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.