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India’s economy is one of the fastest growing in the world. It has seen an explosion in the increase of foreign business investment, outsourcing and Indian companies venturing overseas. Doing business in India offers immense benefits for international organizations, however there are a number of key cultural challenges that can create misunderstanding and conflict as well as huge direct and indirect costs to the organization if overlooked.
Navigating the challenges of doing business in India can be difficult without a comprehensive understanding of Indian social and business culture. Going through cultural awareness training like Communicaid’s Doing Business in India programmed will ensure you and your organization have the right level of knowledge and skills to successfully deal with some of the following key challenges of doing business in India.
Attitudes towards Authority – Traditionally a caste society with roots in Hinduism, Indian culture places a high importance on authority and status. Communication between levels is relatively closed so valuable insight or suggestions from employees in lower positions will rarely be shared with their superiors. Without understanding the complexity of Indian attitudes to authority
A Doing Business in India cultural awareness course helps you to develop strategies to avoid the immense frustration.and how they impact business. delayed projects. It generally accepts social etiquette and norms instead of rules and regulations. Concepts of Time – India is a polychronic culture. organizations doing business in India will struggle to implement change as quickly as necessary. Most large global organizations require adherence to strict deadlines and fast decision-making. time cannot be controlled and is not absolute. Even though rules do exist. in other words. so they struggle to cope with the idea that when doing business in India. Adherence to Rules – India has a high tolerance to uncertainty and has created a society which runs on the basis of a set of assumptions. failure to . the low level of adherence to them creates huge challenges for organizations setting up business in India who are required to follow a set of home-country regulations. people tend to change priorities depending on their importance and attitudes towards punctuality are relaxed. Cultural awareness training can help you better understand Indian concepts of time and develop strategies for dealing with them. Building Relationships – The Indian business culture focuses a lot on relationship and trust building rather than working hard and quick towards specific business objectives. and fail to harness the experience and value of its employees.
Communication Style – Indians have a preference for indirect. however. Instead. In other words. why and how behind them to develop strategies to effectively cope with these cultural challenges. Understanding the cultural differences which exist when doing business in India is only the first step. Being aware of Indian English can help you reduce misunderstandings and loss of time. place a high importance on the impact relationships. International organizations must also understand the what. as a result of the different vocabulary and expressions as well as heavy accents. Indians prefer to see the whole picture.reach tangible results and general clash as a result of different preferences for relationships and tasks and processes. high context communication. The differences in communication style can cause a large challenge to overcome for someone who is used to communicating in a more direct and low context way. many international organizations incorrectly interpret the Indian English they use to be a result of poor education and language skills. Understanding Indian English can be challenging. Many people are unaware of these differences and expect communication with Indians to be simple. Levels of English – Most university graduates and Indians residing in major urban centre have a very high level of English. A Doing Business in India cultural awareness training program will . body language and emotion have on communication and will often avoid saying ‘no’.
Goldman Sachs Economic Research has outlined ten crucial steps that India must take to achieve its full potential. Not all the 10 steps listed by Jim O'Neill and Tushar Poddar. might be addressed at the same time. but the duo believes that progress will have to be made in all of them if India is to achieve its very . THE TOP 10 CHALLENGES FOR INDIA India has huge potential for growth. giving the organization a huge advantage in this fiercely competitive global world. who are the authors of the significant report.help organizations maximize the immense opportunities and benefits of doing business in India while it will also help develop an intercultural competent workforce. And this is where the biggest challenges lie for India. In its Global Economics Paper. But having the potential and actually achieving it are two different things. Otherwise. it might just remain a country with potential and not really fulfil the dreams of its citizens.
delivery systems and effective implementation. Citizens do not organize to demand better services. This exciting potential is also closely linked to India's remarkable demographic advantage. Citizens do not have the ability to hold service providers to account.exciting growth potential. The role of the state is blurred as both a regulator to ensure adequate services and a producer of services. Without better governance. IMPROVE GOVERNANCE India's governance problems stem from the inability of the government and public institutions to deliver public services. increase agricultural productivity. Check out what these 10 areas are and what could make India an economic superpower by 2050. The problem Accountability of politicians to the voters is weak. The report highlights ten key areas where reform is needed. . 1. India will find it difficult to educate its citizens. and ensure that the fruits of economic growth are well-distributed. build infrastructure.
By decentralizing provision of public services. The Right To Information Act passed in 2005 is a step in the right direction. there has to be greater accountability of politicians to the citizens. The use of greater transparency and information can allow more accountability and increased citizen voice in ensuring good governance. RAISE BASIC EDUCATIONAL ACHIEVEMENT Many international observers tend to see education as one of India's biggest advantages. Greater information.Elements of reform To resolve these issues. 2. unbundling of government's role as regulator and provider of services. the government can unbundle responsibilities across tiers of government to create checks and balances. . autonomy for service providers. The Goldman report says that the elements of reform should comprise: Public-private partnerships. This is because they tend to meet only the best and the brightest. Decentralization. Allowing the private sector to provide public services. and greater ability of citizens to hold service providers to account for the services they deliver.
India's population is projected to grow by as much as the total current population of the US. again this 'contradiction' also partly reflects numbers. Many leading international financial firms and technology companies abound with Indian talent that has benefited from higher education. The likely numbers seeking higher education can be expected to grow by three of four times by 2020 from the current number of around 10 million. But it has a population of 1. India's domestic needs are large. India will remain a country with potential. India has a large number of highly educated people. The National Knowledge Commission has proposed an increase in the number of universities from 350 today to 1. To emphasize the point once more.500 by 2016. In some parts of the world. 3. INCREASE QUALITY AND QUANTITY OF UNIVERSITIES There is also significant need for better higher education. . there are fears of an Indian 'brain-takeover' due to the large number of Indian graduates. Without it. between 2000 and 2020. Ultimately it will be the role of the government to ensure that India can raise educational standards. However.1 billion and probably the highest absolute numbers anywhere globally receiving hardly any education.
as India develops. and many of these prices are administered. Goldman Sachs recommends greater independence for the Reserve Bank of India and the abolishment of all FX controls. Given the incredible growth prospects for Indian higher education. CONTROL INFLATION: TRY INFLATION TARGETING? Inflation Targeting should become a centerpiece of a clearer. As part of this. leading foreign universities are eager to 'expand' into India. The target should exclude food and energy and. . The following is the response to the most frequent objections. India's leadership needs to have strong and imaginative goals. 4. That may be true currently. the government should not administer prices frequently. India does not have an official and credible consumer price index (CPI). but it needs a framework to solidify it further. either by developing an Indian campus or tying up with local entities that already exists. India doesn't have an inflation 'problem'. It should spend some resources to develop one. Food prices would constitute too big a share of India's most likely representative consumer price basket. In order to achieve its ambition. more defined and credible medium-term framework for macroeconomic stability.
a big wage hike for civil servants. as it would be unburdened from providing large amounts of financing to the government. restrain populist spending. increasing fertilizer and oil subsidies. The overall government deficit stood at just under 6% in fiscal year 2008. adds to already high government debt. due to a large debt-waiver for farmers. and becomes a key source of macro vulnerability. government borrowing crowds out private-sector credit. At such high levels. and focus on an inflation . Such a fiscal plan would provide several important benefits: It would discipline the government and politicians. It would allow the central bank the space to follow meaningfully an independent monetary policy. INTRODUCE A CREDIBLE FISCAL POLICY: A MEDIUM-TERM STRATEGY India's gross fiscal deficit remains one of the highest in the world. is a must. A medium-term strategy for fiscal policy. this may accelerate to above 7%. which reduces the overall deficit to a sustainable level.5. In fiscal year 2009. keeps interest rates high. improve governance and make the fiscal deficit largely independent of political and election cycles. and higher exemptions on income tax.
improve sovereign ratings and the investment climate. the government has no fiscal space to respond to high oil and commodity prices. with such a high fiscal deficit. . and a large increase in debt. by increasing the flexibility of the government to respond to adverse shocks by tightening or loosening as the case may be. education. and improve the composition towards more efficient and growthenhancing purposes. The hard budget constraint that a fiscal rule would impose would discipline spending. which fundamentally affects the lives of hundreds of millions of Indians. It would require putting all offbudget subsidies on-budget so that citizens and Parliament can assess the true picture. It would improve the overall savings rate by reducing government dissaving . thereby increasing growth. however. and allow for increased credit to the more dynamic private sector. The basis of such a programmer. It would enhance macro stability. has to be commitment by all political parties to improve the health of the government. such as towards health. without endangering its fiscal health.target. and infrastructure. Currently.
and arbitrageurs and risk-takers are discouraged. impeding price discovery.6. interest rate and derivatives market. Bond market reforms. At present. Currency. poor liquidity. The corporate bond market remains small and underdeveloped. LIBERALIZE FINANCIAL MARKETS India's financial sector remains small and underdeveloped. This is a long-term and complex effort that will involve divesting government ownership of public-sector banks. Pension and Insurance reforms. Liberalize the restrictions on investments by pension and insurance funds. we think reforms need to proceed on several fronts. participation is constrained through a number of eligibility and origin barriers. To develop India's capital markets. Banking sector reforms. allowing . these markets have weak institutional structures. lack width or depth. meet funding requirements for infrastructure and enhance financial stability. which lead to a vast majority of assets being invested in public-sector securities. India needs to pursue financial reforms to channel savings effectively into investment. To meet its growth potential.
India currently accounts for no more than 1. Ambitious goals are needed India has announced ambitious goals for its international trade: it aims to reach 5% of world trade by 2020.5% of global trade. if India were to reform other aspects of its financial sector.investor voting rights in proportion to ownership. India's trade with China is rising sharply. As the development of the equity market has shown. however. with large employment opportunities and efficiency improvements which would benefit the entire economy. India has thus far been able to sustain growth rates. it could prove a big engine for growth. and China now ties with the US as India's biggest trading partner. INCREASE TRADE WITH NEIGHBORS’ In the past decade or so. and fully opening up to foreign banks. 7. as it has come from an exceptionally low base. without major reforms in its financial sector. Lower tariff barriers encouraged by Indian authorities have been key. . Indian trade with the rest of the world has ballooned. This impressive development needs to be kept in perspective. as has booming world trade. and for exports to rise to $200bn by 2008/09 (around $155bn in the latest year). encouraging consolidation.
Currently. subsidies are four times the amount of investment. but also to move millions out of poverty. Agriculture needs to be deregulated to allow greater commercialization and economies of scale. 9. 60% of the labour force is employed in agriculture. New technology needs to be harnessed to raise yields. The problems of clogged airports. It allows greater investment. poor roads. inadequate power. IMPROVE INFRASTRUCTURE India's constraints in infrastructure are obvious. which contributes less than 1% of overall growth. incentives to boost productivity. INCREASE AGRICULTURAL PRODUCTIVITY Increasing agricultural growth is critical not only for India to sustain high growth rates. which does not enhance future productivity. better technology. a market focus in terms of crop selection. The recent increase in contract farming is encouraging. The Goldman report says that there needs to be movement on three fronts for agricultural productivity to increase: The quantity and quality of public investment in agriculture needs to be substantially increased.8. Currently. delays in ports have been well-recognized as . access to land and finance.
Indian companies on average lose 30 days in obtaining an electricity connection. Incremental demand for infrastructure will continue to increase due to economic growth and urbanization. which does not augur well. especially at the state level. Institutional constraints. Till very recently. A large percentage of that will have to come from the government. 15 days in clearing exports through customs. and lose 7% of the value of their sales due to power outages. and private investment was negligible. There are may areas of infrastructure that are not open to private investment. There are significant barriers to entry for firms. The Planning Commission estimates that India needs an additional $500 billion over the next five years itself to finance infrastructure. especially foreign firms. But government finances are not in good shape.impeding growth. and FDI limits are still in place. . The problem Financing. Regulatory issues. There are capacity constraints in managing and executing infrastructure. the government dominated the infrastructure space.
. India has built more than 3. extreme climate and economic dependence on its natural resource base make environmental sustainability critical in maintaining its development path.Elements of reform To help resolve financing issues. the New Delhi metro was completed earlier than envisaged. and the privatization of the telecom sector. reduced labour productivity from poor urban air quality. among others. and its rapid growth and penetration. the regulatory constraints need to be removed. To encourage greater private-sector participation. The ability to continue to do so will be critical for the growth of the economy. IMPROVE ENVIRONMENTAL QUALITY India's high population density. whereas in the previous 50 years it had built 300 miles. and the threat of toxic and chemical waste in the environment.600 miles of highways for the Golden Quadrilateral Highway project. For India the impact would come from declining agricultural area and productivity due to soil erosion. are all success stories that demonstrate that India can build infrastructure. India needs to develop its capital markets. Environmental degradation affects the economy in several ways. 10. The success stories in the past few years need to be replicated.
If not given the right priority. India must: Create greater public awareness for the importance of environmental sustainability. Adopt new and cleaner technology. environmental sustainability has the potential to become India's greatest challenge. . Arm regulatory agencies with more teeth. However.For greater environmental sustainability. especially in energy. the Goldman Sachs Economic Research report laments that political commitment to a sustainable environment is still lukewarm.
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