h a population of 1.3 Billion people and 800-900 Million who are eligible to vote, India calls itself the largest democracy in the world (“National Interest”). India runs a federal form of government and proclaims that they can transfer power peacefully every five years since 1951, except for Ghandi’s experiment of autocracy in 1975 (“National Interest”). The political environment is greatly influenced by factors such as government’s policies, politician’s interests, and the ideologies of several political parties (“PESTLE-ANALYSIS”) The democratic will of the people is reflected in the local and national elections and is mostly accepted and also respected by the people and their politicians. The political culture of tolerance is a very dominant factor when it comes to maintaining a stable political climate. This is very important in order to attract FDI. However, sporadic political unrest is not very uncommon. For example at the moment India is preparing for its mammoth general elections, which are held every five years. One political unrest which has been around for the past year is the increasing violence against minorities since the pro hindu sentiment five years ago. (“lowyinstitute”)

One major area of political concern in India is corruption. Currently India is ranked 78/180 with a score of 41 on the corruption index (“Transparency”) Although India does not show the best results it shows a steady increase and less corruption every year. The Indian government created initiatives to combat the challenges of corruption. In 2018 Parliament passed the Prevention of Corruption (Amendment) Act introducing changes to the existing anti-corruption law (“Lexology”). India does this to be more democratic and also to be more interesting for other countries. Often companies do not consider FDI is because of corruption rankings in the desired country.

Economic Environment of India

According to the Economic Complexity Index (ECI), India is the 17th largest export economy in the world and the 45th most complex economy. In 2017, India exported $292B and imported $417B, resulting in a negative trade balance of $125B. In 2017 the GDP of India was $2.6T and its GDP per capita was $7.06k (“OEC”). In 2012 India exported $ 273 B. This means that India has increase at an annualized rate of 1.2% from 2012 to 2017. (“OEC”) When it comes to imports India imported $ 449 Bn 2012. India therefore has an annualized rate of -1.6 % from 2012 to 2017. (“OEC”)