What is the effect of the global business environment on the Indian economy?

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thanatassa eNotes educator| Certified Educator

Although India does limit foreign investment, it is still very much part of a globalized business and economic environment.

As a developing economy, India has benefited from having relatively low costs and wages compared to more developed economies. This has allowed it to benefit greatly from globalization. One area in which India has been particularly successful is IT, as many global firms have outsourced many IT functions to India. The growth of cloud computing, however, has resulted in a  slowdown in IT outsourcing. 

India's largest import product is crude petroleum, which means India is vulnerable to price shifts in the global petroleum market. As more Indians move into the middle class and car ownership grows, this dependency is likely to increase.

The largest single market for Indian exports is the United States. This makes the Indian economy vulnerable to slowdowns in US consumption as well as to the political risk of increased protectionism. 

China is India's largest trading partner in terms of exports and imports combined. This affects the Indian economy in terms of both the way import prices influence inflation and such matters as currency fluctuations and demand levels influence export volumes.