UNIT II

POLITICAL & LEGAL

BUSINESS ENVIRONMENT
Objectives
• Political institutions:
▫ Legal
▫ Executive
▫ Judiciary
▫ Role of government in business
• Types of economies
▫ Capitalism
▫ Socialism
▫ Mixed economy
• Challenges of India Economy
• Critical sectors of Indian business
 Political Environment
• Refers to the 3 political institutions – legislative,
judiciary and executive.
• It is the result of the political stability and systems
prevailing in the country
• Business and politics are closely inter related and
heavily dependent on each other
• Political systems and framework may or may not be
favorable to business
• Political environment is usual sensitive, fluid and
flexible
• It directly affects business and hence economy creating
a chain reaction for either progression or recession
• Political reforms and subsidies aid in developing
business or may even hamper their growth and scope
 Political Institutions
• A Legislature is the law-making body of a political unit,
usually a national government, that has power to enact,
amend, and repeal public policy. Laws enacted by legislatures
are known as legislation. 
• Judiciary is responsible for interpreting and applying law. It
has to look into the exercise of authority by the executives is
according to the general rules laid down by the legislature.
• The Executive branch is the part of the government that has
its authority and responsibility for the daily administration of
the state. The executive branch executes, or enforces the law.
The division of power into separate branches of government
is central to the idea of the separation of powers.
Scope of Government
• Laws and regulations
• Consumer Protection
• Employee Protection
• Environment Protection
• Investor Protection
• Taxation
• Small scale industry growth
• Money supply and credit
• Infrastructure
• R&D
Role of Government in Business
• Government represent the country and its people
• It is given power to make laws and rules for the smooth
functioning of economic and non economic activities
• Its control business activities through various policies like
industrial, fiscal, monetary, foreign investment etc
• Government’s superiority over business is universally accepted
• They should be cordial relationship between government and
business to ensure development and growth of economy.
• Associations of business men like Trade Associations,
Chambers of Commerce ensure the connecting link between
business and the changing governments to ensure cordial
relations and proper communication understanding.
Need for Government Regulation
• To ensure balanced economic / industrial growth
• To regulate unfair business practices and operations
• To control the growth of monopolies or monopolistic
activities; concentration of wealth in certain industries
or sectors
• Avoid exploitation of social groups
• Control the distribution systems and channels for
uniform and standardized availability
• Regulate inflow and outflow of foreign capital and
investments
• Equal growth of all sectors
Responsibility of Business towards
Government

• Pay taxes regularly

• Respect and follow commercial, industrial and other
applicable laws and rules
• Avoid corrupt or unethical issues and practices
• Avoid influencing or abusing political connections
• Assist government in policies and systems
• Proper corporate governance – clean, clear and
communicated
• Encourage exports
Tools and Techniques for Regulations

I. Industrial Licensing
II. Privatization
III. Devaluation
IV. Export – Import
V. Regulation of Foreign Investment
VI. Collaboration
 Legal Environment
• Net result of the various laws, reforms, regulations made
by the government in regard to the formation and
operations of business
▫ Industries Act – 1951
▫ MRTP Act – 1969
▫ FEMA Act – 2000
▫ The Indian Companies Act – 1956
▫ Consumer Protection Act – 1986
▫ Environment Protection Act – 1986
• Framework for business to set up and set objectives
Ensures protection of consumers, investors, employees
and environment
• Strict regulations lead to a conservative or restrictive
environment affecting business growth
Components of Legal Framework
• Fundamental Rights:
▫ Right to Equality
▫ Right to Freedom
▫ Right against Exploitation
▫ Right to freedom of Religion
▫ Right to Constitutional Remedies
• Writs:
▫ Habeas Corpus
▫ Writ of Certiorari
▫ Writ of Mandamus
▫ Writ of Quo-Warranto
▫ Writ of Prohibition
• Directive Principles of State Policy: Article 36 to 51
Current Indian Economic Environment
Preference for the Public Sector
Introduction to the Economic Reforms
Linking Indian economy with Global economy
Continuous process of economic reforms
Problems of minority government
Current positions:
Fiscal policy
Infrastructure
Recapitalizing banks
Black money
Global recession
FDI
Types of Economies
Capitalism
• Capitalism is an economic system in which the means of
production are privately owned and operated for profit,
usually in competitive markets.
• In other words; An economic system in which investment
in and ownership of the means of production, distribution,
and exchange of wealth is made and maintained chiefly by
private individuals or corporations.
• Under this system, the means for producing and
distributing goods (the land, factories, technology,
transport system etc) are owned by a small minority of
people. They are called as the capitalist class.
• The majority of people must sell their ability to work in
return for a wage or salary (the working class.)
• Benefits of Capitalism
 In years 1000–1820 world economy grew six-fold, in
years 1820–1998 world economy grew 50-fold
 Provides Choice to customers
 Provides valuable goods and services
 Capitalism actively rewards positive traits like hard work
 Similarly, it punishes negative traits such as laziness and
theft
 Narrows the gap between common person and wealthy
 Provides opportunity to realize dreams and desires
 Capitalist societies usually do not have large black
markets
 Build on democracy
 Social Good
• Major limitations/ Criticism:
 Downfall of work ethics
 Free Market + Self Interest
 Accumulation of wealth
 Encourages inequality in a society
 Business lobbying with government
 Monopolistic tendency
 Human resource exploitation
 Results in great disparities between income of
people owning the capital resources and others
Socialism
• Collective ownership and democratic control of the material
means of production by the workers and the people
• Socialism is a term applied to an economic system in which
property is held in common and not individually, and
relationships are governed by a political hierarchy.
• Common ownership doesn't mean decisions are made
collectively. Individuals in positions of authority make
decisions in the name of the collective group.
• Socialists argue that socialism would allow for wealth to be
distributed based on how much one contributes to society, as
opposed to how much capital one holds.
• A primary goal of socialism is social equality and
a distribution of Wealth based on one’s contribution to
society and an economic arrangement that would serve the
interests of society as a whole.
Benefits of Socialism  Criticism of Socialism
1. Better salaries 1. Distorted price
2. Stable Environment signals
3. Eliminates poverty 2. Suppression of
4. Better Products economic democracy
5. Fulfills survival need 3. Slow Technological
6. Opportunity for advancements
citizens to explore 4. Minimize self
non-economically - management
productive pursuits 5. Reduced incentives
 BASIS CAPITALIST ECONOMY
Resources Ownership Privately owned
Foundation belief Competition brings out the best
in people
Earning of wealth Everyone works for his own
wealth
Market Scenario Level playing field
Govt. interference Only in situations where laws
have been broken
Employees motivation Highly motivated on account of
proportional benefits
Merit Perception of better economic
growth because of competition
Demerit Few individuals/groups attain
powers, rest are exploited
SOCIALIST ECONOMY
State owned
Cooperation is the best way
for people to coexist
Everyone works for wealth
which is distributed equally
to everyone
Protection to PSUs, Private
enterprises are permitted in
few businesses only
Fully involved
Rarely motivated as
performance is not rewarded
Equal distribution of income
results in welfare of all
Hard work is not rewarded,
lazy employees also enjoy
equal level of benefits
Mixed
• Any economy in which private corporate enterprises and
public sector enterprises exist side-by-side, and
decisions taken through market mechanism are
supplemented by some form of partial planning, is to be
described as a mixed economy.
• Provides a clear demarcation of the boundaries of public
sector and private sector so that the core sector and
strategic sectors are invariably in the public sector.
• The government intervenes to prevent undue
concentration of economic power, and monopolistic and
restrictive trade practices.
Challenges before Indian Economy
1. Effective foreign trade:
• Foreign trade is one of the most important factor of Indian
economy. It is considered as the “ Engine of Growth”.
• This is a challenging task, a challenge in respect of
upgradation of technology, reducing costs, increasing
productivity, and improving quality of goods and services to
meet international standards.
• A developing country like India, cannot reduce its imports
because it needs them for the development of the economy.
• The low percentage in the world trade bring about the fact
that India has not yet exploited its comparative advantage in
many areas.
• Agriculture and services are two main areas where India
has large opportunities to acquire the cost advantage to
increase its share.
2. Regulating the role of Foreign Direct Investment (FDI)
 Foreign Direct investment comes in India mainly through
multi-national corporations.
 These investments bring more money to India.
 They help in capital formation, increase economic growth,
help in reducing balance of payments deficit, supplements
country’s resources, promotes industrial in agricultural
developments, etc.
 In a way, FDI is very helpful but one challenge before Indian
economy is that in many areas FDI has been allowed to the
extent of 100%, due to this many MNC’s may takeover Indian
business and rule over us.
 The Government has to see that FDI should create more
opportunities then threats for India, otherwise liberalization
and globalization will be of no use in fact, it will lead to
unnecessary problems before Indian economy
3. Developing Infrastructure
The major areas where India needs to develop is power, transport and
telecommunication
A. Power: Power or electricity is one of the major sources of commercial
energy.
• There has always been a gap between demand for and supply of power
in India, leading to power shortages.
• This badly affects the production and productivity in the industrial and
agricultural sectors.
• The power sector is having problems at present due to heavy
transmission and distribution losses, low user charges and poor
operational and technical efficiencies.
• The government has taken over various measures like restructuring of
State Electricity Boards, reduction in political interference in tariff
determination, opening power sector to private sectors, delicensing the
generation of power, launching mission 2012- power for all”
B. Roads - PRADHAN MANTRI GRAM SADAK YOJANA
• Roads in India are divided into National Highways, State Highways,
District roads and Village roads.
• Central government is given the responsibility of development of
National Highways, while all other roads are the responsibility of the
state governments.
• India has more than 3 million km of road network, making it one of
the largest in the world. However, the quality of roads is not able to
meet the need of efficient and fast moving transportation.
• Road transport is very important in India as it has various advantages
over other modes of transport. This is because:
 Roads connect remote and far-away places that are not reachable by
railways
 The goods arriving by trains, are reached to their destination
through road transport
 It is more flexible means of transport as it can change route
according to the need of the user
 It is more suitable to carry perishable goods and less bulky goods. 
C. Telecommunication:
▫ Most essential infrastructure in the Indian economy.
▫ With the introduction of cell phone and internet facility the
Indian business scenario has rapidly increased and seen a
boom of nearly 540% in its growth.
▫ Many international cellular companies are now investing in
India due to its massive and increasing demand and market
base.
▫ Companies from all across the world have a market presence
in India providing Indians with a variety of products to
enhance lifestyle
▫ This sector has recently witnessed few major scams
amounting to whopping 1766.45 billion Rs.
▫ This is one sector which is developing at a rapid pace and
india must tap its potential in most optimal manner for
economic growth and development.
Misc….
• 4. Inflation
• 5. Social Inequalities
• Poverty
• Unemployment etc
Sun Rise Sectors
of
Indian Business
FIGHTRIP
• IT
• Health Care
• Tourism
• Retail
• Pharma
• Infrastructure
• Food Processing
• Gems & Jewelry
Food Processing
• The food industry is expected to grow at a CAGR of 11% to
US$65.4 billion by 2018.
• Food and grocery account for around 31 per cent of India’s
consumption basket.
• The government through the Ministry of Food Processing
Industries (MoFPI) is making all efforts to encourage
investments in the business.
• It has approved proposals for joint ventures (JV), foreign
collaborations, industrial licenses and 100 per cent export
oriented units.
• The Indian food and grocery market is the world’s sixth
largest, with retail contributing 70 per cent of the sales
• According to the data provided by the Department
of Industrial Policies and Promotion (DIPP), the
food processing sector in India has received
around US$ 6.82 billion worth of Foreign Direct
Investment (FDI) during the period April 2000-
March 2016.
• The Confederation of Indian Industry (CII)
estimates that the food processing sectors have
the potential to attract as much as US$ 33 billion
of investment over the next 10 years and also
generate employment of nine million person-days.
• Union Minister, Harsimrat Kaur Badal
• Ministers of State, Niranjan Jyoti
• Functions:
▫ Policy support and developmental
▫ Promotional and technical
▫ Advisory and regulatory
• Goals of MOFPI:
▫ Better utilization and value addition of agricultural produce for
enhancement of income of farmers.
▫ Minimizing wastage at all stages in the food processing chain by the
development of infrastructure for storage, transportation and processing of
agro-food produce.
▫ Induction of modern technology into the food processing industries from
both domestic and external sources.
▫ Maximum utilization of agricultural residues and by-products of the
primary agricultural produce as also of the processed industry.
▫ To encourage R&D in food processing for product and process development
and improved packaging.
▫ To provide policy support, promotional initiatives and physical facilities to
promote value added exports
Major Investments:
• Di Bella, the Australia-based coffee chain, plans to invest Rs 67 crore for setting up
around 20 new outlets in Mumbai, besides entering Delhi and Bangalore by 2017.
• PureCircle, a Malaysia-based natural sweetener producer, plans to invest around Rs
1,300 crore in India to set up a manufacturing plant and make the country its
regional production and export hub in the next five years.
• Swiggy, a food delivery start-up owned by Bundl Technologies Private Limited, has
raised Rs 230.34 crore in a Series C funding round, with its existing investors SAIF
Partners, Accel Partners, Norwest Venture Partners and Apoletto Asia Ltd
contributing 79 per cent of the new funds raised.
• Gujarat Cooperative Milk Marketing Federation (GCMMF), popularly known as
'Amul', plans to invest Rs 5,000 crore to establish ten new processing plants as well
as expand the current capacity to touch 32 million litres per day capacity by 2020.
• American doughnut chain Dunkin' Donuts has tied up with local online grocery
delivery platform Grofers for home-delivery of its packaged and freshly made
products.
• Zomato, a restaurant search and discovery platform, has raised US$ 60 million from
Singapore government-owned investment company Temasek, along with existing
investor VY Capital, in order to explore new business verticals.
• ITC Limited plans to invest Rs 800 crore (US$ 117.4 million) to set up a world-class
food processing facility in Medak, a district located in Telangana. The company has
also formulated plans to enter the dairy market.
Major Govt Initiatives:
• The Government of India allocated Rs 1,500 crore and announced various
measures under the MEIS, including setting up of agencies for aquaculture and
fisheries in coastal states and export incentives for marine products.
• Union Budget 2016-17 has proposed 100 per cent FDI through FIPB route in
marketing of food products produced and manufactured in India.
• In Union Budget 2017-18, the Government of India has set up a dairy processing
infra fund worth Rs 8,000 crore.
• The FSSAI has issued new rules for importing products, to address concerns over
the entry of sub-standard items and simplify the process by setting shelf-life
norms and relaxing labelling guidelines.
• Spices Board, set up by the Ministry of Commerce to develop and promote Indian
spices worldwide, aims spice exports of US$ 3 billion by 2017.
• The FSSAI plans to invest around Rs 482 crore to strengthen the food testing
infrastructure in India, by upgrading 59 existing food testing laboratories and
setting up 62 new mobile testing labs across the country.
• The ICFNR will adopt international best practices for research in fertilizer sector,
which will enable farmers to get good quality fertilizers at affordable rates and
thereby achieve food security for the common man.
 IT
• IT sector accounts for 45% share in total Indian services export.
• IT sector accounts for 56% of the total global outsourcing
market - 640 offshore development centers in more than 80
countries.
• IT sector constitutes ~ 9.3% of India's GDP.
• IT employees 10 million workforce.
• The Indian IT sector is expected to grow at a rate of 12-14 per
cent for FY2016-17 in constant currency terms.
• Indian IT industry is expected to grow to USD 300 billion by
2020.
• India ranks third among global start-up ecosystems with more
than 4,200 start-ups
Growth Drivers:
• Emerging geographies and verticals, non-linear growth due to
platforms, products and automation.
• Revival in demand for IT services from US and Europe.
• Increasing adoption of technology and telecom by consumers
and focused government initiatives.
• Use of IT in emerging verticals (retail, healthcare, utilities).
• India has been creating a future-ready digital workforce, with
more than 15 million employees SMAC (social, mobile,
analytics, cloud) skills.
• USD 1.6 billion is spent annually on training workforce and
growing R&D spend.
• The National Optical Fibre Network (NOFN) is being laid down
in phases to connect all the 0.25 million gram panchayats in the
country.
• The government's Digital India Campaign
Major IT developments
• Reliance Industries Ltd (RIL) plans to set up entrepreneurship hubs in key cities
and towns, and a Rs 5,000 crore (US$ 748 million) fund, under the name of Jio
Digital India Startup Fund, to invest in technology based startups.
• Gurgaon-based digital wallet start-up MobiKwik, which is owned and operated by
One MobiKwik Systems Private Limited, has raised US$ 40 million from Nasdaq-
listed firm Net1, a South African payments technology company.
• Mumbai-based baby care and kids products e-tailer, Hopscotch.in, has raised US$
13 million in a Series C round of funding from Facebook co-founder Mr Eduardo
Saverin, which will help the firm in growth and expansion of its technology
platform.
• India’s top-tier IT company, Infosys Ltd, has bought a minority stake worth US$ 3
million in Whoop, which is a US-based start-up that makes activity trackers worn
by athletes.
• Microsoft Ventures is planning to incubate 500 start-ups in India in the next five
years with a vision to create a viable and profitable business out of the booming
start-up sector in India.
• Intel Corp plans to invest about US$ 62 million in 16 technology companies,
working on wearable, data analytics and the Internet of Things (IoT), in 2015
through its investment arm Intel Capital. The Indian IoT industry is expected be
worth US$ 15 billion and to connect 28 billion devices to the internet by 2020.
 Govt initiatives for IT sector
• Mr Ravi Shakar Prasad, Minister of Communication and Information Technology,
announced plan to increase the number of common service centres or e-Seva
centres to 250,000 from 150,000 currently to enable village level entrepreneurs to
interact with national experts for guidance, besides serving as a e-services
distribution point.
• The Government of Telangana has signed an agreement with network solutions
giant Cisco Systems Incorporation, to cooperate on a host of technology initiatives,
including Smart Cities, Internet of Things, cybersecurity, education digitisation of
monuments.
• Government of India is planning to develop five incubation centres for 'Internet of
Things' (IoT) start-ups, as a part of Prime Minister Mr Narendra Modi's Digital
India and Startup India campaign, with at least two centres to be set up in rural
areas to develop solutions for smart agriculture.
• The Government of Telangana has begun construction of a technology incubator in
Hyderabad—dubbed T-Hub—to reposition the city as a technology destination. The
state government is initially investing Rs 35 crore (US$ 5.14 million) to set up a
60,000 sq ft space, labelled the largest start-up incubator in the county, at the
campus of International Institute of Information Technology-Hyderabad (IIIT-H).
Once completed, the project is proposed to be the world’s biggest start-up
incubator housing 1,000 start-ups.
HealthCare
• Healthcare comprises hospitals, medical devices, clinical trials,
outsourcing, telemedicine, medical tourism, health insurance and medical
equipment.
• Rise in population and increasing life expectancy underline the high
domestic demand for healthcare services.
• Currently, India stands at a cross-road of high-end, multi-specialty private
healthcare services on one end and lack of doctors, support staff,
medicines and facilities at the other. 
• The overall Indian healthcare market is worth around US$ 100 billion and
is expected to grow to US$ 280 billion by 2020, (CAGR) of 22.9 per cent.
• Over 80 per cent of the antiretroviral drugs used globally to combat AIDS
are supplied by Indian pharmaceutical firms
• A total of 3,598 hospitals and 25,723 dispensaries across the country offer
AYUSH (Ayurveda, Yoga & Naturopathy, Unani, Siddha and Homoeopathy)
treatment, thus ensuring availability of alternative medicine and
treatment to the people.
Challenges of the sector

• Most of the skilled medical workforce is being sought out

by countries in Europe and the Middle East and retained
by attractive compensation packages there vis a vis India.
• Compliance to regulations is still a cause for concern in
both government as well as private-run organizations.
Major Investments:
• Cisco Systems Inc has entered into an agreement with Bengaluru-based
healthcare services provider Narayana Health, to deliver affordable
specialty healthcare services to patients remotely in various parts of the
country using its Virtual Expertise Digital Solution.
• Aster DM Healthcare plans to invest Rs 600 cr in various Kerala-based
healthcare projects over the next three years.
• Apollo Hospitals Enterprise (AHEL) plans to add another 2,000 beds over
the next two financial years, at a cost of around Rs 1,500 Cr.
• Malaysia-based IHH Healthcare Berhad has agreed to buy 73.4 % stake in
Global Hospitals Group, India's fourth-largest healthcare network, for Rs
1,284 Cr.
• Carlyle Group acquired a stake in Metropolis Healthcare Limited, an
operator of pathology laboratories in India, for an undisclosed sum.
• San Francisco-based Fitbit Inc., a fitness-tracking device maker, has
launched its fitness wristbands across 300 towns in India and expects the
country to be among its top five markets in next two years.
 Govt. Initiatives
• The government has announced that 3,000 Jan Aushadhi Stores (JAS) will be opened
under Pradhan Mantri Jan Aushadhi Yojana (PMJAY) across the country by the end of
March 2017.
• A new health protection scheme for health-cover up to Rs 1 lakh per family.
• Setting up 3,000 medical stores across the country to provide quality medicines at
affordable prices.
• Senior citizens will get additional healthcare cover of Rs 30,000 under the new scheme
• A unique initiative for healthcare 'Sehat' (Social Endeavour for Health and
Telemedicine) has been launched at a government run Common Service Centre (CSC)
to empower rural citizens by providing access to information, knowledge, skills and
other services in various sectors through the intervention of digital technologies and
fulfilling the vision of a ‘Digital India’.
• Mr J P Nadda, Union Minister for Health & Family Welfare, Government of India has
launched the National Deworming initiative aimed to protect more than 24 crore
children in the ages of 1-19 years from intestinal worms, on the eve of the National
Deworming Day.
• All the government hospitals in Andhra Pradesh would get a facelift with a cost of Rs
45 crore, besides the establishment of 1,000 generic medical shops across the State in
the next few months.
Tourism
• The government has allocated about Rs 413 crore for
promotion and publicity activities in India and abroad,
including market development assistance, to woo tourists
• India has moved up 13 positions to 52nd rank from 65th in
Tourism & Travel competitive index
• The tourism and hospitality sector is among the top 10 sectors
in India to attract the highest Foreign Direct Investment (FDI).
• India is host to 35 world heritage sites, 10 bio-geographical
zones and 26 biotic provinces.
• India has 21 Central institutes of hotel management
• In India, 78 jobs are created with every USD 1 million invested
in the sector.
• India is 15th in the world in terms of International Tourism
Receipts with a share of 1.62% of the world's tourism receipts
Major Intitiatives:
• AccorHotels, Australia's largest hotel operator has entered
into an agreement with the Australia India Travel & Tourism
Council to strengthen and promote tourism between
Australia and India.
• Global hospitality Major Carlson Rezidor Hotel Group, the
largest foreign hotel brand in India by number of hotels,
plans to increase its total count to 120 hotels in India by
2020.
• Marriott International Inc, is now looking for expanding its
operations in North India, including prominent cities in Uttar
Pradesh like Kanpur, Varanasi and Agra.
• IRCTC has partnered with OYO Rooms, to provide
standardized accommodation options to train travelers.
• Goldman Sachs, New-York based multinational investment
banking fund, has invested Rs 255 crore in Vatika Hotels
Govt Initiatives:
• Government of India plans to cover 150 countries under e-visa
scheme by 2017.
• Under ‘Project Mausam’ the Government of India has
proposed to establish cross cultural linkages and to revive
historic maritime cultural and economic ties with 39 Indian
Ocean countries.
• The first Incredible India Tourism Investment Summit 2016,
which was organised from September 21-23, 2016, witnessed
signing of 86 Memoranda of Understanding worth around Rs
15,000 cr, for the development of tourism and hospitality
projects.
• The Ministry of Tourism has approved projects worth Rs 450
crore under the Swadesh Darshan scheme, for the
improvement and creation of tourism infrastructure in
Madhya Pradesh, Uttarakhand, Tamil Nadu, Uttar Pradesh and
Sikkim.
Pharma
• The pharmaceutical industry in India ranks 3rd in the world
terms of volume and 14th in terms of value.
• India’s generic drugs account for 20% of global exports in
terms of volume, making the country the largest provider of
generic medicines globally.
• India’s cost of production is significantly lower than that of
the USA and almost half of that of Europe.
• It has skilled workforce and high managerial and technical
competence.
• Economic prosperity is likely to improve affordability for
generic drugs in the market.
• Mr Ananth Kumar, Union Minister of Chemicals and
Petrochemicals, has announced setting up of chemical
hubs across the country, early environment clearances in
existing clusters, adequate infrastructure, and
establishment of a Central Institute of Chemical
Engineering and Technology.
• Indian vaccines are exported to 150 countries. India
produces 40-70 per cent of the WHO demand for DPT &
BCG and 90 per cent of measles vaccine. 
• Presently over 80 per cent of the antiretroviral drugs used
globally to combat AIDS (Acquired Immuno Deficiency
Syndrome) are supplied by Indian pharmaceutical firms.
Major investments:
• India’s largest drug maker Sun Pharmaceutical Industries
Limited has entered into a distribution agreement with
Japan's Mitsubishi Tanabe Pharma Corporation to market 14
prescription brands in Japan.
• India’s third largest drug maker Lupin Limited plans to file
its first biosimilar Etanercept for approval in Japan, world’s
second largest drug market, in 2017.
• International Finance Corporation (IFC), the investment arm
of the World Bank, plans to invest upto US$ 75 million in
Glenmark, which is looking to raise around US$ 200 million
for expansion and the launch of several new products in
India and other emerging markets over the next three years.
• Cipla Limited plans to invest around Rs 600 crore to set up a
biosimilar manufacturing facility in South Africa for making
affordable cancer drugs and growing its presence in the
market.
• Glaxosmithkline Pharmaceuticals has started work on its
largest greenfield tablet manufacturing facility in Vemgal in
Kolar district, Karnataka, with an estimated investment of
Rs 1,000 crore.
• Several online pharmacy retailers like PharmEasy, Netmeds,
Orbimed, are attracting investments from several investors,
due to double digit growth in the Rs 97,000 crore Indian
pharmacy market.
Govt Initiatives
• The government introduced mechanisms such as the drug price
control order and the national pharmaceutical pricing authority to
deal with the issue of affordability and availability of medicines.
• The government plans to set up 8 mini drug-testing laboratories
across major ports and airports in the country, which is expected to
improve the drug regulatory system and infrastructure facilities by
monitoring the standards of imported and exported drugs and
reduce the overall time spent on quality assessment.
• The department of pharmaceuticals has set up an inter-ministerial
co-ordination committee, which would periodically review,
coordinate and facilitate the resolution of the issues and constraints
faced by the Indian pharmaceutical companies.
• The department of pharmaceuticals has planned to launch a venture
capital fund of Rs 1,000 cr to support start-ups in the research and
development in the pharmaceutical and biotech industry.
Infrastructure
• Infrastructure sector includes power, bridges, dams,
roads and urban infrastructure development. 
• Foreign Direct Investment (FDI) received in
construction development sector from April 2000 to
March 2016 stood at US$ 24.19 billion, according to
the Department of Industrial Policy and Promotion
(DIPP).
• In August 2016, India jumped 19 places in World
Bank's Logistics Performance Index (LPI) 2016, to
rank 35th amongst 160 countries.
Major Investments
• The Asian Development Bank (ADB) has approved $ 631
million loan to develop the first coastal corridor, namely the
Vishakhapatnam-Chennai industrial corridor, which is
expected to bring manufacturing and export industries to the
east coast.
• Silver Spring Capital Management, a Hong Kong-based equity
hedge fund, plans to invest over Rs 2,000 cr in Hyderabad-
based infrastructure developer Transstroy India Ltd, for
construction of highways in the country.
• Maharashtra State Government plans to launch infrastructure
projects worth Rs 73,367 crore in Mumbai and neighboring
areas in 2016, which include coastal road, Trans harbor link,
metro rail, airport and road projects.
• France has announced a commitment of $ 2.17 billion to
convert Chandigarh, Nagpur and Puducherry into smart cities.
Govt. Initiatives
• The Reserve Bank of India (RBI) has allowed companies in
the infrastructure sector to raise External Commercial
Borrowings (ECB) with a minimum maturity of five years
and with an individual limit of US$ 750 million for
borrowing under the automatic route.
• The central government has approved amendments to 'The
National Waterways Bill, 2015' which will provide for
enacting a central legislation to declare 106 additional
inland waterways, as the national waterways.
• The Reserve Bank of India (RBI) has notified 100 per cent
foreign direct investment (FDI) under automatic route in
the construction development sector. 
Gems & Jewelry
• India exports 95% of the world’s diamonds - the Gems and
Jewelry Export promotion Council (GJEPC)
• In FY 2014-15, the sector constituted 13.30% of the
country’s total merchandise exports
• The Indian government presently allows 100 per cent
Foreign Direct Investment.
• The overall net exports of Gems & Jewelry during April-
December 2016 stood at Rs 175,879.24 cr, whereas exports
of cut and polished diamonds were Rs 113,171.17 cr.
• Exports of gold coins and medallions stood at Rs 25,819.48
cr and silver jewellery export stood at Rs 18,010.72 cr
during April-December 2016 through the automatic route.
Major Investments
• The International Institute of Diamond Grading &
Research (IIDGR) has invested US$ 5 million for
expanding its synthetic diamond testing facility in Surat.
• Kalyan Jewellers plans to invest Rs 500 cr to add 15 new
showrooms in 2017 and Rs 900 cr over the next three
years to expand its presence in the international markets
like Sri Lanka, Singapore and Malaysia.
• Major mining companies such as Rio Tinto, De Beers and
Alrosa have decided to participate in the Indian Diamond
Trading Centre (IDTC) which has been set up to eliminate
the middlemen in diamond trade and allow Indian
manufacturers to deal directly with miners.
Govt. Initiatives
• The Government of India’s proposal to cut corporate tax rates
to 25 per cent for micro, small and medium enterprises
(MSMEs) having annual turnover up to Rs 50 cr will benefit a
large number of gems and jewelery exporters from MSME
category.
• The Reserve Bank of India has announced norms for gold
monetization scheme, which allows individuals, trusts and
mutual funds to deposit gold with banks in return for interest,
to help reduce gold imports and alleviate pressure on trade
balance.
• The Gems and Jewelry Skill council plans to tie-up with the
existing training institutes including Gemological Institute of
America (GIA) and Indian Gemological Institute (IGI), along
with setting up of new institutes in major diamond cutting
and processing centres
RETAIL
SECTOR
A) Evolution of Indian Retail Industry:
▫ Historical Indian retail market consisted of weekly markets,
village fairs and melas.
▫ The 19th century gave birth to the retail outlets which took the
form of convenience stores, Mom and Pop stores/ Kirana stores.
▫ This helped the consumers on to stick to a particular store for
their day to day requirements and also avail the credit
purchasing -facility.
▫ And in the 1980's people have seen the new formats like
supermarket, departmental stores and discount stores entering
into the Indian retail space bringing in the concept of "one stop
shopping."
▫ The malls became the trend setters in the new millennium. This
has coined the term of ‘shoppertainment' (shopping and
entertainment) which can be attributed to the changing life
styles of the people.
B) Reasons for Growth in India's Retail Sector:
1) Rising incomes and improvements in infrastructure are
enlarging consumer markets and accelerating the convergence
of consumer tastes.
2) Liberalization of the Indian economy.
3) Increase in spending Per capita Income.
4) Advent of dual income families also helps in the growth of retail
sector.
5) Shift in consumer demand to foreign brands like McDonalds,
Sony, Panasonic, etc.
6) Consumer preference for shopping in new environs.
7) The Internet revolution is making the Indian consumer more
accessible to the growing influences of domestic and foreign
retail chains.
8) Reach of satellite T.V. channels is helping in creating
awareness about global products for local markets:
9) About 47% of India's population is under the age of
20; and this will increase to 55% by 2015. This young
population, which is technology-savvy, watch more
than 50 TV satellite channels, and display the highest
propensity to spend, will immensely contribute to the
growth of the retail sector in the country.
10)Availability of quality real estate and mall
management practices.
11)Foreign companies' attraction to India is the billion-
plus population.
Current Scenario of India's Retail Industry:
▫ Retail universe in India comprises large, medium general
stores, chemists and pan-bidi (apart from accessories stores).
▫ On account of the fragmented nature of Indian retail industry
the inhabitants to stores ratio in India is about 150:1 i.e.
there is a store catering to every 150 people.
▫ The presence of 15 million kirana stores brings into light the
very fact that the Indian retail industry is highly fragmented\
unorganized.
▫ Modem retail has entered India as seen in sprawling
shopping centers, multi-storeyed malls and huge complexes
offer shopping, entertainment and food all under one roof".
▫ The major retail players are Pantaloon Retail, Shoppers Stop,
Reliance, etc.
International Presence in Indian Retail Sector:
1)The world's largest retailer, Wal-Mart, has tied-up with Sunil
Mittal's Bharti Enterprises to enter Indian retail market.
2)Microsoft's first shop-in-shop pilot has been launched with
the Tata Group subsidiary Infiniti Retail's multi-brand
consumer durables retail format, Croma.
3)The Walt Disney Company, consumer product retailing arm of
global animation giant, will soon add 135 new stores to its
existing 15 stores.
4)World's leading coffee chain, Starbucks' enters India through
a tie-up with the country's leading multiplex operator PVR
Limited.
5)Apple Inc has entered into an exclusive marketing and
distribution deal with Reliance Retail through "iStore by
Reliance Digital".
6) The UK-based international coffee chain, Costa Coffee,
planned to double its number of retail outlets by the end
of 2008.
7) British retailer Marks and Spencer's has tied with Reliance
Retail and plans to open atleast 50 new stores in India over
the next five years, with an initial investment of upto US $
58 million.
8) UK's largest home .textile retail chain, Rosebys, which was
acquired by Gujarat Heavy Chemicals in 2006, is set to
foray into the domestic market this year with a slew of
stores.
9) German sportswear and Apparel Company, Adidas is going
in for a major expansion-across India, and plans to have a
total of about 450 franchisee outlets in the country.
Challenges of Retailing in India
1) The first challenge facing the organized retail sector is
tile competition from unorganized sector.
2) In retail sector, Automatic approval is not allowed for
foreign investment.
3) Taxation, which favors small retail businesses.
4) Developed supply chain and integrated IT management
is absent in retail sector.
5) Lack of trained work force.
6) Low skill level for retailing management.
7) Intrinsic complexity of retailing- rapid price changes,
threat of product obsolescence and low margins.
8) Organized retail sector has to pay huge taxes, which is
negligible for small retail business.
9) Cost of business operations is very high in India.