India has gained the title of the world’s most populous country this year. This makes India the next big economy on the global front. Yes, we have overtaken China as the world’s most populous country, but our young and dynamic population of a median age of 28 is a global attraction now. This has caught the eyes of investors and businesses from all over the world.
Well, it is indeed good news for us that our economy is attracting foreign investments now, but there are many factors that come into play. Though legendary investors are showing interest in the Indian economy, it isn’t a cakewalk to operate in India business-wise. Here, we have brought to you a few reasons why Indian is difficult for foreigners to make a huge business success:
Trade protectionism
Our history of protecting our trade process makes the business in the country hard for foreigners to comprehend. To ease this, economic reforms are required, for which the government of India has revamped the foreign direct investment policies. However, the government always strives to make the economy self-reliant. The US International Trade Administration, or ITA, mentioned in a market profile that US exporters are under pressure to commence manufacturing their products locally in order to have better market access. This is especially true when the same products are not manufactured in India. Many tariff and non-tariff barriers have been imposed by the Indian government to sustain the local market.
High import taxes
We have the reputation of being a country that imposes some of the highest import taxes on foraging trades. Tariff rates, on average, have hit 18.3% so far, which is 3.4% higher than US tariff rates. Such as for imported cars, the tariff mark can hit up to 70% under the $40,000 price. Owing to this, Tesla was lobbying the government to reduce import taxes on EVs.
Red tape and bureaucracy
We are all set to become manufacturing powerhouses in the next 10 years based on our large young population. But our country doesn’t hold a good reputation in terms of bureaucracy and red tape. Company compliances are way too hard for business owners from a foreign land to come and open a ship in India. As per the World Bank’s lengthy list of annual rankings for countries where ease of doing business is least, the most recent studies showed that India stands 63rd in those terms, far from China, which is 31st.
Decentralised decision making
India relies on a federal system. Here, power as well as decision-making are decentralized. State-level politicians, governance quality, regulations, and labor relations are a few major challenges shared by ITA. Indian states have greater power, which makes it hard for businesses to deal with different state rules and regulations.
However, India has immense potential to catch global attention now, planning timelines and adopting suitable strategies is something foreign businesses need to consider. Already established industry giants like Reliance in India have a loyal consumer base, which is not easy to manipulate by marketing gimmicks now. Hence, there is a long way to go that requires changes in many ways.
