great variety of ethnic types. Prevailing caste system contributed to the preservation of ethnic diversity, and one can meet very light-skinned people, European-looking, dark-skinned, and Mongoloids on today’s streets of India. 7% of the population belongs to the “backward tribes”, often living in the Stone Age. India has 18 official languages, including English – the language of office management and official documents. Most of the North India population speaks Hindi, but all educated people and all who deal with tourists – employees of hotels, restaurants, taxi drivers and auto-rickshaws, vendors of shops and stores, and those offering souvenirs in tourist areas – speak English (Rukmini, 2013).

Economy and GDP

India is an agrarian-industrial country. Its economy is multi-structural. The public sector has a leading position in the defense industry, nuclear energy, rail and maritime transport, aviation, and communications. The private sector is currently dominating in engineering, agriculture, light industry, food and medical industry, construction, trade, and road transport. India has become a space and nuclear power. Small farms prevail in agriculture. India is one of the world’s top producers of sugar cane, peanuts, tea, jute, castor bean and cotton (The Economist, 2014).

The economy of India, despite the impact of the global financial and economic crisis, is stable and has a positive trend. According to the Central Statistical Organization of India (CSO), GDP at current prices has reached 1313 billion USD in 2012/13 FY. In 2012/13 FY, share of the service sector in the structure of GDP accounted for 54.7%, industry – 28.2%, agriculture – 17.1%. In the period 2009-2013, the service sector grew by 8.5%, industrial production – 10.8%, agriculture – 0.2%. GDP per capita is $3693 (The Economist, 2013). Impact of the global financial and economic crisis on the Indian economy was manifested primarily by the fact that orders on exports have sharply fallen; foreign commercial borrowings became very complicated; foreign investment has decreased and foreign portfolio investors began to withdraw funds deposited in Indian corporate securities. The crisis of confidence in the financial and banking system led to an outflow of deposits of the population from private banks. Growth of interest rates and the tightening of credit conditions have reduced the volume of consumer credit and hampered fundraising for new projects.

The global crisis has affected the export sectors of the Indian economy (textiles, chemicals and jewelry industry, petroleum, metallurgy, mechanical engineering, construction and transportation) to the greatest extent. Among the chronic problems of the Indian economy that have a negative impact on it, it may be noted, in particular, the following:

  • dependence on crude oil imports, limited reserves of coking coal, low quality thermal coal, a chronic shortage of electricity;
  • due to a significant number of poor people in the country, the state is forced to spend more to ensure their subsistence level due to various kinds of benefits, grants, and subsidies, placing a heavy burden on the budget;
  • bureaucratization of administrative decision-making processes, and widespread corruption;
  • lack of infrastructure;
  • numerous problems of agriculture, which are connected with the lives of most Indians, including predominance of small landholdings, low mechanization of agricultural production, lack of storage facilities and, accordingly, a significant loss of output, the high cost of transportation of agricultural products, the dominance of intermediaries, the discrepancy of internal quality standards and international safety standards, dependence on weather conditions and growing environmental concern, which is associated with intensive use of fertilizers and pesticides (The Economist, 2014).

Politics

India is a federal, parliamentary, multiparty democratic republic and the largest democracy in the world. The head of the country is the Prime Minister, while the President is only a formal head of the state (much like the monarch in the UK). Executive power is vested in the government. Federal legislative power is vested in the government and the bicameral parliament. The judiciary is independent from both the legislative and the executive branches. The main law of the country is the Constitution.

Administrative functions are performed by the state governments, which, in turn, are subject to the so-called panchayats (village self-government in the amount of five people). Panchayat is a panel of five people, who are elected by their respected villagers for dealing with administrative tasks. Unlike the states, union territories are controlled directly from Delhi.

India has a multiparty system. Parties, which are represented in the Parliament of the country, reflect the heterogeneity of Indian society. The most influential Party of India is Indian National Congress, currently headed by Sonia Gandhi. Congress was the ruling party during most of the history of independent India. Its reign was interrupted only in 1977-1980 and 1989-1991, when the Bharatiya Janata Party – another influential Indian party – stepped forward.

India is a country with the most corrupt and unwieldy bureaucratic apparatuses in the world. At the same time, there is a need to admit that the country has a freedom of speech and conscience at a much higher level than in many countries of the “first” world. The media freely publishes criticism of the government; critical minded parties are held in Parliament and state governments, arrange meetings, congresses and strikes. Particularly strong political activity is observed in the states, headed by Communists (Kerala, West Bengal and Tripura). India has a policy of non-interference in the affairs of other countries, but at the same time defends its own interests, including territorial ones. India has preserved long-standing territorial disputes with China and Pakistan. There are so-called disputed territories on the borders of these states.

Education

Children start school at the age of four. Teaching is often carried out in English. The first stage of education is ten years, while the second is two years. Compulsory schooling ends at this. One can learn the following three years at school (preparation for university) or vocational college (where students receive special secondary education). There are also specialized vocational schools, where after 8-10 years of studying, students with secondary education can receive any demanded profession: seamstresses, mechanics, fitters, etc. Higher Education, correspondingly to Bologna system, has three levels: Bachelor (three to five years depending on the specialty), Masters (two years) and doctoral courses (three years visiting specialized courses and writing a thesis) (Kumar, 2011). India has many universities, and they vary greatly according to the method of teaching and focus. There are highly specialized educational institutions, giving knowledge, for example, solely on the language or music (Angloinfo, n.d.).

Most of students enter the Indian universities on exchange programs and internships. However, there is an opportunity to get an education at the university by oneself. Universities are divided into central (the state regulates their activities), local (subordinated to the state law) and private. There are no branches of well-known foreign universities. Year of study at the university will cost about fifteen thousand dollars to a foreign student (Kumar, 2011).

In general, Indian education is at a high level, but most qualitative is education of pharmacology and jewelry making. Study of English in Indian universities is very popular for foreigners. It is enough to pass a simple test for admission in order to determine the level of knowledge, by results of which students are divided into groups (Angloinfo, n.d.). A significant advantage of Indian education is English; all the educated population of India speaks it. Thanks to this, India has managed to orient its economy on information technology and today, it is one of the major suppliers of information services in the world.

The Caste System and Religion

Castes are classes or races, into which the Indian people are divided. It can be learnt from the earliest works of Sanskrit literature that during the initial colonization of India, the nations that were speaking the Aryan dialects were divided into four major estates, later called “Varnas”: the Brahmins (priests), the Kshatriyas (warriors), the Vaishyas (merchants, ranchers and farmers) and the Sudras (servants and handymen). In the early Middle Ages, varnas were preserved, but they broke down into numerous castes (jati) fixing the class accessory even more rigidly. The Hindu people believe in reincarnation and claim that anyone who follows the rules of their caste will turn out to be in a higher one in the next life. However, those who break these rules will lose their social status.

A representative of each caste had to do their own duty. This idea has remained the leading one in the history of Hindu society: everyone should take a certain place, perform the determined social role and comply with all the related obligations and prohibitions. However, there have always been people that treated their caste responsibilities very thoughtlessly. Over the centuries, the social system in India has become even more complicated; there has been a division of labor, and the number of community groups and statuses has increased from four to several thousands. The caste can be determined in many ways: by the type of clothing and the manner of wearing it; by the presence of certain relationships, or their lack; by the hair and signs painted on the forehead; by the nature of the home, food and even vessels for cooking, as well as by name. It is difficult to pass oneself off as a member of another caste in India.

Compliance with the rules is controlled by a special caste committee or council – the Panchayat, which means “five”; in fact, the number of committee members may be more. It consists of the oldest and most respected people of the village or neighborhood. The Council judges the guilty, and its decisions can be appealed only to the local rajah. The Panchayat impose a repentance and purification for a small offense. As for the more serious one, the guilty person is temporarily exempted from the caste. Concerning the serious sin, for example, the murder of a cow, the most severe punishment is imposed. That is the expulsion from the caste.

Today, there are five main castes in India:

  • The Brahmins. The Brahmins show a high level of human consciousness. They create designs or change something radically at the global levels. This may be a region, country, or maybe, the whole planet. The Brahmin can create the occult doctrine, which has every chance to gain recognition and followers in the world. It is a huge success for the Kshatriya ruler to have the Brahmin as an expert advisor.
  • The Kshatriyas. The representatives of the martial arts that are on the level of creating their schools and movements belong to the lower status members of the caste. Those who work at the global levels have a higher status.
  • The Vaishyas. The Vaishyas, or craftsmen, perform work on the creation and production of finished “products” that are in demand. The word “products” is broader than goods; it could be both newspapers and services. The craftsman can be an engineer and a specialist, a doctor and a psychologist. If the Sudras are just performers, the Vaishyas can create or build something new in their area under certain conditions.
  • The Sudras. This level includes the ordinary workers and apprentices. Sweeping the streets, collecting garbage and performing routine operations at the plants are their responsibilities. They must perform the work under the direction of the Vaishyas.
  • The Dalit. The caste consists of two major groups. The first group is called strangers-nonhumans. The second group consists of degraded people that have reached the point of no return; i.e. the souls of people who have degraded from life to life and are unable to return to normal life. It is believed that the souls of members of the second group will be destroyed in the coming years. The field of their application is unskilled work.

Hinduism is the main religion in India. 80% of Hindus manifest it. The second common religion is Islam with 13% of followers. Buddhism, Jainism and Sikhism have been born in India. 2% of the population professes Christianity. The basis for the formation of modern economic concepts in India is Hinduism, which has traits that sometimes peacefully co-exist and sometimes make extreme opposites. At the same time, trivarna – the doctrine of the three goals of life (dharma, artha and karma) – clearly reflects the three main areas of human existence (Rai, 2011). Dharma is what makes the world and society (law, duty and tradition, a set of established rules), artha is a profit or benefit and karma is action, work or deed. The first ones are associated with public life and are the base for the development of modern Indian economic thought. Religion and caste system have the next effects on the Indian business sphere:

  • The presence of local trading capital, based on caste relations, facilitates the penetration of capitalism in India and the emergence of modern bourgeoisie and other modern social classes on the subcontinent;
  • Availability of the traditional layer of Muslim citizens and Brahmins-leaders gave India an opportunity to grow the modern intellectual elite (Deogawanka, 2007).

Demographics

India is the world’s second largest country in terms of population. Only China is ahead, but India will come in the first place due to the higher projected population growth by 2050. India is one of those rare countries of today, where there is a fairly strong population growth each year. Today, it’s about 20 million people per year. At the time of the census in 1999, the population was 1 billion people. However, population growth is gradually reducing. Huge population creates great difficulties – it is hard to feed and provide it with a good enough standard of living. Therefore, the Government is making serious efforts to promote family planning and distribution of contraceptives. It is extremely difficult, since two thirds of the population live in villages across India, which account 500,000 people. However, the demographic situation in India favorably affects the business sphere. India has one of the world’s largest consumer markets, which shows a stable growth rate. India’s domestic consumption will quadruple by 2025 if economic growth remains the same. One of the key factors of this growth will be an increase in the income level of the population (Rukimini, 2013).

The average age in India is 25 years, which is the lowest while comparing with other developing countries such as Brazil (29years) and China (34 years), and the developed countries such as the U.S. (37 years) and the UK (40 years). More than 30% of India’s population is aged 15 to 34 years. Group of young people in the population of India is growing at a faster pace than the general population. Growth rates of young people from 15 to 34 years will make 2,1% in the period from 1971 to 2021 years, while the growth rate of the total population will make 1,8%. By 2016, young people will be 35% of the total population of India, and by 2021 this figure will be 36%. Such constant demographic dynamics will increase consumer spending. Signs of growth in consumer demand are already visible in some sectors of the economy: financial services (capital markets, asset management, and nonbank financial companies), mass media and entertainment, food industry, etc. Economic growth and demographic changes (such as income growth and urbanization) will make India a consumer superpower and the effect of this will be felt in key consumer sectors (Census of India, 2001).

Agriculture

India is a country of ancient agricultural culture, and agriculture has a strong plant growing direction. Crop – mainly labor-intensive – gives more than 4/5 of the value of agricultural production, with approximately the same proportion of the total sown area occupied by food crops. Livestock, despite having the world’s largest livestock population, is much less developed. Indian agriculture still persist great contrasts – large plantations coexist with small farms. Many farmers have little land or do not have it at all. Most of the villages do not have electricity. India ranks first in the world on irrigated land (54.8 million hectares). Agriculture employs 60% of the workforce, and it gives 19.9% of GDP. The share of agricultural products in India’s export is 15% (“Agriculture in India”, n.d.).

India is the largest producer of sugar cane (about 300 million tons per year) in the world. The main sugar producing areas of the country are Uttar Pradesh (about half of fees) and Maharashtra. Cane plantations spread all over India and in the South, where the Andhra Pradesh, Karnataka and Tamil Nadu now provide about one-quarter of the harvest. Since 1985, production of finished sugar rose more than twice. More than 350 thousand people are employed in the sugar industry in India. It makes it one of the largest sectors of the economy. Also, India takes a leading position in production of cotton (cotton production is 10.5 million tons per year).

India is the world’s largest tea producer. In 2008, it was collected 800 tons (640 tons in 1984/85). Major states producing tea in India are Assam (about half of harvest), West Bengal (about a quarter of fees), as well as Tamil Nadu and Kerala. Hence the names of the three most famous varieties of Indian tea are Assam, Darjeeling (district of Darjeeling in West Bengal) and Nilgiri (from Nilgiri mountains in Southern India). On average, India exports annually about 200 thousand tons of tea (“Agriculture in India”, n.d.).

Transport

Given that India is home to over one billion people, the transport system is very well developed and extensive. India rightfully occupies one of the first places in the world by the length of railways, as well as the length of highways. Railways in India carry about 6 billion people and 350 million tons of cargo in the year. The owner of almost entire industry is the state rail company Indian Railways, under the Ministry of Railways of India. More than 1.6 million employees serve railways in India. India is the world’s leader in rail accidents. 300 serious accidents and fatalities are recorded every year on the railways of the country. According to statistics, more than 4,000 people were killed from 1995 to 2005 in the train crashes in India (”Transport in India”, n.d.).

Buses take over 90% of public transport in urban India and are quite cheap and convenient means of transportation for all classes of people. Bus companies are mainly owned by the state governments. Quite popular transports are also auto-rickshaws (tuk tuk) which represent covered tricycle scooters, usually without doors. They are usually yellow, black or green, but their image depends on the terrain. Tuk Tuk is a cheap and fast means of transportation, convenient for moving in large cities (”Transport in India”, n.d.).

Conclusion

It is difficult to organize profitable business in India due to strong competition. The beginning of the business in this country must be treated seriously and systematically. Thoughtful business plan is a must. Only self-confident and determined businessmen are hesitant to open business there. Doing Business in India lays in the fact that India is a country which occupies the 2nd place in the density of the population. It is known that the country’s leadership gives the right to nonresidents to create their corporations and businesses. Different forms of ownership and legal form can be used for the organization of business. India has created all possible conditions for starting a business; this is due to high unemployment rate. India welcomes professionals from abroad who are paid fairly high, unlike the majority of unskilled workers. Many people, especially in the high technology and computer technology industries, who want to open a business in India, agree to work in Indian companies.

However, India is one of the toughest markets in the world for an international company, but, nevertheless, this country became an incubator for a new generation of global managers. After all, the plight generates leaders. Nevertheless, many companies get away from the Indian chaos and poor conditions, redirecting their investments to other countries. It is difficult to build a global business in India. In most cases, the success or failure depends on whether the appropriate person takes senior position, and whether it can solve unique problems, the main of which is market structure. India has a small segment of wealthy people who could well afford the products of the world’s market at the same prices. One has to be patient and persistent to become a significant and successful leader in this country – only then he or she will be able to break into the large and growing middle market. This way can be costly and time-consuming.

However, India can be a great place to start a business for those who have a tight budget. Division into castes prevents vertical mobility and contributes to cheap labor due to poverty of the population; median income in India is less than $100. $500 is sometimes enough to register the company. If one acts wisely, then it is possible to start a very profitable business in India in a short period of time and using a small amount of money.