The Business Environment of India: A New Mandate for Reform

By Lyn Denend, R. McKern
2005 | Case No. IB58

When India gained its independence in 1947, the country embarked on a journey to establish a democracy and representative government, define a plan for economic development, and build a society within which its large, diverse, and fragmented population could prosper. By 1951, just four years after its independence, the country’s foreign exchange reserves were amongst the world’s largest, at $ 2.1 billion, while India accounted for 2.4 percent of global trade. Six decades later analysts, economists, and politicians both applauded the country’s achievements and decried its failures. Critics noted that with 17 percent of the world’s population, India generated only 4.7 percent of global GDP. Per capita GDP (at purchasing power parity) was less than $3,000 per year, with roughly 25 percent of the country’s 1 billion people living in poverty. On the other hand, supporters touted the fact that India was on track to become the world’s third-largest economy (behind only the U.S. and China). India had made significant progress toward establishing a competitive position in the global economy, but the journey initiated in 1947 remained incomplete. With aspects of its socialist roots still in place, India had not yet fully defined nor realized the competitive advantage that would enable the country to sustain an improved position in an increasingly global marketplace. India’s services sector had shown that the country had the capacity to be a pioneer. The question was whether India would capitalize broadly on this success by addressing obstacles to growth, or would miss the opportunity to become a true world leader. This note provides a brief history of the country and explores India’s current status in the global business environment.

This material is available for download by current Stanford GSB students, faculty, and staff only. For inquires, contact the Case Writing Office. Download