Impact of India on Global Business

This article explores the impact of India on global business in the automobile and manufacturing sector. It also covers the innovation and service sectors, as well as the agriculture sector of India. The article includes a comparison analysis between India and China, and a PESTLE analysis of both countries.

Impact of India on
Global Business
8/8/2018

IMPACT OF INDIA ON GLOBAL BUSINESS
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Table of Contents
Introduction................................................................................................................................2
Overview of Automobile Industry.........................................................................................2
Manufacturing Industry..........................................................................................................2
Innovation sector....................................................................................................................3
Service Sector.........................................................................................................................3
Agriculture Sector of India.....................................................................................................4
Impact of India on Global business........................................................................................5
Automobile Sector.............................................................................................................5
Manufacturing Sector.........................................................................................................7
Innovation Sector.............................................................................................................15
Service Sector...................................................................................................................18
Agriculture Sector............................................................................................................24
Comparison analysis between India and China...................................................................27
Differences.......................................................................................................................27
Similarities.......................................................................................................................28
Pestle Analysis of India and China..................................................................................29
Suggestion............................................................................................................................32
Dumping...........................................................................................................................32
Conclusion................................................................................................................................33
References................................................................................................................................35

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Introduction
This thesis is being prepared in order to provide a brief of the impact of India on global
business in the Automobile and Manufacturing Sector. India is a country in South Asia and
also known as the Republic of India. India is said to be the world’s seventh largest country in
terms of area and most populated democracy. From the southwest, it is covered by the
Arabian Sea, from the southeast by the Bay of Bengal, and from the south by the Indian
Ocean. The country shares border with Bhutan, Nepal, and China to the northeast, Pakistan to
the west, and Bangladesh and Myanmar to the east. (Know India, 2018)
The Indian economy is an emerging mixed economy. It is said to be the third-largest
economy in the world by PPP (purchasing power parity) and sixth-largest by nominal GDP.
As per the per capita GDP (nominal) it is on the 141 rank with $2,134 and according to per
capita GDP (PPP), it is on the 123rd position with $7,783 of 2018 (Nation facts, 2018).
Overview of Automobile Industry
The whole automobile industry includes a broad range of organizations and companies
involved in the manufacturing, design, selling, development, and marketing of Motor
Vehicles, few of them are known as automakers. It is said to be the most vital sector of the
economy by revenue across the world. This industry of automotive does not involve
industries that are devoted towards the automobile maintenance performing delivery to the
customer, like fuel filling stations of motor, and repair shops of the automobile (Euler
Hermes, 2018).
Manufacturing Industry
Manufacturing industry means those industries that are incorporated in the processing and
manufacturing of objects or goods and involved in either making of new products or in value

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addition. This industry is responsible for a major share of the industrial sector in developed
countries. The final good can be provided as a finished good for selling to the customers or
can be used as an intermediary product in the process of production (Chartered Institute of
Management Accountants, 2018).
Innovation sector
Innovation has always been the driver of change in the whole world overriding to offer
available and reasonable solutions to fulfil the shifting needs of the consumer. Examples from
all around the world evidently portray the character performed by innovative solutions in the
cumulative growth of national economic and enhancing standards of living.
There is a strong association between revenue growth and innovation at the level of the
enterprise. According to a global research directed by PwC clearly states this relationship. In
2013, PwC considered around 1,700 businesses of 25 countries and 30 sectors and divided
these according to their potential of innovation depending on a series of parameters
comprising expenses on innovation, launching of the new product, co-development work
carried out with partners, etc. Examining the financial performance of these companies
carried out a strong difference between the top and low performers, along with the top 20%
companies developing 16% quicker as compared to the least innovative. This was equivalent
to all of the best companies making 0.25 billion USD of extra revenue over 2010-2013, as
associated with the least innovative (PWC, 2015).
Service Sector
The service sector creates a huge part of the economy of India in terms of its contribution to
the national income and employment potential. This sector involves a broad range of actions
from the most refined in the arena of Communication and Information Technology to make
simpler services followed by the workers of the informal sector, for instance, rickshaw,

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vegetable sellers, pullers, hawkers, etc. The following wide pool of activities can be focused
to make the part of the Services Sector:
 Transport comprising tourist support activities along with tour operators and travel
agencies activities
 Ownership of residences and real estate
 Defense and Public administration
 Hotels and restaurants
 Insurance and Banking
 Trade
 Personal facilities and activities of extra-territorial companies and bodies
 Business services comprising software development, management and business
consultancy, accounting, data processing services, advertisement, architectural,
engineering and other business and technical consultancy or services
 Storage and communication
 Other various services comprising medical and health, community services, recreation
services, education, religious, legal services, and entertainment services (Das & Raut,
2014)
Agriculture Sector of India
Agriculture is one of the most essential sectors of the Indian Economy. The agriculture sector
of India comprises 18% of the GDP of India and offers the job to around 50% of the
workforce of the country (Madhusudhan, 2015). India is known for producing a huge stock of
rice, spice products, pulses, spices, and wheat. The country possesses various regions to be
selected for the business like meat, fisheries, food grains, dairy, and poultry, etc. India has
appeared as the second biggest manufacturer of vegetables and fruits in the whole world.

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As per the report issues by (DES) the Department of Economics and Statics, the food grain
production for the 2013-2014 year is 264 million tons which is more than the production of
2012-2013 i.e. 257 million tons. It reflects that the agriculture industry of India is growing
and developing with time.
Impact of India on Global business
Automobile Sector
The worldwide industry of automobile is considered as the main sector of the economy for
world’s each main country. Nowadays, the Indian industry of automobile reflects a cluster of
diversities and models meeting all conceivable anticipations and internationally recognized
industry standards. Several leading names resounding in the Indian industry of automobile
comprise Tata Motors, Hero Honda, Maruti Suzuki, Mahindra and Mahindra, Hindustan
Motors, and Hyundai Motors. In the course of initial stages of its growth, the industry of
automobile intensely rests on foreign technologies. Though, in some years, the Indian
manufacturers have on track of utilizing their own technology developed in the home
country. The successful market placed in the country has appealed various manufacturers of
an automobile comprising few of the famous worldwide leaders to place their base in the
country to improve their profile and visions to new altitudes (Shodhganga, 2018).
Being highly Capital concentrated the industry has resulted in the negative impact on the
small players. These players are not able to enter the market due to the presence of big
players in the market. Even the current worldwide auto majors themselves are readjusting
their manufacture sources and coming in the Asia-Pacific region, majorly in Thailand, India,
and China. Besides this, the continuous force for reduction of cost on OEMs is convincing
them to outsource more mechanisms from the countries with low cost. The fluctuating
scenario has unlocked the opportunities for the Indian industry of automobile. India, with the

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vast local market, quickly rising purchasing power, and market-related exchange rate and
well recognized financial market and unchanging corporate governance outline is developing
as an attractive place for fresh investments in the automobile sector.
According to Shodhganga, the fast enhancement in the infrastructure comprising power, port,
road, and world-class amenities for analysis, certification and homologation joined with
obtainability of workforce and enabling government rules to endorse fair rivalry and make
Indian industry of automotive more competitive in the world besides creating the country a
constructive place for investment by the worldwide key leader in the auto industry.
According to Gupta, R., the Indian industry of automotive has its origin in the 40’s; it has
experienced a significant development in last two decades mostly because of economic
liberalization comprising 100% FDI in the sector. Worldwide component and auto
manufacturing companies are encouraged to start R&D and manufacturing amenities in the
country because of accessibility of big group of experienced employees, low cost of
production, quicker design and growth procedure and developing market status. Currently,
there are around 30 OEMs offering more than 75 choices in all classes of vehicles.
Automotive industry of India is the sixth largest manufacturer of automobiles in the world in
regards to value and volume and has developed 14.4% in the last decade. The industry adds
7% to the GDP of India, 7-8% of the overall population who are employed, 4% exports, and
39% of inflows of FDI and contributes 17% to the overall collected indirect taxes. Total local
sales are directed by two-wheelers vehicles, (in 2012-13 77.4% of overall sales) trailed by
passenger vehicles i.e. 15.1% and commercial vehicles i.e. 4.45%.
Since last five years, in the automobile production, there has been the total growth of 20.63
million vehicles in 2012-13 from 10.85 million vehicles in 2007-8. According to Gupta, P., in
2012-13, it has been identified that it has almost stagnant sales, whereas there is 10% increase

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in the exports in the same time period. But, in worldwide terms, According to Maheshwari,
P., the 4 billion USD of export earnings (comprising 1.8 billion USD as auto component
sector exports), the sector of automobile add only 2.37% in the overall production of the
world and is positioned at 26th rank in the market of auto export of the world with a 0.53% of
share. The mission of Indian industry of automotive in struggling for worldwide
competitiveness is obvious from the fact that key manufacturers of the automobile are the
second-largest receivers after Japan for the quality of the Deming award. Considerably, India
possesses the best-in-class fuel rates of the economy along with the reasonable entire cost of
ownership. The above situation designates that the Indian industry of automotive has a high
potential for considerable growth (Gupta, Gupta & Maheshwari, 2015).
India is a worldwide center of automobile industry having:
16 Manufacturers of 2/3 wheelers, 9 Manufacturers of commercial vehicles and 15
Manufacturers of passenger cars, and 5 Manufacturers of the engine, 14 Manufacturers
tractors
Manufacturing Sector
According to A.T. Kearney (2015), in terms of GDP of approx. $2.3 trillion, India is the
ninth-largest economy of the world and in terms of purchasing power parity; it is the third
largest country with $8 trillion. However, manufacturing accounts only 16% of the GDP of
the country and 52% of the service sector. India signifies only 2% of the manufacturing
output of the world, and its 10% is contributed by China. Obviously, India is pressing its
efforts in manufacturing (A.T. Kearney, 2015).
India has various strengths that can support it in becoming a powerhouse of manufacturing: a
young workforce, a large group of engineers, major local consumption of manufactured
goods, and wages that are half of China's. These aspects become especially significant as

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China, the most well-known manufacturing location in the world, faces labor scarcities and
exponential wage growth.
According to A.T. Kearney (2015), the "Make in India" is an essential strategy initiative
planned to endorse the development of the manufacturing sector of the country. This strategy
definitely contributes to the global business but on the other side, it is impacting the
performance of international players and increasing competition for them. India has some
outstanding examples of world-class brilliance in well-organized and manufacturing key
sectors like auto components, textiles, and petrochemicals. For instance, Mundhaewa plant of
Bharat Forge, it is the largest forging factory of the world, is a place of the art complex that
has supported India on getting the position on the world map for the manufacturing. This
company possesses all the essential qualities i.e. high technological investment, a technically
skilled staff, and a sharp emphasis on lean manufacturing. A study was conducted which
reflects that in India there are low labor rates, cheap raw material, etc. in the manufacturing
sector which significantly attracted various international leading organization to settle their
business in India. However, due to this, the cost of labor in the neighbouring countries such
as Vietnam, Thailand, and Malaysia is also low which in turn results in the economic growth
of these countries because international companies are putting their efforts towards settling
their business in these regions (A.T. Kearney, 2015).

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Source [(A.T. Kearney, 2015)]
The above graph reflects that Indian manufacturers charge better than worldwide averages for
cost control in spite of low capacity use, mainly due to inferior wages and an emphasis on
decreasing costs. But, as compared to those countries on the top quintile, Manufacturers of
India deals with more complaints of quality and completion delays. The innovation pace is
very slow (with manufacturers of India need two or three times lengthier to introduce
innovative products), and companies of India agility to scale up or down is lower. In precise,
it can be said that Indian manufacturers delay in a worldwide competition in most of the areas
(A.T. Kearney, 2015).

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Source [(A.T. Kearney, 2015)]
The analysis highlights four points that contribute to limited manufacturing competitiveness
of India:
Low Productivity – Manufacturers are detained back by deprived personnel efficiency,
mainly due to the scarcity of automation, the traditional process of manufacturing, less use of
design in manufacturing and various non-value added jobs.
Skill and Talent shortage – Companies with inflexible labor laws force to employ casual
workforces. Vocational schools are not well-resourced to train workforces. Businesses get
fail to concentrate on the managers of intermediate-level that can offer on the job training to
the direct labor, and researchers of India stress simulation and Excel demonstrating for
engineers over kaizen and Kanban processes.
Insufficient supply chains – Weak structures and Infrastructure bottlenecks credited to the
taxation policies of state-level have subsidized to longer lead times and additional inventory
in the value chain.

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Inferior levels of supplier capability – Various Indian tier 2 suppliers are part of print
suppliers that have yet not invested in enhancing their development of product or capabilities
of quality control. This has created the routine of rework and returns, which further decreases
the productivity.
Challenges and Solutions for Global Competitiveness
It has been identified that there are various challenges in the direction of attaining global
excellence in the manufacturing sector. Some of the challenges are:
The manufacturing practices of India are labor-intensive
According to A.T. Kearney (2015), the manufacturers use Low-cost labor in order to balance
the high capital sum needed for automation. It has been observed that manufacturers make
use of semi-automation or inferior automation technology solutions or custom prepare their
own equipment of automation to manage the cost of capital. By itself, then is not a bad
choice. However, it becomes difficult when the manufacturers rely exclusively on labor
arbitrage in order to attain a competitive advantage in place of focusing on productivity and
quality. Depending on labor and consuming non-standard automation frequently result in
extra labor-related problems, a larger portion of non-value adding time, more issues of safety,
environmental, and health, and lower levels of quality.
Excitingly, a common misconception is that workforce is flexible, and businesses take
superiority in handling their personnel accordingly. Though, with rigid laws of labor and
more self-confident personnel, manufacturers of India are taking extra headcount even in the
time period of low demand. Flexibility is an allegory. Whereas, labor concentrated policy
which has functioned in the past will become a weakness in a global playing field.
Solution- Doing Smart Investments in Asset Productivity

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According to A.T. Kearney (2015), various important steps can enhance the productivity of
manufacturing, like well-organized line balancing, the lean layout of the plant, and procedure
of de-bottlenecking. Furthermore, manufacturers can determine incremental invention and
leverage knowledge of vendors and groups of industry in order to maintain their practices of
manufacturing up to date. These types of steps can enhance the productivity by around 15 to
20%. Another 15 to 20% enhancement is possible with the changes in the structure. For
instance, smart automation devoted to capital equipment to enhance efficiency, places tools
of automation at selected locations, preferably positions that have major issues of quality or
positions with long cycle times.
The capable workforce is in short supply
Despite the fact that India possesses a high working-age population, however, identifying
talented workforce is very tough. As per A.T. Kearney (2015), the reason behind this, is the
training quality offered by the vocational trade schools of India, which lack in having the
essential infrastructure and equipment to influence appropriate training, which means
companies have to re-educate their labor once employed. Rigid labor laws of India also limit
companies from creating fundamental changes and satisfying their best workforces.
In the same way, the concentration at the level of graduate engineering has skewed towards
analytics-based exercise or training and Excel Modelling. As an outcome, engineers are not
proficient at notions like kanban and kaizen. Further, for the period of employment, programs
of training for the engineers simple oriented toward creating managerial knowledge and not
technical skills.
The impact of the improperly trained workforce is vast and an enormous drag on the lean
practices and productivity. This is a type of wasted effort that establishes itself in numerous
ways. For instance, re-education and upgrading the abilities of the existing and new

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workforce has now become vital, with definite companies spending twice global averages to
educate or train workforces. Moreover, skill gaps need an advanced proportion of overhead
workforce to offer on the job training and to keenly handle this workforce.
Solution: Develop skills of employees at every level
As per A.T. Kearney (2015), the industry of manufacturing can take individual and collective
actions in order to create a talented or skilled labor group. At a collective level, the industry
can start and provision institutes of vocational training for developing the pools of skilled
labor around main manufacturing groups. Moreover, making standards for program and
guarantee testing will confirm that all entry-level workforces have talent and skills which is
required to do their works. For instance, in the 2000s, the Information and technology
industry of India was capable to quickly receive thousands of workforces by setting up and
associating with particular training researchers or making large-scale programs of internal
training.
Individual, manufacturers can enhance their competences by developing significant programs
and organized training programs intended at workforces at different stages of their careers
said by A.T. Kearney (2015). The can offer a standard traineeship or induction program for
workers of entry-level and more progressive technical or guiding training for employees of
senior-level. The goal must be to enhance the knowledge and skills of existing employees in
order to take on high-technology processes of manufacturing. Once the workforce is trained,
retaining these extremely skilled employees will need financial incentive and paths of an
individual career.
Introducing official foreman roles can be a modest however operative tool to achieve lean
and, in the procedure, recollect skilled labor. This will release the burden on manufacturing

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engineers, who frequently double up as controllers, and allow them to an emphasis on
practical application of productivity enhancers like kanban and kaizen to drive improvements.
Supply chains are mainly incompetent
Indian supply chain is the main supplier of non-value-added jobs. According to A.T.
Kearney, Group of external factors disturb the network of supply chain, comprising market
instability and tilted patterns of demand, transportation and infrastructure bottlenecks, and
deprived structuring of the network of the supply chain to enhance on excise and sales taxes.
Manufacturers fight to ease these external powers, which lead to augmented raw material and
inventory of finished goods in the overall value chain.
The poor performance of the supply chain and dependability is also a cause why various
Western companies make use of their Indian plants significantly to assist the local market and
shy away from mixing them into their worldwide networks.
Solution: Increasing agility to decrease waste in the overall supply chain
Organizational setup – Make the organization of supply chain a strategic partner, functioning
at the similar level as subdivisions like production and sales. This will be achieved through
expanding the supply chain function’s role by taking it into the range of strategy setting and
authorizing it to cope risks. Along with this, as per A.T. Kearney, to support in managing
market instability, the organization of supply chain should have a seat at the strategy table.
Technology and Tools – Smart manufacturers make use of existing technology in order to
enhance nimbleness of supply chain and better cope up with unstable situations. For example,
tools of business intelligence from the vendors of ERP (Enterprise resource planning) offer
the functionality and adaptability to upsurge visibility of supply chain, thus excluding
uncertainties and decreasing safety stock necessities.

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Innovation Sector
India is placed to play an exclusive part in an impact-oriented worldwide economy as an
invention powerhouse. On the other hand, different opportunities and challenges in the
ecosystem of Indian innovation complicate the image. The International Innovation Corps, in
association with Chicago University Center in Delhi, Roland Berger, and the Indo-American
Chamber of Trade, introduced an event, in 2016 on March 7 that dug into the dynamics at
play in carrying Indian innovations to the worldwide market. The event contained a panel
conversation with the Chief Executive Officer, NITI Aayog i.e. Mr. Amitabh Kant, President,
Honeywell India i.e. Mr. Anant Maheshwari, Chairman Middle-East and Africa, Roland
Berger i.e. Mr. Wilfried Aulbur, and Director and Co-founder of International Innovation
Corps i.e. Professor Anup Malani, moderated by NDTV reporter Manvi Sinha Dhillon.
The members agreed that innovation in India is global, as the country’s youth is quickly
converting into the creators of the job. Professor Malani stated that when OpenIDEO required
crowding source results for global issues, the major ideas originated from India. According to
Maheshwari, Indian does not give themselves credit for being an innovative person. Apart
from detaching light on the Indian present status of innovations, the participants argued how
these innovations can scale, the part of the government in making a facilitative ecosystem,
technology role, and the aptitude of innovations to reflect a series of socioeconomic
challenges. Few of the main subjects and visions that arise are as follows:
Government as an Active Partner
The necessity for the participation of the government in the innovation story of India is
broadly recognized. Though, there is continuing discussion about what part the government
must take for the ecosystem of innovation to flourish.

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Generally, the panellists decided that the government must be an active partner, particularly
in making an enabling environment for growing ideas Kant defined the perfect part for the
government is that of a “catalyst.” Portraying from the experiences of IIC, Professor Malani
highlighted that the government should not be the innovation process driver. Majorly, it must
support to nurture an ecosystem that permits new products, processes, and ideas to scale.
In the important notes, Ambassador Verma spread light on exactly what governments could
carry to the counter as being the active partners in the process of innovation. He specified that
operating with the stakeholders to make regulatory, financing and mentoring rules that offer a
provisioning base essential to the scalability of inventive solutions is a priority. Aulbur
highlighted one more serious component in this ecosystem i.e. “local champions,” according
to him are important in driving investment and R&D.
Human Capital at the Centre for Innovations
According to Dhillon, M. (2018) the above-specified event talked about human capital in the
innovation which reflects that most of the technology innovations take the center place. She
pointed out that there is inherent bias for the innovations that are technology-based by having
global acceptability. However, it was noted that while the technology is vital and created
distinguished hype, the human resource factor in creating any innovation is serious. India
look for exporting innovations to the worldwide economy, presenting fresh products to the
worldwide market is not only the single end aim; the human capital made by the procedure of
innovation also turns out to be a crucial national asset.
According to Kant (2018), it is important to be focused towards the basic human capital
underlying innovations, and have to regularly upgrade the teacher’s quality if we need
innovative India. Verma, A. 2018 reinforced the human capital role and the necessity for
ideation, underlining that technology can be an enabler but cannot be an ancillary for a

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worthy idea. Eventually, emerging human capital at home is serious to confirming that India
remains to be a worldwide leader in the invention (International Innovation Corps, 2018).
Innovation for Social Impact
Innovation applications in the direction of resolving few of the roughest growth challenges
are not academic anymore. In India, social business is holding on, both as an incredible
opportunity for the market and a chance to make an assessable influence. According to Kant,
education and healthcare are two important sectors which have a high potential for
revolutionary impact-oriented work.
Furthermore, in India, the social entrepreneurship market expands outside these out-dated
growth challenges to the sectors like microfinance, and textiles, where the majority of
traditional medium and small enterprises of India exist. Panelists restated the requirement to
create an ecosystem for varied social entrepreneurship in the country.
Eventually, innovations of India should not stop at technology or even social business. As
noted by Aulbur, in India there is an actual opportunity in the e-commerce in spite of the
hype. The exclusive way in India through which e-commerce has constructed is the strength
of domestic players is a convincing example of how in India worldwide brands have carried a
simple local taste to their models of business in creative ways.
Freedom to Innovate
As the innovations of India target to make a cumulative footmark on a global level, event
members highlighted that reinforcing the ecosystem of domestic innovators and government
strategy is important. Aulbur stated that it is very important to note that companies of India
are capable enough to innovate and defeat the world market, along with this Maheshwari,
appeal that the government should provide freedom to innovate to both global and Indian
corporations.

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Service Sector
Contrasting with various emerging countries, the economy of India till date has reflected
significant flexibility to the crisis of global economic by upholding one of the world’s
maximum growth rate. The sector of services reflected approx. 88% of the growth rate in the
GDP (gross domestic product) in 2008-09.
According to Das, L. (2014), in India, the extreme growth of the services sector shows quick
progress made by the professionals who are educated. It is encouraging to see that India is
known as the service center or hub of the world. The traditional or out-dated Indian
perception seems to be changing nowadays from being called as a beggar’s land and snake-
charmers of pasts to becoming a knowledge worker’s land. The highest donor to this change
or alteration is the IT (information technology) assisted services and the business handling
and services of outsourcing. They have previously hit the India shores with a boom. A
number of specific sectors measures have been considered by the Indian government in order
to promote IT and other sectors such as organized retail, telecom, hospitality, financial
service sector and entertainment sector. In the tourism sector India is called as “Incredible
India” and in the financial sector, it is definitely called as “Opportunity India”.
On the other hand, disappointments are also importantly seen, like shortage of labor in the
activities of social service, which must be recognized and challenged with a new simple
valuation of the services value and in specific social services. The women have also played a
significant role in this sector which is concertedly noticeable in the today’s trendy world. A
woman is striding or trending every area of actions with self-belief and established capability.
Her raids into the male domination of decision-making role in administration matters have
listed a major achievement besides of various restraints in her walk to hierarchical positions.

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As per Raut, R. (2014), this sector will perform a significant role in the economic growth in
emerging countries such as India. On the other hand, he believed that as there is an increase
in the level of income, people will be capable enough to pay for additional services whereas
they will be spending this extra income on the service which is of good quality like travel,
health, education, etc. On the other side, entrepreneurs with small-scale businesses can strive
to fulfill the needs of people of additional services with growth in the levels of income and
changes in the lifestyle whereas the service sector will offer additional opportunities of
employment as compared to the manufacturing sector. Furthermore, in the U.S. 80% of the
opportunities of employment belongs to the service sector while there are three factors which
are important for the entrepreneur’s success in the service industry are the consistency of the
services, reliability and customer focus.
Since last two decades, it has been noticed that in developing and developed countries the
service sector has arisen as the key driver of economic growth as associated with the
secondary and primary sectors. According to Das, L. (2014), besides from development in the
service sector, agriculture, industry, agriculture and 1990’s open policies also had an
optimistic influence on the economic growth of India still the service sector seems to
subsidize more. The bases of the growth of Indian service sector seems to be income
elasticity of demand, open policies and the growth in areas such as banking, trade services,
communications, insurance, and business.
In the 1950s, the service sector contributed 30% in the total GDP which augmented in 1980s
to 38%, in 1990s it became 43% and approx. 56.5% in 2012-2013. This can be seen in the
following table.
Components Years

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1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2010-11
Trade Restaurants
and Hotels
6.35 7.61 8.29 11.6 12.69 14.59 17.80
Insurance, Finance,
Business services
and Real
Estate
12.34 13.56 12.00 10.57 11.62 13.23 16.90
Transport,
Storage and
Communication
3.84 4.56 4.41 5.47 6.21 7.68 8.30
Personal, social and
Community
Services
10.43 11.96 12.02 11.43 12.32 14.49 14.90
Source [(Gupte, 2015)]
This table reflects that post-liberalization period has observers the highest contribution by
trade, restaurants, and hotel tracked by personal, social and community services and
insurance, finance, business services and real state.
The support of trade, restaurants, and hotels increased growth after 1990-91 i.e. after the
reforms introduction. The portion of transport, storage, and communication possess a stable
rise whereas in 1960-61 personal, social and community services touched the peak, tracked
by a drop in 1980-81 and subsequently are giving a stable contribution to the GDP of India.
In 1960-61, the support of insurance, finance, business services and real estate was the
highest, and in 1980-81 it cut down drastically only to increase once again.

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Around 37.6% of the FDI (Foreign direct investment) in this sector i.e. the services sector
dropped severely to US 6.4 billion compared to the total growth in the Foreign Direct
Investment inflows at 6.1%. On a general basis, it can be said that service sector of India
appealed the largest number of FDI equity inflows which were amounting to US Dollars 40,
684, 98 million which totals to around 18% of the overall capital inflows (Gupte, 2015).
The share of India in the services export of the world increased to 1.1% in 2000 from 0.6% in
1990 and further to 3.3% in 2013 and it has grown quicker than its world merchandise
exports share (Gupte, 2015).
Software services exports comprised of 46% of total service exports of India. They dropped
to 5.4% in 2013-14 from 5.9% in 2012-13. Travels which contribute to a 12% share observed
an adverse share (Gupte, 2015).
Causes of Growth of Service Sector in India
According to Gupte, M.J. (2015), the service sector of India is the world’s 12th largest sector
by nominal GDP and 4th largest in terms of purchasing power. This sector offers employment
to approx. 27% of the population. Some of the factors that have resulted in the service sector
growth in India are:
Economic Affluence
The society of India is considered by a growing middle class. Moreover, the liberalization of
the economy of India has had an optimistic influence on the households of India. Their
expenditure and income have been pushed up nurturing the service and goods demand.
Changing Role of Women

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22
Previously women were considered to be the neglected portion, which was only responsible
to carry chores of the household. However, the time has passed this point of view has been
changed. Today women are very much educated and allowed to do the job. They are working
in various former male conquered services like police services, software services, defense
services, postal services, health services etc. With the increase in the working women has
resulted in the production of a new market for various services and products.
Changing Culture
The traditional system of joint family is gradually collapsing and creating direction for a
nuclear family living system. This has been complemented by an augmented demand for
various services such as health care, tourism, education, entertainment, and tourism etc.
There has been a noticeable variation in a way of thinking of a person in relation to
recreation, investment, and time perception resulting in increasing services demand.
The growth of Information Technology Sector
Business outsourcing and Information technology in India are said to be one of the fastest
rising sectors with an increasing growth rate of the revenue. The IT sector growth can be
credited to numerous factors like augmented specialization and accessibility of a large group
of low cost, extremely capable educated and effortless English speaking workforces. This
supply is coordinated by augmented demand from the foreign consumers who are interested
in the service export of India or those considering outsourcing of their operations.
Market Development
Both the rural and urban areas have observed extensive spread whole selling and retailing.
Besides this, the retailing has extended to isolated rural areas.
Health Care Awareness

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23
The current generations are getting more health and diet conscious. They are involving in the
fitness club and gymnasiums services in order to maintain their mental and physical health.
Economic Liberalization
The opening up of the economy of India in the year 1991 was tracked by a divestment
strategy. This enabled the entrance of MNC i.e. multinational Corporations resulting in a
supplementary increase in demands. This represented as an emission for the service sector
development.
Relocation to Urban from Rural Areas
With the fast development and other expansions in this time period of globalization, there has
been high scale migration to urban areas form rural areas. This resulted in changing the
lifestyle and services demand.
Export Potential
The services delivered by India to different parts of the world comprise insurance, company
data services, banking, transportation, software services, tourism, and education etc. In fact,
software services and tourism are said to be the significant earners of country’s foreign
exchange.
Service Tax
The coverage of service tax has been prolonged. The tax net includes storage, restaurants, and
hotels, financial services, transport, and commercialization, real estate, social/personal
services and business services.
Obstacles confronted by the Service Sector
The Indian service sector deals with various obstacles such as:

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24
Initially, there is a need for suitable infrastructure not just in the rural regions as well as in the
urban regions. The megacities deal with restraints in the form of bumpy roads, power cuts,
pollution and traffic congestion. This has a significant effect on the provided service quality.
Secondly, the service sector portion was 56.9% whereas the employment portion was just
28%.
Thirdly, tourism is a profitable service sector in the view of the natural beauty of India and
other attractive features, but bureaucratic interruptions and annoyance /dishonest by sellers
and agents perform as an imminent factor.
Fourthly, good gesture and manners are the trademarks of the providers of service, however;
various hotels, hospitals, banks, and restaurants are extremely lagging on this front. The issue
is even more negative in the matter of the institutions of the public sector.
Fifthly, there are various managerial processes involved, resulting in different invisible and
visible obstacles such as visa and sector precise limitations.
Sixthly, for service sector to develop and have an influence on the process of growth, it needs
to be complemented by immediate expansions of both the secondary and primary sectors.
Seventhly, the service providers of India experience rigid competition mainly IT providers
and Business Process Outsourcing. They need to enhance their quality if they want to
compete with the world’s best players (Gupte, 2015).
Agriculture Sector
In India, the procedure of globalization has acknowledged various phases of difficulties i.e.
from the primary period of extremely high to insufficiently diminishing GDP after 2007-2008
worldwide financial crises. The Indian Government has established various sectors and
regions to Foreign Direct Investment (FDI) in a steady way. However, the sector of

IMPACT OF INDIA ON GLOBAL BUSINESS
25
agriculture has been unprotected from the Multi-national Companies (MNCs) in a restricted
way in regards to the land grabbing threat along with other social, economic, and technical
issues (Sawant, 2014).
Globalization
Globalization is the procedure of merging of diverse countries and activities by innovative
foreign investment and foreign trade. Globalization also called as the enhanced possibilities
for the occurrence of activities between countries in circumstances where longitudinal and
latitudinal position looks insignificant (Beck, 2018).
Different people have a different opinion about the concept of Globalization. Some look it as
the procedure that is advantageous and important for the future economic development of the
world. Some of them look at it with the hostility, because they believe that it contributes to
increasing inequality among different nations, it affects the living standard of people and
employment. Globalization provides various opportunities for global development, however;
the fact is that it is not developing consistently. Some nations are becoming cohesive into the
worldwide economy more rapidly as compared to other nations.
The Globalization has shown diverse ways to the Indian Agriculture sector to grow and
develop in the worldwide economy. This concept has helped this sector in contributing to the
development of diverse countries. Due to globalization, the agriculture sector is able to affect
the global business in positive as well as negative ways. Today, various businesses are
importing different food crops such as wheat, rice, etc., from India due to the lack of skilled
labors and natural resources for growing such products. Some of the agriculture products
exported from India are:

IMPACT OF INDIA ON GLOBAL BUSINESS
26

IMPACT OF INDIA ON GLOBAL BUSINESS
27
Source [(Business Vaani, 2017)]
Comparison analysis between India and China
Differences
The Indian growth rate of GDP overtook China’s GDP growth rate in 2015. This has powered
various newspaper articles in India declaring that India is on the track to imitating the growth
story of China. Yet, the trust looks far from it. In spite of the efforts made by the Indian
media to place India and China at the same club by utilizing statistics that are deceptive to
associate the two economies, India is yet behind China. India has made quick steps on the
track to becoming a powerhouse in terms of economy. However, China is doing this for the
last many decades.

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The economy of China is Four Times Larger as compared to the economy of India
The Indian GDP is near around $1.5 trillion and at the similar time, the Chinese GDP is
around $7 trillion. The Chinese economy is four times bigger than the Indian economy. It
reflects that if China develops at the 1.5% rate and India develops at 7% rate, the economy of
China would add a similar amount of output as the economy of India would have.
Comparing the growth rate of GDP of India and China is consequently a useless exercise.
The growth rate of China has been steadily higher as compared to the growth rate of India in
the last three decades. India has hardly overtaken the growth rate of China for some couples
of the quarter.
In India, Inflation is 6 times higher as compared to China
The GDP growth of India has been complemented by runaway inflation. The growth rate in
country complements by the inflation is not able to remain for a longer time. In its place, such
rate of growth is the indication of the short-term push that has been provided to the economy
through monetary policy.
On the different side, inflation in China has been comparatively constant at a negligible 0.8%
from the last several years (Management Study Guide, 2018). This has been attained in spite
of the fact that China has been reflecting fiscal surplus for many years and preferably must be
reeling with inflation. In the contrast, China has initiated sovereign wealth funds that invest
extra cash in the foreign assets that help in maintaining the low inflation rate.
Similarities
Desi-Chinese
Desi-Chinese is the version of Chinese seasoning and technique of cooking to the Indian
tastes. The small community of China that has lived in Kolkata for over a century developed
the Indian Chinese food. They have done the bastardization of the Chinese cooking in India

IMPACT OF INDIA ON GLOBAL BUSINESS
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now can as the version, which is red, tasty, spicy, and garlicky. Nowadays, Chinese food is an
essential portion of the Indian cooking. Indian and Chinese communities in Malaysia,
Singapore, and North America also enjoy it.
Conventional music
While listening to a Chinese music, a person who is not familiar with the music will not
understand what they are listening. The conventional music of China has assorted diversities
depending on the age and day. In customary Chinese symphonies, the mixture of several
instruments used to create a sweet and outstanding sound-related environment. The
diversities of tempo, tone quality, and beat increases in the customary music of China are
very specific. India and China both have diverse styles but; both make wide use of pentatonic
scales. Precisely the recognized Indian Raga Mohanam is exactly vague to the Chinese
pentatonic scale (Saahil, 2017).
Pestle Analysis of India and China
Political
India
India is considered as the biggest democracy in the whole world, which is operated on a
federal form of the government. The political environment is majorly affected by the factors
like the interest of politicians, ideologies of political parties, and policies of the government.
As an outcome, the Indian environment of business is influenced by the multivariate political
factors. The system of taxation is developed effectively and the Union Government enforces
various taxes, like services tax, sales tax, and income tax.
China
China is known as the world’s most commanding country. It is an enduring follower of the
Security Council of the United Nations. It is the fourth leading nation in the world in terms of

IMPACT OF INDIA ON GLOBAL BUSINESS
30
land area. The capital of China is Beijing. As it is known that, the Chinese Communist Party
is the establishing and governing administrative party of the People’s Republic of China.
Though China relishes a steady political environment, the absence of freedom is one of the
major concerns (Rahman, 2017).
Economic
India
The Indian economy has been stable, due to the establishment of the 1991 reform policies.
According to the policy, decreases in foreign capital liberalization, industrial licensing, the
creation of FIBP, etc. has caused in a continuous development in the economic environment
of India.
China
China is the world’s second-biggest economy in terms of nominal GDP. However, it is the
largest economy in the world in terms of purchasing power. Many economic reforms initiated
in 1970, which supported China to make quick economic growth. The nation has been shifted
from a centrally scheduled to the market-based economy and the growth of the GDP has an
average of around 10% a year.
Social
India
Social factor means any alteration in the trends that will influence the environment of the
business. For example, the increase in the aging population of India is subsequent to a
significant increase in the cost of pension and growth in the older worker’s employment.
India possesses the population of around 1.2 billion and 70% of the population comes under
the ages of 15 and 65. Hence, there are structures with the percentages as per the age. All

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31
these structures comprise varying flexibility, in income distribution, education, and work
attitudes, etc. (Pestle Analysis, 2014)
China
The cultural and social features of China perform an essential part as the demographics
continually change. For instance, an increase in population and age distribution fluctuates.
All of these aspects can change cultural values and social trends. Social behavior and the size
of the family mostly influence the decision-making process. Other social factors are customer
education, lifestyle, emigration, and religion. China is said to be a collectivistic culture,
dependent on Geert Hofstede’s value dimensions. Moreover, the rate of literacy in China is
around 90%. China stresses on education and most of the population in the nation is well
educated.
Technology
India
Technology considerably affects the development of product and introduces established new
processes of cost cutting. India is managed with 3G and 4G technology that has enabled
numerous of their technology projects. Besides this, the nation also has one of the world’s
strongest IT sectors, endorsing continuous IT development, technical advancements, and
software upgrades. In recent times, India has tried to launch satellites into space.
China
China possesses the largest online population in the whole world with around 772 million
users. In China, there are several large tech giants for e.g. Tencent, Alibaba, and Baidu.
Moreover, these business and some others are very powerful that various large business from
different nations has failed in the operations in China. China has made a vision i.e. to become
the worldwide leader in technology and science. In order to attain this, the nation has initiated

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a programme i.e. ‘mass entrepreneurship and innovation’ in 2015. The programme is aimed
towards spreading entrepreneurship all over in China.
Legal/ Environment
India
Recently, various numbers of legal alterations have been performed in India, like an increase
in minimum wage, recycling, and disability discrimination that has directly influenced the
businesses. However, in regards to the environment, the air quality in India has been
negatively affected by the urbanization and industrialization that is the major reason behind
health problems. As an outcome, there have been formations of environmental pressure
groups, noise regulations, and controls, on waste disposal and control.
China
The legal framework in e-commerce is yet in its initial stage. China has less experience in
enrolling e-commerce legislation for subjects such as tax and intellectual property rights
protection. There is no policy regarding the consumer rights, privacy, recognition of digital
signatures, and proof of electronic contracts (Pestle Analysis, 2015).
The rapid economic development of China has influenced its natural environment brutally.
Air and Water pollution, deforestation, biodiversity loss, industrial waste, and climate change
are the examples of challenges that are being faced by China.
Suggestion
Dumping
Dumping in economics is said to be a type of injuring pricing, particularly in international
trade. It happens when producers export product to a different country at a low price with an
injuring effect. The goal of dumping is to grow the market share in the international market

IMPACT OF INDIA ON GLOBAL BUSINESS
33
by increasing competition and thus make monopoly condition where the exporter will be
capable to individually command quality and price of the product.
India and China can initiate a business by collaborating the clothing business of China with
the Charity association of India. In which the products sold by China in India by following
the dumping policy will be taken by the charity organization for the needy and poor people
who have less purchasing power.
This strategy has been suggested because in India there is a huge population that lies under
poverty line i.e. around 800 million people are living with less than USD 1.90 per day, which
account for 30% of the Indian population living under poverty line. Moreover, China
generally adopt its dumping pricing policy while selling its products to India, therefore this
business strategy will help it in exporting products at low cost for good cause.
For the successful implementation of the business strategy, the responsible businesses of both
the countries need to take permission from the government.
Conclusion
The above paper is highlighting the important aspects of Automobile, manufacturing,
innovation, and service sector of India and their impact on global business. In the conclusion,
it can be said that the global automobile industry is the major contributor to the global
economy. Nowadays, the Indian industry of automobile reflects a cluster of diversities and
models meeting all conceivable anticipations and internationally recognized industry
standards. In its initial phase, the whole industry was depending on the foreign technology.
Although, in few years only the manufacturers of India came into the track by making use of
their own technology which use to develop in the home country. In fact, some of the
companies have established their name and position in the list of leading organization of this

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34
sector. From the analysis, it has been identified that the fast growth in the infrastructure
sector enabled government rules to endorse fair rivalry and make Indian industry of
automotive more competitive in the world besides creating the country a constructive place
for investment by the worldwide key leader in the auto industry.
The manufacturing sector has also experienced various ups and down in the worldwide
market however attained a stable and effective position. The above analysis has reflected that
India has various strengths that can support it in becoming a powerhouse of manufacturing in
the worldwide market: a young workforce, a large group of engineers, major local
consumption of manufactured goods, and wages that are half of China's.
The innovation sector India is placed to play an exclusive part in an impact-oriented
worldwide economy as an invention powerhouse. On the other hand, different opportunities
and challenges in the ecosystem of Indian innovation complicate the image.
The Service sector will perform a significant role in the economic growth in emerging
countries such as India. On the other hand, it has been identified in the above paper that as
there is an increase in the level of income; people will be capable enough to pay for
additional services whereas they will be spending this extra income on the service, which is
of good quality like travel, health, education, etc.
From the above analysis, it can be said that Agriculture sector has also contributed in the
global business after Globalization as various countries import agricultural products from
India because they lack in those producing those products. Moreover, the analysis has
highlighted the comparison between India and China with the help of PESTLE Analysis
framework and suggested a business strategy between both the countries.

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35
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