Indian Retail Industry-Pantaloon Retail (India) Ltd. Part IV

Indian Retail Industry
PEST Analysis
Political Environment

The political environment/factor of PEST focuses on “the effects of government policy” and it meticulously takes into account “items such as government stability, taxation policy, and government regulation” (Henry, 2008, pp.52). Although “government stability is not a major issue in Western economies”, it has to be noted that “where multinational corporations operate across international borders, the stability of governments and political systems in those countries need to be taken into account” (Henry, 2008, pp.52). Analysis of the political environment helps these organizations in being “assured that there will not be any sudden and detrimental changes that might jeopardize the substantial investments they will have made” (Henry, 2008, pp.52).

As per the findings of a study that had been carried out by A. T. Kearney – notable global management consultants – to evaluate the attractiveness of thirty emerging markets in terms of investment in the retail sector, “for the last three years, India has held the top slot in the annual Global Retail Development Index (GRDI)” (Krafft & Mantrala, 2010, pp.130). This is augmented by the fact that of late a number of global retailers have become increasingly enthused to invest in the potentially strong Indian market. However, it has to be taken into consideration that foreign direct investment (FDI) continues to be a politically susceptible issue in the context of the retail sector.

Owing to the fact that “multiparty coalition governments have become increasingly common in India”, the process of decision making has become quite complex and it has also been observed that “the decision to allow FDI in retail initially looked straightforward but became complicated as a result of the political circumstances” (Krafft & Mantrala, 2010, pp.130). These decisions are influenced to a great extent by means of the political attitudes nurtured by the constituencies that belong to different political parties. Under these political circumstances, as has been thoughtfully suggested by Sinha and Kar (n.d.), “until a single party forms a government at the Center, there is likely to be delays in making such important and critical policy decisions” (Krafft & Mantrala, 2010, pp.130).

Read the full post(Requires Facebook Login)