Republic of India Business Guide
Introduction
The Republic of India, is a sovereign country in South Asia. It is the seventh-largest country by geographical area, the second most populous country, and the most populous liberal democracy in the world. Bounded by the Indian Ocean on the south, the Arabian Sea on the west, and the Bay of Bengal on the east, India has a coastline of over 7000 kilometres. It borders Pakistan to the west; China, Nepal, and Bhutan to the north-east; and Bangladesh and Myanmar to the east. In the Indian Ocean, India is in the vicinity of Sri Lanka, Maldives, and Indonesia. With the world's twelfth largest economy by exchange rates and the fourth largest in purchasing power, India has made rapid economic progress in the last decade. Although the country's standard of living is projected to rise sharply in the next half-century, it currently battles high levels of poverty, illiteracy, persistent malnutrition, and environmental degradation.
Economy
India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Services are the major source of economic growth, accounting for more than half of India's output with less than one third of its labor force. About three-fifths of the work force is in agriculture, leading the UPA government to articulate an economic reform program that includes developing basic infrastructure to improve the lives of the rural poor and boost economic performance. The government has reduced controls on foreign trade and investment. Tariffs averaged 12.5% on non-agricultural items in 2006. Higher limits on foreign direct investment were permitted in a few key sectors, such as telecommunications. However, tariff spikes in sensitive categories, including agriculture, and incremental progress on economic reforms still hinder foreign access to India's vast and growing market. Privatization of government-owned industries remained stalled in 2006, and continues to generate political debate; populist pressure from within the UPA government and from its Left Front allies continues to restrain needed initiatives. The economy has posted an average growth rate of more than 7% in the decade since 1996, reducing poverty by about 10 percentage points. India achieved 8.5% GDP growth in 2006, significantly expanding manufacturing. India is capitalizing on its large numbers of well-educated people skilled in the English language to become a major exporter of software services and software workers. Economic expansion has helped New Delhi continue to make progress in reducing its federal fiscal deficit. However, strong growth - more than 8 percent growth in each of the last three years - combined with easy consumer credit and a real estate boom is fueling inflation concerns. The huge and growing population is the fundamental social, economic, and environmental problem.
Market Overview
The Indian market and its one billion plus population, presents lucrative and diverse opportunities for U.S. exporters with the right products, services, and commitment. In recent times, the declining value of the dollar, vis-à-vis competitors’ currencies, is expanding and accelerating these opportunities. India’s infrastructure, transportation, energy, environmental, health care, high-tech, and defense sector requirements for equipment and services will exceed tens of billions of dollars in the mid-term as the Indian economy globalizes and expands. India’s GDP, currently growing at around 7 percent, makes it one of the fastest growing economies in the world. Construction of nearly everything from airports to container ports to teleports is setting the stage to remake India.
Business Climate
The Indo-U.S. relationship is in the midst of a remarkable transformation. The two countries, politically and economically distant for much of the late twentieth century, now find their national interests converging at many points. Indian tariffs have been reduced progressively since the early 1990’s. Tariffs and poor infrastructure present the biggest obstacles to foreign investment and growth, but India’s infrastructure requirements also present trade and investment opportunities for American companies. Key factors to doing business successfully in India include: finding good partners who have knowledge of the local market and procedural issues; good planning; aggressive due diligence and follow up; and patience and commitment.
