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Doing Business in India: Leveraging the possibilities

Businesses worldwide have molded themselves around the Pandemic. So has India. After facing unforeseen uncertainty, and crosswinds of geopolitical unrest that resulted in a pressurized economy, the country strides towards a self-reliant economy. Today, it rides the crest in exports, increasing foreign investments and global tie-ups. This is possible due to its globally congruent interests and values, impressive entrepreneurial talent, large internal market, and thriving private enterprises. Its report card for FY2022 shows a very positive economic trajectory: Government-led initiatives for exports resulted in the latter being at an all-time high. Production-linked Incentive Schemes (PLI), Free Trade Agreements (FTAs), incentives around special economic zones, and assistance for start-ups and new manufacturing firms have ensured and assured investors of an aggressive strategy to resuscitate a flagging economy.

The World Bank in its Doing Business Score Survey ranks India well below the 70th position. The important parameters are construction permits, getting electricity, getting credit, protecting minority investors, trading across borders, and resolving insolvency. Single Window System for construction approvals, online submission of documents for cross-border trade, paying tax with a simplified Goods & Services Tax (GST) for the entire country, and the Land Acquisition Bill are some of the Indian Government’s initiatives that have brought in a very optimistic business environment. Everyone is welcome to join the “Star-tup India Movement” without burning a hole in their pocket.

A dynamic economy that is also the world’s largest democracy, is how India is perceived today. With a population of more than a billion rising disposable incomes, and shifting consumption patterns, it is undeniably an alluring market for overseas businesses and investors.

Measures taken by the Indian Government to Attract Investment

● Make in India

India, today is the cynosure of global eyes as it progresses on its journey towards self-reliance through the medium of ‘Atma Nirbhar Bharat’ and ‘Make in India’ policies. In the past, impediments to business included uncertain and cloudy regulations and burdensome compliances. But today, the Indian Government has fast-tracked a four-pronged policy that is based on a simplification of compliances, self-certification, digitization, and the creation of online interfaces. This is especially targeted to welcome domestic and foreign investors to the country. Steps like - Reduced corporate tax rates, easing NBFC and bank liquidity problems, improving Ease of Doing Business, Foreign Direct Investment (FDI) policy reforms, compliance burden reduction, and policy to boost domestic manufacturing through public procurement orders are amongst measures to facilitate investment and production. The National Single Window System (NSWS), the National Infrastructure Pipeline and the National Monetisation Pipeline, The India Industrial Land Bank, and the Industrial Park Rating System have all been launched to inaugurate winds of change in the business atmosphere of the country.

It is an accepted fact that the Manufacturing sector is the bulwark of the economy. The government reforms too, begin with the aim to expand a sadly shrunk manufacturing sector. With 13 sectors being identified for PLI and Phased Manufacturing Program (PMP) incentives, manufacturing has been administered a booster shot by the Indian Government. Three sectors to be specially noted are:

  1. Mobile manufacturing and Specified Electronic Components,

  2. Critical key starting materials/Drug intermediaries and active pharmaceutical ingredients.

  3. Manufacturing of medical devices.

Various PLI programs will buttress and pump industry capacity for the production of medical devices and bulk drugs. Participating businesses like hospitals, health insurance, and health tech segments, now have ample opportunity to consolidate and integrate their business portfolio.

● Business Friendly Regulations

India ranks 63 amongst 190 on the Ease-of-Doing-Business Index. That itself explains how regulations have been relaxed and made business-friendly. Liberalization in Foreign Direct Investment (FDI) and simplifying Import and Export policies have made entry into India more welcoming and warm. And it does not stop here - An Investor Facilitation Cell has been put in place to help the investor through the entire lifecycle of his business.

The Indian States are ranked according to how much they have relaxed laws and simplified complex and repetitive procedures.

● Amendments to Labour Laws

A very important deciding factor in the growth of foreign investments is the flexibility of its trade and labor policy. India’s Labour Laws, have been a huge mammoth of 100 State laws and 40 Central Laws. This complex web of laws had created deterring compliance barriers thus discouraging foreign investors. In an effort to promote ease of doing business, the Indian Government has enacted legislation to simplify procedures that had been cumbersome. The Indian States, individually, have worked to make labor laws flexible and manufacturing-friendly. An example of the most dramatic and drastic measure has been taken by the State of Uttar Pradesh. The State Government has declared all labor laws including the Minimum Wages Act defunct and void. The respite includes laws relating to the settling of industrial disputes, occupational safety, health, and working conditions of workers as well as those pertaining to trade unions, contract workers, and migrant laborers. For the managerial as well as top management levels there are legal guidelines for the work-from-home model determining work parameters for the employer and the employee. A very workable strategy to contain an economic slowdown.

● Entry Routes for doing Business in India

A business or trade can become a part of the Indian market directly or indirectly. A direct entry would be to set up a wholly owned subsidiary, a liaison, or a rep office; or sign a joint venture with a local business operator. An indirect model would be an agency or a distributor arrangement within the country. It could also be done by selling through online services.

● Free-Trade Agreement Route

Another route to doing business in India is the Free Trade Agreement. This is a part of the free trade policy. It allows goods and services to be exchanged across international borders with little or no interference from the respective governments to restrict this relationship. This policy does away with economic protectionism or economic isolationism. India has signed 13 FTAs that have given a major fillip to trade and commerce of the country.

● Presence of Special Economic Zones (SEZ) in India

India has delineated geographical areas as Special Economic Zones (SEZ). These are territories that are specially marked to promote business activity within the country. These assure certain amenities and measures to ensure smooth and painless conducting of business. These could be free trade zones, export processing zones, industrial parks, economic and technology development areas, free ports, and so on. With that objective, these zones enjoy tax holidays, income tax exemptions, exemption from sales tax, dividend distribution tax, liberal labor regulations, and exemption from excise and customs duty on the purchase of capital assets or raw materials from the domestic market. Other promotional incentives include a flexible approach to foreign direct investments and an online single-window clearance for procedures. We have Gujarat International Finance Tech-city (GIFT) as India’s first International Financial Services Centre under the SEZ vision.

● Seamless Global Business Transactions

India’s first global bullion exchange, India International Bullion Exchange (IIBX) was inaugurated in Gandhinagar, Gujarat. Gandhinagar’s GIFT city is India’s first operational smart city and is intended to be a hub of International financial services. It is the Government’s agenda to make GIFT city an alternative to Canary Wharf (London’s Business District), Singapore, and Dubai as financial hubs. The chief aim of this business hub is the integration of global markets and supply chains. It is the latest business destination for financial and technology-related services and also offers several operational advantages. Amongst the amenities for ease-of-doing business, its Exchanges function for 22 hours a day in a bid to have seamless global transactions, companies in the city do not have to pay securities transaction tax and commodity transaction tax, and it has single window clearances and operating costs here are expected to be 20% lower than metropolitan cities of India.

To Conclude

Post-corona slowdown India celebrated an undimmed foreign investment of $ 500 billion, despite an evolving regulatory environment. Silicon Valley poured money and foreign companies like Walmart and Amazon created successful footholds here. On the basis of this data, it can safely be stated that India is fast emerging as a very popular center for services and outsourcing. As a popular business destination, it consolidates itself to outrun Japan and Germany to become the world’s third-largest economy by 2027.

Entering the Indian market at this time is indeed very lucrative and attractive, however, it is advisable that all options are tooth-combed, advantages and disadvantages given a thorough study and a solution arrived at only after these are found to be in sync with the objectives. The structure of the business model has to be gotten right. Right, knowledgeable people should be roped in at the very outset for a wrong move could result in expensive damages. For example, each state in the country will require a different approach. What would appear just right for, say Maharashtra might not work smoothly in Karnataka.

Companies need to contemplate and strategize a roadmap for entry into the Indian market. The procedures and groundwork include observing compliances under various laws, obligations, India’s Investment Climate, Tax, Audit and Accounting, and finally Human Resources and Payroll. A local consultant or an advisor would be required to navigate the business entry processes seamlessly.

“Once one starts thinking about actions to accelerate economic growth, it is hard to think about anything else” - Robert Lucas, Nobel Economics laureate, once observed.

This explains the Indian Government’s focus on pushing the pedal to improve India’s ranking with regard to Ease of Doing Business. In a bid to ensure consolidation and sustained growth, it adopts an aggressive policy of global offshoring, digitalization, and energy transition.

In conclusion, it will be very appropriate to say that India welcomes businesses by offering its strengths - Democracy, Demography, and Demand.




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