Doing Business with Indians Essay Sample

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Introduction of TOPIC


India has a well built economy that makes it a major destination for global investors.  The population of India is huge.  There are more than a billion people living in India, making it one of the biggest markets in the world.  As a matter of fact, the Indian economy is the fourth largest around the world.  International businesses representing a variety of industries are welcomed by the Indians with open arms.  In “Doing Business With Indians,” we explore only few of these industries to reveal something about the focus of the Indians with respect to their need for foreign investment.

     The national language of India is Hindi, and its currency is the Indian Rupee.  The country has a well developed workforce.  The impact of technological development on the Indian organization is great.  Indians use the latest in technological developments in the workplace.  In fact, many important companies with their software applications make it easier for businesses in India to flourish.  These companies include Dell, Nortel, and Microsoft, and they are constantly working on innovations to introduce for the benefit of the Indian economy and all those who contribute to its growth.

     The Indian retail market is booming as well.  Wal-Mart Stores Inc. have entered the market.  The closest rival for Wal-Mart in India is the local Reliance Industries Ltd.  This organization is spending billions of dollars to develop the Indian consumer market even further.  The growth in the consumer market is coupled with the growth in the household consumer products market.  Many investment opportunities still await the shrewd international businessman who wants to enter the Indian consumer market at a time of high growth in the economy.

     India imports only some of its required industrial products.  Much of the demand for industrial goods is met by local manufactures.  Many multinational corporations have also outsourced the manufacturing of industrial products to India.  Cheap and technically advanced labor force in India is one of the reasons for this trend.

     The Indian financial market is mainly run by the Reserve Bank of India (RBI), which monitors and regulates the financial system in the country.  RBI is also assigned the tasks of formulating the monetary policies, controlling the foreign exchange, and formulating the exchange control norms.  The country has public banks in addition to private ones.  Multinational banks also exist in India.  Moreover, there are cooperative banks and non-banking financial institutions in the country.

     Investors in India have to abide by various laws in the country having to do with business in general.  These laws include: the Company’s Act; acts related to industries such as the Labor Act, Workman Compensation Act, Industrial Disputes Act, Industrial Employment, Minimum Wages Act, Payment of Bonus Act, Factory’s Act; laws related to taxes such as income tax, sales tax, service tax, VAT, excise, etc.; and anti-trust regulations.  It is also important for investors to note that the once highly complicated tax structure of India has undergone a revolution.

Given that India is expected to become the third largest economy of the world by the year 2032, the Indian government – especially keen to attract investments in hi-tech, high-value industry – has removed many tax concessions and incentives in recent years.  What is more, the overall tax structure of the country has tumbled from sixty five percent to thirty percent.  The Bureau of National Affairs in Washington D.C. reports: “Outsourcing, rapid expansion of the Indian software industry, new tax planning opportunities – and the fact that India is itself a formidable market in its own right – have all helped to make India a realistic, attractive business location.”

     India is a “Sovereign, Socialist, Secular, Democratic Republic” as per its constitution.  Being a large democracy like the United States, the country shares many of its values with the world’s business leader and superpower.  The United States has much business to conduct with India.  However, India interacts with many other nations in the matter of business.  Various politicians and business leaders from around the world visit India in order to consider the possibility of doing business with Indians.  India’s current Prime Minister is an ex Finance Minister.  It is but natural that the Indian economy is doing especially well during his leadership of the nation.

     India not only desires to do business with the Western world, but also with its neighbors in South East Asia.  Even so, all businessmen wanting to work with the Indians must be aware of the business culture of India, and the etiquette.

     India’s love of democracy is revealed through its collectivist culture in organizations.  Decision making is preferred in groups, no matter how long it takes for a team to come up with its conclusions.  Indians do not like to rush into decisions regarding business.  They would rather take their time to analyze perfectly the given business scenarios.  Even so, the technological breakthroughs in the nation have speeded up the process of doing business with the Indians.

     The Indian business environment is typically hierarchical.  Senior managers are looked up to for guidance and support.  These seniors or elders in Indian organizations are also expected to come up with the final plans and policies that organizations must eventually work with.  Furthermore, the senior managers or elders of the organizations are firm supporters of their subordinates.

     Although Indian businessmen are brilliant mathematically and expect punctuality from others, they are not always punctual themselves.  These businessmen prefer indirect methods of disagreement, and find it offensive to hear a direct “no” for an answer.  Aggressiveness in business meetings is not appreciated.  Neither should criticism be offered in a direct manner.

     Indians speak a variety of languages, although English is the principal official language of the nation.  A vast number of people in the nation speak English, thus making it even easier for international businesses to perform in the nation.

     The Indians also belong to various religious.  Hence, the religious observances of Divali, Holi, Eid, and Christmas – all are led up to with great fervor in holiday shopping.  International businessmen from the Western world are also delighted to know that India celebrates Christmas with great feeling.

     Finally, international businessmen in India must remember to respect the values and traditions of the Indians.  These values include the concept of collectivism.  Business meetings are preferably begun after friendly talk regarding the family.  Moreover, the Indians prefer to develop a rapport with their business associates, even if it delays the processes of business.  International businessmen must not expect to get right down to business.

     Following the researched guidelines for conducting successful business in India, as offered in “Doing Business With Indians,” an international organization should feel assured of its future success in the Indian market.

 Doing Business with Indians


Over the years, India has evolved as a major destination for global investors for its huge market and a knowledgeable workforce.  Indian economy has boomed and the growth continues.  The fundamentals of the economy are strong and marked with stability.  Led by a tremendous growth in the Information Technology industry, the nation is fast becoming a knowledge hub for the world at large.

 With one of the largest pool of professionals in all spheres of business, the country is all set to play a key role in the global economy in the coming years.  For multinational companies, Indian market presents a great business opportunity.  A population base of over one billion and a burgeoning middle class with reasonable levels of expendable disposable income make a strong case for India to be on the priority list of international companies while drafting their business strategies.

     India’s ranking has also gone up by two places in the World Economic Forum’s Global Competitive Index (GCI) rankings for 2006-07, placed at 43rd, well ahead of many countries.  The ranks of the remaining BRIC countries are: Brazil, 66; China, 54; and Russia, 62.

     In recent years, the business environment has improved substantially in India.  According to a survey report from Dun & Bradstreet in October 2006, the business optimism index for the quarter ending December’ 06 marked an increase of 14% to 177.1, as compared to 155.3 for the quarter July-Sept’06 (Ernst & Young, 2006).  According to another survey conducted by Ernst & Young[1], India is ranked as the fourth most-attractive country for investment, and the preferred location for call center and back office activities.

     Fitch Ratings have improved India’s Long-term Foreign and Local Currency Issuer Default Ratings to ‘Stable Outlooks.’  What is more, India’s Short-term Foreign Currency IDR has been upgraded, and its Country Ceiling has been raised.  According to Paul Rawkins, Senior Director at Fitch, “This upgrade reflects Fitch’s view that fiscal consolidation is at last taking hold in India, reinforced by the impressive growth story and India’s strong external balance sheet.  Public finances are still weak, but they are no longer an insuperable constraint on this rating.”

     In spite of a global economic slowdown, Indian economy has sustained its impressive growth rate of over 7% and has maintained its position as one of the few bright spots from business perspective globally.  The development oriented government and a stable political environment of India have further created an investor friendly climate with an objective to make India an economic powerhouse.  A large English speaking population is one of the major advantages India enjoys over other countries, thus making it a favorable destination.

     In view of India’s role played in the global economy and its pool of manpower provided to the multinational enterprises, it is important to understand the Indian culture and management in order to be successful here in business along with a sound knowledge of political and economic landscape of the country.

India: An Overview

Geographically, India is seventh largest country in the world with an area of over three million square kilometers, located in the northern hemisphere.  The shares its borders with China, Pakistan, Bangladesh, Nepal, Bhutan and Myanmar.  India’s federal capital is New Delhi, while Mumbai is termed its commercial capital.  Other major cities in the country are Bangalore, Kolkata, Chennai, Ahmedabad, and Hydrabad.  Hindi is the national language as per the constitution.  All the same, there are twenty-two principal languages spoken in the country.  English remains the main official language of India (U.S. Central Intelligence Agency).

     India is a secular country where all religions enjoy equal status, though majority of the Indian population follows the Hindu religion.  As per a recent report published by Ernst and Young, there are over one million schools in India.  Professional institutes have a combined intake of over half a million students per annum.  These institutes continuously add to India’s English speaking, highly skilled workforce.  This manpower provides India an edge over many other countries (U.S. Department of State).

     As compared to Europe and the United States, the cost of living in India is quite low.  However this cost varies in metro, urban and upcountry locations.  All business locations are well connected by regular flights and many airlines operators.  Otherwise also, the country has one of the largest railways network in the world.  Transportation within and to and from India is not a problem.  The country has over a dozen international airports and an equal number of major seaports (U.S. Department of State).

     The Indian Standard Time is applicable throughout the country: GMT+5.30 hours.  Normal business hours are 9 am to 6 pm Monday to Fridays.  But many organizations function on Saturdays also.  Normal banking hours are 10 am to 2pm and 3pm to 4pm.  Some private sector banks work until 8.00pm.  Sunday is the weekly holiday for all Indians.  Then there are three national holidays – Independence Day on the 15th of August, Republic Day on the 26th of January, and Gandhi Jayanti on the 2nd of October (U.S. Central Intelligence Agency).

Government of India

India is a “Sovereign, Socialist, Secular, Democratic Republic” as per its constitution.  It has 29 states and six Union Territories.  Each state has its own government, elected democratically through multi-party elections.  Central government is in charge of overall administration of the country.  Nominated representatives of the central government administer Union Territories.

Though the President of India is the head of the nation; the executive head is the Prime Minister of India belonging to the party that gets elected through the majority of ifs members in the Parliament.  Election commission is an independent body that monitors free and fair elections.  Similarly, Judiciary is an independent body and the Supreme Court is the apex judicial authority.  At state level, there are High Courts in India; and District Courts exist at the subordinate level (U.S. Department of State).

     Major political parties in India include the Congress (I), the leftists forming Communist Party of India (CPI), CPI (Marxist), the rightists – Bhartiya Janta Party (BJP) – plus a host of regional parties.  Even independent candidates can contest elections in the country (U.S. Department of State).

Financial System

The Reserve Bank of India (RBI) monitors and regulates the financial system in the country.  RBI formulates the monetary policies, controls foreign exchange and formulates the exchange control norms.  RBI also acts as banker to the state and central governments.  There are 28 public sector banks which have government controls; and in the case of private banks no shareholder is allowed to have more than 5% shares.  There are major foreign banks in the country in addition.  Cooperative banks and non-banking financial institutions are the other essential components of Indian financial system (U.S. Department of State).


As per the Bureau of Public Affairs, U.S. State Department, currently, India’s population is approximately 1.1 billion and the annual growth rate of population in the country is 1.3%.  With a GDP of $797, it is the third largest economy in Asia after Japan and China, and the 12th largest economy in the world.[2]  Major contribution comes from services (51%), followed by industry (28%).  Agriculture in India accounts for 21% of the Gross Domestic Product.  India has one of the largest middle classes estimated at 325-350 million people who have disposable income for consumer goods.

     Economic liberalization and market reforms started in 1991 and the country is moving forward with these changes.  The government of India has liberalized foreign investment and exchange regimes.  There has been an appreciable reduction in tariffs and trade barriers.  Significant steps have additionally been taken to reform the fiscal and monetary policies and towards protecting intellectual property rights.  The Bureau of National Affairs in Washington D.C. reports on some of the transformations that make India today a highly lucrative market for international organizations:

         India ‘s once highly complex tax structure – with overall rates high combined with tax

    incentives to encourage corporate activity in government-preferred activities – has undergone

    a transformation.  Now overseeing the world’s fourth largest economy (predicted to become

    the third largest by 2032) the Indian government is keen to attract hi-tech, high-value industry.

    Many tax concessions and incentives have been removed.  The overall tax rate has tumbled

    from 65% to 30%.  Outsourcing, rapid expansion of the Indian software industry, new tax

    planning opportunities – and the fact that India is itself a formidable market in its own right –

    have all helped to make India a realistic, attractive business location.

Foreign direct investments have increased considerably in recent years and that shows increased faith of investors in the Indian market.  By mid-September 2006, they had added to the $166 billion in foreign exchange reserves.  And, there is more to come.  In January 2007, the   Swedish Deputy Premier Maud Oloffson arrived in India along with a business delegation including business leaders from IT, telecom, automotives and biotechnology industries.

This visit to India was, of course, meant for the Swedish industry leaders to explore opportunities in the various sectors of the Indian economy.  Besides other important government officials of the country, the Swedish Deputy Premier planned to meet the External Affairs Minister, the Shipping Minister, and the Telecom Minister.  The lady further planned to meet the women entrepreneurs of the nation (The Press Trust of India)

     Likewise, a newspaper report from India read in January 2007 that the U.S. maker Dell Inc. has planned to extend its business in India, using Malaysia as the hub for capturing the Asian market for its products.  The company plans to base its call center in India that would cater to other parts of the world (The Press Trust of India).

     The British, too, continue to show keen interest in the Indian market.  Alistair Darling, the British Secretary of State for Trade and Industry, also began his visit to India in January 2007.  This visit was aimed at enhancing bilateral economic ties.  Darling came along with a high-profile business delegation and representatives of companies from financial services, infrastructure, telecom, healthcare and other sectors.

   All were interested in the possibility of doing business with the Indians.   Moreover, Darling met with the Commerce Minister of India and lead the British delegation in the India-UK Joint Economic and Trade Committee (JETCO) talks.  In Bangalore, India, the British Secretary of State for Trade and Industry, along with the UK Chancellor of the Exchequer, Gordon Brown, attended a CII summit and visited some of India’s leading companies (Asia Pulse News).

     While the possibilities for doing business with the Indians appear endless, the government of India has moved further towards privatization.  Proceeds from privatization were about $3 billion in the fiscal year 2003-04.  At the same time, the economic growth in the country has been restricted by insufficient infrastructure, red tapes, corruption, labor market regulations, controls and regulations for foreign investments, the protection provided to small-scale industries by reserving items for them, and high fiscal deficits.[3]

     By 2002 quotas on 1,420 consumer imports were eliminated and the government had announced its intention to continue to lower customs duties, which has been done in a phased manner.  But a complicated tax structure still needs to be resolved (U.

S. Department of State).      The United States is India’s

largest trading partner today, with their bilateral trade being approximately $26.8 billion.  The software sector and IT enabled services like BPOs are India’s strength and are boosting the economy.  PC penetration is 1.4% while cellular phone market has grown to 140 million subscribers.  There are about 54 million cable TV customers in the country (U.S. Department of State).

     The use of latest technology is truly one of Indian economy’s strengths.  In December 2006, Microsoft India announced the availability of its new operating system, Windows Vista, to business customers across the nation.  The company additionally announced the availability of Microsoft and Office System Exchange Server 2007 (Asia Pulse News).

Further, Nortel, described as “a recognized leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the world’s most critical information” announced during the same month that the company has improved its ability to assist enterprises, service providers, and cable operators in focusing on their business instead of their networks with the opening of a new customer network management center in Asia.

  This network management center is, of course, based in New Delhi.  With the opening of the center, India has joined similar facilities in London and Raleigh, North Carolina, to provide network management, technology transformation, and hosted application services for multi-vendor, multi-technology telecommunications networks the service both local and multinational companies.  The report in M2 Presswire further stated that these services to be provided by New Delhi’s center are “designed to take the worry out of networks by optimizing performance, efficiency, reliability, security and cost. “

     Bharti Airtel is India’s leading provider of telecommunications services, makes use of hosted contact center services and an interactive voice response (IVR) solution from Nortel to provide customers with a virtual, multilingual storefront for ordering new services and completing routine transactions.  All of this is managed from the Asia Network Management Center based in New Delhi.  The director, director, IT and Innovation at Bharti Airtel said: “With Nortel minding the store 24/7, our customers can be assured that we’re always open and always available to respond to their needs.”

     Technological developments have a direct impact on the economy of India.  These developments, no doubt, play a fundamental role in making India a valuable investment opportunity for global businesses.  It has been further reported about the new Nortel center in India’s federal capital:

         “It’s this kind of support that allows us to control our costs while focusing on the customer-

    facing aspects of our business.  There’s tremendous opportunity for cost savings and improved

    efficiency and performance through remote operation and management of networks and

    applications,” said Michael Pangia, president, Asia, Nortel.  “With our extensive Global

    Services portfolio and the opening of our new Asia Network Management Center, we now

    have the global scale to help our customers capitalize on this opportunity virtually anywhere in

    the world.”  Nortel’s Global Services include a full range of network application,

    implementation and support services for end-to-end multi-vendor networks.

While international businesses find that the nation is well equipped to bear the challenges of new investments through tremendous developments in technology, the largest foreign direct investments to India come from the United States – the global business leader – and in 2005-06 these investments were estimated to be over $5 billion (U.S. Department of State).

     The Foreign Investment Promotion Board of India considers proposals for direct foreign investment and these are generally approved by the government.  Priority sectors for foreign investment are in power generation, telecom, ports, roads, petroleum and mining.  For further development of infrastructure, health, education and rural sector; the World Bank plans to increase aid to India to about $3 billion a year.

     According to a report compiled by Forbes, the following table ranks India’s position from business point of view as compared globally.[4]

Foreign Restrictions 69[5]
Wages & Prices 56
Regulation 50
Competitiveness 46
Technology 38
Red Tape 17
Investor Protection 79
Corruption 44
Personal Freedom 63
Corporate Tax Rate 54

The salient features of the Indian economy today can be summarized by the following table:

GDP Growth 7 %
GDP/Capita $3,400
Trade Balance $-36.9 billion
Population 1,080.3 mil
Unemployment 9%


The Indian Rupee is the currency of India.  Currently one United States Dollar is equal to approximately 44 Indian Rupees.  During last year, the rupee has strengthened against the dollar.  However, the Indian currency is not freely convertible into foreign currency, and foreign exchange transactions take place through RBI authorized dealers only.  While purchasing foreign exchange, one must declare the intended use.  This money must then be used accordingly, or else there would be a violation of the Foreign Exchange Management Act of India.

India’s Business Culture

India is a country of diversity and has a cultural heritage that dates back to some five thousand years.  It is one of the oldest civilizations in the world.  For any business organization it is important to understand the traditions and ways of communication that form the fabric of the Indian social system (Gorrill).

     While Hinduism is the major religion, people of other religions also live freely in India.  India has the third largest Muslim population in the world.  Caste system that has prevailed among Hindus has spread over to other religions as well.  Though the traditional caste system has been eliminated, it still remains in the mindsets of the people.  These aspects of the culture influence the hierarchy of business in India (Gorrill).

     Indians thrive in groups.  They do not have a culture based on individuality.  Business organizations in India prefer to work in teams, and make decisions collectively.  The democratic political system of India is reflected in this aspect of the Indian business culture.  In fact, Indian businessmen can be expected to do their utmost to involve as many people as possible in the planning department, and various other organizational areas.

     Furthermore, Indians can be superstitious, while at the same time they are guided by the notion that every thing happens for a reason.  This influences the concept of time in the nation, and as result business negotiations take time and are not rushed into (Gorrill).  Thorough planning and essential group advice also play a large role in delaying business talks in the country, seeing as the Indian business is expected to take its time to organize a group that would analyze a given business situation appropriately.  Perhaps it is this concept of collectivism that makes India still a developing country.

  But as far as business analysis is concerned, the Indian businessman is known to be one of the very best analysts in the world.  Indian businessmen are also very good at computation.  As a matter of fact, they are known to be both shrewd and mathematical.  Any international organization wishing to do business in India must, therefore, be prepared for perfectly analyzed business plans made by the Indians in a relatively longer duration of time.  (This is, of course, in comparison with the swift business planning in the United States).

     Finally, Indians value their community and families apart from their teams at the workplace.  International businessmen in India are expected to show respect for this value nurtured by the Indians.  What is more, there is wide acceptance of the hierarchical setting in Indian business.  Interpersonal contacts are very important in India.  With a view of avoidance of conflict, an indirect approach to communication is usually taken (Gorrill)

Work Culture

Punctuality is expected in India but might not be reciprocated.  Therefore most of the schedules are confirmed well in advance, sometimes even a month in advance.  Moreover, most of the schedules are flexible (Gorrill).  Senior managers have the authority to change them as they will.

     The usual time for business appointments in India is between 11 am and 4 pm.  Decision-making can be slow, and deadlines are not to be rushed into.  Rushing for deadlines might be interpreted as aggressive or disrespectful behavior (Gorrill).  Indians like to work at their own pace, though technological developments have made the Indian business processes much swifter.

Company Structure

Indians prefer working in hierarchical system where seniors and elders are respected and looked up to for guidance and support.  The relationship between a boss and an employee may be like that between close relatives.  Seniors in the organization usually initiate the discussions.  These high ranked managers also must take the final decisions (Gorrill).

     The senior management of the Indian business monitors and looks after the subordinates.  Individual criticism in business situations needs to be avoided or done carefully since self-esteem and face are very important in Indian culture (Gorrill).

Business Practices

It is important among Indians to build rapport and trust with their business associates, instead of getting right down to business.  So usually meetings begin with friendly talk, perhaps personal questions about the family lives of the business associates.  Since family is held highly, a show of respect towards the Indian businessman’s family can be a good trust building exercise.  Speaking some of the phrases in local language can be another effective way to win trust.  In the Indian culture, disagreement is rarely expressed directly and ‘no’ is usually avoided (Gorrill).

Business Etiquette

While addressing formally, titles such as “Professor” or “Doctor” are used wherever possible, else “Mr”, “Mrs”, or “Miss” are used.  Indian men do not generally shake hands with women, out of respect.  However, things have changed now and cultural changes are taking place.  The interesting fact is that with increased interaction with the United States and the Western civilization in general, western trends are also becoming visible in the Indian culture (Gorrill).  All the same, the good old saying still holds – While in Rome, do as the Romans do.

     Politeness to Indians is important in all matters.  Aggressiveness during negotiations needs to be avoided.  Large or expensive gifts may cause embarrassment.  Additionally, the gifts should be presented with both hands (Gorrill).

     During business meetings, any food or drink offered should be usually accepted.  Traditionally, Indians are vegetarians and do not consume alcohol either.  Then again, Western culture is leaving its influence and hard drinks are becoming common in business parties (Gorrill).

The Indian Market

India is a large and growing consumer market.  With growing urbanization and impact of the Western culture, there have been big changes in lifestyles and consumer behavior.  Indians celebrate the Divali and Holi as some of their religious observances.

On these occasions as well as on the Muslims’ Eid and the Christians’ Christmas, the spending across India increases and the Indian market flourishes.  Expatriates in India coming from the Western world are delighted to discover that Christmas is celebrated with great fervor around the country, even though only 1% of the Indian population is Christian by birth (McGowan).  The holiday shopping, the increase in sales and revenue, make up for the difference nevertheless.

     In India, there is an extensive reach of electronic media, which has created brand awareness even in rural parts.  With excellent distribution networks and good national transport services available, unlike in China, distribution of goods is not a problem in India.  Consumer finance is easily available and that has really pushed up the markets for various products like white goods, electronics appliances, computers, automobiles, etc (U.S. Department of State).

     According to a recent report published in The America’s Intelligence Wire, the retail giant Wal-Mart Stores Inc. have entered the Indian market by tying up with a local company by the name of Bharti Enterprises.  The first Wal-Mart store is expected to open in India in August 2007.

And, the most formidable competitor to the United States based store would be Reliance Industries Ltd., one of the top business conglomerates of India, which hopes that its recent entry into the retail business would bring in almost $122 U.S. dollars in sales over the next four to five years.  Reliance Industries Ltd. has plans that are the most aggressive among domestic players.  Rajesh Mahapatra further reports on 29 January 2007:

          Reliance insists its knowledge and understanding of the Indian market gives the company

    an edge over Wal-Mart.  Also, the company is confident keeping prices of products at its

    stores competitive.

         “It will be a combination of price and how well we will execute our model,” which includes

    services such as home delivery, shop-on-phone and engaging small traders in the management

    of its supply chain, said Raghu Pillai, chief executive of the company’s retail business.

         “Our stores will have a non-intimidating environment with products available at affordable


         The company has so far opened 49 stores, mostly selling fruits, vegetables, grocery and

    diary products.

         The forecast came Monday as the company opened nine stores in the five satellite towns

    around India’s capital, New Delhi, mostly selling vegetables and groceries.

         Around the country, Reliance has opened 49 stores so far.  By December, it aims to open

    1,000 stores in India, where the booming retail market – estimated at about US$200 billion

    (A155 billion) per year – is currently dominated by more than 12 million mom-and-pop shops.

         “By 2010-11, our total revenue should be in the region of 1 trillion rupees,” said Pillai.

         Large, air-conditioned stores remain a rarity in India, even as rising middle-class incomes

    and an increase in demand for branded products are driving a retail surge in India.  Selling

    through company-owned stores – also called organized retailing – currently totals just US$8


         In recent years though, the share of organized retailing has grown with many Indian

    companies entering the lucrative trade.  Reliance plans to invest about 250 billion rupees

    (US$5.5 billion; A4.3 billion) in building a nationwide network of procurement centers, cold

    storage centers and stores.  The first of the company’s stores opened in the southern Indian city

    of Hyderabad in November.

According to another business report published in January 2007, the air-conditioning and the refrigeration markets in India are most likely to witness spectacular growth in the near future.  Much of this growth is expected to take place in the commercial rather than the household sector.   This is because it is companies like Retail Industries Ltd. spurring the growth in the household sector to boot.  Adite Chatterjee writers: “As the retail industry gets more organized, there will be a growth in demand for cold retail chains.  The process of storing, transporting and displaying food at appropriate temperatures will gain more significance.

“  The author goes on to mention the launch of 11 Reliance Fresh stores in the city of Hyderabad in southern India.  Chatterjee believes that these 11 stores are only the beginning of a foray into retailing – the largest of its kind in India.   Reliance Industries Ltd. has planned to invest almost $5.6 billion to launch a national chain of supermarkets and hypermarkets that would sell everything from groceries to fresh vegetables to consumer durables under one roof.  “The national roll-out could include the opening of stores in 784 cities and 6,000 small towns by 2011.“  The author continues:

         Such hyperactivity on the retail front is good news for OEMs selling air-conditioning and

    refrigeration systems, such as Carrier Corporation.  President Geraud Darnis is betting big-

    time on the cold chain refrigeration market in India.  In fact, Darnis feels that the cold chains

    refrigeration segment could be bigger than air-conditioning.

         Carrier entered the Indian market more than 20 years ago.  In 1993, at a time when the

    market was made up mostly of small, unorganized air-conditioner manufacturers and a few

    Indian companies, Carrier launched successful new air-conditioner lines and became the

    market leader.  However, over the years, it lost out to the aggressive marketing strategies of

    the Korean players.

         Carrier is now taking a fresh look at the Indian air-conditioning market, revamping its

    strategy and offering consumers products more to their liking.  Darnis says that the company

    will be introducing new technology and higher efficiency products.  One product already

    introduced in Indian market is the Aqua Force, which Carrier claims is the “highest energy-

    efficient chiller in the world.”

         Carrier is clearly not going to ape its Korean rivals’ value-for-money pricing strategy.

    Instead, the focus is on energy efficiency.  The company feels that, as consumers get more

    demanding about the efficiency of their appliances, they will be willing to pay a little more for

    air-conditioning appliances.  With appropriate consumer education and a cost-effective

    marketing campaign, Carrier could use this unique attribute of its products to regain some

    market share lost to its Korean competitors.

         But in the air-conditioning segment too, Carrier’s focus will continue to be on the

    commercial segment, which is more sensitive to energy costs than residential customers.

         Another company that is showing keen interest in the growth of the cold chain refrigeration

    segment is Blue Star Ltd.  Pointing to the Indian government’s initiatives to enhance

    production and export of fruit and vegetables and the emergence of organized retail, the

    company’s Executive Director Satish Jamdar recently told APPLIANCE that this presents a

    huge business opportunity.  The company has signed technical agreements with consultancy

    organizations in Europe that specialize in cold chain solutions.  It is also collaborating with

    Danfoss, a world leader in compressors and control solutions, for addressing methods of

    conserving energy in HVAC/R applications.  It will also initially import, and later

    manufacture, the Bitzer range of compressors.  Bitzer is a global leader in refrigeration

    equipment that is widely used in supermarkets.  Agreements with supermarket display cabinet

    OEMs in Europe are also in the cards.

         Clearly, the anticipated boom in Indian retailing is ringing in a new era of growth for air-

    conditioning and refrigeration manufacturers. 

The Industrial Market

India’s industrial market is equally vast and growing.  Most of the requirements for industrial goods are met internally.  Similarly, in certain categories, India is an exporter also.  As per a study of Ernst and Young (2006), several MNC’s have started using India as a manufacturing base for industrial products to outsource their regional requirements.  During 2004-06, there was a growth of 7.8% in industrial production.

Investment Climate

The Indian Foreign Direct Investment regime has been gradually liberalized and today there are very few industries in the nation where foreign investment is prohibited.  Even investment ceilings are being removed.  India welcomes foreign investments for all but a few strategic sectors like defense, railways, atomic energy, etc.  Apart from looking forward to foreign investments from the Western world, the country also seeks to do business with its neighbors.  Prime  Minister Manmohan Singh attended at least two South East Asian business conferences in January 2007 with the goal of increasing India’s business ties in the region.

   “I am looking forward to this visit and to utilizing it to elevate India’s engagements in South East Asia to qualitatively new levels,” the Press Trust of India quoted him in this regard.  Prime Minister Singh, a former Finance Minister of India, attended the India-ASEAN and East Asia Summits in the Philippine city of Ceebu.   He further said that he planned to discuss the India-ASEAN Free Trade Agreement (FTA) and how it can promote “greater economic synergy.”   Moreover, the economically sentient Prime Minister announced that he would use this opportunity to explore the steps that both India and its neighbors can take to hasten the conclusion of this important agreement, which would make India even a wiser choice for foreign investors worldwide (UPI News Track).

     Except for a notified small list, no government approval is required for FDI in India.  Free repatriation of capital investments and profits is allowed if initial investment is made in convertible currency.  Single window clearance facilities are available.  Government of India has also approved around one hundred and fifty Special Economic Zones to facilitate hassle free exports (U.S. Department of State).

     India is a signatory to GATT and a member of the World Trade Organization.  Laws are in force to protect the intellectual property rights as well as trademarks, patents, geographical indication of goods and industrial designs (U.S. Department of State).

Legal framework for Business

There are various laws in India that organizations must adhere to.  These include the Company’s Act; acts related to industries such as the Labor Act, Workman Compensation Act, Industrial Disputes Act, Industrial Employment (standing orders), Minimum Wages Act, Payment of Bonus Act, Factory’s Act; laws related to taxes such as income tax, sales tax, service tax, VAT, excise, etc.; and anti-trust regulations.


According to a USAID paper, over 1.1 billion people live in India.  The population of India thus constitutes one-sixth of the world’s population.  Given its sheer size, India is the fourth largest economy in the world, and therefore highly profitable for international businesses to be a part of.

     Though India enjoys its trade with many countries around the globe, the United States and India, the two largest democracies in the world, have many common values and strategic interests.  Both of the countries are positively transforming their relationship at a dramatic pace.  India is increasing its economic and social policy reforms to reduce poverty with the help of business partners such as the United States.  By 2020, the country has planned to bring down the poverty rates to half.

     Although there has been financial stability in India, the economic development in the nation is uneven and varies by region and social factors.  India has a high-consolidated fiscal deficit at 10% of gross domestic product.  Insufficient infrastructure and state ownership of core infrastructure are major reasons for slow economic growth and failure in poverty reduction.

     Literacy rate among women is poor.  In spite of extensive constitutional and statutory safeguards, judicial system is slow.  Religious tensions exist among different groups of people.  Strikes, work disruption, traffic blockades etc. can happen at the behest of petty leaders.  Adding to these problems are the power shortages that plague the country.  Further, due to populist regimes, the current losses in the Indian power sector amount to more than $7 billion per year.  This figure is growing at 15% to 20% every year.

     All of the factors outlined in this research paper need to be given due consideration while drafting a final policy for doing business with Indians.




  1. Asia Pulse News. “British Delegation Begins Three-Day Tour of India,” 16 January 2007.

  1. ———————. “Microsoft Vista Available To Business Customers In India,” 4 December 2006.

  1. Chatterjee, Adite. “Commercial refrigeration: big business in India.” Appliance, 1 January 2007.


  1. Deloitte Tax LLP. “Corporate Tax Rates at a Glance, August 2005,” 2005. Available at http//,1044,stc%25253DHOME%252526lid%25253D2,00.html/. (2 February 2007).

  1. Ernst & Young. “Ernst & Young – Doing Business in India 2006,” 2006. Available at (2 February 2007).

  1. —————–. “The Ernst & Young European Attractiveness Survey 2006.” Press Release, 2006. Available at (2 February 2007).

  1. ——————. “Europe Tops Attractiveness Survey.” Media Release, 7 June 2006. Available at (2 February 2007).

  1. Fitch Ratings. “Fitch Raises India’s Ratings To Investment Grade,” 2002. Available at (2 February 2007).

  1. Freedom House. “Freedom in the World, 2004,” 2004. Available at (2 February 2007).

  1. Gage, Jack, and David A. Andelman. “Capital Hospitality Index.” Forbes,.June 2006. Available at (2 February 2007).

  1. Gorrill, Jodie R. “Doing Business in India: Indian Social and Business Culture,” 2004. Available at (2 February 2007).

  1. M2 Presswire. “Nortel opens Asia network management center in India; Center helps customers focus resources on business, not networks,” 4 December 2006.

  1. Mahapatra, Rajesh. “India’s Reliance Industries sees new retail business bringing in US$22 billion in 4-5 years.” The America’s Intelligence Wire, 29 January 2007.

  1. McGowan, Jo. “Christmas in India: It Could Still Happen Here.” Commonweal, 15 December 2000.


  1. The Bureau of National Affairs. News Release. “Doing Business in India: Expert Guidance on Tax and Investment Issues,” 9 October 2006. Available at (2 February 2007).

  1. The Heritage Foundation. “2005 Index of Economic Freedom,” 2005. Available at (2 February 2007).

  1. The Press Trust of India. “Swedish Deputy PM to lead top business delegation in India,” 28 January 2007.

  1. ———————————-. “Dell Plans To Extend Business In India,” 23 January 2007.

  1. Transparency International. “Global Corruption Report 2005”, 2005. Available at (2 February 2007).

  1. UPI News Track. “India Looks East For Business,” 13 January 2007.

  1. USAID Budget. “India,” 2006. Available at (2 February 2007).

  1. S. Central Intelligence Agency. “India.” World Fact Book. “India.” Available at (2 February 2007).

  1. S. Department of State. Bureau of South and Central Asian Affairs. “Background Note: India,” December 2006. Available at (2 February 2007).

  1. World Bank. “World Bank, 2005,” 2005. Available at (2 February 2007).

  1. World Economic Forum. “Global Competitiveness Report, 2005,” 2005. Available at (2 February 2007).

  1. ——————————. “Global Competitiveness Report: India,” Available at (2 February 2007).

[1] “The Ernst and Young European Attractiveness Survey 2006” was released on 7th June 2006 in La Baule, France.

[2] According to some reports, India is the fourth largest economy in the world today.  See The Bureau of National Affairs, 2007.

[3] See:

  1. Deloitte Tax LLP. “Corporate Tax Rates at a Glance, August 2005,” 2005. Available at http//,1044,stc%25253DHOME%252526lid%25253D2,00.html/. (2 February 2007).
  2. Freedom House. “Freedom in the World, 2004,” 2004. Available at (2 February 2007).
  3. The Heritage Foundation. “2005 Index of Economic Freedom,” 2005. Available at (2 February 2007).
  4. Transparency International. “Global Corruption Report 2005”, 2005. Available at (2 February 2007).
  5. World Bank. “World Bank, 2005,” 2005. Available at (2 February 2007).

[4] See Footnote 3.

[5] Given Percentile ranking means a score of 80 is better than 80% of countries in each of ten categories for which data is available. Total score takes an average across those categories (at least 7 out of 10) for each country.

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