Consulting Issues

India: The Fastest Growng Free Market Democracy
Aditya Nath, CGN & Associates

India’s vision and strategy has placed it in close proximity to achieving a targeted annual GDP growth rate of 8.5 to 9 percent over the next 20 years. This would mean a quadrupling of the real per capita income, thus allowing India to improve its GDP ranking from 11th to fourth by 2020 from among 207 countries.

India’s Challenges
India is the world’s largest democracy of more than 1 billion people, with a huge cultural diversity spanning regions, languages, ethnicity, religions, castes, traditions, histories, and philosophies. While India continues to sustain the internal fundamental strengths that contribute to making it a unique case study in the global context, India also is faced with the not-so-unique challenges brought on by a rapidly growing economy.

Every day, India adds 4.5 miles to its existing highway network, part of an ambitious drive to upgrade 28,000 miles of national highway. In addition, several hundred thousand rupees have been earmarked for investment in the country’s infrastructure sector for new roads, ports, airports, Export Processing Zones, Special Economic Zones, railway corridors, etc.—all of which present a huge financial, political, and logistical challenge.

In addition, there aren’t enough leaders, engineers, and managers to handle all of these projects. Estimates of a manpower shortage in India vary from a few thousand to several hundred thousand. Such unprecedented growth and investment, following the massive brain-drain to the West of the last 30 years and the great opportunity the IT industry has presented to the Indian talent, has left Indian industry faced with a tremendous management and talent gap. This unprecedented demand has caused the labor markets to wake up, resulting in very high attrition rates at companies of all sizes and industries.

Doing Business in India
The Indian economy offers a lot of lucrative packages for investors to make India their home base for business. Almost every imaginable line of business is promoted in some form, and there are national and state benefits competing with each other for investors’ attention.

Among the packages available to foreign corporations, the biggest one is the Special Economic Zone (SEZ) run by the Central Government’s Ministry of Commerce & Industry. The SEZ can comprise any line of business and provides benefits in every imaginable way—tax benefits, relaxed environmental regulations, and reduced bureaucratic and banking procedures.

Furthermore, SEZs are self-contained portions of good infrastructure that don’t need to rely on local governments for water or power. What the SEZ package doesn’t do is remove the labor rights, which any multi-national has to keep in mind before entering India.

Clearly an emerging economic force to be reckoned with, India has the potential to sustain its growth for years to come. And although there are many challenges, the upside for this rapidly growing, democratic giant is hard to ignore. IBI