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General overview

Describe about the Business PEST Analysis for Foreign Investment.

India which is mostly and commonly known as the republic of India is mainly identified for its cultural diversity and democratic approaches. The country is chiefly famous for its unique business proposals and proper customer dealings. From past many years, the country is continuously showing constant growth in the GDP due to which the chances for the growth are increasing simultaneously. The foreign investors and different organizations come up with their definite business proposals to make a suitable investment in the country. The report defined here is mainly related to the foreign direct investment (FDI) and trade policies in context to India. For defining the different perspectives related to the FDI, the major sections which are covered in this report are defined below: -

  • Pest analysis is defined which helps in defining the suitable business environment of the concerned company.
  • Natural resources and factor endowment will assist in defining the suitable sources for the FDI.
  • Foreign currency exchanges and its impact.
  • Trade policies, system barriers and incentives will be helpful in showing the appropriate policies related to the investment.
  • At last, suitable summary along with some recommendations for the current aspects have been mentioned.

The PEST analysis is identified as the method to analyze the macro environment of the specific country.  It is not only helpful in providing the suitable macro environment, but by the help of this, the evaluation of the whole environment can be identified easily. The suitable table to show the PEST analysis is defined below: -

Political

·         The political aspects of the country are totally dependent on the views and ideologies generated by political leaders.

·          

·         Being a democratic country, the policies and rules of the country are comparatively different and precise as compared to the other countries.

·          

·         The influence of government, semi-government and private aspects are identified in different respects (Srivastava, 2014).

·          

·         The taxation system of the country is also well developed and distinguished in a suitable way. The different taxes are income, services and sales tax.

Economic

·         The economic aspects of the country are improving continuously since the year 1991.

·          

·         The liberalization in the trade policies and changes observed in the foreign licensing is identified as the major source of financial and economic aspects.

·          

·         The marvellous improvement in the GDP of the country is clearly visible which is helpful in defining the major aspects related to the growth and development.

Social

·         The social and cultural aspects of India are widely distributed. The country try to provide flexibility to different types of trade and policies.

·          

·         The social aspects of India are continuously changing and to manage these aspects, the rapid changes are observed on an initial level.

Technological

·         Technically, the country is getting sound and these technical aspects may also help in improving the trade ventures related to the organization as well (Contributor, 2014).

·          

·         The improvement in the technical aspects like 3G and 4 G will be helpful in promoting the beneficial aspects of online trading. By the help of this, the foreign ventures can easily be introduced in the existing market.

By the help of PEST analysis defined above, the current scenario related to the trading environment of India can be identified. By this, the suitable trade can be conducted in the correct way and right direction. For the new ventures and approaches, the proper scenario also gets cleared, by which the foreign investors can able to plan their specific strategy simultaneously.

The national resources and endowment factors are identified as the most effective catalyst which is helpful in introducing the suitable changes in the current trends of trading. There are various national resources and factor endowment provided in India. The specific discussion for both the aspects is defined below on an individual level.

The wide ranges of national resources are available in India. To strengthen the trading perspectives and to generate the possible outcomes from the external trades, these national resources are identified as the most supporting factors. The metallic ores, zinc ore and different type of valuable resources are helpful in opening the doors for the foreign direct investment in the country. With the help of these investments, the trading aspects also get improved on an initial level. Other than this, there are also some specific lands, forest and other sources identified which can able to contribute in the appropriate operating of business in a possible way. There are different sources of oil and gases discovered in India, which assists in supporting the FDI on the large scale (Harrison, 2007).

PEST Analysis

The factors endowment is the structure which includes the multi variation elements that are helpful in case of production with the help of specific resources. These resources are defined as land, labor, capital and investment. These factors simultaneously help in increasing the trading perspectives of India. The most specific factors endowment which helps in generating competitive advantage in comparison to the other countries are identified as the geographical aspects, demographic, psychographic aspects and aspects related to the political stability. There are various historical data available, which may help in defining that the introduction and usage of suitable endowment factors will be helpful in upward shifting of the production function. By this, the quality of product will get improved and improved towards the lower to higher quality.

These natural resources and factors endowment not only helps in providing suitable assistance to the business, but also give tough competition to the competitors too (Prakash & Anand, 2014). The other countries like UK, US, Australia and Sri Lanka are equipped with the great resources and factors endowment. In that scenario, these aspects of India will be helpful in providing the appropriate developmental aspects.

The foreign currency and exchange influences the economic and financial aspects of India in both the positive and negative way. With the influence of foreign currency, the economic perspectives of the country are improving with a rapid rate and by doing suitable exchange of money; the financial aspects are also getting strengthened. Apart from this, some of the combined influences are shown below in the form of specific points: -

The depreciation of the foreign currency will directly influence the exporting aspects of products. Indian investors sometimes are not able to generate the proper profit as required by them. In this scenario, the purchasing of raw material should be defined properly.

The floating exchange rates are identified as the key cause for the depreciation and devaluation of the product. This will also reduce the actual cost of product. It is recommended that constant rates should be defined for the suitable exchange.

The exchanges in foreign currency & exchange also affects the GNP of the country due to which the price level may also change simultaneously.

According to the suitable graph and developmental curves, it is also identified that the depreciation in currency of any country will also reduce the current value of product in the existing market.

There are also various changes which are observed constantly in the economic and financial aspects of the country.

Political

These factors are responding both in the positive and negative directions. But, the changes and fluctuations may also create an influence in the present economic scenario of the country.

Every country possesses its specific trade policies. To perform trading, these policies are considered as the milestone for the growth and development. Similarly, India also possesses specific trade policies for suitable execution in a proper mode. As FDI is discussed in this report, so the trade policies for the foreign are defined here on an initial level. The two foreign trade policies are defined which are identified as the double the percentage of shares in the next five years and adaptation of effective aspects to provide the suitable results. The short term objectives of the system are to decline these suitable trends in every possible manner. The revision of the global policies and improvement in the management aspects are identified as the long term target (Centre for Public Policy Research, 2015).

The system barriers are also there which influences the systematic approach related to the foreign trading.  The greatest trade barrier in the business of export and import is related to the tariffs and custom duties that are imported on the products which are purchased from foreign (Gujral, 2014). The trading aspects are quite different and due to imposing of different type of taxes, the cost of product will be raised three times more than the actual cost of the product. Due to this, trading aspects won’t be fulfilled in an easy way (Gupta & Pursell, 1998).

The incentives are identified as the different perspectives for performing the suitable trading. But due to changing scenario, the incentives are also changing continuously to perform the appropriate trade. The requirement of consistency is required on the wide level.

The current scenario of the market and policies for performing suitable business task states that the condition of the foreign direct investment is comparatively more developed and well maintained. But, to identify the suitable evidences related to the growth of the country, the further fruitful studies are required on an initial level. The industries, sources and the developmental growth in 5 years are defined in the description shown below.

 The wide ranges of industries are performing suitable process of FDI. In fact, most of them are successful in providing suitable assistance and output to the economic and financial aspects of country, but the major ones are the hotel and tourism industry, non-banking financial companies and telecommunications (Miglani & Das, 2015). The individual discussion for all the industries is defined below with the specific details. These business perspectives are helpful in contributing in a definite way.

Economic

The hotel and tourism industry is improving with rapid rate. Not only the Indian hotel chains are expanding with wide speed, but the foreign investors are also expanding their business in India by an appropriate implementation of FDI. The hotel and tourism industry is also strengthening their brand value with the help of FDI. FDI will be helpful in providing the most specific aspects related to economy too (Jayachandran, 2013).

The non-banking financial companies of India are also influenced by FDI in India. The influence flows in the positive direction. The NBFC are specialized in providing the suitable loans, shares and personal assistance related to the financial aspects to their specific clients. There are various foreign banks like Barclays, Credit Suisse and Royal Bank of Scotland which are expanding their roots of business and personal assistance for the Indian customers.

Similar to the hotel and tourism and non-banking financial companies, the telecommunication industry is also getting benefit from the FDI. There are various aspects which may help in providing the most appropriate direction for involvement of foreign companies in India. Various telecommunication companies are expanding their trade through FDI in India and also succeed in appropriate contribution too. These companies are also providing the appropriate assistance for the wide range of services. The different Apps and applications are identified for the definite services to the customers.

Similar to the major industries, some measurable sources of FDI are also identified in India, which are considered as the major source of stability and other financial aspects. The sources are identified as the FDI in the small scale industries (SSI’S) of India, civil aviation in India and the exchange & commodities involvement in the country. These sources are identified as the most recommendable aspects which are defined on an early stage. These aspects can also able to provide the most remarkable results too. The trading phase of the small scale industry is also changing with an involvement of FDI. Their products are also distributing on the large scale which will be help in providing monetary aspects too.

Defining the existing scenario of India to show the Foreign direct investment (FDI), the suitable developmental and growth, a chart is shown below which will also help in showing the suitable assumptions.

 (Capital Mind Team, 2016)

The assignment basically defines the FDI on the basis of different perspectives. On the basis of this, an appropriate strategic research is also conducted which help in providing different output too. There are various sections defined above which helps in highlighting various sources and industries related to FDI.  This will assist in showing the definite type of research perspectives. A suitable influence of the FDI on the economic and financial aspects is also displayed with the help of this report. On the basis of their particular report, the appropriate guidelines and recommendations are also provided to manage the effect of FDI in a proper way. Some of the major recommendations are defined below: -

For improving the FDI, it is essential to improve the manufacturing aspects too. The services provided by the country are good, so the major focus should be targeted on manufacturing part.

The suitable transparency and consistency is required while making the appropriate policies in a suitable direction (Shamim & Ranga, 2016).

It is always kept in mind that FDI is the source of income, but the unemployment and poverty cannot be eradicate with it. So, suitable measures should be planned accordingly.

By adapting these policies and procedures, the suitable aspects can be defined accurately.

References

Capital Mind Team, 2016. % Change in FDI inflow since 2001, Available at: https://capitalmind.in/wp-content/uploads/2016/05/Changes-in-FDI-Inflow-India-2001-to-2016.png

Centre for Public Policy Research, 2015. India’s trade barriers: an analysis with reference to tariffs and customs procedures, Available at: https://www.cppr.in/article/5300/

Contributor, P., 2014. PESTLE Analysis of India in five Steps, Available at: https://pestleanalysis.com/author/contributor/

Gujral, R., 2014. Foreign Trade Policy, Available at: https://pib.nic.in/archieve/ForeignTradePolicy/ForeignTradePolicy.pdf

Gupta, A. & Pursell, G., 1998. Trade Policies and Incentives in Indian Agriculture: Methodology, Background Statistics and Protection and Incentive Indicators: World Bank Publications.

Harrison, A., 2007. Globalization and Poverty: University of Chicago Press, Available at: https://www.nber.org/chapters/c0112.pdf

Jayachandran, G., 2013. Impact of exchange rate on trade and GDP for india: A study of last four decade. International Journal of Marketing, Financial Services & Management Research, September.02(09).

Miglani, S. & Das, K., 2015. India frees up foreign investment in 15 major sectors, Available at: https://in.reuters.com/article/india-reforms-idINKCN0SZ18J20151110

Prakash, S. & Anand, S., 2014. Impact of Growth on Factor Endowment and Structure of India’s Trade. IOSR Journal of Economics and Finance, Sep.-Oct., 5(5), pp. 53-66.

Shamim, M. & Ranga, M., 2016. India’S Foreign Direct Investment: Current Status, Issues And Policy Recommendations, Available at: https://ideas.repec.org/a/ris/utmsje/0010.html

Srivastava, D., 2014. Society and politics. Journal of Social Science and Humanities, 03(02).

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