MACRO BUSINESS ENVIRONMENT IN INDIA

Project submitted by:RISHABH ANAND Roll No. 22 Semester 1, MBA(FINANCE) Batch 2011-2013 Department of Commerce

University of Calcutta

TABLE OF CONTENTS
Introduction 2. Overview of Indian Economy 3. Political Environment 4. Economic Environment 5. Key Economic Indicators 6. Socio-Cultural Environment 7. Technological Environment 8. Ecological Environment 9. Opportunities In India 10. Conclusion 11. Bibliography
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Acknowledgement
I, Rishabh Anand,wish to express my sincere gratitude to Prof. B. Roy Choudhury, to give me an opportunity to do my project work on this topic. This project bears on imprint of many people. I also wish to express my gratitude to the officials and other staff members who rendered their help during the period of my project work. Last but not least I wish to avail myself of this opportunity, express a sense of gratitude and love to my friends and my beloved parents for their manual support, strength, help and for everything.

Introduction
Business environment refers to all those factors which have a bearing upon the operations of the business firms.Those key environments include political,economic, sociocultural, technological and ecological environment. Analysis of these influential environments has been used to identify business opportunities and threats in the country along with the three industries which have been performing well. Selection of industries has been done on the basis of its current performance, its viability with respect to environmental analysis and its potential to contribute more to the Indian economy through its comparative advantage in South Asia.E n v i r o n m e n t a l a n a l ys i s s t a r t s w i t h t h e a n a l ys i s o f p o l i t i c a l e n v i r o n m e n t w h e r e t h e Legislature, the Executive, the Judiciary, the States, Election Commission, Political Influence in Business and Indian Corporate Governance practices has been analyzed.A n a l ys i s o f e c o n o m i c e n v i r o n m e n t i n c l u d e t h e a n a l ys i s o f b u s i n e s s i d e o l o g y b e i n g i n f l u e n c e d b y p o l i t i c a l i d e o l o g y, G D P t r e n d s , per capita Income and Consumption,Market Size, Growth Rate, Foreign D i r e c t I n v e s t m e n t ( F D I ) a n d r e a s o n s f o r F D I attraction in India. It also analyzes the economy with respect to the models of command a n d m a r k e t e c o n o m y . Demography, Caste System, Women Empowerment and Consumption Pattern are important analysis that forms the socio-cultural environment a n a l y s i s . W h i l e analyzing the technological e n v i r o n m e n t , t r a n s p o r t a t i o n a n d communication sector have been considered. India as an emerging market for value-added services and telecom equipment manufacturing has been studied in the process.F i n a l l y , environmental analysis has been concluded with the analysis of e c o l o g i c a l environment (Geography, Rural Environment, Biological & Agricultural Diversity and Domestic Resources).

1. Overview of Indian Economy

India is developing into an open-market economy, yet traces of its past autarkic policies remain. Economic liberalization, including reduced controls on foreign t r a d e a n d investment, began in the early 1990s and has served to accelerate the countrys growth,w h i c h h a s a v e r a g e d m o r e t h a n 7 % p e r y e a r s i n c e 1 9 9 7 . I n d i a s d i v e r s e e c o n o m y encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Slightly more than half of the work force is in agriculture, but services are the major source of economic growth, accounting for more than half of Indias output, with only one-third of its labor force.I n d i a h a s c a p i t a l i z e d o n i t s l a r g e e d u c a t e d E n g l i s h - s p e a k i n g p o p u l a t i o n t o b e c o m e a major exporter of information technology services and software workers. An industrial slowdown early in 2008, followed by the global financial crisis, led annual GDP growth t o s l o w t o 6 . 5 % i n 2009, still second highest growth in the world among major economies. Domestic demand, driven by purchases of c o n s u m e r d u r a b l e s a n d automobiles, has re-emerged as a key driver of growth, as exports have fallen since the global crisis started. Indias fiscal deficit increased substantially in 2008 due to fuel and fertilizer subsidies, a debt waiver program for farmers, a job guarantee program for rural workers, and stimulus expenditures.The government abandoned its deficit target and allowed the deficit to reach 6.8% of GDP in FY10. Nevertheless, as shares of GDP, both government spending and taxation are among the lowest in the world. The government has expressed a commitment to fiscal stimulus in FY10, and to deficit reduction the following two years. It has increased the pace of privatization of government-owned companies, partly to offset the deficit. Indias l o n g t e r m c h a l l e n g e s i n c l u d e w i d e s p r e a d p o v e r t y , i n a d e q u a t e p h y s i c a l a n d s o c i a l infrastructure, limited employment opportunities, and insufficient access to basic and higher education. Over the longterm, a growing population and changing demographics will exacerbate social, economic, and environmental problems but possibilities of strong business growth remains.

2. Political Environment
Inspired by Mahatma Gandhi and his Satyagraha, a unique non-violent campaign, India threw off the yoke of British rule on August 15, 1947. Free Indias first Prime Minister,Pandit Jawaharlal Nehru, described the moment as a tryst with destiny.I n l e s s t h a n t h r e e ye a r s o f a t t a i n i n g f r e e d o m , I n d i a h a d f r a m e d a C o n s t i t u t i o n

a n d declared itself a Republic on January 26, 1950. The Constitution was given shape by some of the finest minds of the country who ensured the trinity of justice, liberty and equality, for the citizens of India. The Constitution was made flexible enough to adjust to the demands of social and economic changes within a democratic framework. Adopting the path of democracy, the country held its first general elections in 1952. Elections to the Lower House of Parliament, Lok Sabha, have been held regularly every five years.India is a Union of 28 States and seven centrally administered Union Territories. The country attained freedom on 15 August 1947. The Constitution of the Republic came into effect on 26 January 1950.

2.1 Government of India

2.1.1 The Legislature India has a parliamentary form of government based on universal adult franchise. The e x e c u t i v e a u t h o r i t y i s r e s p o n s i b l e t o t h e e l e c t e d r e p r e s e n t a t i v e s o f t h e p e o p l e i n t h e Parliament for all its decisions and actions. Sovereignty rests ultimately with the people.The Parliament is bi-cameral: 2.1.1.1 Rajya Sabha (Council of States) The Council of States consists of not more than 250 members, of whom 12 are nominated by the President of India and the rest elected. It is not subject to dissolution, one-third of its members retiring at the end of every second year. The elections to the Council are indirect. The allotted quota of representatives of each State is elected by the members of the Legislative Assembly of that State, in accordance with the system of proportional r e p r e s e n t a t i o n b y m e a n s o f a s i n g l e t r a n s f e r a b l e v o t e . T h e n o m i n a t e d m e m b e r s a r e persons with special knowledge or practical experience in literature, science, art and social service. The Rajya Sabha is presided over by the Vice- President of India. 2.1.1.2 Lok Sabha (House of the People) The House of the People consists of 545 members. Of these, 530 are directly elected from the 25 States and 13 from the seven Union Territories. Two members are nominated by the President to represent the Anglo-Indian community.Unless dissolved sooner, the term of the House is five years from the date appointed for its first meeting. The Lok Sabha elects its own presiding officer, the Speaker. 2.1.2 The Executive The President of India is the Head of the State and the Commander-inC h i e f o f t h e Armed Forces. He is elected by an electoral college composed of members of both the Houses of Parliament (Rajya Sabha and Lok Sabha) and the legislatures of the nations constituent States. The President holds office for five years and can be re-elected.The President does not normally exercise any constitutional powers on his own initiative.These are exercised by the Council of Ministers, headed by the Prime Minister, which is responsible to the elected Parliament.The Vice-President is elected jointly by the members of both the Houses of Parliament.The person enjoying majority

support in the Lok Sabha is appointed Prime Minister by the President. The President then appoints other ministers on the advice of the Prime M i n i s t e r . The Prime Minister can remain in office only as long as he or she e n j o y s majority support in the Parliament

2.1.3 The Judiciary

The judiciary is independent of the executive. It is the guardian and interpreter of the Constitution. The Supreme Court is the highest judicial tribunal, positioned at the apex of a s i n g l e u n i f i e d s ys t e m f o r t h e w h o l e c o u n t r y . E a c h S t a t e h a s i t s o w n H i g h C o u r t . A uniform code of civil and criminal laws applies to the whole country.

2.1.4 The States

The States have their own Legislative Assemblies and in certain case a second Chamber.All members of the Legislative Assemblies are elected by universal adult franchise. The H e a d of the States are called Governors. Appointed by the President, they n o r m a l l y exercise the same powers in the States as the President does at the Union government l e v e l . A s i n t h e C e n t r a l G o v e r n m e n t , e a c h S t a t e h a s a C a b i n e t h e a d e d b y t h e C h i e f Minister responsible to the elected State Legislature.

2.1.5 Election Commission

The electoral machinery is centralized in an independent statutory body c a l l e d t h e Election Commission. The Commission is responsible for the superintendence, direction a n d c o n t r o l o f t h e e l e c t o r a l r o l l s f o r a l l e l e c t i o n s t o P a r l i a m e n t a n d t o t h e S t a t e Legislatures and also for conducting the elections.

3. Economic Environment
Political ideology has had an influence in Indian economy. Political ideology basically shaped the economic policy and model which impacted market performance.

3.1 Economic impact of the British rule in India

The chief motive of the British to establish political control in I n d i a w a s m a i n l y economic and commercial. The sole aim of the British government was to establish a colonial market for the British goods. However the British impact on the economic life of India was devastating and harmful. Britain used the most complicated methods to exploit Indias vast rich economic reserves of India. After a control of two hundred years the British completely shattered the economic set

up of India. India in 1947 presented the picture of an economically underdeveloped nation with hunger, poverty; low national income etc. Indian agricultures received maximum care under the east India Company. This was primarily because the main sources of state income were lands revenue. Moreover it was the sole aim of the British government was to establish India as agricultural base. Thus t h e a g r i c u l t u r a l p r o d u c e s i n I n d i a c o u l d p r o v i d e c h e a p r a w m a t e r i a l s t o i n d u s t r i a l England. The Company tried various experiments to maximize the land revenue by resort to the method of oppression and repression to the peasants. The system of farming of land revenue became obsolete. Cornwallis introduced Permanent Settlement or a system of Land Revenue in Bengal, Bihar and Orissa in the year 1793. Subsequent administrators introduced the Ryotwari system in the Bombay Presidency and most of the parts of the Madras Presidency. The Mahalwari system proved extremely devastating in the part of Uttar Pradesh. The Zamindary system encouraged absentee landlordism. It eventually created a host of intermediaries between the state and the cultivator. This complicated system of land revenue created a group of moneylender, who otherwise oppressed the poor peasants by lending them at high interests. The poor cultivators could not repay those high interests and ultimately submitted to those moneylenders. As a result famine was the regular feature of the time. The sole mission of the European in India was the economic exploitation. The burden of the Europeans was carried on through the economic exploitation in India. The British rulers created new economic structure belonged to the colonial institutions. The British e s t a b l i s h e d a c o l o n i a l e c o n o m y, c o l o n i a l s o c i e t y a n d e v e n colonial ideology. The institution of landlordism, casteism infested w i t h n a r r o w p o l i t i c a l c o n s i d e r a t i o n , communalism, regionalism etc were the immediate results of the British economic policy.Moreover" distorted modernization" created new problems. In 1947, when the British left, India represented a ruined economy, a sick society and the present danger of the evileffects of neo-colonialism.

3.2 Key Economic Indicators 3.2.1 Gross Domestic Product

The overall growth of GDP at factor cost at constant prices in 2008-09, as per revised estimates released by the Indian Central Statistical Organization (CSO) (May 29, 2009) was 6.7 per cent. This is lower than the 7 per cent projection in the Mid-Year Review2008-09.The growth of GDP at factor cost (at constant 1999-2000 prices) at 6.7 per cent in 2008-09 nevertheless represents a deceleration from high growth of 9.0 per cent and9.7 per cent in 2007-08 and 2006-07 respectively.

3.2.2 Per Capita Income and Consumption

The per capita income in 2008-09, measured in terms of gross domestic p r o d u c t a t constant 1999-2000 market prices, was Rs. 31,278. In 2007- 08 this stood at Rs. 29,901.Per capita consumption in 2008-09 was Rs. 17,344 as against a level of Rs. 17,097 in2 0 0 7 - 0 8 . W h i l e t h e r e h a s b e e n a n i n c r e a s e i n l e v e l s o f p e r c a p i t a i n c o m e a n d consumption, there has been a perceptible slowdown in their growth rate. The growth in p e r c a p i t a G D P d e c e l e r a t e d f r o m 8 . 1

p e r c e n t i n 2 0 0 6 - 0 7 t o 4 . 6 p e r c e n t i n 2 0 0 8 - 0 9 , while the per capita consumption growth declined from 6.9 per cent in 2007-08 to 1.4 per cent in 2008-09.

3.2.3 Market Size

The economy of India is the eleventh largest economy in the world by nominal GDP and the fourth largest by purchasing power parity (PPP).In the 1990s, following economic reform from the socialist-inspired economy of post-independence India, the country b e g a n t o e x p e r i e n c e r a p i d e c o n o m i c g r o w t h , a s m a r k e t s o p e n e d f o r i n t e r n a t i o n a l competition and investment. In the 21st century, India is an emerging economic power with vast human and natural resources, and a huge knowledge base. Economists predict that by 2020, India will be among the leading economies of the world .I n d i a s l a r g e s e r v i c e i n d u s t r y a c c o u n t s f o r 6 2 . 6 % o f t h e c o u n t r y s G D P w h i l e t h e industrial and agricultural sector contributes 20% and 17.5% respectively. Agriculture is t h e p r e d o m i n a n t occupation in India, accounting for about 52% of e m p l o y m e n t . The service sector makes up a further 34% and industrial sector around 14%.The labor force totals half a billion workers .Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes, cattle, water buffalo, sheep goats, poultry and fish. Major industries include telecommunications, textiles, chemicals, food processing, steel, transportation equipment,c e m e n t , m i n i n g , p e t r o l e u m , m a c h i n e r y , i n f o r m a t i o n t e c h n o l o g y e n a b l e d s e r v i c e s and software.

Figure 3: Growth in per capita GDP and Consumption (Source: Economic Survey 2008-09) (Note: The top line is per cap GDP and the bottom line is per cap Consumption)

Indias per capita income (nominal) is $1,030, while its p e r c a p i t a ( P P P ) i s US$2,940. Previously a closed economy, Indias trade

has grown fast. India currently accounts for 1.5% of World trade as of 2007 according to the WTO. According to the World Trade Statistics of the WTO in 2006, Indias total merchandise trade (counting e x p o r t s a n d i m p o r t s ) w a s valued at $294 billion in 2006 and Indias services trade i n c l u s i v e o f export and import was $143 billion. Thus, Indias global e c o n o m i c engagement in 2006 covering both merchandise and services trade was of the order of $437 billion, up by a record 72% from a level of $253 billion in 2004. This presents a huge opportunity for business.

Figure 4: Composition of GDP by Industries

3.2.4 Growth Rate

While developed economies are not able to grow at a significant pace, India is able to

3.2.5 Foreign Direct Investment

During 2008-09, the total FDI equity inflows stood at IRs. 1,22,919 crore (US$ 27,309million) against IRs. 98,664 crore (US$ 24,579 million) during 2007-08 signifying a g r o w t h o f 2 5 p e r c e n t i n t e r m s o f r u p e e a n d 1 1 p e r c e n t i n t e r m s o f U S d o l l a r . T h e distribution of FDI within the industrial sector between mining, manufacturing, electricity and construction was as follows.

Figure 7: Sector-wise FDI Flow

Figure 8: Sectors attracting highest FDI Flows (IRs. In Crores)

4. Socio-Cultural Environment
Social section enables understanding of customer demographics through income d i s t r i b u t i o n , r u r a l - u r b a n s e g m e n t a t i o n a n d c e n t e r s o f a f f l u e n c e , h e a l t h c a r e a n d educational scenario. Changes in social trends can impact on the demand for a firms products and the availability and willingness of individuals to work.

4.1 Demography of Inequality

Scientific study of human population, their size, their structure, their development is regarded as Demography. According to Van Mayer, sociologist, Demography can be d e f i n e d a s t h e n u m e r i c a l a n a l ys i s o f t h e s t a t e a n d movement of human population inclusive of census enumeration and r e g i s t r a t i o n o f v i t a l p r o c e s s e s a n d o f w h a t e v e r quantitative statistical analysis can be made of the state and movement of population on t h e f u n d a m e n t a l c e n s u s a n d r e g i s t r a t i o n d a t a . C e n s u s i s t h e p r o c e s s o f c o l l e c t i n g , compiling, evaluating analyzing and publishing demographic, social and economic data pertaining to specific point of time to all persons in a country. This process was first of all started by British in 1871, since then it is conducted every 10 years. The last census in India was conducted in 2001

4.2 Population
India, whose land occupies 2.4% of total area of world, has the second largest nation in terms of population size. India has population of 1.1 billion, which is 16% of total world population. With current rate of population growth (2.11% approx.), India will soon r e p l a c e C h i n a a s a m o s t p o p u l o u s n a t i o n o f t h e w o r l d . A c c o r d i n g t o t h e C e n s u s conducted in 2001, India had total population of 1,028,610,328 out of which population of males was 532,156,772 as against 496,453,556 number of females with overall sex ratio of 933 i.e. 933 females per 1000 males.

4.2.1 Rural and Urban Population

It is said that India lies in villages. Around 70% population of India lives in villages and is employed in primary sector. But in recent times this ratio of Rural/Urban population is changing fast. There are many factors of which the most important is migration. Due to unemployment and lack of facilities in rural set up people are immigrating into the cities in search of work and better living conditions. This migration has put a lot of strain on basic infrastructure of cities. The increasing population pressure on cities has resulted inc o m i n g u p o f s l u m s . A c c o r d i n g t o 2 0 0 1 C e n s u s D e l h i a l o n e h a s s l u m p o p u l a t i o n o f 1,851,231, which is 18.7% of total population of Delhi.

4.3 Religion
India is a secular democracy; almost all the religions of world find representation in this country. If on one hand majority of its population (approx. 80%) is Hindu, then on the other it also boasts of having the third largest Muslim population in the world. As per the l a s t c e n s u s c o n d u c t e d , o u t o f t h e t o t a l p o p u l a t i o n o f 1 0 2 8 , 6 1 0 , 3 2 8 8 , 2 7 5 , 8 7 9 a r e Hindus; 138,188 (13%) Muslims; 24,080 (2.34%) Christians; 19,216 (1.8%) Sikhs; 7,955(0.7%) Buddhist; 4,225(0.4%) Jains; and 6,640 (0.6%) others.

4.4 Language
India is home to approximately 1,652 languages among them 350 are major ones. There are 22 officially recognized languages. It includes Assamese, Bengali, Bodo, Dogri,Gujarati, Hindi, Kannad, Kashmiri, Konkani, Maithili, Malayalam, Manipuri, Marathi,Oriya, Punjabi, Santhali, Sanskrit, Sindhi, Telugu, Tamil, Nepali and

Urdu. Hindi is the most widely spoken language closely followed by English, which is the second official language of the nation.

4.5 Literacy Rate

Literacy can be defined as the ability to read and write with understanding in any one language. The percentage of literate people out of the total population of the country is known as the literacy rate of that nation. In India literacy rate is 65.38% as per 2001c e n s u s . B u t t h i s r a t e i s n o t u n i f o r m a n d m a y v a r y a c c o r d i n g t o r e g i o n , r e l i g i o n a n d gender. Urban literacy rate is much more than rural, male literacy rate is higher than the female literacy rate.

4.6 Caste System

India has a hierarchical caste system in the society. Within Indian culture, whether in the north or the south, Hindu or Muslim, urban or village, virtually all t h i n g s , p e o p l e , and groups of people are ranked according to various essential qualities. If one is attuned to the theme of hierarchy in India, one can discern it everywhere. Although India is a political democracy, in daily life there is little advocacy of or adherence to notions of equality. Indias complex caste system includes 3,000 castes and 25,000 sub-castes, all traditionally related to occupation and they fall under four broad categories: Brahmin priests, Kshatriya warriors, Vaisya merchants, and Sudra workers and farmers.

4.7 Women Empowerment

Women empowerment is the ability of women to exercise full control over ones actions.In the past, women were treated as mere house-makers. They were expected to be bound to the house, while men went out and worked. This division of labor was and is still in a few parts of the country one of the major reason because of which certain evils took birth in our society child marriage, female infanticide, women trafficking.The government has passed many laws so as to empower the women. These rules have empowered them socially, economically, legally and politically. Not only the government but various non-governmental organizations have done a lot so as to improve the status of woman in our society. Empowerment would become more relevant when women are actually treated as equal to men. This division of labor that a woman is supposed to do only household chores and the men are the only one who can earn a living for the family has to be removed.

4.8 Consumption Pattern

The liberalization of the economy in 1991 has had a significant impact on the nature of spending among consumers in India. The portfolio of spending categories for the average Indian has increased from 1991 to 2007. In 1991, the average Indian spent on 8 product c a t e g o r i e s , w h e r e a s i n 2 0 0 7 t h e n u m b e r o f c a t e g o r i e s i n c r e a s e d t o 1 7 , a n d i n c l u d e d mobile handsets, gifts, and durables, among others.Major factors influencing the increase in spending categories include rise in disposable i n c o m e s , i n c r e a s i n g n u m b e r o f d u a l - i n c o m e n u c l e a r f a m i l i e s a n d c h a n g i n g a t t i t u d e s toward consumption. The attitude of people toward

shopping has changed from it being a regular chore to one that provides an enriching experience.The Indian consumer market is set to undergo a major transformation. By 2025, India is estimated to climb from its current position as the worlds 12th largest consumer market to become the worlds 5th largest consumer market. More than 291 million people are expected to move out of abject poverty to a more sustainable lifestyle and the size of the middle class is expected to swell by over ten times from its current size of 50 million to583 million people. Moreover, more than 23 million Indians will get added to the group of the countrys wealthiest citizens by 2025. This well-being is expected to spread across the rural areas as well, with annual real rural income growth per household expected to a c c e l e r a t e f r o m 2 . 8 p e r c e n t ( s i n c e t h e p a s t 2 d e c a d e s ) t o 3 . 6 p e r c e n t o v e r t h e n e x t 2 decades. As the incomes in India continue to grow on the back of strong overall economic growth,income dynamics in India are expected to set in.

5. Technological Environment
Technological environment in India is favorable to quality improvement, cost reduction,& introduction to new products in market. It will lead to Industrial development with g l o b a l c o m p e t i t i v e n e s s . I n I n d i a , t h e g o v e r n m e n t h a s s e t u p l a r g e n u m b e r o f R & D Activities, space research centers etc. for introduction of new technology in different a r e a s . T h e e x p a n s i o n o f i n f r a s t r u c t u r e f a c i l i t i e s i n r e g a r d t o t r a n s p o r t , communication, electricity etc also encourages the application of modern technology to industries.

5.1 Transportation Sector

Indias transport sector is large and diverse; it caters to the needs of 1.1 billion people. In2 0 0 7 , t h e s e c t o r c o n t r i b u t e d a b o u t 5 . 5 p e r c e n t t o t h e n a t i o n s G D P , w i t h r o a d transportation contributing the lions share. Good physical connectivity in the urban and r u r a l a r e a s i s e s s e n t i a l f o r e c o n o m i c g r o w t h . Since the early 1990s, India's growing economy has witnessed a rise in d e m a n d f o r t r a n s p o r t i n f r a s t r u c t u r e a n d s e r v i c e s . However, the sector has not been able to keep pace with rising demand and is proving to be a drag on the economy. Major improvements in the sector are required to support the country's continued economic growth and to reduce poverty.

5.1.1 Railways
Indian Railways is one of the largest railways under single management. It carries some17 million passengers and 2 million tones of freight a day in year 2007 and is one of the worlds largest employers. The railways play a leading role in carrying passengers and cargo across India's vast territory. However, most of its major corridors have capacity constraint requiring capacity enhancement plans.

5.1.2 Roads
Roads are the dominant mode of transportation in India today. They carry almost 90 percent of the countrys passenger traffic and 65 percent of its freight. The

density of I n d i a s h i g h w a y n e t w o r k a t 0 . 6 6 k m o f h i g h w a y p e r s q u a r e k i l o m e t e r o f l a n d i s similar to that of the United States (0.65) and much greater than Chinas (0.16) or Brazil's(0.20). However, most highways in India are narrow and congested with poor surface equality, and 40 percent of Indias villages do not have access to all-weather roads.

5.1.3 Ports
India has 12 major and 187 minor and intermediate ports along its more than 7500 km l o n g c o a s t l i n e . T h e s e p o r t s s e r v e t h e c o u n t r y s g r o w i n g f o r e i g n t r a d e i n p e t r o l e u m products, iron ore, and coal, as well as the increasing movement of containers. Inland water transportation remains largely undeveloped despite India's 14,000 kilometers of navigable rivers and canals.

5.1.4 Aviation
India has 125 airports, including 11 international airports. Indian airports handled 96m i l l i o n p a s s e n g e r s a n d 1 . 5 m i l l i o n t o n e s o f c a r g o i n ye a r 2006-2007, an increase of 31.4% for passenger and 10.6% for cargo t r a f f i c o v e r p r e v i o u s y e a r . T h e d r a m a t i c increase in air traffic for both passengers and cargo in recent years has placed a heavy strain on the countrys major airports. Passenger traffic is projected to cross 100 million and cargo to cross 3.3 million tones by year 2010.

5.2 Communication
The Communication Industry in India is one of the rapidly emerging sectors in India and is estimated to surface as the second biggest international telecom market. As per the r e p o r t c a r r i e d o u t b y T e l e c o m R e g u l a t o r y A u t h o r i t y o f I n d i a ( T R A I ) , I n d i a n communication industry has registered a 3.5% increase in its total telecom subscribers in December 2009. The sector touched 562.21 million in its total number of subscribers within a month, against 543.20 million in November 2009.T h e g r o w t h i n c o m m u n i c a t i o n i n d u s t r y w a s t r i g g e r e d b y a n i n c r e a s e i n t h e r e v e n u e s generated from both landline and mobile facilities. On December 31, 2009 the sector earned the revenue of USD 8.56 billion. As per the Business Monitor International report,the nation is all set to include 8 to 10 million cellular phone subscribers on monthly basis.At this pace the communication industry is expected to encompass more than half of India's population i.e. 612 million cellular phone subscribers by mid 2012.The manufacturing of Cellular phone in India is predicted to expand at an annual rate of 28.3% till the FY 2011 which can be translated as a production of 107 million mobile handsets by 2010. The production would automatically generate profits and is predicted to increase at an annual rate of 26.6% till 2011, reaching the target of USD13.7 billion.

5.3 Power
The growth in electricity generation by power utilities during 2008-09 at 2.7 per cent fellmuch short of the targeted 9.1 per cent. Despite the sharp decline in hydro and

nuclear generation in 2008-09, the growth in total electricity generation was positive due to the 5 per cent plus growth in thermal generation.

6. Ecological Environment
About 76% of Indias population lives in about 5,76,000 villages. In developing countries like India, the rural sector with high population density and high level of poverty poses a serious threat to the environment and the impacts of human activities o n t h e I n d i a n ecology is evident from its degrading environment. Biological diversity in general and agricultural diversity in particular is being depleted at an unprecedented rate in the past few decades. Moreover, the growth and economic development are also contributing to the environmental degradation because of the uncontrolled growth of urbanization and industrialization, expansion and massive intensification of agriculture, and the destruction of forests.One of the primary causes of environmental degradation in a country could be attributed t o r a p i d g r o w t h o f population, which adversely affects the natural resources and environment. The uprising population and the environmental d e t e r i o r a t i o n f a c e t h e challenge of sustainable development. The existence or the absence of favorable natural resources can facilitate or retard the process of socio-economic development. The three b a s i c d e m o g r a p h i c f a c t o r s o f b i r t h s , d e a t h s a n d m i g r a t i o n a n d i m m i g r a t i o n p r o d u c e changes in population size, composition, distribution and these changes raise a number of important questions of cause and effect.

6.1 Pollution
Indian cities are polluted by vehicles and industry emissions. Road dust and vehicles are contributing up to 33% of air pollution. In cities like Bangalore, around 50% of children suffer from asthma.One of the biggest causes of air pollution in India is f r o m t h e transport system. The major problem areas are in the big cities where there are huge concentrations of these vehicles.On the positive side, the government appears to have noticed this massive problem and the associated health risks for its people and is slowly but surely taking steps. The first of which was in 2001 when it ruled that its entire public transport system, excluding the trains, be converted from diesel to compressed gas (CPG).Another major cause of air pollution is due to cremations in India. In India, 78% of the p o p u l a t i o n c o n s i g n s t h e d e a d b o d i e s t o f i r e f o r c r e m a t i o n a s a r i t u a l i n o p e n a i r . Just as the low temperature creates pollution,higher temperature is also found to create pollution with emissions dangerously harmful for the environment.

6.2 Uncontrolled Population Growth

It is estimated Indias population will increase to about 1.26 billion by the year 2016. The projected population indicates that India will be the first most populous country in the world and China will be ranking second in the year 2050. India having 18% of the world's population on 2.4% of world's total area has greatly increased the pressure on its natural resources.P o p u l a t i o n g r o w t h a n d e c o n o m i c d e v e l o p m e n t are contributing to many serious environmental calamities in I n d i a . T h e s e i n c l u d e h e a v y p r e s s u r e o n l a n d , l a n d degradation, forests, habitat destruction and loss of biodiversity. Changing consumption pattern has led to rising

demand for energy. The final outcomes of this are air pollution,global warming, climate change, water scarcity and water pollution.

6.3 Environmental Issues

Environmental issues in India include various natural hazards, particularly cyclones and annual monsoon floods, population growth, increasing i n d i v i d u a l c o n s u m p t i o n , industrialization, infrastructural development, poor agricultural practices, and resource mal-distribution that have led to substantial human transformation of Indias natural e n v i r o n m e n t . A n estimated 60% of cultivated land suffers from soil erosion, w a t e r logging, and salinity. It is also estimated that between 4.7 and 12 billion tons of top soil are lost annually from soil erosion. From 1947 to 2002, average annual per capita water a v a i l a b i l i t y d e c l i n e d b y a l m o s t 7 0 % t o 1 , 8 2 2 c u b i c m e t e r s , a n d o v e r e x p l o i t a t i o n o f groundwater is problematic in the states of Haryana, Punjab, and Uttar Pradesh. Forest area covers 18.34% of Indias geographic area (637000 km). Nearly half of the countrys forest cover is found in the state of Madhya Pradesh (20.7%) and the seven states of the northeast (25.7%); the latter is experiencing net forest loss.

6.4 Effect of Global Warming

The effects of global warming on the Indian subcontinent vary from the submergence of lowlying islands and coastal lands to the melting of glaciers in the Indian Himalayas,threatening the volumetric flow rate of many of the most important rivers of India and South Asia. As a result of ongoing climate change, the climate of India has become increasingly volatile over the past several decades; this trend is expected to continue.Elevated carbon dioxide emissions contributed to the greenhouse effect, causing warmer weather that lasted long after the atmospheric shroud of dust and aerosols had cleared.F u r t h e r c l i m a t i c c h a n g e s 2 0 m i l l i o n y e a r s a g o , l o n g a f t e r I n d i a h a d c r a s h e d i n t o t h e Laurasian landmass, were severe enough to cause the extinction of many endemic Indian forms.

6.5 Industrial pollution and the environment

Polluting industries have been a significant source of air and water pollution. Out of 2,982 industries identified under the 17 categories of polluting industries, 2,121 units have so far set up pollution control devices to comply with the standards, 478 units have been closed and action has been taken against 383 defaulting units. Necessary measures - both preventive and promotional - have been taken for control of industrial pollution.T h e s e , i n t e r a l i a , i n c l u d e ; n o t i f i c a t i o n a n d e n f o r c e m e n t o f e m i s s i o n a n d e f f l u e n t standards, setting up of clean t e c h n o l o g y m e c h a n i s m s a n d e f f l u e n t t r e a t m e n t p l a n t s , establishing waste minimization circles in clusters of small scale industries, regulating s i l t i n g o f industries, implementing the Charter of Corporate R e s p o n s i b i l i t y f o r Environmental Protection (CREP) in highly polluting industries, Eco-mark scheme to encourage environment-friendly products, progressive emission norms and cleaner fuels for controlling vehicular pollution, economic instruments to internalize costs of pollution and fiscal incentives for pollution control equipment.

7. Opportunities in India
With reference to the analysis of macro business environment identified in the previous section, we have identified the following opportunities and threats to business in India.They are discussed under each macro environmental headings.

7.1.1 Political Environment

Political ideology of market economy Indian political parties have realized that socialism or socialist economic policies have hampered the economic growth in the past. The results of liberalization are visible with the growth in economy and standard of living. It is unlikely that the current ideology would change. This gives a great opportunity to private sector for business growth and expansion. Economy becoming top priority Economy is becoming a top priority of government and the i m p o r t a n c e o f economic diplomacy has significantly increased in the last few decades. With the i n c i d e n t s l i k e g l o b a l f i n a n c i a l c r i s e s , g o v e r n m e n t o f a l l e c o n o m i e s h a v e emphasized more and India is no exception. This is a positive sign for economy. Reducing instability Indian government is slowly becoming stable. Since its independence in 1947, political scenario has improved slowly to take the present shape. Political parties have become more responsible and as a result, governments have become more stable than in the past. This is a great confidence booster for domestic as well as foreign investors.

7.1.2 Economic Environment

Growing Market Size Indias GDP is constantly growing and the growth is likely to c o n t i n u e i n upcoming years. It has become one of the fastest growing economies of the world.T h e p o p u l a t i o n s i z e a n d g r o w i n g m a r k e t i s a t r e m e n d o u s o p p o r t u n i t y f o r businesses. Growing middle class population

Indias middle class is growing with the growth in economy. GNI per capita is growing every year signally the increment in purchasing power of people. This has fueled he demand for various good and services. Base for low-cost production India is increasingly being recognized as a place for low-cost production. China succeeded with that factor and India is heading in the same direction. Due to the stiff competition in global arena, the need for cost-reduction h a s b e c o m e significant. The growth in IT sector in India is the result of focus towards cost reduction. FDI The continuing inflow of foreign direct investment reinforces the positive view that the Indian market has the capacity to absorb investment and generate a return b a s e d o n productive growth. At the same time, a balance needs to be struck between the immediate priorities for the Indian economy and the l o n g - t e r m concerns that include environmental and security concerns.

7.1.3 Social Environment

The large diverse group present in the country provides m a n y b u s i n e s s opportunities to cater to one or many groups. The country is slowly shifting from the traditional culture to more Western style of living. The large middle-class citizens are diverse from poor to very rich people. Governments initiatives towards providing more education favor most of the business areas in terms of educated workers and even educated consumers.

7.1.4 Technological Environment

In India, lifestyle, consumption pattern in changing rapidly and with development o f technology new market is created and this increases opportunities for t h e business houses.

7.1.5 Ecological Environment

D i f f e r e n t p r o g r a m s l i k e d r i n k i n g w a t e r p r o t e c t i o n , s o l i d w a s t e m a n a g e m e n t , vehicle emission monitoring, eco-cities program and many other programs are launched by government of India as a step to protect environment. Indias climatic conditions are extremely favorable for the cotton farming, which is one of the major raw materials for textile production. This provides great scope for the development of the Indian textile industry

CONCLUSION

Our previous discussion shows that there are some important components of macro business environment in India.We can now indicate some of the basic features of this macro business environment which has gradually changed during the plans period,particularly during the post liberalization period.

SCOPE OF BUSINESS ACTIVITIES WITHIN A FRAMEWORK OF MIXED ECONOMY. INCREASING PURCHASING POWER OF THE PEOPLE. GRADUAL IMPROVEMENT IN THE BANKING AND INSURANCE FACILITIES. LIBERALISATION IN GOVERNMENT POLICIES IN FAVOUR OF THE PRIVATE SECTOR. GRADUAL IMPROVEMENT IN THE INFRASTRUCTURAL FACILITY GROWING URBANISATION,CONSUMERISM AND DEMONSTRATION EFFECT EXPANDED DOMESTIC MARKET FAVOURABLE TECHNOLOGICAL ENVIRONMENT

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India Economic Survey Report, 2008-09

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