India’s demographic trends paint an overall hopeful picture for the budding international business. In 2020, 67.3% of the population was between 15 and 64 years old, with an annual population growth of 0.99% and 48.6% of the working-age population (GlobalEDGE, n.d.-c). High percentages of the working population and net population growth indicate ample human resources available for employers. Moreover, India’s literacy rate for people over 15 years old was 86.7% (World Bank, n.d.). This percentage points to a sufficient amount of educated people in the nation.
Modern India is a dynamic entrepreneurial society; however, certain cultural differences may arise and affect international business. The predominant religion in India is Hinduism, which propagates ideas of asceticism and self-reliance, potentially negatively impacting the entrepreneurial environment (McGraw Hill, 2022b). Furthermore, the most spoken languages in India are Hindi and English, allowing for the easier development of international business (McGraw Hill, 2022b). Lastly, formal education is widely supported and financed in India, with a big societal value on more ‘technical’ professions such as engineering.
In the Indian caste social structure, there is a low degree of social mobility. An individual’s social position is pre-determined by their family and unlikely to change (McGraw Hill, 2022b). Such a division influences relationships with members of other classes: for instance, the tension between manual labor and higher castes in India may have consequences of increased entrepreneurship costs.
Informal Trade Barriers
Some of the informal trade barriers may include communication styles. Unlike Western cultures, India scores high on power distance, a work value that focuses on how society deals with inequality in physical and intellectual abilities (McGraw Hill, 2022b). Additionally, India does not emphasize individualism as much as the US or the UK (McGraw Hill, 2022b). Overall, certain cultural disparities may arise in communicating with Indian colleagues, which entrepreneurs must consider.
Government and Politics
The role of the government in doing business in India is supportive yet not overpowering. Social democracy significantly influenced India’s political system, which may provide better business conditions given a more open competition and growth space (McGraw Hill, 2022a). However, India has not adopted the Foreign Corrupt Practices Act (FCPA), making its stand on bribery in international business transactions known (McGraw Hill, 2022a). India’s risk rating is high, showing a high probability of corporate default and concerning implications for the corporate payment behavior (GlobalEDGE, n.d.-a). The overall political situation in India is very uncertain, rendering an unstable business environment.
Formal Trade Barriers
When merging with the Indian business environment, the company must consider some foreign trade limitations. For instance, India is not a member of the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade agreement, which may negatively affect its market shares (GlobalEDGE, n.d.-RISK). Moreover, India has not ratified the United Nations Convention on Contracts for the International Sales of Goods (CISG), which indicates the government’s hesitancy to adhere to certain rules of international commercial contracts (McGraw Hill, 2022a). However, India still trades widely and continues to improve its across-borders trading policies, eliminating some causes for concern. Hence, a newly opened business must be evaluated closely, considering local laws may differ from Western businesses.
Promoting Global Business
As mentioned before, India implemented reforms that made it easier to start a business and trade across borders. The “Make in India” campaign enhanced manufacturing and other sectors, thus increasing the country’s competitiveness and attracting foreign investment (World Bank, 2020a). The government also implemented reforms to improve the tax payments and resolve insolvency issues (World Bank, 2020b). Overall, the Indian government is making significant efforts to attract foreign investment and is constantly improving.
The computer software industry suffers acutely from lenient enforcement of intellectual property rights. India is a part of the World Intellectual Property Organization, which protects the rights of businesses (McGraw Hill, 2022a). India’s scores on intellectual property protection are mediocre (GlobalEDGE, 2021). Thus, the issue of pirating software persists in India, making it a real possibility for IT-related entrepreneurship to encounter some significant losses.
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McGraw Hill. (2022a). Chapter 2: National Differences in Political, Economic, and Legal Systems [PowerPoint slides].
McGraw Hill. (2022b). Chapter 4: Differences in Culture [PowerPoint slides].
Overview of International Intellectual Property Rights. (2021). global edge: Your Source for Global Business Knowledge. Web.
World Bank. (n.d.). Literacy rate, adult total (% of people ages 15 and above). The World Bank: Data. Web.
World Bank. (2020a). Doing Business 2020: Comparing Business Regulation in 190 Economies. World Bank. Web.
World Bank. (2020b). Economy Profile of India (No. 17; Doing Business 2020: Comparing Regulations in 190 Economies, pp. 1–125). World Bank Group. Web.