If you compare advantages and disadvantages of investing in India, it is a very difficult question to answer. It is a big risk – but it is worth taking. Many of them have gone ahead with huge committment to India, even though possibility of failing in India is equal to the success.
If you are a regular reader of this blog I have written a lot on why you should you invest in India. In this post, I will very briefly touch upon the challenges faced. This post is also part of the series that I have been running on “Key Success Factors of doing business in India”.
Indian economy at present is doing very well, infact in last quarter India registered a GDP growth of 9.2 one of the fastest in the world. However, with it, inflation has grown at equally fast pace hovering somewhere around 6% to 7%. In the space of two years India has swung from a current account surplus to a deficit equal to 3% of GDP, indicating a growing gap between demand and supply.
A cover story in The Economist in February 2007 examined the potential for overheating of India’s economy and presented the possibility of sustainable future growth, making the inevitable comparisons with China.
The Economist observed “Perhaps the only thing really growing faster in India than China, is hype.”
Even with a huge population, India is still facing a shortage of qualified employees due to inadequacies of the public educational system. This is pushing wage rates up and eroding the cost advantage that has driven much of the economic growth in India in the past decade.
The state of Infrastructure in India is bad, if not worst. If India has to reach its goal of becoming a super power, drastic improvements are essential in roads, seaports, airports, power grids, and communication systems, as well as improved education and health care.
There is a huge difference in culture when it comes to doing business in India. However, for a westerner it is masked initially as they are used to dealing with persons of Indian origin in business contexts in the U.S and UK. Business negotiations in India are often characterized by indirection, ambiguity and seemingly endless revisiting of settled issues, and in most cases agreement is just the starting point for the next negotiation.
Corruption in government and throughout the economy adds to the cost of doing business and presents legal and ethical challenges for U.S. companies. Indian courts are said to have a backlog of 27 million cases, and it can take decades for disputes to be resolved in the courts. Patent protection is granted grudgingly and slowly. Labor laws are not very friendly. What is put forth by government officials about trade liberalization and open markets is not always what is played in reality.
India is one tough place to do business.
The picture does look grim, however, despite its many challenges and uncertainties, India is and will continue to be one of the most important nations of the 21st century, both strategically and economically, and the potential for investment by foreign corporations in India is great. Moreover, it is one of the most fascinating places on the face of the earth in which to do business.