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Political System Of India Economics Essay

Introduction

This paper discusses the opportunities for the establishment of health equipments in India. The purpose to move the industry to India is to reduce the manufacturing cost. India dot independence from British rule in 1947 and is democratic country. The country has large potential itself for the consumption of health equipments. The objective is to make a set up in India is to become more competitive by reducing the cost. In early nineties India under the leadership of Prime minister Narismah Rao and the current prime minister Manmohan Singh who was Finance mister of Narismah Rao government started economic liberalization in India. There was reduction in taxes an sound fiscal policies were introduced. Emphasis was given to improve the technical skills of the people and more focus was given on manufacturing sector. So many foreign companies have made huge investments up till now.

Till 2009, about 300 million people have come out of extreme poverty Nick Gillespie (2009). The results of liberalization reached at their peak in 2007, when highest GDP growth rate of 9% was recorded in India (www.cia.gov). With this growth, India turned out to be the second fastest growing major economy in the world, next to China. A report from Organization for Economic Co-operation and Development (OECD) states that the average growth rate of 7.5% will double the average income in a decade, and further reforms would speed up the tempo (www.oecd.org).

In fact, India is well-known now for its low cost manufacturing because it has a large number of cheap labor, stable political environment, favorable investment policy, stable social environment and better technical knowhow etc. All such factors make India one of the most welcomed investment country in the world. As a health equipment manufacturer, it is a big opportunity to become cost-effective by moving business to India and involving in market competition since this country has huge market potential.

Political System of India

India is a Secular, Sovereign, and Democratic Republic and it has a Parliamentary form of Government. Its constitution was prepared by the Constituent Assembly on 26th November 1949 after getting independence from British Rule in August 1947. The constitution came into force on 26th November 1950. The main components’ of Constitution advocates the equality of all citizens, trinity of justice, and liberty. The Constitution was structured keeping in mind the socioeconomic development of the country. The government setup in India is federal in structure and it follows the parliamentary form of democracy..

The constitutional head of the executive of the Union of India is President in Indian political system, but the Prime Minister and the council of Ministers holds the actual executive power (www.tradechakra.com).. There are two houses, Lok Sabha (Lower House) and Rajya Sabha (Upper House or council of states). Free elections are held every five years in which members of the Lok Sabha are elected by the people of India directly (parliamentofindia.nic.in). Members of the Rajya Sabha are elected by the members of the LokSabha and members of the provincial assemblies (www.jstor.org). The present government of India is heavily involved to boost the economy of the country and as already mentioned has adapted the policy to invite foreign investment in India.

Economic System

According to market exchange rate Indian economy is the world's twelfth largest economy. By purchasing power parity (PPP) basis, it is the fourth largest economy of the world (www.cia.gov). After independence from 1947 to 1991, there were social democratic-based economic system policies. The features of the policies were extensive regulation and public ownership and protectionism which led to corruption and slow growth. 

From 1991 Indian economy has moved to a market-based free economic system in which economic liberalization has been adapted. With policy and with healthier economic reforms economic growth rate increased in 2000’s and by 2008 India became the second-fastest growing major economy in the world. It has been predicted that India will be among the leading economies of the world by 2020 (planningcommission.gov.in).

Service industry contributed around 54% of the GDP while industrial sector contributed 29% and contribution of agricultural sector was 17% in 2008. India’s 60% population is employed with agriculture sector, whereas about 28% of the population is employed in the service sector and industrial sector constitutes the rest of 12%. India has about half a billion workers (business.mapsofindia.com)

Some of the basic features of the India Economic System are given below -.

GDP

$1.209 trillion (2008 est)

GDP growth

6.7% (2009)

Per Capita (PPP)

$ 2,762 Ranked 129th by IMF

GDP per capita

$1016 Ranked 142nd by IMF

Inflation (CPI)

7.8% (CPI) (2008)

Population below poverty line

22% (2008)

Labor force

523.5 million (2008 est)

Unemployment

6.8% (2008 est)

Public debt

$163.8 billion (2008)

Source: (business.mapsofindia.com)

India has been declared as Newly Industrialized country. The countries whose economies have not so far reached World status but are, in a macroeconomic wisdom and have outpaced their developing counterparts are called NIC’s. Some other features of such countries include:

They have increased civil rights and social freedoms, have strong political leadership, have tendency to switch from agriculture to manufacturing sector, an open market economy which allows free trade with other nations, have large conglomerates operating internationally, have strong foreign capital investments, and have lowered poverty rates (Paweł Bożyk, 2006). India meets most of these criteria, therefore is an NIC.

Detail is shown in the figure below

Country

GDP (PPP)

(Billions of USD, 2009IMF)

GDP per capita (PPP)

(USD, 2009IMF)

Income equality (GINI)2006

Human

Development

Index (HDI, 2010)

GDP (real) growth rateas of 2009

GDP (real) growth rate per capita as of 2008

 India

3,526,124

3,015

32.5

0.519 (medium)

5.7

4.66

Source: IMF World Economic Outlook Database, April 2010. GDP-PPP figures of selected NIC countries for 2009.

India economic reforms of 1991 are continuing and there has been no significant change occurred within past ten years.

Infrastructure Conditions

Banking system

RBI is the central bank of the country since 1934. It regulates, controls credit, issue licenses and functions as banker of all banks and the government. In India the banking sector is segregated as public or private sector banks, cooperative banks and regional rural banks (finance.indiamart.com).

Energy

Energy Production and Consumption

India

Total Energy Production, 2000

421565

 

% change since 1980

90 %

Energy Imports, 1997

59162

Energy Exports, 1997

2376

Total Energy Consumption {b}, 1999

480418

Electricity consumption, 1999

32529

Energy consumption per capita, 1997

0

 

% change since 1990

14 %

Energy Consumption per GDP {c}, 1999:

222

 

% change since 1990

-18 %

 

 

 

Source: (earthtrends.wri.org)

Internet connections

Following data shows internet users in India

YEAR

Users

Population

% Pen.

2009

81,000,000

1,156,897,766

7.0 %

Source (www.internetworldstats.com)

Telecoms systems

India's 21.59 million-line telephone network is the largest in Asia, 3rd largest among emerging economies (after China and Republic of Korea) and the 12th largest in the world. India's telecom network comprises of 27,753 telephone exchanges, with a total equipped capacity of 272.17 Lakh lines and 226.3 Lakh working telephones. The Long Distance Transmission Network has nearly 1, 70,000 route kilometers of terrestrial Microwave Radio Relay & Co-axial cables and about 171,000 route kilometers of Optical Fiber Cables. Fully automatic International Subscriber Dialing (ISD) service is available to almost all the countries. The total number of stations connected to National Subscriber Dialing (NSD) is over 18,000 and this is increasing fast. Yet the present Tele-density is very low at about 2.2 per hundred persons, offering a vast scope for growth. In the field of International communications, tremendous progress was made by the use of Satellite Communication and submarine links. It is therefore not surprising that India has one of the fastest growing telecommunication systems in the world with system size (total connections) growing at an average of more than 20 percent over the last 4 years (india.mapsofindia.com).  

Transport systems

Transport in the Republic of India is an important part of the nation's economy. Since the economics of the 1990s, development of infrastructure within the country has progressed at a rapid pace, and today there is a wide variety of modes of transport by land, water and air. However, the relatively low GDP of India has meant that access to these modes of transport has not been uniform. The demand for transport infrastructure and services has been rising by around 10% a year with the current infrastructure being unable to meet these growing demands. According to recent estimates by Goldman Sachs, India will need to spendUS$1.7 Trillion on infrastructure projects over the next decade to boost economic growth of which US$500 Billion is budgeted to be spent during the eleventh Five-year plan (en.wikipedia.org) .

Legal System

The major sources of law in India are the Constitution, legislation, case law and customary law. An exceptional feature of the India Constitution is the judicial system. A single incorporated system of courts administers both state and union laws. The Supreme Court of India is the highest body in the whole judicial system. Every state has High Court under which there is a chain of subordinate courts.

The judicial process is considered fair, but due to a large number of cases adjournments can result in substantial delay before a case is closed. Nevertheless, priority matters and public interest matters may be dealt with expeditiously, and provisional relief may be allowed in other cases, where suitable.

To support trade and industry to have alternative to settlement rather than time-consuming court litigation, the current arbitration law is anticipated to be revised under the Arbitration and Conciliation Bill 1995 (www.internetworldstats.com).

Protection of intellectual property

India strengthened its copyright law in May 1994, placing it at par with international practice. The new law, which entered into force in May, 1995, fully reflects the provisions of the Berne Convention on copyrights, to which India is a party. Based on its improved copyright protection, India's designation as a "priority foreign country" under the United States' Special 301 list was revoked and India was placed on the "priority watch list." Copyright enforcement is also rapidly improving (www.indiaonestop.com).

Political Conditions

The current political outlook in India is reasonably exceptional due to the comparatively strong position of the ruling coalition. The present government, reelected in May 2009, has not any sort of strong challenges to face to its position and the coalition seems fairly united on the majority of issues. Present political government is continuously pushing its reforms agenda in a cautious way. Security environment is to some extent is threatened by the Islamic militants but is in control (www.edc.ca). These conditions are favorable for investment in India since it is potential market for so many products. India is growing economy and is the second largest population in the world; therefore there is lot of potential for many types of products sales in India including health equipments.

Indian Culture and Business

While doing business in India following cultural values should be considered:

Language

In Indian each state has different official language. The central government official language is Hindi. However for business English is the language of international commerce.

Meeting and Greeting

In business meetings etiquette needs a handshake. Conversely, Namaste is used by Indians. Using this word is a sign of one’s understands of Indian etiquette. Sir and Madam are commonly used words in business which shows that you are giving respect to other person. In first business meeting, business cards are used. Card should be given in the most respectful way and it should be given and received with right hand.

Building Relationships

For successful business doing in India it is important to build good relationships. Indians deal with people they know and trust. It is crucial to demonstrate positive traits and give honour to your business partners.

Meetings and Negotiations

It is important to arrange the meeting well in advance. Meeting information should be given in writing and a confirmation should be made on telephone. Meeting s should be avoided near to national holidays; Indians do not like meetings nearby their national holidays. Punctuality is important however 10 minutes late margin is acceptable. One must greet the most senior person first while entering the meeting room. Business dealing in India always involves negotiations. Indians base their business decisions on their intuition, faith and feeling to guide them. Diplomatic language is required while making criticism and disagreements. It is important because Indian society has the tendency to say no. If they say I will see. I will try, it means they are saying no. When negotiations end successfully, it should be celebrated with a dinner. It will further build up the relations (www.kwintessential.co).


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