India is the biggest democracy country in the World and its government type is federal republic. The balance or imbalance political stability is very important for the stability and growth of capital market in India. India currently has a coalition led government and two major political parties which are the United Progressive Alliance (UPA) and Bharatiya Janata Party (BJP). Moreover, there are few major political factors affect on business environment in India include well developed taxation policy with a three- tier federal structure, privatization by the government to reduces the political interface in the management of the companies to improve efficiency and productivity, deregulation for foreign to freely do business in India, flexible international trade regulations, general initiatives, government stability increased foreign direct investment and international stability. Democracy in India has no fundamental conflicts with the political factor.
Strategy position in Asia occupied by India is well known worldwide. India has been one of the most emerging global economic power countries although it has reached the high rate of growth. The economic factors in India are improving continuously. The GDP (Purchasing Power Parity) is estimated at about 3.965 trillion U.S. dollars in the year 2009. The GDP- real growth rate in 2009 was 6%. India has the third highest GDP in terms of purchasing power parity just ahead Japan and behind U.S. and China.
Furthermore, India also one of the most preferred locations for foreign direct investment (FDI). India has become one of the top rapidly growing economy is because of the positive economy reformation. It stimulates the foreign investment and boosts the investment. To gain investors confidence, India government must reform the regulatory environment with regard to enforcement of contracts, payment of taxes, business closure, licensing, property registration and setting up of business., which is much effective than packages of fiscal and monetary stimuli. Democracy in India has no fundamental conflicts with the economic factor. Besides, International Monetary Fund states that the percentage change of GDP based on Purchasing Power Parity (PPP) per capita showing positive since year 1981 till 2009. Table below shows the real GDP grow rate of India.
Year
GDP - real growth rate
Rank
Percent Change
Date of Information
2003
4.30 %
54
2002 est.
2004
8.30 %
16
93.02 %
2003 est.
2005
6.20 %
43
-25.30 %
2004 est.
2006
8.40 %
24
35.48 %
2005 est.
2007
9.20 %
23
9.52 %
2006 est.
2008
9.00 %
23
-2.17 %
2007 est.
2009
7.40 %
28
-17.78 %
2008 est
Social
India is a country of unity in diversity and it is the second most populous nation in the world with an approximate population of over 1.1billion people. This population is divided in the following age structure: 0-14 years â€" 31.8%, 15-64 years â€" 63.1% and 65 years and above â€" 5.1%. Changes in social trends can impact on the demand and supply for a company's products and the availability and willingness of individuals to work. For example, the population has been ageing in the India. This has increased the costs for the companies who are committed to pension payments for their employees because they are living longer and some companies also have started to recruit older employees to tap into this growing labor pool.
Customer Analysis
With a rapidly change in the purchasing power and demands of the Indian customers, the companies are analyzing their ways of defining and delivering more value to consumers. The companies are moving from the tangible to the intangible with the focus on ideas, concepts, creative, innovative and paradigms and shifting away from physical resources such as capital, technology, and manpower. The customer's delight has become the most critical issue in marketing.
Brand Consciousness
A Nielsen Global Luxury Brands study (Mar 2008) reveals that India has the third highest brand-conscious population in the world only Greece and Hong Kong ahead of it. From the study, it is 35% of Indian consumers showed inclination towards purchasing branded products, while it was 46% in Greece and 38% in Hong Kong. India also is the third highest buyer of Gucci products, the sixth highest for Calvin Klein, ninth for Diesel and tenth for Fendi. It showed the Indian consumer desire on branded goods and services.
Value Consciousness
Price sensitive and value consciousness are the important factors in influencing the India's consumer market. However, this does not necessarily mean it is a market for cheap products but today Indian consumers are willing to pay more if convinced of the value of a product. This has driven most of companies strategically highlight the value-for-money aspect of their products. .
Changing Attitude of Today’s Customers
Nowadays, Indian consumers buying the products not only fulfil their basic needs and wants but they concern on value sensitive and are not much price sensitive as was the case earlier. If they feel that a particular product offers them more benefit but its price is high they also willing to pay more to buy the particular product. The Indian consumer of today gives preference to features of a product rather than its brand name. Moreover, the trend that higher segment consumers only buy the top brands has also come to an end.
The table below assists the consumer product companies in identifying a plausible market size for their products in India.
India's consuming class
Table I
Estimated households by annual income
Table II
Structure of the Indian consumer market (1995-96)
Annual income (in Rupees) at 1994-95 prices
No. of households (in million)
Annual income
(in Rupees) at 1994-95 prices
Classification
Number of households (in million)
Urban
Rural
Total
<25,000
80.7
<16,000
Destitutes
5.3
27.7
33.0
25,001-50,000
50.4
16,001-22,000
Aspirants
7.1
36.9
44.0
50,001-77,000
19.7
22,001-45,000
Climbers
16.8
37.3
54.1
77,001-106,000
8.2
45,001-215,000
Consumers
16.6
15.9
32.5
>106,000
5.8
>215,000
The rich
0.8
0.4
1.2
Total no. of households: 164.9 million
Total no. of households
46.6
118.2
164.8
Source:National Council of Applied Economic Research (NCAER)
