India Business

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Taking the lead and fostering overall economic development – that is what India business has been targeting at for a long time. With the innumerable options of trade and business, high amount of volatility in the stock market, foreign investment flows in the country, the dollar getting over valued in terms of INR – could the India business scenario get more versatile? India definitely gives immense possibilities to everybody who wishes to start off a business here. But scouting the required opportunity and maximizing the utmost potential depends entirely on the investor.

Business in India

India's rank in ease of doing business -
2006 116

2008 120

2009 132

2010 133

So, what is the underlying reason behind this decline in the position? Actually the number of countries that have been studied for determining this index have increased from 155 to 183 over the specified time period.

What steers the India Business?

Imports and exports form the core elements of India business. To substantiate the same, the figures of currents imports and exports are respectively, $287.5 billion and $175.7 billion. India mainly imports crude oil, machinery, gems, fertilizer and chemicals whereas its export basket includes petroleum products, textile goods, germs Jewelry, Engineering goods and chemicals. India has a lower dependency on exports to foster its growth – thus in a way the exposure to global demand shocks are limited. We all know that global financial shocks act as an impediment to the country's growth. To strengthen this position, the domestic institutions should have a stronger base.

On the other hand, Foreign Direct investments (FDI), institutional investors and external commercial borrowing (ECBs) should again be the main driving force behind India's business growth, but all these factors are let loose to some extent as of now. We need to understand that FDI would not only bring in money but also better management systems, enhanced corporate governance and new technologies – all helping together to drive India's business pattern.

Highlights of India's business scenario -

  1. Massive young skilled work force, being cost effective, drives the production patterns in the country
  2. Improvement in the infrastructure and intellectual capital
  3. Progressive tax reforms
  4. Leveraging the economy to FDI inflows and outflows – generating business in turn
  5. Tailor made policies as per investor requirements.
  6. Introducing the concept of Public private partnership (PPP)
  7. More mergers and acquisitions to build brand value of the individual companies and in turn creating the India brand value.

A recent research states that the volume of mergers and acquisition In India witnessed a sharp nine times jump standing at US$ 2.27 billion during March 2009 against its volume of deals in February 2009.

Figures to prove India's healthy business status -

  • India ranks 3rd in global foreign direct investments in 2009
  • India would remain among top five attractive destinations for international investors in the next two years (UNCTAD report).
  • FDI inflows to India stood at US$ 3.5 billion in July 2009, up by 56% from the value in July 2008.
  • FDI equity inflows to the tune of US$ 10.532 billion came in India during April-July 2009.

So, with figures showing robust growth, statistics predicted to be only augmenting, India business surely has a lot more untapped potential, exploring which shall really make it the Asian Tiger.

RBI Second Quarer Review of Monetary Policy 2011-12

The RBI has brought out the second quarter review of Monetary Policy for 2011-12. RBI has decided to increase the repo-rate under Liquidity Adjustment facility by 25 basis points there by increasing the rate from 8.25 to 8.5 percent. RBI has also deregulated the saving bank deposit interest rate with immediate effect.

RBI policy decision has been based on the following basic three broad points

  1. To maintain an interest rate environment that contains inflation and anchors inflation expectations
  2. To stimulate investment activity to support growth
  3. To manage liquidity
The major risk factors for Indian Economic Growth assessed by RBI are

  1. Global macro economic environment
  2. High global commodity prices
  3. High government market borrowings which can potentially crowd out more productive private investment
  4. High food inflation
Initiates announced by RBI
  • Deregulation of Saving Bank Deposit interest rates enables the banks to freely determine their saving bank deposit rates subject to the condition that each bank will have to offer a uniform interest rate on saving bank deposit up to one lakh Rupees and secondly for deposit over one lakh rupees a bank may provide differential rates of interest if it chooses. But the bank cannot discriminate between customer to customer on similar amount of deposit
  • RBI has decided to permit domestic scheduled commercial banks other than RRBs to oopen branches in Tier 2 Centers with population of 50,000 to 99,999 without the permission of RBI.
  • In the area of Financial Markets 4 initiatives have been announced
    • First the RBI will issue the final guidelines in Interest rate Futures including Final settlement Price
    • Guidelines on Credit Default Swaps (CDS) will be made effective by end November 2011
    • Third Guidelines on short sale in government securities will be issued by December 2011
    • Forth a working group to be constituted to examine and suggest ways to enhance secondary market liquidity in the G-Sec and interest rate derivates market
  • The Reserve Bank has also announced two important measures with regard to NBFCs.
    • First, a new category of NBFCs called, Non-Banking Financial Company – Micro Finance Institutions (NBFC-MFIs), has been introduced.
    • Second, a separate set of guidelines for overseas investment by core investment companies (CICs) in both financial and non-financial sector companies will be issued.
Last updated on 10/25/2011