Political Risk Profile: India
Currently the seventh largest country on the planet (World Atlas), India is home to more than 1.2 billion people, making it the second most populated country (United States Census Bureau). Therefore, it is quite understandable that multinational companies desire to gain entry into the Indian economy as part of the global market playing field. However, like every country, entering India’s economic market is not to be met without some risks. In particular, India is considered among several countries to have higher political instability and, therefore, risk when considering economic entry (Rapoza). To understand the risky political profile of India, however, one must also understand the economic and business environment of India under which MNCs would be entering. India’s business environment is uniquely different from that of Western countries such as the United States or Canada (Edsel) – the economic market often causes shifts and changes within the business environment due to fluctuating customer demands across the nation. Rather than mass customer demand nationwide, as often encountered in the United States (Gartner), Indian customer demand varies from region to region. India is home to peoples of multiple and different religions, cultures, and languages (as are many countries, but none in such a conglomerate state is in India); weather patterns and infrastructure also vary throughout India’s many regions due to the diverse terrain of the country (World Atlas).
To combat the varying degree of customer demand throughout the country, Indian businesses, and consequently, MNCs, are faced with the task of adapting their products to the customer tastes of the region. Unfortunately, MNCs cannot fully reap the benefits of larger, country-wide product promotion (BBC). Additionally, and perhaps even still unfortunately for MNCs, while India boasts one of the world’s largest populations, the majority of its people live outside of the country’s more urban/metro areas, working in low-level, “blue-collar” positions, leaving an employment gap and higher need on the part of MNCs to fill positions on the corporate level with a relatively low workforce pool. Other factors, such as fluctuating rates in interest, inflation, and currency, as well as volatile investment from foreign entities and tax-related issues, also contribute to the uncertainty of Indian economic dexterity (IndiaStat).
After recognizing the economic climate of India, it is easier to understand the country’s political climate. Over the past several years, India has grown to be a significant presence in the global market, despite its internal economic shortcomings (IBEF). However, while such shortcomings may harm India’s internal economy, the country’s political risks pose a similar threat to its external affairs. Over just a few years, India has seen the fall and installment of three different governments, calculated growth in unrest within the country’s political parties, a growing interest in the nuclear playing field, rapid social change, as well as multiple bouts of military involvement with neighbouring countries, like Pakistan (CNBC). Such factors have increased international concern towards the country, especially from MNCs. Many have been deterred from entering the Indian economy out of apprehension or fear of the political landscape.
Should international companies wish to further their investments into India, or even merely to further India’s involvement within the MNC’s home country, India (as an entity) must set itself toward a path of political stability and economic certainty, characterized not only by economic growth and development but by strong, firmly-footed government control and policy (Overdorf).
BBC. “Business Studies: Economies of Scale; The Benefits of Large-Scale Business.” 2014. BBC.
CNBC. “India, China Soldiers Involved in Border Altercation: Indian Sources.” 16 August 2017. CNBC: Asia-Pacific News.
Edsel, G. “Country vs Country: India and United States Compared: Economy Stats.” 3 April 2014. Nation Master.
Gartner. “Demand Pattern Analysis.” 2017. Gartner.
IBEF. “About Indian Economy Growth Rate & Statistics.” October 2017. IBEF: India Brand Equity Foundation.
IndiaStat. “Socio-Economic Statistical Information About India: Labour and Workforce.” 2017. IndiaStat. Overdorf, Jason. “How to Fix India: 5 Solutions to India’s Biggest Problems.” 28 August 2012. PRI. Rapoza, Kenneth. “The World’s Riskiest Nations.” 2013 19 March. Forbes.
United States Census Bureau. U.S. Census Bureau Current Population. 9 December 2017.
World Atlas. India Geography. 2017. <http://www.worldatlas.com/webimage/countrys/asia/india/inland.htm>.
—. The Largest Countries in the World. 2017. <http://www.worldatlas.com/articles/the-largest- countries-in-the-world-the-biggest-nations-as-determined-by-total-land-area.html>.
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The purpose of this assignment is to understand how the political environment of a foreign country affects the decisions of an MNC, such as entry, operations, etc. At some point, almost every MNC will encounter some political unrest in a foreign country. It’s important to be proactive as much as possible with decision-making. Select a foreign country that has experienced recent political unrest (select up to the previous 10 years). Complete a political risk analysis of the country using the readings, lectures, and scholarly research. Address the following in your paper:
- What is the current political environment for the country?
- How did the political unrest affect business for an MNC? Select an MNC to provide context as an example.
- What recommendations do you have for an MNC wanting to enter this country to expand its operations?
Use critical thinking to apply depth and breadth. Be concise and address the country and its political environment. Go beyond description and restate the facts. This writing assignment is required to be completed in the standard APA format. Minimum 2 pages (not including title and reference pages). Abstract not required.
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