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India since independence

The Business potential of India

India is considered as one of the poorest and backward countries in the world. Only 52% of its population is literate. Its per capita income is about $350. Less than 50% of the houses have electricity, less than 23% of the houses have sanitation facilities. With these figures it might seem that India isn't a good market for business. But if these figures are broken up in different factors like Indian states or into numbers, one might find that India could be a good lucrative market for business.

In the educational field, after every ten years the literate population of India goes up by about 10%. During its independence, there were only 12% literate Indians and according to 1991 census there were 52% literate Indians, meaning that over half a billion people are literate. Among the literates, about one-third of them (according to researches made in the 1980s) study or studied in schools which have English as language of instruction. For these people, English is in many senses their first language and it is easier for them to read and write and even communicate in English than in their Indian languages. This makes India the second largest English speaking country in the world after USA.

In 1995 there were over 5 million students in Indian universities. In general, less then 3% of India's population has academic education, which is very low compared to world standard. But numerically India has almost 24 million university graduates. India is also among the few countries in the world to launch satellite and has proven its nuclear capability. Because of this high number of academicians and their good knowledge of English, many technology companies (especially in the computer field) from around the world have arrived in India.

The per capita income of India is low at $350. From this figure one can conclude that the salaries are low in India and therefore it is cheap to produce in India. But one might also conclude that India isn't a good market for marketing quality and costly products. But, even though the per capita income in India is low, India is a huge market, even for costly products. In general, India has a potential of almost a billion buyers. About 10% of Indian households have an income of just over $1400. Numerically that is about 100 million people, which is about the population of Germany. Less them 5% of Indian households have an income of over $30000, but numerically that is over 40 million people. Some estimated that by the year 2000, the number of Indian households to have this level of income would surpass that of USA. Beyond these figures, when the Indian income is measured by purchasing power parity - PPP - calculations, the Indian economy and income gives better figures. In this sense India is the fifth largest economy in the world. The middle class of India is estimated at 180 million people. For these reasons, many international companies and names in different fields, from shoes to cars, have arrived in India and they manufacture and sell their goods in India.

 
 

True to 1994, Indians had more than 40 million televisions; 10 million telephones; 60 million radios; 10 million refrigerators; 16 million two-wheel vehicles; 2 million cars and according to 1997 figures almost a million cellular phones. Some estimate that by the year 2002, about 25 million Indians can be potential buyers of cellular phones. There are many business fields which are new in India and have huge potentials like credit cards. According to 1995 figures there were less than a million credit card holders, while the potential is estimated at about 10 million by the year 2000. Another potential market that involves millions of people is tourism. In general India has about 2 million foreign tourists per year, which is low considering India's potential as a cultural country. But India also has over 130 million Indians travelling around India.

The standard of living, like education figures is different from state to state. Punjab in north India has the highest income per capita in India, while Bihar in east India has the lowest. Punjab, Haryana, Maharashtra and Gujarat are considered as the more prosperous states of India. Bihar, Orissa, Madya Pradesh, Uttar Pradesh and Rajasthan are considered as the less prosperous states of India. Goa which was created in 1987 also has a high per capita income. The prosperity of states finds its expression in electricity used by the states. In prosperous states all the villages are electrified, while in the less prosperous states not all villages are electrified. But the electric figures can be misleading because some states, like Kerala, where all villages are electrified there are hours in the day when there are electricity problems. Because of these electricity problems, many houses and businesses use private generators.

According to the 1991 census about a quarter of India's population live in cities. The standard of living is higher in cities than in villages. The urban people are more aware to modernization than villagers. Less than one third of the villages are electrified while almost 75% of the urban dwellers have electrified homes. Less than 10% of the village households have sanitation facilities while 60% of the urban households have sanitation facilities. Its not rare in Indian villages to find satellite dishes on house roofs, while in the whole village there isn't a single toilet. Drinking water is more secure in cities than in villages. In many villages, water is even today pumped from wells or from water streams. Most of the urban houses don't have 24 hours water facilities, but instead these houses and buildings have big water tanks which get filled during those hours when there is water in order to secure 24 hours water facilities for the houses. These problems mentioned above, have good business opportunities for development planners. As mentioned above people who live in cities are more aware of modernization than villagers. About a quarter of India's population (numerically that is about the whole population of USA) is urban. At least 23 Indian cities have over million residents. Delhi, Calcutta, Mumbai and Chennai are the four main cities of India. The first three cities have over 10 million residents each.

The first impression a foreigner gets of Mumbai is poverty. But Mumbai for Indians is like New York and Los Angles together. In many fields it is the center of India. Mumbai is the commercial, financial and entertainment center of India. Of the 23 stock exchanges in India, the stock exchanges of Mumbai are the most important. In general there are over 7000 companies registered in Indian stock exchanges, second after USA. India produces the largest number of movies in the world. Until the mid-90s it had over 800 movies a year. In this field Bollywood(like Hollywood) in Mumbai is the entertainment center, even though some other cities of India, like Chennai in south India produces more movies than Mumbai.

The Mumbai cinema is perhaps the only culture common to Indians all over India. The Hindi movies produced in Mumbai (before the boom of cable TV) were the most popular entertainment of India. In Indian movies, except in a few cases, there are always a few dances and songs. But almost all of these songs are sung by professional singers called playback singers and the actors only move their lips in the film. One such playback singer, Lata Mangeshkar, sung over 50000 songs for different actresses in different Indian languages. These Indian films and their dances, songs, singers, and actors are very popular in India and with Indians all around the world. Many non-Indian companies that sell Indian music almost never sell music from Indian movies, only classical, missing a huge market.

In the last few years Hyderabad, capital of Andra Pradesh, is competing with Chenai as the movie center of India. Hyderabad is also competing with Bangalore as the 'silicon valley' of India. Bangalore is considered today as the technology center of India. Most of the high technology companies that operate in India are centered in Bangalore. Bangalore is called 'garden city'. It is very clean compared to other Indian cities. It is also seen as the most westernized city in India because of the pubs and western style shopping centers.

Until the early 1990s, the Indian governments were very conservative in their approach towards west. They were very suspicious of the capitalist system. One of the reasons for this fear of western capitalist system was the fact that a British trading company, East India Company, came to India as a trading company and turned up to be rulers of India. During Indira Gandhi's reign as Prime Minister, many new laws were enforced which prohibited foreign companies from holding more than 49% of the companies shares operating in India. For this reason many foreign companies left India and came back again in the 1990s. Many other companies, from shoes to cars, who foresaw the potential of Indian market also arrived in India. For the last few years, the 'hot' field in Indian business is computers. Many international computer companies have subsidiaries in India. A combination of low salaries, good English knowledge of Indians, big number of academicians and the government's desire to make India a high technology country has made India to transform into one of the computer centers in the world. The Indian government has established many software parks in different places in India where foreign companies can also establish software companies.


Aharon Daniel

1999-2000

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