Business Environment in India

Top seven changes in India’s business environment

India is set to emerge as the fastest-growing

economy in the world, even ahead of China, as
per a report by The World Bank. This has
prompted many prominent global companies to
create a niche in this emerging market. Further,
the Government is making several policy
announcements and changes to facilitate ease
of doing business in India. Let’s find out what is
changing in the business environment of India.
Essentials of the 3Ds – Democracy, Demography and Demand
Essentials of the 3Ds – Democracy, Demography and Demand

Despite a diverse demography, India’s democratic system has

been integral for the progress in the country, helping bind its
65 per cent young population with the India growth story.
With a population base of more than 1.25 billion, stable
parliamentary system, technological advancement, and quality
resources at competitive price, India has over the years
emerged as a preferred investment destination for
manufacturers and service providers alike. In the recent past,
the Government has also been playing a crucial role in
highlighting the above advantages – the essential Ds –
Democracy, Demography and Demand – in the global arena,
inviting foreign companies to set shop in India.
 Advantage manufacturing – Make in India

Some important points:

•Taking the growth story forward, India is being
projected as a manufacturing hub through the Make in
India campaign, with the Government promising to
provide a conducive environment for investors.
• Panels have been formed to help fast-track
investment proposals, overcome bottlenecks that
obstruct the efforts for investing in India and provide
consistent efforts in creating investor-friendly
environment.
• It is expected that the manufacturing sector
in the country could reach USD 1 trillion by
2025, with the sector accounting for around
25 per cent of the GDP and creating 90 million
domestic jobs by that period.
 It’s a go – Easy to set shop

• Setting up operations in India is now becoming far

more flexible, thanks to the policy changes initiated
by the Government. With most of the information
and submission options available online, India is
providing easier and flexible programs for investors
ready to ship their operations in the country.
• One of the myths, that one needs an Indian partner
to root themselves in India, is a fallacy of the past, as
major companies are now setting up their hubs in
the country on their own.
 Easing policy guidelines

• The Department of Industrial Policy and Promotion

(DIPP) has been focused at improving policies and
guidelines for doing business in India. The emphasis
has been mainly to rationalise and simplify the
existing rules, along with introducing technology for
making governance more effective and efficient.
• A prominent change had been online availability of
applying for Industrial License and Industrial
Entrepreneur Memorandum 24*7.
 Disintegrating red tapism

• The Government has progressed on

environmental clearances for more than 300
projects and has made sure that it would be
red carpet in India rather than red tapism.
• Also committed to fast-track reform process,
Government has been able to take ordinance
route for increasing foreign investment limit in
various sectors such as insurance.
Developing infrastructure – Smart cities and industrial corridors

• Being an emerging economy, major emphasis is

given on developing infrastructure in the
country. With the Government announcing an
outlay of around USD 8 billion for creating 100
smart cities, many international companies
expressed interest to collaborate with Indian
companies and the Government to build
infrastructure, transportation, renewable energy
and other Greenfield projects in the country.
Eight cities were
developed in phase I.
With regards to industrial
corridors, Delhi Mumbai
Industrial Corridor,
Ahmedabad Dholera
Special Investment Region,
Chennai Bangalore
Industrial Corridor,
Bengaluru Mumbai
Economic Corridor and
Vizag Chennai Industrial
Corridor are now showing
great progress.
National Industrial Corridor Development
Programme is India's most ambitious
infrastructure programme aiming to develop
new industrial cities as "Smart Cities" and
converging next generation technologies
across infrastructure sectors.
The National Industrial Corridor Programme
includes the following Industrial Corridors:
1. Delhi Mumbai Industrial Corridor (DMIC)
2. Amritsar Kolkata Industrial Corridor (AKIC)
3. Chennai Bengaluru Industrial Corridor (CBIC)
with extension to Kochi via Coimbatore
4. East Coast Economic Corridor (ECEC) with
Vizag Chennai Industrial Corridor (VCIC) as
Phase 1
5. Bengaluru Mumbai Industrial Corridor (BMIC)
The objective is to expand India's
Manufacturing & Services base and develop
National Industrial Corridors as a "Global
Manufacturing and Trading Hub". The
programme will provide a major impetus to
planned urbanization in India with
manufacturing as the key driver.
Offering strategic locations for doing business in India

Along with the major industrial cities and towns,

India is rapidly developing various strategic
locations for companies to establish their base in
the country. With the availability of multiple
clusters for centres of excellence for manufacturing,
engineering & design, and skilled talent at
competitive cost, India is at an advantageous
position for establishing manufacturing facilities,
engineering design and development centres as
well as for sourcing from the country.
Further, the country is emerging as one of the
best global locations for talent arbitrage, as
foreign companies are hiring Indians for top
leadership positions for their global
operations.
Natural Environment and its
Impact on Business
 Natural Environment
The analysis of the mega environment must
also cover aspects like extent of endowment
of natural resources in the country, ecology,
climate, etc. These constitute the natural
environment.
 Natural resources:
• Business firms depend on natural resources.
The extent to which the country/region under
reference is endowed with these resources has
an impact on the functioning of the firms. Raw
material is one major part of these resources
and firms are concerned with their availability.
 
 Ecology:
•  Firms are also concerned with ecology. In
modern times, all societies are very much
concerned about ecology, especially about
issues like environmental pollution, protection
of wild life and ocean wealth. Governments
are becoming active bargainers in
environmental issues.
 Climate: 
• Climate is another aspect of the natural
environment that is of interest to a business firm.
Firms with products whose demand depends on
climate, and firms depending on climate-dependent
raw materials will be particularly concerned with
this factor. These firms have to study the climate in-
depth and decide their production locations and
marketing territories appropriately.
• In the case of India, the country is rich in
natural resources like iron, coal, rare minerals,
ocean wealth, etc. The country also receives
good rainfall and has a strong network of
rivers. As regards climate, the tropical climate
in the country generally favours agriculture
and industry.
• India has some of the world's most bio diverse eco-zones
—desert, high mountains, highlands, tropical and
temperate forests, swamplands, plains, grasslands, and
areas surrounding rivers.
• The climate comprises a wide range of weather
conditions across a vast geographic scale and varied
topography, making generalisations difficult. Given the
size of India with the Himalayas, Arabian Sea, Bay of
Bengal and the Indian Ocean, there is a great variation in
temperature and precipitation distribution in the
subcontinent.
 Technology Environment
Today, technology is a major force which industry
and business have to reckon with. Technology
leads practically all the forces that shape people’s
lives. For a business firm, technology affects not
only its final products but also its raw materials,
processes and operations as well as its customer
segments. In the present times, rapid changes are
taking place in the realm of technology. The IT
industry is one example. Telecom is another.
 Options available in technology:
•  The firm has to analyze carefully the overall technology
environment and the technology options available in the
given industry. The level of technology prevailing generally in
the country is at par with the developed countries.
• It has to assess the relative merits and cost-effectiveness of
alternative technologies. It has also to analyze technological
changes taking place in its industry at the international level.
In addition, it has to assess the scope of substitute products
emanating from new technologies.
 Government’s approach in respect of technology:
• Regulations by the government in matters relating to
technology often restrict the freedom of operation of
business firms. There may be areas where the governments
may support the use of modern technology; there may be
areas where they may ban technologies that are potentially
unsafe.
• All such factors demand careful investigation. In modern
times, much of the business opportunities are embedded
in technology and firms desiring growth have to harness
technologies with necessary adaptations.
 Technology selection:
• It is possible that several levels of technologies are
floating at the same time in an industry. Firms have
to scan the technology environment and select
technologies that will be appropriate for the firm and
the given product-market situation.
• They have to forecast technological trends, assess current and
emerging technologies, and develop the inputs for right
technology choice. The policy of the government on technology
import is also a concern in this regard. India is adopting a fairly
liberal approach to technology import. It is also at the same
time encouraging efforts of internal technology development
by all sections of Industry by giving them tax rebates and
concessions.
• Indian government is very much encouraging the generation of
power from natural resources like wind, tidal waves, hydro,
solar. Organic wastes etc., by giving the entrepreneurs 100%
loans with long term tax holiday.
The current Indian technological development is the outcome of:

• Technological collaboration
• Joint Ventures
• Licensing
• Merger & Acquisition
• Increased exports
• Liberalized imports of foreign made new /second handed
machineries
• Liberalized imports