Doing Business in India: Business Climate and Economic Upturn in India – JD Supra

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Doing Business in India: Business Climate and Economic Upturn in India – JD Supra

[co-authors: Mr. Vinay Vaish, Mr. Bomi Daruwala]* 1. What is the current business climate in your jurisdiction including major

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[co-authors: Mr. Vinay Vaish, Mr. Bomi Daruwala]*

1. What is the current business climate in your jurisdiction including major political, economic and/or legal activities on the horizon in your country that could have a big impact on businesses?

As nations and economies were reeling under the socio-economic impact of the pandemic, the tremors of the impact were equally felt across the Indian legal industry. The legal community has witnessed one of the toughest times and has seen a huge economic downturn in the past year. However, we are gearing towards better times and are optimistic that the current year and beyond would be reflective of a better forecast as per global economic predictions.

The business climate in India is currently the best it has ever been. India has had a stable government since 2014, which has steadfastly focused on improving the ease of doing business in India, which steps have propelled India to 63rd place amongst 190 countries in the World Bank’s Ease of Doing Business rankings of 2020 in contrast to India’s 142nd place in 2014. India has improved its rank in 7 out of 10 indicators and has moved closer to international best practices. Recently, the government has also introduced a bill to abolish retrospective taxation which presents a clear and predictable taxation law to provide impetus to India’s aim of becoming a USD 5 trillion economy.

2. From what countries do you see the most inbound investment? What about outbound?

India is viewed as an attractive investment destination. India is the fifth largest recipient of inflows in the world. Between April 2020 and March 2021, India received the highest FDI equity inflow from Singapore (USD 17.42 billion), followed by the U.S.A.(USD 13.82 billion), Mauritius (USD 5.64 billion), the UAE (USD 4.20 billion), Cayman Islands (USD 2.80 billion), the Netherlands (USD 2.79 billion) and the U.K. (USD 2.04 billion).

Indian firms invest in foreign shores primarily through mergers and acquisition (M&A). With rising M&A activity, companies will get direct access to newer and more extensive markets and better technologies, which would enable them to increase their customer base and achieve a global reach. According to the Reserve Bank of India (RBI), India’s outward foreign direct investments (OFDI) in equity, loan and guaranteed issue stood at USD 6.71 billion in May 2021 and spread across the U.S.A., the U.K., the Netherlands, the UAE and Singapore.

3. In what industries/sectors are you seeing the most opportunity for foreign investment?

The industries/ sectors which are attractive to foreign investors are Services, IT, Telecom, Chemicals, Pharma and Automobiles. Deal momentum continues to be robust, driven by transactions which are evidently led by new-age sectors such as technology, digital, e-commerce, Fintech, etc. India now ranks as the third-largest startup ecosystem globally and is home to over 50 unicorn startups in the new-age sectors and counting.

4. What advantages and pitfalls should others know about doing business in your country?

Factors that enhance the business opportunities in India are a stable government, large domestic market, favorable FDI policies and overall improvement in the business environment, the introduction of various reforms for ease of doing business, high literacy rate, a comparatively large, affordable, and young workforce, and increased consumption patterns. On the flip side, Indian laws and bureaucracy are quite intricate and cumbersome. It is, therefore, advisable to hire an expert or Indian lawyer or liaison, who can assist in navigating these intricacies.

Our own publication “India Business Guide – From Start-up to Set-up” is an exhaustive guide that provides valuable insight from years of experience about doing business in India. It can be accessed here .

5. What is one cultural fact or custom about your country that others should know when doing business there?

India is a diverse and complex country. Each person you meet will be a unique blend of Indian and western values. People from different socio-economic strata, educational backgrounds, class and religion may behave very differently.

Most Indians enjoy good conversation on a variety of topics. Even in business meetings, it is common and normal to start discussions with ‘small talk’ on other unrelated issues. In fact, this is seen as a way of building rapport and trust. Welcome topics for discussion are current affairs, cricket, films and Indian economic reforms. While Indians sometimes tend to ask questions which can be perceived as too personal and intrusive, one must remember that basic inquiries about the other person’s family is seen as a sign of friendliness and a genuine interest towards the other person. Conversation in India is as much an exchange of views as it is a mode of building and strengthening relationships. Consequently, complimenting and showing appreciation are quite normal among Indians. Indians usually do not express their disagreements openly and directly; as that would be considered discourteous.

With respect to doing business, the government-owned public sector companies are more often bureaucratic and hierarchical as compared to their private sector counterparts.

In India, a financial year runs from April 1 to March 31 of the next year. Since the end of March is the time for closing the financial year, people are generally very busy. One must try to avoid scheduling meetings around this period.

*Vaish

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