Exploring the Strategic Advantages of doing business in India

India’s burgeoning market undoubtedly presents a plethora of opportunities for international and domestic businesses alike. As the economy continues to grow it becomes ever more attractive to entrepreneurs globally. The country’s commitment to fostering an open and competitive business environment is clearly reflected in its comprehensive reforms. Key legislation such as the Arbitration and Conciliation Act, 1996 and the Bankruptcy and Insolvency Code, 2016 provide a reliable framework for conflict resolution and financial security thus reinforcing the nation’s appeal as a business hub.

The Indian government’s consistent efforts to improve the ease of doing business coupled with initiatives to simplify regulatory hurdles, significantly enhance the nation’s commercial attractiveness. With a streamlined tax system through the introduction of Goods and Services Tax (GST), the process of setting up and operating a business in India has become more seamless. However, entrepreneurs are advised to seek local legal counsel to fully understand and navigate the nuances of the Indian business environment.

India’s steady economic stability, underpinned by consistent Gross Domestic Product (GDP) growth creates an ideal environment for commercial ventures. As of the current data, India holds the fifth rank globally in terms of GDP reflecting its economic strength and resilience. This positive economic trajectory showcases the country’s ability to endure various global economic downturns thus signifying a secure landscape for businesses.

Several statutes and policies contribute to and safeguard this economic stability:

Fiscal Responsibility and Budget Management (FRBM) Act, 2003:

This act aims to ensure fiscal discipline in the country by setting targets for the government to reduce its fiscal deficits. The objective is to maintain macroeconomic stability and thus ensure sustainable economic growth.

Foreign Exchange Management Act (FEMA), 1999:

FEMA governs and manages the foreign exchange market in India. It enables the development and maintenance of the foreign exchange market, facilitating external trade and payments. This Act promotes orderly development and maintenance of the foreign exchange market in India.

Monetary Policy by Reserve Bank of India (RBI):

The central bank’s role in maintaining economic stability is crucial. It uses various tools like Repo Rate, Reverse Repo Rate, Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) to control inflation and stabilize the economy.

Insolvency and Bankruptcy Code (IBC), 2016:

This Code has brought significant reform in India’s corporate laws while offering a resolution for insolvency in a time-bound manner. By doing so, it has enhanced the ease of doing business and facilitated more significant foreign and domestic investment thus contributing to economic stability.

Securities and Exchange Board of India (SEBI):

The primary function of SEBI is to regulate the securities market and protect the interests of investors. By ensuring a level playing field for investors, it maintains confidence in the Indian securities market, which is essential for economic stability.

India’s status as a prime destination for Foreign Direct Investment (FDI) can be attributed to its robust economic performance and favourable investment policies. The steady influx of FDI underscores India’s significance in the global economic landscape thus providing increased opportunities for businesses to thrive. The Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry is the nodal agency for FDI policy formulation and facilitation.

To create a conducive environment for FDI, the Indian government has eased various legal and regulatory norms. Under the Consolidated FDI Policy, foreign investors can invest up to 100% in most sectors through the ‘automatic route’ bypassing the need for government approval. In certain sectors where such unrestricted investment might have implications on national security or strategic interests, investments are regulated through the ‘government route’ requiring prior approval. The Foreign Exchange Management Act (FEMA), 1999 further governs and regulates foreign exchange thus ensuring smooth transactions and reliable returns for foreign investors.

To further attract FDI, the government’s ‘Make in India‘ initiative aims to establish India as a global manufacturing hub. FDI inflow has consistently grown in response to these investor-friendly policies. This indicates not only global investor confidence in India’s economic potential but also the country’s stable legal framework, ease of doing business and vast market potential.

India’s promising demographic structure characterized by a youthful and energetic populace creates a vast consumer base ripe for business development. As the world’s second-most populous country, India boasts a demographic dividend with more than 50% of its population below the age of 25 and about 65% below 35. This youthful demographic equates to a vibrant and potentially high-consumption market that businesses can leverage for substantial growth.

India’s consumer protection laws play a critical role in shaping and regulating this dynamic market. The Consumer Protection Act, 2019 strengthens consumer rights and provides an efficient redressal mechanism for consumer grievances. Laws such as the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 regulate the collection and use of personal data providing necessary safeguards in a digital economy. Such robust legal mechanisms ensure consumer trust which is essential for businesses to capitalize on India’s promising demographics.

India’s workforce, teeming with competent and skilled labour, provides a distinct competitive edge for businesses. With the world’s largest youth population, India is poised to supply over half of Asia’s workforce over the next decade. A significant percentage of this workforce is highly skilled, particularly in sectors like Information Technology, engineering and pharmaceuticals. This availability of skilled labour at competitive rates enables businesses to optimize costs and enhance operational efficiency.

Although complex, Labour laws in India aim to provide a balance between the rights and obligations of employers and employees. The recent consolidation of 29 central labour laws into four codes – Industrial Relations Code, Code on Social Security, Occupational Safety, Health and Working Conditions Code and Code on Wages – is a significant development towards simplifying and modernizing labour regulations. The Code on Wages, 2019, for example, mandates a national minimum wage thus ensuring a fair wage structure while keeping labour affordable. The Industrial Relations Code, 2020 introduces provisions making hiring and firing practices more flexible, especially for smaller establishments while maintaining protections against arbitrary dismissal.

India’s government has undertaken a range of initiatives with the objective of facilitating a business-friendly environment. Significant among these initiatives is the ‘Make in India’ campaign launched in 2014 with the goal of transforming India into a global manufacturing hub. Another notable program, the ‘Digital India’ initiative aims to digitally empower the country in technology by improving online infrastructure and internet connectivity thereby enhancing the ease of doing business.

Substantial efforts have been made to streamline regulations and diminish bureaucratic challenges in India as well. India jumped 14 places to the 63rd position in the World Bank’s Ease of Doing Business 2020 report up from 77th in 2019. This leap was mainly due to significant improvements in ‘resolving insolvency’ and ‘dealing with construction permits’ parameters. The Insolvency and Bankruptcy Code, 2016 played a significant role in this offering a resolution to insolvency within a time-bound period. The implementation of the Goods and Services Tax (GST) in 2017 consolidated multiple taxes into one also simplified the tax regime and easing the process of doing business in India. These concerted efforts have considerably smoothed the path for businesses operating in the country.

Marked by considerable advancements in transportation, logistics and communication systems, India’s infrastructural development substantially enhances the nation’s commercial appeal. The country boasts an extensive and diverse transportation network consisting of an integrated system of roads, railways, airways and waterways. India has the second-largest road network globally spanning over 5.9 million kilometres according to the Ministry of Road Transport and Highways’ Annual Report (2021-2022). One of the largest railway networks worldwide, Indian Railway Network has over 68,155 km of tracks as of 2021, facilitating efficient transportation of goods and people across the country.

Parallelly, advancements in the logistics and communication sectors have revolutionized business operations. India’s ranking of 35th on the World Bank’s Logistics Performance Index (LPI) 2018 testifies to the improvements in its logistics infrastructure. As per the Telecom Regulatory Authority of India (TRAI) the country had approximately 765 million internet subscribers as of September 2021 bolstered by the government’s ‘Digital India’ initiative. Strategic government projects such as the Smart Cities Mission and the development of five major industrial corridors aim to improve urban living conditions and foster balanced industrial growth, respectively.

Nestled strategically between the Middle East and the Far East, India endows a unique advantage. It shares borders with several South Asian countries and has coastlines along the Arabian Sea and the Bay of Bengal. This makes India a vital economic and strategic hub providing easy access to key international markets.

The country’s strategic location has been leveraged to develop 12 major and 200 minor ports along the Indian coastline according to the Ministry of Ports, Shipping and Waterways. These ports handle approximately 95% of India’s trading volume. India’s Furthermore, Look East Policy, now broadened and rechristened as the Act East Policy is aimed at improving economic and strategic relations with the nations of Southeast Asia and the broader Asia-Pacific region. The Connect Central Asia policy aims to strengthen India’s economic and security cooperation with Central Asian nations. The country’s proximity to the Middle East also facilitates the import of crude oil to meet its energy requirements. These policies and advantages underscore India’s strategic position as a desirable business hub, connecting diverse global markets.

Through the prudent exploitation of the aforementioned aspects inherent to conducting business in India, both domestic and international entities can unlock remarkable opportunities for growth in one of the most rapidly evolving global economies. An insightful analysis of these diverse factors can serve as a catalyst for the strategic positioning of enterprises thereby paving the way for sustained success within the burgeoning Indian market.