Table of Content
List of Abbreviations
Table of Figures
2. Cultural overview
3. Political overview
4. Economic overview
References of Figures
List of Abbreviations
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Table of Figures
Figure 1: Caste System
Figure 2: India’s cultural dimensions according to Hofstede
Figure 3: GDP growth and GDP per capita of India and China since 1980
Figure 4: Inflation rate of the Indian rupee
Figure 5: India's imports and exports
Figure 6: Top ten exporter to India
Figure 7: Top ten importers from India
Figure 8: Indian Free Trade Agreements
Figure 9: Corruption Perceptions Index 2013
Figure 10: India's merchandise exports (2009-2014)
Figure 11: Industries in India, GDP percentage
Figure 12: Top 20 Indian companies listed on Forbes' Global 2000
Figure 13: Overview major Indian industries and companies
In order to summarize the external environment of India, the following report is divided into three parts – the cultural, political and economic issues concerning the country.
2. Cultural overview
India is divided in 28 states as well as in seven territories. The national languages are Hindi and English, but there are about 22 other official languages and nearly 400 living languages spoken in various parts of the country (Global Edge, 2014). India is called a high context culture, which means that their purpose is to maintain harmony. They don’t exchange exact information and the communication in total is less direct than in western cultures. The culture of India is coined by their caste system, where people are being placed in specific groups (Hill, 2014). This determines which types of occupation a person can pursue and also the behavior of one member of society over another (Figure 1). The only chance to escape your current stage in the system is being a good Hindu and being reborn in an upper caste, which reflects the immobility of the social structure in India. Considered as the birthplace of Hindu, 80.5% of the Indian population shares their beliefs (Global Edge, 2014). They believe just in one god with many forms, which means it is a monotheistic religion like Islam and Christianity. Special features are on the one hand that God is considered both, male and female and on the other hand that cows are holy, which means it is forbidden to kill them or eat their meat. For explaining different cultures, it could be helpful to take a look at the five dimensions model by Geert Hofstede (Hill, 2015). In the first dimension, this is called ‘Power Distance’ and India scores high in it. This means, that the Indians accept the fact that power is distributed unequally. Secondly, it comes to ‘Individualism’, where the Indian culture has an intermediate score. This leads to the conclusion, that they have individualistic traits, caused by their religion, where everybody is responsible for their own life, and collectivistic traits, which shows the preference of belonging to a large social framework. The third dimension is called ‘Masculinity’, where India’s result is considered as high. This could be explained by the fact, that in the Indian culture masculine attributes, like work and status, are more important than the feminine ones. When talking about the ‘Five Dimensions’, there is also the point of ‘Uncertainty avoidance’ to mention. Their score is considered as medium low, which means nothing has to be perfect. They also have a high tolerance for the unexpected. Last but not least there is the ‘Pragmatism’, where they score quite high, caused by being more long-term orientated and their concept of karma. (Figure 2)
3. Political overview
India is a federal parliamentary democratic republic, in which the President of India is head of state and the Prime Minister of India is the head of government. Current President of India is Pranab Mukherjee, who presents the party called the ‘Indian National Congress’ (INC) and the current Prime Minister Narendra Damodardas Modi belongs to the ‘Bharatiya Janata Party’ (BJP). BJP is the conservative Hindu party and the INC is seen as the social democrats party and both demonstrate the biggest parties of the country (National Portal of India, 2014). The political power has a strong influence on the economic development of the country, because the ‘reform charade’ depends on the profound ambivalence of India’s ageing rulers and a tricky political climate with a weak coalition (The Economist, 2014).
4. Economic overview
According to the IMF India will become the tenth-largest economy in the world, with a real growth rate of 3.2% and a GDP of $1.84 trillion in 2012 (Nationmaster, 2014). The currency of the country is called ‘Indian rupee’, its inflation rate is fluctuating and reached the lowest rate between 2012 and 2014 with an inflation rate of 6.46 percent (Trading Economics, 2014). (Figure 4) Its labor force comprises 487.3 million with an average gross salary of $1.46 per hour. The unemployment rate is 10.8 million (8.5%) (Nationmaster, 2014). India belongs to ‘the BRICs’, which is reflected as newly advanced developing country as well as to ‘the G-20 economies’, which stands for the forum of major economies (Hill, 2015). The trade patterns of India were mainly influenced by the historical background of the country (Figure 3). During the so called ‘Indian post-independence era’ between 1947 and 1991 was the country characterized as a closed mixed economy, means the country was inward-concentrated and practiced interventionist policies. After the fiscal crisis 1991 the country passed an economic progress by introducing free-market principles (Mukoyama, 2008). This liberalization of the economy is the reason why India nowadays belongs to the top-20 global traders according to WTO (WTO, 2013). In addition, India is now the 19th largest exporter and 12th largest importer of merchandise and the 6th largest service exporter and 7th largest importer of services in the world (The Dollar Business Bureau, 2014). (Figure 11) According to the Ministry of External Affairs its total amount of exports is US $26.26 billion and of imports US$ 41.18 billion. According to the Indian Department of Commerce the major trading partner of India is China, then United Arabian Emirates slightly followed by the USA (Figure 5, 6, 7). In addition, the USA is the major importer of Indian goods and services (The Guardian, 2013). The country has a variety of economic and trade arrangements with other countries or regional blocks. One of those is the ASEAN–India Free Trade Area (AIFTA), which is with the ten members of the ASEAN - but India has separate free trade agreements with Thailand and Malaysia (U.S. Commercial Service, 2014). The South Asian Free Trade Area (SAFTA) is a trade agreement with Bangladesh, Bhutan, the Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan. Another one is the India-Korea trade agreement with South Korea, called CEPA. Others are with Singapore, Sri Lanka and Japan (Figure 8). Negotiations concerning trade arrangements with the EFTA, Canada and the EU are still ongoing (India Trade Promotion, 2010). Especially the Indian market is interesting in terms of its exporting products. The major export goods comprise labor intensive products like agricultural products, leather, medical appliances, jewelry, and textiles. In 2012 India's key exports were petroleum products, followed by gems and jewelry (The Guardian, 2013). The economic progress of liberalization influenced the investment patterns in India, too. Before the introduction of the Foreign Exchange Management Act in 1991, FDI was strictly restricted and allowed only Indian ownership of businesses. Nowadays India is the third most important FDI destination, after China and the US, for transnational corporations (United Nations, 2013). But the Indian government still imposes a cap on equity holding on various sectors like the retail industry and the more sensitive atomic energy, gambling, and agriculture (Peng, 2010). But the country has problems, e.g. it is ranked on place 94th out of 177 countries of the ‘Corruption Perceptions Index’ in two years in a row with a score of 34 (Figure 9). The total amount of FDI inflows for 2012-13 comprises US$ 1.1 billion according to the Ministry of External Affairs. The country has rank 71th according to ‘Global Competitive Index’ (Schwab, 2014). Major industries and companies within these industries: The economic success of India is contributing to its major industries and companies within these industries (Figure 11). The countries’ major industries are retail and wholesale trade and agriculture, followed by retail-estate, banking and insurance and IT industry (Deeksha Rawat, 2014). The major companies can be found in these industry sectors and belong to the top 20 Indian companies listed on Forbes’ Global 2000 (Business Standard 2014). This includes ‘Reliance Industries’, ‘State Bank of India’, ‘Infosys’ and the ‘Tata Group’ (Figure 12, 13). According to the U.S. Commercial Service can be seen, that India is quite an attractive because market opportunities in specific industries for U.S. entrants from 2013 to 2014 enlarged a lot (Figure 14). This is caused inter alia by the English language, which enables the business between the two countries. Mainly the cultural environment has a strong impact for U.S. companies operating in India, that’s why they have to be aware of it and make use of intercultural training programs. In addition, there were no reported politically motivated attacks on U.S. companies operating in India in 2012 (Commercial Guide).
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