Foreign Direct Investment In India
India has the second largest population in the world, with over a whopping 1.1 billion people. It also is one of the most diverse countries in the world with religions from Hindus, Christians, Islamic and much more (Esha). The rule of law simply states that no one is above the law and they are to be obeyed by everyone (Rule of Law). In India’s instance, their rule of law is a parliamentary democratic republic government. This type of government consists of the President being the Head of State, and a Prime Minister is the Chief Executive of the executive branch that is solely responsible for running the federal government. The legislative branch is bicameral, which is divided into two houses: The Council of States and the House of the People (Pariona). India continues to be ranked one of the most corrupted countries in the world. Prime Minister Modi had demonetized their currency because of illicit counterfeit bank notes. This was in hopes to decrease the illegal activity constantly going on in India, but now many people are struggling to survive on a daily basis.
Foreign direct investment is an investment made by a firm or individual in one country into business interests in another country (Chen). A lot of countries generally invest into India because of the benefits in accessing cheaper wages as well as India’s monetary value being extremely cheap compared to first world countries. FDI has two entry routes into India. The first entry is an automatic route in which the non-resident or the Indian company does not require any approval from Government of India for that specific investment. Some examples of automatic routes are agricultural, air transport services, automobiles, biotechnology, and coal and lignite. The second entry is the government route which requires an approval from the government prior to the investment. Some examples of these are core investment companies, certain food products retail trading and satellites. Just recently, there were a few changes regarding tax relief in the foreign direct investment policy to make it a more efficient economy for India. Their investments of 100% of FDI in coal mining and contract manufacturing were in efforts to boost their energy market. Single brand retail sourcing norms eased for those who are proficient with ecommerce, opening up jobs for logistics, customer care and digital payments (Mishra).
The main challenge in investing in a foreign country like India is being culturally diverse and knowing the difference of an individual’s ethics versus India. India doesn’t have the same business ethics as a country like the United States because their values and beliefs are completely different. For example, in the United states people greet each other by having a firm handshake. On the other hand, in India they greet each other with their hands together and bowing and saying, “Namaste.” Every country in the world has unique ways to approaching ideas, theories, morals, values and many more behaviors. The most important thing to note while working with those countries is being aware of what gestures are being sent, what is being said in general and how you say them. Anyone can perceive something we may think is so little to it being a bigger situation than we could have sought.
Investing into a foreign country can be a great opportunity to be able to expand globally. Companies like McDonalds really set the bar on how it should be done. In India, they revised their menus to being culturally diverse which is why they are so successful around the world. They have options for vegetarians and non-vegetarians along with spices and other unique choices that makes India the way it is. The main idea to investing in a foreign country is to be able to give the country what makes them who they are. Implementing things that they would never use is not a worthy way to expand nor is it a good business strategy.
India is economically growing, but it hasn’t developed yet. It has a long way to go. Their purpose to increasing their foreign direct investments are the next step to allowing their people to have more opportunities. For an American investor to be more than successful to invest in India the first step I would want to suggest is to study the country and their values, beliefs, and their morals. It doesn’t seem like it, but there is a lot that goes into expanding globally. Understanding their trading system, their government, most importantly their consumers. Once they think they that they have mastered the basic foundation of knowing the Indian culture, their next step should be to give the people what they want and to make sure that they have options to where it will benefit them and their lifestyle. Once that they have followed these two steps, I high believe that they would be on their way to being accepted as one of India’s own.
At the end of the day, people just one want one thing: equality. They want to feel like they are included instead excluded. Yes, India doesn’t have as many resources as they would hope to have, but they are on the brink of getting there.
