Political & Corruption Factors Affecting Business in India
The political environment can impact business organizations in many ways. It could add a risk factor and lead to a major loss. You should understand that the political factors have the power to change results. It can also affect government policies at the local to the federal level. Companies should be ready to deal with the local and international outcomes of politics.
India is the largest democracy in the world. A country where a handful of politicians control more-than-a-billion population. Business, just as other things in India, is adversely affected or rather controlled by politics. When we say politics, it means politics and not the government. Because in India, Politics is at the helm of it. Corruption has made deep roots in our system, through almost every fabric of our society and is inevitable now. And it greatly influences the way businesses to run in our country.
Corruption seriously affects India’s business and political environment, posing a challenge to the country’s economic growth.
Corruption has become more endemic since the late 2000s along with the country’s strong economic growth and a surge in investment.
India ranked 87th place out of 178 countries in Transparency International’s Corruption Perceptions Index (CPI) in 2010, down from 84th place in 2009. The index refers to perceptions of the degree of corruption as seen by business people and country analysts. With this ranking, corruption in India is seen to be worse than in China and Brazil, but still less severe than in Russia and Indonesia.
Corruption raises the cost of doing business and adds to the problem of regulatory uncertainty, thus affecting foreign direct investment (FDI). Due to strict foreign investment regulations, FDI inflows to India remain low compared to its peer economies and stood at US$24.6 billion in 2010, compared to US$106 billion for China and US$41.2 billion for Russia;
Significant tax revenues have been lost due to corruption. The sale of the 2G spectrum telecom licenses in 2008 alone caused an estimated US$40.0 billion revenue loss for the Indian government. India has faced a rising budget deficit which stood at Rs7.0 trillion (US$153 billion) in 2010 or 8.9% of total GDP;
If you are a company that depends on labour (physical labour), your company will have a labour/trade union. This is what Wikipedia read for Trade Union: A trade union s an organization of workers who have come together to achieve common goals such as protecting the integrity of its trade, improving safety standards, achieving higher pay and benefits such as health care and retirement, increasing the number of employees an employer assigns to complete the work, and better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members (rank and file members) and negotiates labour contracts (collective bargaining) with employers. The most common purpose of these associations or unions is "maintaining or improving the conditions of their employment".
Now, a Trade union is definitely a boon for the workers, but in India, a new dimension affects how Trade unions work, POLITICS. The trade union leaders are people who have political links (Most of them). They are more concerned about the interests of their political parties rather than the interests of the workers. This is also because these people from various political parties have little knowledge about the workers, their conditions, etc. and this ignorance gravely affects the working of an enterprise/company.
So, for labour-intensive industries like in India, Businesses face the problem of “Politicization of Trade Unions”.
Economic growth in India will continue to be boosted by a rising middle-class and strong consumption. During 2005-2010, consumer expenditure in India grew at an average annual rate of 5.8% in real terms. In order to sustain growth, however, India needs to address corruption to improve investor confidence, consolidate government finance and reduce poverty.
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