Business Environment: Assignment

DM253064

Positive Aspects of India's Business Environment (Next Three Years):

1. Digital Transformation: Continued advancements in digital technology and connectivity

are expected to enhance efficiency and innovation across various industries in India.
2. Government Reforms: Ongoing economic and regulatory reforms, such as the ease of
doing business initiatives, may create a more favorable environment for businesses to
thrive.
3. Youth Demographic: India's youthful population can contribute to a dynamic and
energetic workforce, fostering innovation and adaptability in the business landscape.
4. Renewable Energy Focus: Increased emphasis on renewable energy sources aligns with
global sustainability trends, potentially creating opportunities for businesses in the green
sector.
5. Global Investment: India's attractiveness to foreign investors may continue to grow,
driven by strategic partnerships, geopolitical factors, and the expanding market.
6. Boom in the Manufacturing Sector: There is a huge boom in the manufacturing sector
due to government-linked schemes like ‘Make in India’ that encourage production and
promote investment.
7. Upskilling the workforce: India has been focussing on upskilling its workforce to global
standards by investing in projects like National Skill Development Corporation (NSDC)
and Pradhan Mantri Kaushal Vikas Yojana (PMKVY) that are initiatives for skill
development.
8. The Introduction of ONDC: The open network for digital commerce is a game-changing
initiative taken by the Indian government to promote the e-commerce culture in India.
ONDC aims to counter the dominance of e-commerce giants like Amazon and Flipkart
and offer a level playing field to small business owners.

Negative Aspects of India's Business Environment (Next Three Years):

1. Infrastructure Challenges: Inadequate infrastructure, especially in transportation and

logistics, could pose hurdles for businesses in terms of timely and cost-effective
operations.
2. Bureaucracy and Red Tape: Excessive bureaucracy and red tape may persist, slowing
down decision-making processes and hindering the ease of doing business.
3. Skill Mismatch: Despite a large workforce, there might be challenges in matching the
skills of the workforce with the evolving demands of industries, potentially causing a
skills gap.
4. Economic Volatility: Economic uncertainties, both domestically and globally, could
impact businesses, affecting investment decisions and market stability.
 5. Environmental Concerns: Environmental issues, such as pollution and resource
depletion, may pose challenges to sustainable business practices, potentially leading to
increased regulations.
6. Land acquisition Struggles: Countering the growth of the manufacturing sector and
infrastructure development in general is the land acquisition struggle that is faced by the
government. These lands are usually owned by farmers and local communities who are
not willing to sell their land.
7. Complex and evolving regulations: India’s ever-evolving regulations make it quite
difficult to understand its business environment. This makes MNCs a bit hesitant to
operate in India.
8. Brain Drain: India has been going through a huge brain drain which is constantly
growing with more young individuals looking to settle abroad and work there. Most of
these individuals are highly talented which then results in loss of economic growth.

Positive:
Boom in the Manufacturing Sector:

India’s manufacturing sector has been a topic of discussion over the past few years. Due to some
stability in the political landscape, the country has seen huge interest from foreign investors to invest
in the manufacturing sector. The government itself has been very collaborative and lenient in
promoting these investments. India is a country that constantly has a Trade Deficit. To counter this
trade deficit the only option is to promote the manufacturing sector to increase exports and improve
our balance of payments. To achieve this, the government has taken a lot of initiatives to encourage
manufacturing in the country. The biggest initiative taken by the government is the “Make in India”
initiative which was launched in 2014 by Prime Minister Narendra Modi. The motive of this initiative
is to make India the global hub of manufacturing. To achieve this the government is facilitating a lot
of leniency in taxes and regulations on the industry. The government is offering reduced corporate
tax rates and exemptions from customs duties to promote this initiative. The government is actively
revisiting its policies to promote FDI in certain sectors. As a result of this, we have seen huge interest
from MNCs around the globe to set up their manufacturing units in India. Companies operating in all
major sectors have shown interest in starting manufacturing operations in India. To state a few
examples, technology companies like Apple, Samsung, Foxconn, Intel, Dell, and many more tech
companies have shown interest in establishing manufacturing facilities in India. Apple has already
started manufacturing in Karnataka. Intel has announced to invest $5 Billion for its manufacturing in
India. Automobile giant Tesla has shown interest in starting a manufacturing facility in the Indian
Market in the coming years. Companies like Harley-Davidson, Volvo, and BMW have already started
manufacturing in India and plan to expand even more. These are just a handful of examples of what
is happening in the manufacturing sector of India. The government has developed a strategic view of
India’s manufacturing sector and has developed strong foreign relations which will further help in the
growth of this sector. We are constantly observing large amounts of Foreign Direct Investments from
all around the globe. The world has recognized India’s potential in this industry majorly because of its
large young workforce, government collaboration, and overall economic standing. Overall, the Indian
manufacturing sector is expected to grow rapidly in the coming years and contribute heavily to the
country’s GDP.
Negative:
Brain Drain in India:

One of the most fatal and highly challenging problems that India has been facing currently and will
continue to face in the coming years is the problem of brain drain. Brain Drain refers to the
phenomenon wherein people who are highly skilled and belong to the crème talent of a country
leave their country to find working opportunities abroad. There are many reasons for this and most
of them are also justified in some sense which makes this problem worse.

Causes of brain drain:

Causes of brain drain include things like limited opportunities, better living standards, skill mismatch,
and Perceived lack of meritocracy. There are very limited high-paying jobs in India which makes it
appealing for individuals to look for opportunities abroad where they’ll get a better lifestyle and their
skills will be aligned with their work.

Impact of Brain Drain:

Brain drain results in loss of highly educated and capable talent which hinders growth and innovation
in various sectors. Brain drain starts a chain reaction amongst upcoming professionals which causes a
dump in their morale to work in their country. The perception of losing talents discourages other
people from pursuing higher education in their own country.

Brain Drain Statistics of India:

Over the past ten years, India has seen a considerable brain drain. A Global Business Culture report
claims that since 2011, more than 1.6 million Indian citizens have renounced their citizenship, costing
India billions of dollars in lost tax revenue. The report also notes that the term "Great Indian Brain
Drain" is being used to describe the phenomenon. Another report suggests that 1.8 million Indians
will be spending close to $85 billion on studying abroad by the year 2024. There have been loads of
surveys amongst young individuals asking about their preference for studying abroad over India.
Most of these individuals are inclined towards studying in abroad India as they understand the
benefits that foreign education offers in terms of exposure and lifestyle offered.

The solution to Brain Drain:

The solution to brain drain is simple but very tough to execute. The government can work and
collaborate with corporations to improve job market conditions in terms of opportunities and
compensation offered. The government should work on providing higher-quality education with
incentives like scholarships and research opportunities. Building a supportive ecosystem that
promotes national pride and encourages working in India. This can be done by promoting the success
stories of established Indian entrepreneurs and showcasing India’s potential for growth.