03 Jun 13 Is India frightening to do business in?

I had never thought of India as an intimidating place for doing business, until I met two people in the same week who called it just that.  Painful, yes. Confusing, yes. But frightening? Really?

The World Bank has consistently placed India very low on the “Ease of Doing Business” ranking. The last couple of years, its ranking has stayed at 132 out of 185 economies. The parameters in the index include ease of starting a business, dealing with permits, getting electricity, registering property, getting credit, and so on. Admittedly, if all these take a lot of form-filling, red tape and delays, the process becomes  time consuming and painful.

So what is frightening, I asked…

Large multinational firms with deep pockets hire global consultants and senior executives with India experience to smoothen their entry into the country. But many small and medium companies from Europe or the US have had nasty experiences in the country.

They find it very difficult to navigate the regulatory environment and often need to hire local partners or agents in India to help them through it. While the regulations are generally documented, the ground reality of how they are implemented is different.  An experienced local has the practical knowledge to get the paper work done.  The problem is that foreign companies often find it difficult to identify local partners who are reliable and trustworthy, as they don’t understand cultural nuances and don’t know how to do due diligence on potential partners.  They get taken for a ride; find themselves paying endless amounts to the agent/partner to get the requisite formalities, clearances and paperwork done. Not knowing whether the expenses are justified, not knowing whether the formalities have been completed correctly – that is scary!

Some companies beat a hasty retreat. Sure, the Indian market is growing and can be attractive, but don’t go there – you’ll get into trouble!

What small and medium companies need is to be armed with adequate knowledge, so that they can successfully expand their business in India.

  • First, they need to know what the regulations are and what formalities they need to complete – not just on paper, but on-the-ground.
  • Second, they need to identify a trustworthy partner/agent in India. It is important for them to have someone local to help them across language and cultural barriers every step of the way.  But they must undertake adequate research and due diligence on the partner before signing him on.

There are several “doing business in India” guides that are available to all. But these are typically very generic.

Only on-the-ground primary research will give them the specific information and insights that they need to reduce their risks in doing business in India.

Varsha Chitale

Varsha led the competitive intelligence practice at ValueNotes. As part of her drive to educate India Inc. on the merits of competitive intelligence, she often conducted webinars and seminars on CI for senior executives of Indian companies.

  • Rahul
    Posted at 07:07h, 11 June Reply

    Very True and Very Good Article. Even to open a small kirana shop is a very hectic and cubbersome process. Inspite of being a local person, you need to find an agent who can smoothen the process of paper approvals and registration with the government authorities.

    One the thigs are in place, the first 2 months are more of further paper formalities of electricity bills copies etc assetted and to be submittted as the proof of business running on the registered place so that the authorities confirm that no other business is happening in the shop registered as kirana shop.

    I sincerely request for a research on the Real Estate Builders Lobby expecially in Mumbai & Pune area. The curiosity is not only about pricing but other aspects of business which both the government body & customers are unaware of but builders get away with as they is no current law in palce for the same. A very good example is the redevelopment of existing socities wherein builder sells extra fsi either horizontal or vertical to outsiders at commercial price. Many times the CC is not collected for these floors and there are futher illegal floors constructed over and above them regsitered and sold off. Such a case that builder runs away with the money and the issue gets stuck between the buyer, society and the bmc.

  • ValueNotes
    Posted at 08:55h, 03 June Reply

    Is India frightening to do business in? – http://t.co/ZraF9sKPFK http://t.co/iOk7kCgEUL

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