Doing Business in India: An insight
The beginning is the most important part of the work.
Plato
The Greek philosopher's words mark their relevance in the corporate world of the 21st century. The world economy is witnessing a paradigm shift in terms of rapid globalization: markets are no longer limited by the confines of boundaries defined by the geographies of countries. A borderless world presents to each entrepreneur a world of unlimited opportunities, unprecedented growth and unparalleled success. In such a scenario, India has emerged as a lucrative destination to do business in and economists, world across, believe that the country offers some of the best opportunities for entrepreneurs and capitalists to start and expand their business.
Simultaneously, they also realise that the diversities of the Country make it perhaps one of the most complex places to do business in. The Doing Business Report, 2009, which is released by the World Bank, investigates the regulations that enhance business activity and those which constrain it in a particular region. According to the Report, "when entrepreneurs draw up a business plan and try to get under way, the first hurdles they face are the procedures required to incorporate and register the new firm before they can legally operate. Economies differ greatly in how they regulate the entry of new businesses. In some the process is straightforward and affordable. In others the procedures are so burdensome that entrepreneurs may have to bribe officials to speed the process or may decide to run their business informally." Undoubtedly, the beginning is obviously the first most important part of the art of doing business. The Report ranks 180 global economies and positions India as 122 on the parameter of the ease of doing business and 121 in terms of starting a new business in the country. While the ranking is obviously not very flattering, it certainly seems to have a little effect on the entrepreneurship spirit of the country. For instance the Registrar of Office, Karnataka, incorporates 200 companies on an average every month. Of these however, the number of companies that survive the Indian corporate culture is another question. Evidently, while the science behind the decision to do business in the Asian Pacific can promise lucrative returns for any entity, the art of staying in business in the country can be a different ball game altogether and renders true the Darwinian theory of the survival of the fittest.
In such a scenario, careful planning and execution hold the key to success. Business owners, whether domestic or international, should have a clear picture of the objective of their venture in the Indian markets. Before commencing upon their ventures in the Asian sub-continent, therefore, it is imperative for them to find answers to a few questions, which can help determine the exactness of the cause to enter into the Indian markets
1. Why India?
I have never seen India so dynamic, vibrant and full of business opportunities.
Peter Loescher
Business gurus, across the world, over the past decade have been harping about the prosperity offered by the Indian economy. However, no one else, except the business owner, can really determine if the country has what it takes to have their business running and most significantly to keep their business in business. Entrepreneurs have to introspect and study the Indian demographics to understand whether the economy has a market for their business at all, and also the availability of the resources to execute their plans into actions. For instance, the fact that India has the youngest population in the world could one of the most appealing factors to float an Indian entity. At the same time however, it is important to assess the availability of employable resources required to make a business successful. An in-depth report by any of the innumerable manpower and placement agencies in the country can reveal the picture that matters most to the business owner. Likewise, business owners should exercise their prudence and not depend on any generic report of the country to arrive at their decision to venture into the Indian markets.
2. Where in India?
"India is a geographical term. It is no more a united nation than the Equator."
Winston Churchill
Diversity is the landmark of the Asian pacific. The country boasts of assorted cultures, diverse demographics and differing socio-economic parameters. While many perceive this diversity as one of the strong points of the Indian economy, it is important for the new entrepreneur to identify the exact needs of his business, in terms of resources, markets and legalities thereof and move on to commence the business in a place which best suits the requirements. However, this advantage can be leveraged upon even more profitably when the choice of the location of a manufacturing unit is set-up near one of the iron ore belts in the region. While on one hand, this reduces the logistics cycle related to the business of manufacturing, on the other the government of the region would have initiated policies to maximise the potential of the available resources.
3. When is a good time to enter the markets?
"Much of the world is flat or declining. Only India is growing."
Daniel J Magoon
The world economy is witnessing a paradigm shift in its perceptions about India. The country is no longer a land of snake charmers and post the era of liberalization, globalization and privatization, the country has become the darling of the world economy. However, the economy is not immune to socio-economic-political changes within and across the world. It is therefore vital that the decision to enter the Indian markets is not only strategically planned but also tactically timed.
4. Who will be the growth partners in the business?
"We recognise the greatest strength of India is not just the number of people, not its ability to put them into seats - it's the skill level that exists here."
Joseph M Sigelman
It is a daunting task to find your feet in a foreign land, especially in a country as diverse as India. However, partnering with the right people certainly eases the task. The business partners can be anyone - right from the consultants who help in the process of incorporation to the realty agents who assist in the selecting the right place for the business and vendors who will facilitate the growth of business in the country. Every single person associated with the business is as important the business itself. It is imperative that these partners are chosen carefully, after a thorough due diligence of the experience and credibility in the market since this is the team which will shape the future of the company. The process of choosing the right partners should be completed before the revenues start coming in - too many changes during the course of the existence of the company can impair its growth.
5. How?
"We want to bring to the world various facets of this extraordinary country, its people and progress"
Chris Cramer
The ‘how' factor determines the nature of the legal entity through which the daily affairs of the business are conducted. This is predominantly determined by the objective of the Indian entity. The Indian corporate laws, which have evolved over a period of time, facilitate for different types of entities for different reasons. For instance, if a multinational company simply wants to assess the Indian markets and has not planned for the economy to fetch it any immediate revenues, it is advisable to register a liaison office with the Reserve Bank of India rather than incorporating a Company. Likewise, if a domestic individual wants to venture into entrepreneurship but simultaneously does not want to take on the challenges of that the corporate world brings with itself, should instead go in for a proprietorship concern until he evolves to the next level.
It is impossible to rank the above questions in terms of importance, since they are all interrelated. The bottom line, nevertheless, is that to make the most of the opportunities presented by the Indian economy, one should be well and truly prepared.
The author is the Chief Mentor at Floraison India Compliances Private Limited, which is a Bangalore based strategic and business consulting organization.
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