Doing Business in India
By Group 2
Vikram Pratap Singh
DOING BUSINESS IN INDIA
According to the World Bank and the IFC, India is at 132nd rank among the 185 economies in the world in the ease of doing business. In spite of improved regulations and a number of favourable policies for trading across borders, India still continues to prove tough for starting and running an enterprise in the country. Moreover, India is also the lowest ranked among the BRIC nations. Because of its strategic geographical location in the Asia pacific, India has a huge potential to be the hub not only for IT ...view middle of the document...
The current UPA Government has become associated with corruption and scams and the political and social risks associated with a particular locality, or state are also influencing doing business in India. The key challenges with regard to the political environment are lack of transparency and accountability. This affects the time required for many regulatory clearances and also makes these processes a complex one. India’s economic growth has been affected by uncertainties in the domestic policies, concerns about governance, slack external demands and poor monsoons in the very recent months. India is currently going through a phase of lowest growth at 6.8%. Inflation is affecting the disposable income levels of households which ultimately influence the slowdown of the economy. On the socio cultural front, India’s growing population and diversity makes it a great market for businesses to grow and thrive. More than 50% of the country’s population is young at below 35 years of age. Although rural population is higher at 70% compared with Urban, rapid urbanization in the country is being fuelled by financial inclusion policies, infrastructure projects, and the growing emphasis on education and health by the government. India is ranked 134th out of 187 countries in terms of human development as per the Human Development Report 2011, which was lower than some of the poor African nations. There is less penetration of economic development to the rural mass, high illiteracy rate, low healthcare and sanitation in the rural areas despite Central government spend on social services rising from 7.9% of total expenditure in 2004–05 to 14% in 2010–11.
India’s focus has also been directed at technological innovation and growth. The Government has declared 2010-20 as the “Decade of Innovation”. The new STI policy of the country encourages a strong and viable science, research and innovation systems. The present level of investment in India for R&D in science and technology sector is 0.88% of GDP. However, the private investment in R&D is only 0.23% which is quite low compared with other developed nations and emerging economies. The digital revolution has been continually helping growth in IT-BPO sector and the telecom industry. The growth in the urban infrastructure is one of the critical advantages favourable to starting businesses.
While, the socio-economic factors attract entrepreneurs and investors, the legal framework of the country is still lagging in its rigorousness. From doing business point of view, labour laws, company laws and taxation laws in the country are of particular importance. The main issue is that, majority of the population is employed in the unorganized sector where labour laws do not apply. Even where the labour laws apply, there is a problem of enforcement and avoidance. Moreover, the laws are not contemporary and are extremely archaic. For the corporate too, there are comprehensive reforms required in the Companies act in...