Investing in India is no longer a step into the unknown; however challenges still remain according to a new report from global law firm White & Case LLP.
"We believe in India's potential and we are optimistic about its future," said Nandan Nelivigi, head of White & Case's India Practice. "However, we recognize that there are challenges in doing business in India and reform in the country will take time, but companies can't afford to wait for improved conditions before developing a stronger presence in India."
The report identifies four guidelines to help companies navigate India's complex business and regulatory landscape including:
Understand the Regulatory Regime – India's laws and regulations reflect the political compromises required to balance the complex and conflicting demands of multiple constituencies. This does not mean that rules in India change arbitrarily, but investors need to be aware of the regulatory regime.
Interpret Regulations Conservatively – When the economics of a deal depend on an aggressive technical interpretation of the law, companies should think twice about investing. When regulations are ambiguous, foreign companies should take a conservative approach to interpretations.
Evaluate Joint Ventures in Forensic Detail – Countless Indian joint ventures between foreign and domestic partners have collapsed as a result of insufficient due diligence and preparation prior to the launch. The benefits of a domestic partnership must be weighed against any possible downsides.
Build in Commercial Protections – Good legal documents are essential but they are not sufficient. Deals must be structured so that they provide commercial protection to investors. In dealing with compliance issues, it is not enough to include compliance standards in business contracts. Companies must actively encourage the behaviors they want their partners and employees to adopt.
The report also highlights important steps companies should take to avoid corruption and other missteps in their activities in India, offers an in-depth look at the twists and turns of India's foreign direct investment policy (FDI), with a particular focus on the FDI policy for retail trade and discusses protections for foreign investors when their deals go wrong, including investment treaty protections.
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