The Emerging Market in India - dummies

The Emerging Market in India

By Ann C. Logue

India is a diverse country that’s always been open to the rest of the world, and its emerging marketplace shows the power of a diverse, open economy.

Although only 60 percent of the people are literate, most who have an education understand English — it’s one of two official languages of the government — making India the largest English-speaking nation in the world after the United States.

A program of economic liberalization started in 1991 led to rapid growth. India’s large population and low starting point mean that it can sustain much faster average long-term growth than most other countries on earth.

India has its own numbering system that uses a number that’s between a thousand and a million: the lakh, which is equal to one hundred thousand. If a company reports earnings of 20 lakhs rupees, that means it earned 2 million of them. Another number, the crore, is equal to 10 million. A company with assets of 100 crores rupees has 1 billion rupees in assets.

What you should know about India:

  • Type of government: Federal republic

  • Major industries: Armaments, caustic soda, cement and other construction materials, ferrous and nonferrous metal fabrication, fertilizers, food processing (particularly sugar refining and vegetable oil production), petrochemicals, petroleum, textiles

  • Currency: Indian rupee

  • English-language newspaper: The Times of India

The pros of doing business in India

India has huge scale growing off of a small economic base. Even small improvements in income, when multiplied across more than a billion people, add up to big money. That opportunity is huge, but it’s not the only one:

  • Saving big to encourage enterprise: Indians are big savers, so Indians who want to start businesses have access to local capital — from family members or local banks. The country’s culture encourages enterprise.

  • Improving infrastructure: India has long been hampered by poor infrastructure, ranging from dirt roads (if roads exist at all) to electrical systems with frequent blackouts. The infrastructure is improving, though, slowly but surely.

  • Serving the bottom of the economic pyramid: Much of India’s population is poor, but Indian companies have been developing products, services, and packaging to appeal to people who have little cash and small savings but who want to lead a better life.

Risks of doing business in India

Although India’s growth and prospects have all the excitement of a big Bollywood movie, the country has some real challenges that could derail its progress:

  • Ethnic tensions: The diversity that is one of India’s strengths is also one of its weaknesses. Myriad religious and ethnic groups mostly get along, but not always, and the tensions can get ugly. These tensions have spilled into three wars with Pakistan, and several assassinations and bombings. Ethnic tensions are constant and not easy to resolve.

  • Petty corruption: India is notorious for its petty corruption, inefficient operations, and incompetent bureaucracy. On top of governmental snags, almost any commercial activity involves a chain of inefficiencies.

    The hassles are frustrating to Indians and to overseas business people. Unless these issues are addressed, India’s growth rate will be held back.

  • Extreme poverty: India’s population skews young, poor, male, and poorly educated. The shortage of skilled workers is driving up wages for Indians who do have an education and leaving everyone else behind. The frustration of these energetic, young people without jobs or direction may well drag the country down.