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Introduction
India is the seventh-largest country in the world by area, the fourth-largest by gross domestic product, and the second-largest by population. With its mixed population, languages and cultures, climate and topography varying vastly throughout its territory, a drastic gap in the development of rural and urban districts, India truly is a country of contrasts.
Main body
There is an enormous number of factors affecting the development of international business. Among them, one can schematically draw up two blocks economic and noneconomic environment in the country. Speaking about the economic environment, it includes socioeconomic, financial, competitive, distributive and labor environments in the country. What sometimes can be even more important than the economic environment is the noneconomic environment covering demographic, geographic, ecologic, socio-cultural, physical and other types of the environment having nothing to do with economic performance as such.
In speaking of India, the noneconomic environment is the one affecting the development of international business ties the most. Being the second-most populous country in the world with more than 1.25 billion people ( The World Factbook: India par. 26), India can provide a larger supply of workforce. It can be a good motivator for foreign investors because the greater the supply of labor force, the lower the labor costs are and the more competitive the labor market is. Moreover, being a country of various cultural, religious and ethnic backgrounds, Indias international business ties can be strongly affected. Ethnic and religious conflicts can play a negative role in strengthening international business relations, deepening a countrys integration into the global economy, and inflow of foreign investments into the domestic economy (As-Saber 13). Cultural and social issues may affect the long-run development of business. As customs and habits of society change, the demand changes as well, and so has to improve the business. That is to say, if society gets used to eating semi-processed food or wearing readymade clothes, the business has to satisfy this demand, so it evolves in response to the evolution of societys habits and customs (Nagashwini par. 17).
Among all non-economic factors affecting the development of international business, the geographic environment is the one having the strongest impact. Speaking about the geographic environment, one should bear in mind not only climate and topography but also the availability of natural resources. Being an agricultural country, the economy of India is deeply affected by the difference in climate and topography throughout the countrys territory. So does the development of international business ties. For example, the moderate climate in hilly northern parts of the country is beneficial for tea and coffee producers, while the tropical climate in the plains is suitable for growing rice. While more than half of land is used for agricultural purposes, only slightly more than 4 percent is suitable for growing permanent crops ( The World Factbook: India par. 14).
What is also of significant importance is the availability of natural resources. India is rich with coal, ores, rare earth elements, natural gas, diamonds, petroleum and other resources, arable land being one of the most precious of them ( The World Factbook: India par. 13). Having raw materials available also affects the development of international business. The key point of view is that it is more beneficial to invest in building plants close to deposits of natural resources rather than transport them over long distances and transporting finished products is always cheaper than transporting raw materials. When it comes to producing goods close to raw materials deposits, one speaks about agriculture-based industries ( Geography (316) Syllabus 199). In speaking of India, such agriculture-based industries are textile, sugar, iron and steel industry, etc.
Speaking about the textile industry, it is represented by the cotton industry. Due to suitable climate and topography, cotton plantations together with cotton mills are located in Mumbai which is even called the Cottonopolis of India. Choosing this location was a sober decision for the following reasons: the climate and soils are suitable for growing cotton; the proximity of rivers is beneficial for processing cotton; Mumbai is close to ports, so it is easy to transport finished goods together with the nearness of cotton markets; availability of cheap and skilled workforce ( Location Factors: Why Cotton & Textile Industry Developed in Osaka, Manchester, Lancashire, Mumbai, Ahmedabad par. 8).
When it comes to the sugar industry, it is also one of the biggest agriculture-based industries of the Indian economy. It is located in the southern states of the country that is also affected by the fact that it is cheaper to build sugar mills close to sugarcane-producing territories. What is even more important is that the climate of southern states is more suitable for growing sugarcane than in the northern states of the country, not to speak about availability of cheap workforce and nearness of the market ( Geography (316) Syllabus 203). Another agriculture-based industry is the iron and steel industry. As it was already said, India is rich with ores and coal. Most of the plants and mines are located near Chhota Nagpur plateau endowed with deposits of these raw materials.
Being rich with natural resources, India is an active participant in international trade. Key exports items are petroleum products, textiles, jewelry and gems, agriculture products, and engineering goods. Among key import items, there are silver, gold, precious stones, and electronic goods. Indias major trade partners are the United States of America, the United Arab Emirates, China and Singapore, some African and Latin American Countries. That said, there is no direct correlation between geographic location and trade, with the USA being the biggest trade partner of India ( General Trade Performance: India chart 3).
Being a country with a large population base and excellent opportunities to grow business, India is among top attractive destinations for foreign investments. Except low labor costs, foreign companies investing in India enjoy special investment privileges (for example, tax exemptions) and favorable policy regime set by the Indian government. Because foreign capital is a necessary resource for the sustainable economic development of India, the Indian government has started many initiatives to encourage investment. Among them, one can name facilitating investment rules in fields such as defense, stock exchanges, oil refineries, telecom, power exchanges, etc. ( Foreign Direct Investment par. 2). In 2015, there was an increase in FDI in telecom, mining, infrastructure, oil and gas, and infrastructure.
Conclusion
So, India is a country of contrasts which is one of the factors influencing the development of not only domestic but also international business ties. Many business decisions are made in compliance with the geographic environment of the country, i.e. topography, climate and availability of natural resources because it is cheaper to invest in building plants near plantations and deposits rather than transport raw materials while a cheap workforce is not a crucial factor because of its availability all over the country.
References
As-Saber, Sharif. Geopolitics and its Impacts on International Business Decisions: A Framework for a Geopolitical Paradigm of International Business. Jan. 2001. Web.
Foreign Direct Investment. 2015. Web.
General Trade Performance: India. 2014. Web.
Geography (316) Syllabus. 2013. Web.
Location Factors: Why Cotton & Textile Industry Developed in Osaka, Manchester, Lancashire, Mumbai, Ahmedabad. 2013. Web.
Nagashwini, Nagaraja. Business Environment Economic and Non Economic, Macro and Micro Environment. 2013. Web.
The World Factbook: India. 2015. Web.
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