INDIA: Not the best place for COMPANY startups For all those people who think that doing business in India is worthwhile because we are an inexpensive destination, please think again. Let us go to the basics of Economics: There are 4 factors of production needed for an enterprise – land, labour, capital, and entrepreneurship. Land: By no stretch of imagination is land cheap in India. Wherever you go land prices have gone up substantially. Rents in urban India are high – in cities it is a demand pull price and in rural India it is a supply constraint! Land for factories – say 500 acres for a car factory is almost impossible to get. The land acquisition has to be done by touts, politicians, criminals combination – they then add their margin and what you get is an expensive piece of ordinary land. So if you thought land was cheaper, banish the thought! With a population of 5,140,300 and a GNI per capita of $40,920, Singapore is ranked number 1 for ease of doing business. Labour: The qualified and mobile Indian is willing to work in all parts of the world. So a salary / wage arbitrage which India enjoyed long ago is already in the history pages. The unqualified labour requires a lot of training! Also there is a demand side inflation in urban India and a supply side constraint in rural India. Getting people to come on time and work hard is not easy. Maruti lost one manager to labor violence, and now it seems to be the worry for Hero Motors, and others in the North belt. Capital: In a country where a hospital gets money from the banking system at 15.5% p.a. – money is not cheap. In fact the banking system will ensure that more companies end up in the CDR. Then there are many companies with such poor margins that they barely exist after paying the bank interest and bank installments. Why is money so expensive? Bankers need margins to cover their mistakes – after all if they lend to Kingfisher Airlines, that full principal has to be recouped from the ‘good’ borrowers, right? Add to that the and the bureaucracy and the broken promises by the government; No wonder Aditya Birla, Ratan Tata and Laxmi Mittal have all openly said ‘It is easier to do business abroad. The situation is dire it will take 22 horses to pull the government in the right direction
Posted on: Tue, 08 Oct 2013 14:41:52 +0000
Trending Topics
Recently Viewed Topics
© 2015