What is sophisticated product in India


India as an investment location

With the economic policy reforms initiated since 1991, the Indian government has laid the foundation for making India an attractive business location for foreign investors. The reform measures of the first few years have led to foreign confidence in the seriousness of the reform policy. But the increasing political instability and the accompanying slowdown in the reform process are beginning to put a strain on the patience of foreign investors.

An assessment of India as an investment location cannot be formulated uniformly and generally because of the great differences in individual sectors and regions. The advantages and obstacles of a commitment should be compared on an individual basis. It must be taken into account that India, despite numerous notable developments in individual regions or sectors, is still a developing country. This leads to a number of structural deficits, particularly in the areas of energy, Water, transport and, with restrictions, telecommunications as well. In these sectors are substantial investment is still required. The electricity deficit, for example, is around 12 percent nationwide Peak times at up to 30 percent. As a result, the industry is now 48 percent of theirs Electricity requirements are independent of the grid. Some investors consider the comparatively low ones Environmental requirements rated as positive, but this is due to the careless use of the environment or natural resources to expect major problems soon. Also are the social Investments in e.g. health care, family planning and education are still much too high low. Not to be underestimated is the encrusted and cumbersome bureaucracy involved in realizing Hinders investment. Legal security is becoming more diverse due to the overloading of the courts Chances of delaying proceedings and impaired due to enforcement problems.

In addition, foreign investors, supported by the Indian economy, are calling for an unfinished reform agenda. A Survey of German investors in India In mid-1993 by the Ifo Institute, Munich, it was found that the bloated inefficient administration, labor policy requirements, Limiteffects in foreign and domestic trade, the inadequate infrastructural supply, the Supply of intermediate products and spare parts, the low labor productivity and the inadequate Management competence of the Indian partner as a major investment barrier Many foreign investors are calling for a modernization of the rigid Indian labor law applicable to the formal sector, in particular the introduction of a so-called Exit Policy. According to the current labor legislation, it is almost impossible to close a permanent establishment or to lay off workers. So far, the traditionally very strong trade unions have prevented attempts by the Indian government to change.

After this Indian Patent Act, 1972 Indian patents are not for products but for Manufacturing process granted. A slight modification of the procedure is thus sufficient to to apply for a new patent. In the social interest from a developing country perspective the rights of the patent holder are limited. Many Indian companies are also quite lax foreign patents that they can copy without paying royalties. So far stayed Demands for the alignment of Indian patent law to international standards without effect. However, changes are emerging as a result of India's entry into the GATT. Foreign observers also hope that increased efforts in industrial research, which for a long time have been limited to adapting foreign licenses to the needs of the domestic market, will result in stricter national patent law.

Regrettably, the reforms are not always pursued in a straight line. The attacks on the restaurant chain "Kentucky Fried Chicken"of the US group Pepsico or the decision of the government of the Indian state of Maharashtra to sign the contract for an energy project for the US group ENRON to terminate or renegotiate have to Uncertainties in foreign investors guided. In addition, there are critical comments on the role of multinational corporations and calls for better protection against foreign competition from individual industrial groups and occasionally individual industrial associations.

Partly due to political instability, the reform package is only being implemented slowly. Only those measures that find a broad political consensus (common minimum programs), have been followed up recently. The reform of labor legislation, finance and insurance and other consolidation measures in the context of the continuation of the liberalization of private investment have already been slowed down, postponed or canceled. In individual Union states, there are also political-related difficulties: If in some Union states (e.g. Karnataka) fundamental reform policy decisions are welcomed and implemented more quickly, there are also Union states that are opposed to some reform measures and hinder or refuse their implementation. Likewise, there is not only a growing number of modern entrepreneurs and a middle class leaning towards the western standard of living in some aspects, but also many millions of people who reject the reforms more critically than "prescribed" by the IMF. Added to this is the accusation of the opposition that the reforms had the Brought nothing to the poor of the country.

There are a number of positive arguments against these rather disadvantageous aspects. Generally speaking, the reform policy so far has been viewed positively for such a large country as India. Since there is a largely bipartisan consensus on the direction of the reform policy, it can be assumed that, despite frequent changes of government, the basic direction of the reforms will be maintained, even if the measures are not necessarily advanced with the desired speed. India has been the largest democracy in the world since 1947 and has an extensive legal system based on the British model and an extremely free press, which guarantees a certain level of protection. Since a large part of the Indian population speaks English and the business language is English, there are no language barriers for international investors. In addition, India, with its favorable location conditions, is also considered a bridgehead for activities in both Asia and the Gulf region. The country is particularly attractive because of its low Labor costs, which, however, are also offset by low productivity. Numerous good trained specialists are available on the labor market. Just because of the big one Population, the market potential is considerable. Not just the middle class with their demand for upscale assets is growing. The television will also be used by the rural population Aroused consumer desires that initially focus on non-essential goods such as soap, toothpaste, Restrict radios and watches. More and more farmers have more available Income, the demand for luxury goods in the cities is growing rapidly. The shadow economy, so the informal sector, which according to numerous studies in India the amount of up to 50 percent of the GNP, achieved and growing faster than the formal sector, contributes significantly to the purchasing power of this growing middle class.

The automotive industry (including supplies) are currently considered to be the growth sectors in India Information technology, machine tools, pharmaceuticals, petroleum and petroleum products. The automotive and software industries are two sectors that particularly characterize India's attractiveness as a business location, which is why they should be presented here in detail.

Bangalore - the Indian Silicon Valley

India's potential is most evident in the software industry. The first computer was installed in Calcutta in 1955. In the mid-1980s, information technology (IT) was recognized as a key area and software exports were particularly encouraged. At that time, Indian IT was already showing itself to be a growth sector: Software exports grew more than that in 1984-88 Triple. Software development is now one of the fastest growing industries India. Since 1991 the annual growth of 50 percent has been well above the global one Average. India today supplies software to 75 countries.

Bangalore, the capital of the southern Indian state of Karnataka, was one of the software production centers supported by the Indian government early on. The city, which is also well-equipped in terms of infrastructure, traditionally has a highly developed high-tech culture. In particular about the famous Indian Institute of Science technological training is promoted. Organizations like Hindustan Aeronautics, the Indian Space Research Organization or that too National Aeronautical Laboratory numerous engineers and scientists who made Bangalore a center of Indian technology. Recently, the city is often referred to as the Silicon Valley of India. Multinational companies such as Hewlett Packard, IBM,Microsoft or Novell have settled here as well as the national IT giants such as TISL (a joint venture from Tata, India's most famous large corporation, and IBM), Infosys, Wipro, Baysoft or Nashsoft. More and more multinational corporations like Nestlé or Samsung have their accounts done in Bangalore.

In the software industry one encounters old-fashioned, hierarchically structured companies such as TISL or also to more American-looking companies such as Baysoft or Infosys. A large part of the emerging elite of software developers can be found here, who work in companies that are extremely unconventional for India. Ambitious and demanding, they not only shape the image of the booming City, but above all form the driving force of India's software industry and serve as a catalyst for the change in traditional society. For example, they also give up their traditional, rather feudal loyalty to their employer. The young, up-and-coming generation of programmers is ready without hesitation to change jobs if an attractive offer is made.

The focus of the industry is currently still in the area of ​​commissioned work. In India there is clearly fewer than 1 million computers and none yet low cost Pc. The own software products are still rather insignificant. The as Body shopping well-known hire of software engineers to foreign For example, companies that work for a significantly lower price than employees in the US are called the big, hidden factor in India's success in theIT acted. Indian software competes for Time essentially about the low price. The creation of software based on the division of labor is offered in India the advantages of short development times, the availability of large teams of experts, and low labor costs as well as a high degree of flexibility. If only because of the good price-performance ratio Indian software companies are likely to be internationally competitive.

Table 6: Virtual India - a selection

Source: own compilation

Starting from the city of Bangalore all the major Indian companies and institutions through to the Ministry of External Affairs represented with its own homepage on the Internet. You can even find a business partner via the Internet (see Table 6).

The Indian middle class is motoring itself

The Indian automotive industry is always cited in connection with estimates of the size of the developing Indian middle class. The number of affluent middle class is estimated at 150-300 million people, depending on the method. Not only the Indian middle class is available as a potential buyer. Western "Antique car"Fans as potential buyers. The American SUV Willys, the motorcycle Bullet and the Fiat 1100 are just some of the Antique carthat could meet in the west on demand.

The Indian automotive industry has a long history. The first company was founded in 1928. Until the end of the 1970s, the Indian vehicle industry was still in a bad starting position: it fell under licensing and vehicle prices were controlled until 1975. The government bought much of the production and kept prices artificially low. Until the 1980s, Indian vehicle production was therefore dominated by a few large suppliers [for passenger cars Hindustan Motors Ltd. , Premier Automobiles Ltd. ; for commercial vehicles Tata Engineering & Locomotive Co. TELCO; for off-road vehicles Mahindra & Mahindra.] and the vehicle market foreclosed by the government. A vehicle production facility that was launched on the initiative of Indira Gandhi's son Sanjay was bought up by the Indian government in the early 1980s. In cooperation with Suzuki it was renamed Maruti achieved a market share of over 75 percent today. A full 10 percent of production is exported.

In the past, only a tiny fraction of the Indian population appeared as car buyers. In addition, the selection was limited to a few models that were produced unchanged for a long time, such as the Ambassador, the Indian version of the Morris Oxford. For years it was just after state planning specifications produced. Today, however, there are several providers on different Sub-markets that compete on price and performance. The class of buyers has also changed. The An increasing number of buyers want modern western design and also have concrete Performance ideas. There are limited, partly inflexible ones Production capacities of the Indian companies. Innovative Indian as well There is great potential for growth in foreign companies in particular Mid-range cars.

The biggest problem facing the Indian automotive industry is technology. The long foreclosure of the Market has not set any incentives for independent development of competitive technology. The Buyers who have become demanding in the meantime are no longer satisfied with the outdated technology. Developing your own technology in a short time is not an alternative for the Indian automotive industry for reasons of cost and time. That is why the "big ones" try (t) to establish contacts with foreign corporations. Premier Automobiles, one of the older Indian vehicle manufacturers, tried for a long time with limited capital upgrading the production, but has meanwhile been next Fiat also with Peugeot teamed up. Telco, a commercial vehicle manufacturer where Mercedes Benz had a minority stake for a long time, now manufactures together with Mercedes Benz E-class car. Almost all major international Automotive companies, including all well-known German vehicle manufacturers, are already on represented Indian market. Every Indian automotive company already has one joint venture With founded by a foreign group. The Joint ventures have so far mainly focused on one Production concentrated for the Indian market. The locational advantages of India - low labor costs at at the same time qualified workforce and comparatively low (environmental) requirements - always leave more often a production for the European market seems worthwhile. Behind the The automotive industry also includes the supplier industry and spare parts production, which is managed by the boom the industry will benefit.

The annually increasing production and sales figures since the beginning of the 1990s indicate sustained growth in the automotive sector. Over the past two years, the industry has grown by over 25 percent. In the 1994/95 financial year around 266,000 vehicles were sold, in 1995/96 it was already around 350,000. The production for export is increasing: in 1995/96 the number of exported automobiles grew by 31 percent to 121,696.

According to experts, the industry produces a product that is very well tailored to the Indian market. The high foreign presence - it can be found on Indian roads Daewoo Cielo, Opel astra, Fiat Uno, Peugeot 309, Ford Escort as Mercedes 220 E. - and with it the influx of foreign capital and know-how lead to increased competition and lead to an increase in production in the near future. Critical voices indicate that India is the The forecast number of vehicles could not cope with ecological reasons, especially the Roads for such a load were not built and an expansion of the road network was not in Point of view is. It is also often assumed that the Indian middle class would prefer a motorized two-wheeler before buying a car. Individual investors then also have to realize that business in India has so far been worse than hoped: Mercedes Benz was able to sell only 1,300 sedans instead of the hoped-for 5,000 in the first business year up to March 1997.

© Friedrich Ebert Foundation | technical support | net edition fes-library | May 1999