PESTEL analysis of India
This detailed PESTEL analysis of India aims to address some of the political, economic, social, technological, environmental, and legal issues that shape India today. India is the second largest country in the world by population. It plays a very important role in global trade and politics.
Political environment of India
India is one of the most powerful countries in the world. New Delhi is the capital of India. India neighbours two powerful countries i.e. China and Pakistan. Other neighbouring countries are Bangladesh, Myanmar, Nepal, Bhutan, & Sri Lanka.
India is the largest democracy in the world and enjoys a relatively stable political environment. However, its dispute with Pakistan over Kashmir has been an issue of grave political uncertainty. Likewise, the Citizenship (Amendment) Act, 2019 has led to mass protests and violence in many states of the country.
Democratic will of the people reflected in the local and national elections is mostly respected and accepted by the political parties and people in general. This political culture of tolerance contributes immensely to maintain a stable political climate which is in fact a very important factor to attract foreign direct investment (FDI).
A major area of concern in India is corruption. It badly affects the country’s business and political environment, posing a challenge to the country’s economic growth. Corruption increases the cost of business operations and often affects foreign direct investment. However, a growing public awareness and government initiatives are combating the challenges of corruption.
Economic environment of India
India is one of largest economies in the world in terms of nominal GDP. Its GDP in 2018 was worth around $2.72 trillion (Plecher, 2019). However, the consumer demand has weakened recently. Consequently, the economy is slowing down causing people a lot of concern.
The corporate tax rate in India is among the lowest in the world. In September 2019, the country reduced the tax rates to 22% from 30% for existing companies and to 15% from 25% for new manufacturing companies. It is worth noting that the country witnessed frequent corporate tax rate changes over the years. For example, the tax rate in 2010 was 33.99%, while it reached an all time high of 38.95% in 2001 (Trading Economics, 2020).
India is one of the top countries in many industries. For example, it is the 7th largest coffee producing countries in the world (International Coffee Organisation, 2017). It is also one of the top agriculture producing countries in the world.
India’s key exports are petroleum products, jewellery, pharmaceutical products, transport equipment, machinery and readymade garments to name but a few. On the other hand, India imports crude petroleum, gold and silver, electronic good, pearls and precious stones and many other things. Some of the top trading partners of India are China, UAE, Switzerland, Saudi Arabia, USA, and Qatar (Guardian News and Media Limited, 2016).
Social environment of India
India has a gigantic consumer market with a total population of approximately 1.2 billion. Such a huge market is a great opportunity for multinational companies. No wonder why so many multinationals are operating in India! India offers cheap labour and the labour force is expected to reach 160-170 million by 2020 (IBEF, 2019). Accessible and affordable labour force has encouraged many multinational companies to outsource some of their business operations to India.
India is a multi-ethnic, multi-lingual, and multi-religious country. Communal harmony is a great strength; however, the country sometimes witnesses tensions in ethnic lines. India has a world-renowned film industry. It is also world renowned for some of the sports e.g. Cricket and Hockey. IPL (Indian Premier League) attracts cricket legends and talents to India.
India is one of the most attractive markets in the world in many sectors. Standard of living is gradually improving and the country has a growing middle class with good disposable income. However, it is worth noting that India still suffers from poverty and according to the World Bank, 1 in 5 people in India are still poor.
Technological environment of India
India is one of the most technologically advanced countries in the world. In fact, according to some sources, it is the 3rd most technologically advanced country in the world. No wonder why more and more tech giants including but not limited to Facebook, Microsoft, and Apple are investing in the country! India is a key destination for outsourcing work in IT. With an advanced IT infrastructure and highly skilled IT work force, India offer enormous opportunities for entrepreneurs to embark upon technological projects such as software development and upgrades, e-commerce, mobile apps, business solutions, and many more.
Environmental issues of India
While India has made a lot of progress over the years, the country still faces a number of environmental challenges e.g. air pollution, water pollution, floods, resource depletion such as water and forest, loss of biodiversity, and diversion of consumer waste into rivers. Expatriates may sometimes find it difficult to live under some of these environmental challenges.
Legal environment of India
The last element to address in the PESTEL analysis of India is the legal landscape. As mentioned above, India is a famous destination for foreign direct investment. Depending on the scope and the business needs, foreign investors can set up a company, branch, or a limited liability partnership in India. Indian companies are governed by the Companies Act, 2013. There are a number of labour laws that regulate employment relations in India e.g. Employees’ State Insurance Act 1948 (ESI Act), Industrial Disputes Act 1947 (ID Act), Maternity Benefit Act 1961 (MBA) and the Payment of Bonus Act 1965 (PBA).
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Last update: 03 January 2020
Guardian News and Media Limited (2016) India’s trade: full list of exports, imports and partner countries, available at: https://www.theguardian.com/news/datablog/2013/feb/22/cameron-india-trade-exports-imports-partners (Accessed 10 February 2018)
IBEF (2019) About Indian Economy Growth Rate & Statistics, available at: https://www.ibef.org/economy/indian-economy-overview (Accessed 01 January 2019)
International Coffee Organisation (2017) Monthly Coffee Market Report – December 2017, available at: http://www.ico.org/documents/cy2017-18/cmr-1217-e.pdf (Accessed 01 January 2018)
Plecher, H. (2019) India: Gross domestic product (GDP) in current prices from 1984 to 2024, available at: https://www.statista.com/statistics/263771/gross-domestic-product-gdp-in-india/ (accessed 01 January 2020)
The World Bank Group (2018) India at a glance, available at: http://www.worldbank.org/en/country/india/overview (Accessed 10 February 2018)
Trading Economics (2020) India Corporate Tax Rate, available at: https://tradingeconomics.com/india/corporate-tax-rate (Accessed 01 January 2020)
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Author: M Rahman
M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He is a graduate of Leeds Metropolitan University and London South Bank University.