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Country Risk Analysis.

Please use India to write an initial country risk analysis. Discuss each of the following:

a. Economic exposure
b. Translation exposure
c. Transaction exposure
d. Political
e. Socio-economic
f. Environmental

What are some procedures and techniques that can be used to mitigate the risks? Use both quantitative and qualitative techniques.

Solution Preview

First, India is located in south Asia. It is one of the fastest developing countries in the world. Our business can be profitable here as its GDP is growing more than 8% last quarter ( This growth proves to be a large opportunity for multinationals. However, the country is comprised of multiple ethnicities therefore; several languages and religious beliefs are recognized.

Political Environment

India has democratic political system. It has got independent judicial system. Here free elections take place as it is one of the largest democracies of the world. Right now government is involved in the economy, but there are major reforms going on. Compared to the past the intervention has reduced drastically due to the liberalization policies.

Yes, legal system is effective and impartial.

Economic Analysis
India's GDP growth rate:
Year GDP growth rate
1990-91 5.81
1995-96 7.52
2000-01 3.94
2001-02 5.13
2002-03 4.11
2003-04 8.61
2004-05 7.09
Average 5.72


- High GDP growth and it is increasing as you see in the recent years the growth is very high, as discussed in the previous slide giving greater potential for the economy.

- India among top 3 Asian investment destinations in "The 2005 World Investment Report" - UNCTAD

- Foreign portfolio investment of more than US $ 8 billion in the Years 2005

- One of the best performing among emerging stock markets, in recent times

- Low Inflation around 5% (RBI data) and Huge foreign exchange reserves.

Social Environment

India is a diverse culture with many languages being spoken. The list of languages used in India is Hindi, English, Assamese, Bengali, Bodo, Dogri, Gujarati, Kannada, Kashmiri, Konkani, Maithili, Malayalam, Manipuri, Marathi, Nepali, Oriya, Punjabi, Sanskrit, Santali, Sindhi, Tamil, Telugu, Urdu, Awadhi, Bhojpuri, Bundeli, Chhattisgarhi, Haryanvi, Kanauji, Magahi, and Marwari. The official languages of India are Hindi and English and it is the largest democracy in the world and the population is having multiple religions

Economic exposure

India's GDP growth is one of the fastest and its growing more then 9% annually. (RBI) Apart from that , the average income structure of the people is also growing in the country, study reveals that 6Of the 179 million Indian households, 14 million are in the top 8 metros - Delhi, Mumbai, Kolkata, Chennai, Bangalore, Ahmedabad, Hyderabad & Pune. Out of these 14 million households, 1.18 million are earning an MHI of Rs 10,000 or above - which could be safely called the Consuming Class.
There are 2.2 million Households in the rest of India, which touch the mark of Rs 10,000 MHI, who are ready to join the spending bandwagon.

India raised two spots in the overall Global Competitiveness Rankings from 45 to 43; they earned high ...

Solution Summary

A country risk analysis is discussed. The procedures and techniques that can be used to mitigate the risks are discussed.