Pros and Cons of doing business in India

Discuss the benefits and challenges of doing business in India. From an ethics and compliance perspective, what industry faces the most ethical challenges? Please support your argument with examples

Globalization has created a litany of new opportunities for both small and large businesses worldwide. Developing countries such as India and China continue to leverage their large consumer base to help grow and develop their economies. This is being reflecting in the emerging middle class of these economies along with robust GDP growth. Unfortunately, the COVID-19 pandemic has created complications related to these economies as it relates to their overall growth. India for example has experience a recent surge in infection rates that has left the economy and its citizenry in shambles. It has also impacted the rest of the world as many countries are now restricting travel to and from the country of India. The massive death tools, political instability, and business disruption has caused an unprecedented change in the overall economy of India. Those international companies doing business in India must recognize the possibility of instability in the nation and account for it properly in their overall projection and assessments. There are many benefits and challenges with doing business in India, that all executives must be aware of. First, India has a very large consumer base of over 1 billion people that provides a very compelling opportunity of business to profitably expand into emerging markets. In addition, the country offers a rising middle class with substantial purchasing power for established brands and services. The country also houses a large base of intelligent and able citizens that work within the STEM fields. These individuals are highly desirable as they have valuable skills that many companies in the developed nations can utilize to further develop their own product offerings. In addition, these individuals often command lower salaries than their international counterparts thus allowing businesses to obtain more value for their investment dollar as it relates to labor. In addition, India offers substantial upside to businesses who enter the market early and can fully participate in the growing economic develop of the industry (Akerlof, 1984).

To begin the benefit of doing business in India are very strong. For one, India has a very large and growing economy. The economy is beginning to grow its middle class which means the overall country has a substantial amount of purchasing power and ability to purchase products they ordinarily couldn’t. This presents very interesting opportunities for multinational organization looking to enter the market with compelling products and values propositions. India consumers much like Chinese consumers value quality products. With a growing middle class, they now have an opportunity to purchase goods and services that provided exceptional value relative to the competitors within the market. Aspirational brands such as Nike, Luis Vuitton, Movado, and others are highly sought after within the India market. Much like China, India typically has very high savings rates. As a result, they typically have lower levels of debt with further increases their purchasing power relative to other countries. All of the above concepts allow companies to better penetrate the India market while also having a substantial runway for sustainable growth in the future. In addition, the educated citizenry also helps perspective companies as it relates to foreign direct investment. Here, American companies can invest directly into India, while also enabling its citizenry to also participate in the growth of the overall company. This investment can provide India with new technology, more jobs, and economic development (Akerlof, 1983).

A negative aspect related to doing business in India relates to its overall infrastructure and services. As noted in the introduction, India is a burgeoning country. Many of the infostructure issues that persist in India do not persist in the United States. In fact, we are currently witnessing this weakness as it relates to healthcare and COVID-19. To date, India has been one the most ill-prepared countries as it relates to the COVDI-19 virus, which relates heavily to its infrastructure issues. For one, the healthcare system overall is not as robust as that of many of the developed nations. The United States, for example, spends roughly 17% of its GDP on healthcare related expenditures. This amount to roughly $3 Trillion dollars per year, which is substantial considering the United States have roughly 330 million people compares to India’s nearly 1.1 billion people. In addition, the quality of care within the United States is much higher as compared to that of India. As a result, the United States has better outcomes as it relates to the India, which ultimately saves lives and increases efficiencies throughout the country. We see this as it relates to COVID-19 and the rippling effects it has on the overall country. Currently, India has the worst COVID-19 statistics out of any country in the world including South American which also has some very devastating statistics. As of this writing , nearly 400,000 people within India are becoming infected with the virus per day. The country does not have the ability to produce or import enough vaccines to properly protect its constituents, which is further inhibiting business activity throughout the nation (Akerlof, 1982).

The world has already seen the gruesome images of bodies being set ablaze as many within the India community can not afford nor have the time to properly bury those who have died form COVID-19. Hospital have become overwhelmed as they do not have enough ventilators, oxygen, or personal protective equipment to stem the infection rate. The country also does not have adequate healthcare personnel to properly care for those infected, which forces many of the citizenry to use other, more esoteric means of treatment. This all culminates into a healthcare infrastructure system that is inadequate given the resources, time, and money needed to maintain it. Those doing business in the country must recognize that American citizens are therefore at risk her. Business are also at risk as they too will need to be shut down, or heavily restricted as it relates to business operations within the country. This can be very costly for businesses in India on two fronts. First, the company must entice American workers to move to India with higher wages that ultimately undermine the profitability of the business. These higher wages are often much higher than what can be obtained domestically, and compensates Americans for the risk that they take living and working in India. For the jobs that can be provided by the constituents in India, the wage rate will also go up as they too will demand higher wages as they are at risk for infection and other healthcare concerns. In addition, due to business closure from the government, many organizations will risk a loss of profitability as it relates to the country and operations within it. The pandemic, although unique, is really a symptom of weak healthcare infrastructure the businesses must be aware of when entering the country. This weakness can ultimately inhibit profits as business will not be able to sell their product adequately and they will also have to deal with periodic shutdowns which vary in magnitude. These shutdowns will lower profitability, increase expense and lower business development and growth within the country overall (Alchian, 1972).