Challenges Doing Business in India Essay

Trade barriers are created to encourage domestic players by making it more difficult for foreign firms to compete. Traditionally, India has had several types of trade hurdles for foreign exporters, such as, Import Quotas, Subsidies, Trade Samples and Tariff/Duty. The most critical barrier to trade is tariffs or the tax imposed on imports. High tariffs in several sectors continue to bar foreign businesses from increased market access. Red-tapism and Corruption Traditionally, Indian bureaucracy has been mired in red tape which proved to be a frustrating experience for foreign investors. These include limited access to Government offices, cumbersome and multitude paperwork, lack of coordination between various departments processing the documentation, long waiting period for approvals, and above all ambiguous rules. However, with the economic reforms of early 1990s, the level of bureaucratic hurdles which the MNCs had to overcome, gradually reduced making it easier to do business. Corruption is another big hurdle when doing business in India. Areas like electricity supply, judiciary (particularly lower courts), Police, land administration are counted in the most corrupt category. Since all these are essential in building up a business, corruption proves to be a major hurdle for starting business in India. Inadequate Infrastructure It has long been felt that roads and communication in India need substantial investment in order to make them world class. Problems with the country’s education and power situation are also counted amongst the toughest obstacles for doing business. Today, there is an increased private participation in ports, roads and other key sectors. Infrastructure development has emerged as a niche market for foreign investors in India with several states looking to build world class infrastructure. The problem area is the absence of a clear-cut policy framework, which has hampered private investment in the infrastructure sector.