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By Vinita Bahri Mehra,
Kegler Brown Hill & Ritter
In April, after my two months' stay in my homeland of India, as I sat on the return
flight to Columbus, the words from one of Mahatma Gandhi' s Independence speeches in 1947 flashed in
my mind. Referring to India, he said, "A world leader is born." Nearly sixty years later, the words of
Mahatma Gandhi are coming true. In the new world order of the twenty-first century, India could lead
the world in peace, democracy, industrialization and trade, and commerce. India indeed is growing and
prospering as it becomes a new world leader and an attractive place to do business.
India has an ancient civilization, mingled with diverse races, religions, cultures and ways of life.
The country is rich in natural and human resources and has a fervent drive to expand and modernize
its industries through the development of science and technology. For those reasons, India is attracting
global companies and foreign nationals. It also provides opportunities to capitalists interested in free
trade and commerce, to non-profits and others committed to solving its vast human welfare needs and to
tourists who simply want to experience its rich culture and impressive natural beauty.
India' s large and growing market for consumer goods, its massive infrastructure needs, a sophisticated
financial sector, an increasingly flexible regulatory environment, numerous incentives, a democratic
political system and strong economic outlook makes India an attractive investment destination. The
business environment is considered conducive for achieving high levels of sustainable growth to business
committed to a long term view.
Due to the competitive advantages offered, numerous multinationals and much smaller companies have established
a significant presence in the Indian market through wholly owned subsidiaries or joint ventures. In the
past, a more pronounced multinational presence in non-core sectors such as consumer goods, intermediates
and services was observed, primarily because the core sectors, such as infrastructure, were reserved for
the public sector. A large number of foreign investors have recently entered various core sectors of the
Indian market. These include Fortune 500 companies as well as small and medium enterprises from all over the
world. The opening of capital-intensive infrastructure industries, such as power, telecom, oil and natural gas,
roads and highways, and ports offers vast opportunities to foreign investors.
The foremost important factor responsible for the strong interest of foreign investors in India is the size and
potential for growth of the domestic market. Sweeping sociological changes have been brought about by rapid
urbanization, an explosion in the use of electronic media, high levels of education and increasing domestic and
foreign travel as well as a change in the buying habits of consumers with a growing emphasis on brands, product
quality, features and convenience.
In addition to the above, another
relevant and important factor is that
investment in India can be profitable
because the Indian government allows
facilities/companies to freely repatriate any
capital appreciation, free remittance of
royalties, technical fees, dividends, interest,
etc., after payment of taxes. The rate of
return on investment amounts to an average
of 16.8 percent.1 Collaborations of many
developed countries
have shown that growth
of foreign companies'
investment in India has
been good. Royalties
have been satisfactory
in comparison to that
elsewhere in the world.
Moreover, the Indian
enterprise is keen to do
business with foreign
nationals, companies
and corporates and seek collaboration for
many purposes, including the transfer of
modern technology.
Further, the depth and size of Indian
stock markets far exceeds that of rival
Asian giants, such as Indonesia, Singapore,
Thailand, Malaysia and the Philippines and
is gaining ground on its well establish
rivals in Taiwan, Hong Kong, Korea, etc.
This growth is indicative of the magnitude
that can be achieved. Indian stocks, buoyed
by phenomenal growth of the technology
sector and knowledge-based industries
have also achieved significant milestones
in US capital markets because of strong
interest from foreign as well as domestic
investors.
In recent years, a number of significant
policy changes have been introduced to
make investment in India an easier and
more rewarding proposition. Basic changes
in the policy towards foreign investment
and a host of other initiatives have
considerably improved the business
environment within which foreign
companies now operate in India now.
Even though India appears to be an
attractive destination for foreign investment,
another reality is that it is critical for every
foreign company planning to set-up
operations or otherwise to do business in India to comply with all relevant national and local
laws, rules and regulations that impact the business it
plans to conduct in India.
Various legal issues impact a foreign company
setting-up operations or doing business in India.
These legal concerns, of course, include issues arising
from the contracts required for your client to do
business in India, but also encompass a number of
other legal issues, such as:
Obtaining regulatory approvals,
Devising an appropriate strategy to enter the Indian
market,
Researching the competitors of that market,
Finding and securing a suitable location for your
client' s operations of the foreign company, etc.
So, it is important to develop a legal strategy that
supports your client' s business plans and objectives.
This legal strategy will include doing proper due
diligence on your client' s prospective partners or
others with whom your client will do business, as well
as on the specific conditions and prospects of your
client' s market. To that end, it is critical to obtain
experienced guidance before helping your client to
venture into this new and exciting market.
We are moving towards a global economy and
the world is indeed getting flatter. The vast and
growing Indian market is a reality. In India the
growth is staggering, the quality of goods and
services is top notch and the cost can be as low as
one third of doing business in the United States. Even
so, it is a challenging market that should be entered
only with the planning and execution that you would
perform in any developing market. Business
enterprises, in order to sustain, succeed and to be a
part of the world globalization must be flexible, open
minded and adaptable to the realities of the Indian
market.
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