India is today, considered as the seventh largest, and the world's second most populated country, with 1.1 billions inhabitants. Due to a series of reforms conducted since 1991, India has become the second fastest growing economy with an annual growth rate of around 8% over the last three years, offering opportunities for foreign businesses. India became independent in 1947. At the beginning, government monopolies concentrated more in industrial sectors such as telecommunications, chemical etc., constraining the growth of the private sector. Private companies needed the approval of the government for business activities, called 'License Raj', to diversify a new product. In the mid-1960s, the government decided to strengthen its policy towards foreign investment. Companies like Coca-Cola or IBM chose, at this time, to leave India, preferring not to follow the new strict legislation. Finally, in 1991, the system was unable to deliver any kind of economic progress. The government, facing a grave balance of payments crisis, received loans from the International Monetary Fund, on the condition that it opens up the economy. Manmohan.Singh, then the finance minister, now the prime minister launched a huge economic reforms process, Import and export restrictions were almost banned. Foreign investments were allowed in several areas, such as the telecommunications industry, air transport etc. The 'License Raj' system was banned. The government also introduced a privatization program for India's state owned business, some 40% of which were in crisis in the early 1990s.
[...] This industry is expected to grow considerably because of a large urban middle class with change in their food habits. The government intends to improve the level of food processing from 2 percent to 25 per cent by 2025. There are major investment possibilities in food processing, in a wide range of areas from the fruits and vegetables to beer and alcoholic drinks. The market is evaluated at $70 billion.[8] 3. Risk involved The liberalization of the Indian market has created huge opportunities for foreign investors. [...]
[...] Consequently, the Indian parliament banned the sales of these products in the country. To avoid bad publicity, Coke and Pepsi decided to work together against those allegations. The testing revealed luckily that the pesticide quantity in the soft drinks was within the requiring norms.[9] Bureaucracy/Corruption Bureaucracy and corruption remains as major problems for foreign companies investing in India. To manage these risks, foreign companies should develop and keep good and friendly relationships with various stakeholders and political parties. For instance, Hindustan Lever, a subsidiary of Unilever, benefits from an excellent image in India. [...]
[...] The major stake for India is its ability to provide millions of jobs for millions who enter the workforce annually Recommendations It seems that the main problem were faced by the foreign companies who had incorrect assessment of the nature and size of the Indian market. Companies could enter into a strategic partnership with local companies. With Arvind Group, Indian largest producers of denim clothes, Lee was able to get introduced to the Indian market with international standard branded products at a suitable price for target customers.[15] To conclude, companies must demonstrate adaptability in several dimensions; strategy, organizational and cultural, if they want to prosper in India. [...]
[...] Available from: http://news.bbc.co.uk/2/hi/south_asia/4103554.stm, [accessed 10.11 .2006] Cites as: (K. Basu 2005) – U.S. Department of State FY 2001, Country Commercial Guide: India. Available from: http://www.state.gov/www/about_state/business/com_guides/2001/sa/india_ccg 2001.pdf [accessed 11.11 .2006], pp.78- – KPMG, Destination India. [...]
[...] It is thus advisable not to invest in the extreme north-eastern zone of India because of those terrorist threats. Anyway, current laws are restricting investment activities in those areas like in Kashmir. Nationalism Despite the liberalization of its economy, Indian nationalism is still present. As an example, several privatizations introduced by the Indian government where dedicated to domestic buyers rather than foreign companies. Recently Coca-Cola and Pepsi were accused by the Centre for Science and Environment, a non-governmental Indian organization, of having exceeded the European Union norms concerning the level of pesticides in their soft drinks. [...]
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