1. “India is not an easy market to understand and operate in.” Why is the Indian market untenable for Multinational Companies, yet at the same time attractive to global businesses? Discuss.
It is true that India is not an easy market to understand and operate in. MNCs have realized this the hard way as their expectations have remained unfulfilled, and many have either suffered reverses or have had to wrap up their operations. Unable to figure out the reason for their failure, they have chosen to blame the market as erratic and fickle in its behavior. But this is not true as there is more to India than meets the eye. This country came under the global spotlight only in 1991 when it embraced economic reforms and allowed FDI. Before that the country carried the burden of its historical legacy which had given a socialistic flavor to its economic policies that laid emphasis on self-reliance and local production and, therefore, discouraged the MNCs which were seen as instruments of neo-colonialism. The state, therefore, controlled the market forces and the government was, for all practical purposes, in charge of business. However, all of this changed in 1991 with liberalization. Taxes and import duties were severely cut and MNCs were encouraged to take notice of this emerging market. But the Indian market is untenable for Multinational Companies, yet, at the same time, attractive to global businesses. It is untenable for MNCs because it defies all conventional logic of markets. They keep waiting for the ‘take-off point’, which they have observed in developed economies, after which consumption shoots up but do not realize that such a ‘take-off point’ will not come in India because that is not the way market economics works in emerging economies, especially in India. The market growth in the first five years after liberalization was phenomenal but it soon seemed to stagnate due to a below-average monsoon and retarded rural demand. More importantly, the tested and...
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