Political and Economic Environment in India

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1. Political Environment

India became an official republic in 1950, and is currently the second largest country with a population of over 1.2 billion people. The country is made up of 28 states and 7 union territories. It functions as a federation, with a central federal government as the point of unification among its partially self-governed states and regions. India’s parliamentary system is governed by Constitutional law which came into force on 26th January 1950.

Some of the strengths of the Indian political system include the established practice of democracy in Indian politics. Elections are held at national, state and panchayat (village) levels, so that citizens will be able to exercise their voting rights. (Datamonitor, 2012) Also, the country enjoys stable macroeconomic policies as its two main parties – the INC and the BJP, have similar views on economic policies and are both in favour of liberalization in the Indian economy.

2 Economic Environment

India has the fourth largest economy in the world as ranked by nominal Gross Domestic Product (GDP) in Purchasing Power Parity (PPP) terms. (CIA World Factbook, 2011) Its GDP (PPP) was estimated to be $4.463 trillion in the year 2011, which is a significant increase from $4.139 trillion in 2010 and $3.760 trillion in 2009. (CIA The World Factbook, 2011) In fact, HSBC and PwC have predicted the dominance of the Indian economy in world rankings by 2050 to become the ‘fastest growing large economy in the world”. Furthermore, India is also said to be the “world’s largest free market democracy”.

Although India’s economy is growing quickly, a great number of its population is still living in poverty, suggesting the problem of income inequality within the country. However, the working age population in India is still the largest in the world and is mostly English-speaking, which is a highly attractive factor for investors worldwide.. Its large working age population is also expected to be a...
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