Introduction
Since the liberalisation of its economy in 1991, India has emerged as a major player on the global economic front. The World Bank and other bodies have regularly projected that India is likely to sustain its economic growth over the coming decade and more and is likely to become the second or third leading economy of the world. Also, during most of the 2000s, it was acknowledged that, after China, India was preferred for foreign direct investment (FDI), even ahead of developed countries like the USA. In 2011, this was the case, despite the worldwide economic slowdown and the fact that India’s infrastructure is well recognised as less developed than that of most Western nations (UN, 2017). In order to sustain economic development, the present Indian government, which came to power in June 2014, has initiated a number of meaningful initiatives, such as 100 Smart Cities, major infrastructure projects, ‘Swachh Bharat’ (Clean India), ‘Make in India’, among others. As per the latest United Nations report (UN WESP, 2017), India is projected to remain the fastest-growing large developing economy, on the back of robust private consumption and significant domestic reforms gradually being implemented by the government. Further, investment demand is expected to pick up and sustain, helped by the easing of monetary restrictions, government efforts towards infrastructure investments and public-private partnerships, and the implementation of domestic reforms such as the demonetisation in November 2016 and the introduction of the Goods and Services Tax (GST) Bill. Not surprisingly, such developments have led to a renewed interest in India, and foreign investors have been making a beeline to enter the lucrative Indian market.
Accordingly, since 1991, the number of academic and other publications related to India has increased. These cover topics like the rapid economic developments in India (e.g., Tharoor, 2007; Kumar et al., 2009; Arevalo and Aravind, 2011; UN WESP, 2017); comparing India and China (e.g., Cappelli et al., 2010; Cooke and Budhwar, 2015), management in India (e.g., Budhwar and Bhatnagar, 2009; Venkatesan, 2013; Budhwar et al., 2016), areas of further development (e.g., Singh et al., 2012; Thite et al., 2016), and how to do business in India (see Kumar and Sethi, 2005; Budhwar and Varma, 2011; Nair, 2017).
Nevertheless, given the dynamic nature of the Indian business environment, which is changing rapidly on most fronts, there is still a paucity of research-based evidence regarding available and emerging opportunities for foreign investors, and the key challenges they might face in doing business in India. Indeed, potential investors would be well served by publications directed towards addressing the issues they might face, as well as suggestions on how to successfully navigate these. As the Indian economy grows at a rapid pace, businesses are facing numerous critical issues, such as:
- expanding competition;
- increasing pressures to attract and retain talent;
- pressure for further reforms in different sectors;
- developments and deficiencies in infrastructure;
- finding relevant Indian-based partners;
- divestments in the public sector;
- bureaucratic delays in the approval of proposals of foreign direct investments, etc.
In addition, foreign investors would likely have to deal with other issues, such as:
- corruption;
- limited infrastructure (power, transport);
- outdated labour legislation;
- challenging stakeholders, including union policies and practices that are sometimes counter to progressive business.
While millions of Indian students graduate from high schools and colleges each year, many of them lack employable skills, and need further training.
Finally, India’s geography offers both advantages and disadvantages. With thousands of miles of coast, and a diverse topography, India is indeed a land of opportunities for potential investors. However, it is also a nation bordered by unstable neighbouring countries and suffers from poor border controls, resulting in regular insurgencies and a continuous in-flow of illegal immigrants (see Budhwar and Varma, 2011). Thus, potential investors would need to devise project plans and strategies that incorporate more than simple ‘business-oriented’ steps. A more detailed presentation of the complex, uncertain and challenging aspects of the Indian business environment and ways of dealing with them is the focus of this volume.
Table 1.1 presents the ranking of India by the World Bank (2018) on various parameters on the ‘ease of doing business’ in a comparison of 190 economies. The figures in Table 1.1 are telling, and indeed, discouraging; however, given the opportunities India offers to foreign operators, the potential is immense, and those that make the effort are likely to be rewarded handsomely in terms of their bottom line. The key to success in India, however, lies not only in their own competencies, but also more importantly on how best they understand the Indian business context and efficiently function in it.
TABLE 1.1 India’s ranking on ease of doing business 2018 (against 190 economies)
| Parameters of ease of doing business | Doing business 2018 rank |
| Starting a business | 156 |
| Dealing with construction permits | 181 |
| Getting electricity | 29 |
| Registering property | 154 |
| Getting credit | 29 |
| Protecting minority investors | 4 |
| Paying taxes | 119 |
| Trading across borders | 146 |
| Enforcing contracts | 164 |
| Resolving insolvency | 103 |
Source: World Bank (2018).
The importance of understanding a given ‘context’, and developing appropriate management systems as a prerequisite for success, is now well acknowledged in the literature (e.g., Budhwar et al., 2016). If those foreign operators developing strategies for their Indian implementation fail to carefully understand the Indian business context, the potential for mistakes and eventual failure can be high. This volume is specifically designed to provide information, which should prove extremely useful for multinational companies (MNCs) and their decision-makers, as they formulate their strategies for doing business in India.
We started by noting some of the shortcomings of the Indian business environment, and the potential pitfalls that foreign investors might face. We now address some of the tremendous strengths and related opportunities that are available in the Indian business landscape. These include cheap resources, a pool of reasonably skilled talent, a massive national market (a population of 1.25 billion or so), a rapidly growing middle class (over 350 million) with increasingly stronger purchasing power, and one of the youngest populations in the world. In addition, India boasts one of the most diverse populations in the world, with a democratic political set-up, a free press, and a reasonably reliable judicial system, which though slow, is known to be robust. Further, Indians are known for their entrepreneurial abilities, and the willingness to learn, adapt and integrate into the global business systems. In addition, time and again India has shown the capacity to absorb global economic/financial crisis-related ripples.
Due to its uniqueness in many ways, the economic development model pursued by India is considerably different from other emerging markets, which perhaps minimises the impact of global events, such as the different economic crises in the past couple of decades. Broadly speaking, it is characterised by:
- the strengthening and enhanced contribution of the private sector;
- indigenous entrepreneurship;
- the presence of massive local and national markets;
- increased support to encourage FDI – both inward and outward – and the entry of multinational companies to India;
- massive contributions from non-resident Indians to India’s foreign reserves in the form of remittances sent from overseas;
- the growth of the Indian multinational companies;
- increasing global leadership of specific sectors (such as information technology, software, business process outsourcing, knowledge process outsourcing, pharmaceuticals, research and development, animation, among many others).
Most aspects of the Indian economic model are strongly ingrained into the unique socio-cultural, political, legal and economic milieu of India; as a result, the challenges regarding developing a good understanding of the Indian business context and how to successfully operate in it can be both complex and demanding for foreign investors. An attempt has been made in this volume to address such issues. This should contribute to better practice development. We believe this information will be useful to a variety of readers, including top managers, researchers, consultants, students and academics. This volume then provides latest research-based evidence and consolidates it in a single source of information which helps to address questions pertaining to the ‘what’, ‘why’, ‘how’ and ‘when’ of doing business in India.
The structure of the book
The majority of the contributors are Indian and have been conducting research in their respective fields for a number of years. We believe this helps to minimise the ‘Western bias’ for this project and this has enabled us to present a more realistic picture of the key issues facing foreign investors in India. The contributors were given a framework to develop their respective chapters:
- key points to take away from the chapter;
- why the chapter topic is critical to successfully operating in India;
- any historical background about the topic and changes that have taken place since the 1991 economic reforms;
- the present state of affairs;
- the present and future challenges, and the way forward;
- a short case study and a list of useful web resources.
This volume is divided into three Parts: Part I, The Indian business context; Part II, Conducting business in India; and Part III, Emerging practices.
In Chapter 2, Pradhan and Kumar start off the volume by highlighting the scenario related to the Indian economic environment, including both the growth achieved historically and particularly since the liberalisation of the Indian economy in 1991 and the key constraints on the same. They also provide an overview of the key reforms and initiatives pursued by India since 2014 (when the present government came to power). They close the chapter by discussing the advantages India presently holds for economic growth, and emerging growth opportunities and challenges for doing business in India.
In Chapter 3, Saini analyses the Indian political and legal frameworks influencing employment. In particular, he focuses on the provisions of the main labour laws (i.e. relating to working conditions, the law of industrial relations, laws relating to wages and monetary benefits, and the law of social security). He also covers issues relating to the structure and functioning of various branches of Indian employment law and assesses the obstacles that the Indian labour law framework poses to the smooth conduct of business. Saini summarises his chapter by highlighting the precautions employers should take when complying with Indian labour laws.
In Chapter 4, Kumar, Mishra and Fang discuss the cultural paradox in the form of India’s contradictory identities and value systems. They use the concept of Ardhanarishvara (a Sanskrit word which represents the synthesis of masculine and feminine energies of the universe, believed to have been represented only by Lord Shiva) to explain and appreciate a variety of cultural Indian paradoxes. They also the highlight the usefulness of the Ardhanarishvara perspective to better understand the cultural considerations crucial for fostering business relations in India.
Badigannavar highlights the critical role played by trade unions in the various spheres of organisation in India in Chapter 5. He starts by providing background information on trade unions in India, then discusses the main reasons for the continued increase in trade union membership in India, and finally makes suggestions regarding how to manage trade unions in India.
Khatri and Varma cover the sensitive and challenging topic of corruption and cronyism in India in Chapter 6. Given the common understanding that both corruption and cronyism are seriously ingrained in the Indian business environment, Khatri and Varma discuss the types of cronyism and corruption prevalent in India and their impact on businesses. They then reveal the role played by political parties in the promotion of such practices. Finally, they provide guidance to managers and policy-makers regarding how to minimise the influence of both corruption and cronyism in their organisations.
In Chapter 7, Panda and Gupta unravel the Indian mindset and present a comprehensive understanding of the way Indians behave. They make a number of suggestions regarding how business leaders can craft culturally appropriate ecosystems to productively leverage the Indian mind-set.
Pappu in Chapter 8 highlights the challenges faced by an entrepreneur in India. He provides an overview of the key operational challenges and opportunities offered by the business ecosystem in India, linking it with past and present changes in the legislation and their effect on businesses. He later provides ...
