International Business Across Borders: A Country Analysis of India

This report provides a comprehensive analysis of India as an emerging market for foreign direct investment. It includes a PESTLE analysis, discussion of trade policies and barriers, levels of FDI, and recommendations for the government to sustain economic growth.

Running Head: INTERNATIONAL BUSINESS ACROSS BORDERS
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International business across borders
12/12/2018

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Executive Summary
India as one of the democratic nations in the world is found to have higher potential and
found to attract the investments from foreign partners. One of the economic aspect of the
country is the fact that increasing globalization in the country acts as the base of increasing
foreign direct investment. The present rate of GDP leading to the economic growth in India
has been 8.2% and continues to increase with the end of the FY18. The report has discussed
well all the aspects of the country, and the economic and political stability also led to the
conclusion that India has been able to attract better FDI than the other developed countries
around the globe. This indicates about the country’s growth in terms of every aspect,
including the international trade with other nations leading to sustained economic growth in
the future years.

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Contents
Introduction...........................................................................................................................................2
Overview of the country (India)............................................................................................................2
PESTLE analysis of India......................................................................................................................3
Foreign Currency and exchange influences...........................................................................................5
Trade policies, systems, barriers, and incentives...................................................................................5
Levels of Foreign Direct investment......................................................................................................6
Recommendations.................................................................................................................................7
Conclusion.............................................................................................................................................7
References.............................................................................................................................................8

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Introduction
The report brings about the discussion on the topic of the assignment ‘International business
across borders’ and the related aspects. The assignment will perform the country analysis and
assessment of the emerging market which represents an increase in the GDP growth rate,
leading to attractive investment opportunities in the market. The country will be assessed in
terms of potential and the opportunity for the foreign direct investment. For the assessment,
and analysis India has been taken as the country in this report. In addition to the assessment,
the readers will gain an understanding of the benefits received by the country and the
currency rates prevailing in the country. Trade systems, policies, and barriers, pestle forces
influencing the business environment of the country with other markets or countries. In the
later part of report, the factors or aspects of the country will provide an understanding of the
factors contributing to the country’s competitive position in the world economy.
Recommendations will be provided in the last section of the report as how the country can
make further improvement or advancements in terms of investment opportunities which will
enhance the stability of the country’s economy.
Overview of the country (India)
India is a country located in South-Asia, is found to occupy seventh position amongst other
nations in terms of geographical area, and has been the most populous country with over 1.2
billion people. The population in the country states that the country is found to constitute the
world’s one-sixth population. The country is surrounded by Indian Ocean to the south, the
Arabian Sea to the southeast, and Bay of Bengal to the southwest. India has been divided into
29 states and 7 union territories, with New Delhi as the capital. Hindi and English are
established as the official languages of India, which are broadly spoken amongst the
population of the country (Chittoor, Aulakh, and Ray, 2015).
Discussing the other general aspects of the country’s economy it can be stated that over the
seven decades in the past, India has achieved self-sufficiency in terms of food and grains;
thus it has now become an exporter of food. In addition, there has been certain major
improvements in the country such as increase in the life expectancy rates, literacy rates and
the health conditions has been also improved. India is now a larger market for a number of
companies which has been involved in the operations of pharmaceuticals, automobiles, steel,
and information, and space technologies. In context to the politics and the aspects related to

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government, India is considered as the world’s most populous democracy. India has the
mixed economic system, and continues to be an emerging market in the economy (Cavusgil
et al., 2014).
PESTLE analysis of India
The pestle analysis of India aims to define and analyse the political, economic, socio-cultural,
and technological influences and the benefits concerned with the country.
Factors Influence/benefits
Political India has been one of the most powerful nations in the world, and
forms as the base of largest democracy, with a relatively stable
political environment. New Delhi is the India’s country, and it has
two other powerful nations as neighbours, China and Pakistan.
The citizens in the country show their democratic will in the local
and national elections held in the country, and the due respect is
given to them. Thus, the political culture of tolerance in the country
has been contributing towards maintaining a stable political climate
to a major extent. This in turn leads to an initiative towards attracting
the investments in the FDI (Tripathi et al., 2016).
Negative influence such as corruption in India is a major issue which
badly affects the political and economic stability, and increases cost
of the foreign direct investment.
However, over the recent years it has been analysed that India has
reduced the political interference in the management of the
businesses, which has led to the improvement in the productivity and
efficiency of the businesses. Thus, the above benefits described that
the political situation of the country can be defined as stable (Rastogi
and Trivedi, 2016).
Economic The economic factors consist of the changes in taxation system,
interest rates, economic growth, and prevailing exchange rates in the
country. According to the data obtained from IMF 2017 economic
forecast, the GDP of the country is equal to $2.4 trillion which

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describes it as the 7th largest economy in the world with the nominal
GDP. Current corporate tax rate in the country is 30%, and attributes
as one of the top country in several industries; as 7th largest coffee
producer in the World. India has several key export products which
leads to the strong economic system of the country facilitating in the
trade. Thus, these are the benefits of the economic factors and the
stability in the environment.
Socio-cultural India has extensive consumer market, with 1.2 as the total
population, and such a huge market leads to the opportunity for the
multinationals to invest. India has abundant cheap labour, and they
are easy to access and afford leading multinationals to make
investments and outsource their business to the country. Looking
into the cultural aspects, India is the country with multiple
languages, and follows different cultures and religion, maintains
communal harmony which is one of the greatest strength.
Standard of living of the people living in the country is improving
and leading to a growth in the disposable income of the people
(Saeidi et al., 2015).
Technological
India has been recognised as the most technological advanced
countries in the World; as it ranks third in terms of technology. As
there has been investments from the high-tech giants or companies
such as Facebook, apple, and Microsoft.
Thus, there are major benefits in the technological environment of
the country and India features a developed IT system (Raina, 2015).
National resource and factor endowments
The biotic natural resources include fossil fuels, coal, petroleum, and the nation’s coal
reserves are found to be fourth largest in the world. There are some other natural resources
which lead to a comparative advantage of the country, such as availability of water,
rainwater, water quality, surface water. These are the resources which create a competitive

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sustainable advantage for the country, leading to further growth of economy (Prakash and
Anand, 2014).
Although India is rich in multiple natural resources, but the knowledge-based services act as
the major competitive advantage of the country. The increasing level of contributions to the
country’s GDP is often the positive outcome of growing service sector in the economy
(Bhaumik, Driffield and Zhou, 2016).
A significant rise in the BPO/KPO, and the healthcare tourism sectors in India are assumed to
India’s fundamental strength of the country. A country’s factor endowment is generally
referred to the amount of land, labour, capital, and entrepreneurship that is possessed by any
country, and used in manufacturing products. Talking about the India’s factor endowments
and aspects related it has been considered that Indian labour market determines the major
advantage of the country over other markets such as China, and the labour costs at the top
management in India are low (Bhaumik, Driffield and Zhou, 2016).
Foreign Currency and exchange influences
Investing in the international market differs from the investments made in the home market in
numerous ways, but one of the major differences has been the currency or impact of the
currency fluctuations. It has been a general aspect that reduction in the currency of one
country leads to an increase the flow of FDI into that country. Foreign Direct Investment
(FDI) refers to the international flow of capital where the individual or the country invests in
another country. Exchange rate means the price of one currency in terms of another currency
(Seid, 2018).
Currently one US dollar is exchanged for 62 rupees, thus it is the foreign exchange rate of
rupee in terms of US dollars. Changes in the foreign exchange rates influence the import and
exports within the country thereby determine the balance of payments (Pradhan, 2017).
Discussing about the foreign currency and exchange rates in the country, it has been analysed
that India has experienced depreciation in the recent years. The low value of the currency of
India has been affecting both, the higher and lower sectors of economy. Exchange rate has
the significant role in context to the Indian economy, as it affects other factors such as return
on investments, investor’s portfolio, and the profitability of the firm (Malhotra, 2014).

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Trade policies, systems, barriers, and incentives
The foreign trade policy of India is also referred to as EXIM policy (Export-import), and the
policy in general can be defined as developing export potential, improving the performance
of country’s exports and encouraging foreign trade. The policy also aims at creating or
enhancing the situation of favourable balance of payment (Farooqui, 2016).
DGFT (Directorate General of foreign trade) is the main body which governs the matters
related to the exports and imports within the country. The main objective of this policy is to
accelerate the growth of the economy and support high level of economic activities. The
other objectives are generation of employment opportunities for the citizens of country
(Matsushita et al., 2015).
The foreign trade policy in the country facilitates by providing incentives to the exporters to
help them succeed over the impacts of the decreasing demand of Indian products in the major
markets, such as US and Europe. Government has made amendments in the FDI policy of
India to increase the flow of FDI (Joshi and KUKREJA, 2016).
Discussing about the barriers, anything restricting or putting barriers to the flow of trade
between nations is referred to as trade barrier. The trade barriers can be both, tariff barriers or
non-tariff barriers, including import licensing, standards testing labelling and certification,
export subsidies and support, service barriers. A negative list has been also made for certain
imported products included in non-tariff regulation, such as tallow, fat, and oil of animal
origin. The items which are restricted require an import license include livestock products
and certain chemicals. India has the trade system which puts restrictions on a number of
services. These are Insurance, banking, securities, motion pictures, accounting, construction,
architecture and engineering, retailing, legal services, and telecommunication and others
(Mukherjee, 2015).
Levels of Foreign Direct investment
Discussing about the current levels of Foreign Direct Investment in the country, it has been
found that Indian government has made investments around $1 trillion on the infrastructure
on the infrastructure facilities from the year 2012-2017. From this 40% is found to be funded
by the private sector in the country. Now, 100% FDI under the automatic route has been

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permitted in the country in context to the construction sectors for the cities and township.
Annual FDI inflows are expected to increase in the country at the rate of US$ 75 billion, and
private investments are expected to increase by 8.8% in the FY18-19. Currently for a single
retail brand in India, up to 49% FDI is allowed under the automatic route, and it applies to the
foreign airlines investments in India. Thus, it all describes about the existing levels of FDI in
the country (Zheng, 2016).
Recommendations
From the perspectives of different sectors, FDI is allowed in India in many sectors, such as
service sector, manufacturing sector, however there has been issues still in the global
operations of the Indian economy. As FDI is the strategic component of the investments in
the country therefore, it is required by India to sustain the economic growth and development.
Thus, there are suggestions for the government and their policies as they must focus on the
increasing the speed of improvement in the infrastructure sector and their requirements as
they are crucial towards the diversification of business operations. In addition, government of
India must allow and open doors for the foreign companies in the export-oriented services
which could facilitate in increasing the demand of the unskilled workers and services which
are low-skilled, thus leading to increased wage rates for workers in these services. Increase in
the FDI from the other sectors and removal of restrictions from other businesses will help in
increasing the per capita income and GDP of the country.
Conclusion
To conclude the above discussion it has been analysed that India has been well established
country and has become the most attractive market for the global partner’s investments in
various sectors. The stability of the country’s economic, and political environment has led to
an invitation to the major investments across the border. The report discussed several aspects
of the country, and FDI related discussions which stated about the economic growth of the
country. Thus, India is expected to grow at the rate of 8.2% in the year 2018-19.Hence, India
has been considered as one of the fastest growing economy with the dynamic and young
manpower and rich in natural resources and has high potential to create sustainable
competitive advantage amongst economies of the world.

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References
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