GSBS6003 Economic Component of Pestle analysis in India and New Zealand Assessment Answer
GSBS6003 Globalisation – Group project assessment
The following task will emphasize on comparative analysis of economic component of Pestle analysis in India and New Zealand for determining the scope and opportunities of Australian companies for Foreign Direct Investment. The study will critically compare the financial attractiveness, rate of inflation, interest and tax from the perspective of India and New Zealand.
|Comparative Analysis of India and New Zealand (Economic Aspect)|
|Economic Attractiveness||As far the GDP of the country is concerned, India has raked 140.78 crore with an increasing growth rate of 6.81 % over the first revised estimation of GDP in 2017 (Statisticstimes.com, 2019). In this context, it could be stated that the GDP of India has experienced an expansion of 2.57 times from the year 2005 to 2019 presently. An increasing GDP suggest a good trend for investment which is need for FDI.||The GDP of New Zealand accounts for 205.02 billion US dollars in the year 2018 representing 0.33% on global economy (Tradingeconomics, 2019). The country exported nearly $39.8 billion price of goods in the year 2018 (Workman, 2019). The nation is a strong supporter of free trading which could prove to be attractive for Australian trades of Foreign direct investment.|
|Tax System||India abides by a well-constructed tax system. There are certain mandatory taxes which any company operating business in India needs to pay such as property tax, fuel tax, central sales tax etc (Investindia.gov.in, 2019). However, owing to the slumping of the economic growth, the corporate tax rate is reduced to 22% which was 30% previously. As far manufacturing of fresh investment is concerned, 15% rate of tax is levied which is favourable for FDI from the perspective of Australian companies (The Economic Times, 2019).||The tax rate is flat by nature with personal tax being around 33% for every individual earning above $70000 and the corporate tax are only 28% (Newzealandnow.govt.nz, 2019).|
|Interest Rate||India has tilted more towards industrial policies through liberalisation of foreign capital. However, owing to its low interest rate of around 5.15%, after Reserve Bank of India took the initiative of lowering the repo rate by approximately 25bps. The low interest rate needs are not very much favourable from the perspective of FDI.||As per the estimates of interest rate by September 2019, the country experienced a record low interest rate of 1% which is not at all favourable for attracting FDI currently (Fxempire.com, 2019).|
|Inflation Rate||The inflation rate in India is unpredictable by nature as a result of which Uncertainty is being created within inflation rates resulting in redistribution of the money from the lenders towards the borrowers (Tradingeconomics, 2019). However, the rate of inflation rose around nearly 3.99% by September 2019, with an enhancement of 3.28% than the month of October, which will not work in favour of foreign direct investments||In case of New Zealand, the rate of inflation has even lowered to 1.5% as compared to 1.7% of the previous October month (Rateinflation.com, 2019). The lower rate of inflation rate might work in favour for FDI from the Australian Perspectives.|
From the above, mentioned table it can be analysed that India will be a more profitable venture of FDI for Australian companies in comparison to New Zealand. The increasing growth rate of GDP by 6.81% of India will be a much more favourable option for FDI than that of New Zealand. The corporate tax rate is also higher in New Zealand than that of India (22%). The interest rate is NOT much favourable for either countries, However, New Zealand has recorded a lowest of 1% interest rate in recent times which might be a huge threat for conducting international business. However, the inflation rate in India is high than New Zealand which will be reducing the monetary value, thus affecting return on Investment. However, on an overall note, India is arguable the better option for FDI in comparison to New Zealand.