Political System Essay

262 WordsJul 2, 20132 Pages
India was British colony until 1947, when India clamed to independence and constituted federal republic country (Dun & Bradstreet 2012). The Indian government is formally bound and secular by its local law and national constitution. As Cavusgil, Knight, Riesenberger, Rammal and Freeman (2012) stated that there are three kinds of political systems which are totalitarianism, socialism and democracy. India belongs to democratic status, and democracy seems to be associated with the phenomenon that the more opening to the outside world, the less restraints for foreign companies. For instance, in 1980s, foreign car producers can entered Indian can market and raising sale of car models and quality, because of Indian government lessened barriers for car market. In terms of constituted government, the political parties involved, and they formulate crucial and decisive policies which are able to affect multinational companies to invest in India. If government was unstable to manage country, it could be threat to Australian investors’ interests and profits. Typically, the political risk is the most relevant element in Indian political system due to the principle that many governments usually encourage Foreign Multinational Companies to invest by providing cash motivations and tax holiday to hire local people to work. In order to deal with and drop the risks, the administrators have to develop an ability of comprehending the entire Indian political environment and also extend a skill to impact with local institutions effectively (Cavusgil, Knight, Riesenberger, Rammal and Freeman 2012). Australian investors are more required to understand Indian government sector and to avoid passive influences on operations and earnings within

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