Professional Documents
Culture Documents
Globalization and International Business: Indian Context
Globalization and International Business: Indian Context
INTERNATIONAL BUSINESS
Indian context
Observations
Perceptions about globalization and its effects vary, and have gone
through a definite cycle in the past ten years or so.
The upswing of the cycle occurred in first half of the 1990s, a period
characterized by a highly optimistic mood in industrialized countries.
Politically, the collapse of Communism in Eastern Europe at the end
of the 1980s and of the Soviet Union in 1991, and the enthusiastic
adoption of democratic systems and market oriented policies by
these countries, contributed to an air of triumphalism in the West.
These events coincided with the start of a prolonged boom in the
U.S., which was fed by extraordinary productivity gains from new
technology especially the application of IT.
The benefits of globalization were expected to flow to developing
countries also through access to export markets in industrialized
countries, while also promising a limitless supply of capital to all
well managed economies.
Observations
Observations
BUSINESS SCENARIO IN
INDIA
With the country in the grip of an economic crisis and still
reeling from the assassination of former Prime Minister Rajiv
Gandhi, an unexpected free-market champion emerged during
this dark hour in the form of Manmohan Singh, a well-regarded
economist who became Indias new finance minister in June
1991.
Singh immediately launched an ambitious slate of economic
reforms based on three pillars devaluation of the rupee,
slashing of import tariffs, and decontrol of gold imports (to
eliminate currency black market).
Singh also liberalized the industrial licensing policy and relaxed
the rules for foreign direct and portfolio investments.
BUSINESS SCENARIO IN
INDIA
From 1991 to 2011, Indias GDP quadrupled, while its forex reserves
soared more than 50-fold to over $300 billion, and exports surged 14fold to $250 billion.
The telecom sector and the introduction of cellular phones in the
1990s dramatically changed the industry.
The number of phone subscribers soared from 0.5 million in 1991 to
960 million by May 2012, the overwhelming majority of which were
cellphone users; this was not just an urban revolution but a rural one
as well, with rural users making up 35% of the subscriber base.
As a result, the number of phones per 100 people in India increased
in leaps and bounds, from just 0.02 in 1950 to almost 3 in 1990, and
over 79 in 2012.
BUSINESS SCENARIO IN
INDIA
Despite these tremendous achievements, the Indian economy was
bogged down in recent years by various factors.
These included inadequate infrastructure, a deteriorating financial
position characterized by rising fiscal and current account deficits.
Proposed
measures
include
infrastructure
development,
implementation of a goods-and-services (GST) tax that could
contribute to percentage increase in annual GDP growth, and
opening up more areas of the economy to foreign investment.
Another priority would be reducing the burgeoning subsidy bill
that had grown fivefold over the past decade to 2.6 trillion rupees
annually.
2011
2012
2013
2014
2014
Brazil
2.7%
1.0%
2.5%
0.3%
-0.4%
Russia
4.3%
3.4%
1.3%
0.2%
1.35%
India
6.3%
4.7%
5.0%%
5.6%
6.7%
China
9.3%
7.7%
7.7%
7.4%
7.5%
Definitions
FDI
means
investment
by
non-resident
entity/person resident outside India in the capital
of an Indian company under Schedule 1 of
Foreign Exchange Management Act, 2000.
Foreign Institutional Investor(FII) means an
entity established or incorporated outside India
which proposes to make investment in India and
which is registered as a FII in accordance with the
Securities and Exchange Board of India (SEBI).
Definitions
Illustration
To illustrate, if the indirect foreign investment is being calculated for Company X which
has investment through an investing Company Y having foreign investment, the
following would be the method of calculation:
(A)where Company Y has foreign investment less than 50% -Company X would not
be taken as having any indirect foreign investment through Company Y.
(B)where Company Y has foreign investment of say 75% and:
(I)invests 26% in Company X, the entire 26% investment by Company Y would be
treated as indirect foreign investment in Company X;
(II) invests 80% in Company X, the indirect foreign investment in Company X would
be taken as 80%
(III) where Company X is a wholly owned subsidiary of Company Y (i.e. Company Y
owns 100% shares of Company X), then only 75% would be treated as indirect
foreign equity and the balance 25% would be treated as resident held equity. The
indirect foreign equity in Company X would be computed in the ratio of 75:25 in the
total investment of Company Y in Company X.
(iii)The total foreign investment would be the sum total of direct and indirect foreign
investment.