Scots businesses keen to enter this emerging market might need help to avoid some potential pitfalls, says Kirsty McBirnie
As a result, there is a huge opportunity for Scottish businesses looking to expand into the booming economy, from low operational costs and tax-free zones to highly- educated English-speaking talent and large-scale business outsourcing. However, India is a huge and diverse market which differs dramatically from the Scottish market. Scottish businesses should be aware of these potential pitfalls in order to make the most of the ample opportunity presented by expansion into India.
India consists of 28 states and eight union territories. It has 22 official languages, hundreds of unofficial languages or "mother tongues" and thousands of local dialects. The legal system is made up of common law, statutory laws (both central and state) and codified personal laws governing specific religious communities in personal matters such as marriage and inheritance.
In short, the Indian market might appear almost impenetrable to Scottish businesses used to working internationally in smaller, European countries or largely English-speaking countries. But that's not to say it can't be done. In fact, one of the current Indian government's main objectives is increasing ease of business in the country to encourage foreign direct investments and, as a result, several key elements of the legal system have become more streamlined in recent years, to the benefit of international businesses.
One example is that India now uses the American system for listing on the stock market – where once listing a business took two to four years on average and a series of complicated paperwork, it now takes around a year and follows an established process, making it far more accessible.
Although India has, over the course of the past decade, started to open up more and more to international business, Scottish businesses entering the Indian market for the first time should seek the advice of a lawyer or law firm which specialises in India's legal environment.
This allows the businesses to not only ensure the correct dispute resolution and governing law clauses are included in contracts, mitigating the risk of potential commercial disputes, but also to feel secure in navigating an unfamiliar business, economic and cultural landscape. A law firm that understands India will be able to direct businesses towards promising areas of investment, guide them through the cultural differences between the countries and facilitate connections with the Indian business and legal sector.
Businesses which look past the "fear of the unknown" and choose to invest in the Indian market will find it full of potential, particularly for trade and investment in areas such as renewable energy, infrastructure, life sciences, business outsourcing, and food and drink.
The Indian government is heavily investing in ease of business, most notably perhaps in GIFT City, an emerging global financial and IT services hub – the first of its kind – in Gandhinagar, Gujarat, which offers several key incentives for global firms, including exemptions from various Indian laws, simplified taxation regimes and the ability to transact in multiple foreign currencies. It even offers 100 per cent tax exemption on business profits for any 10 consecutive years within a 15-year period to certain companies.
As India becomes an increasingly powerful global economy, Scottish businesses should look to take advantage of the huge opportunity presented while remaining cognisant of the potential challenges of moving into this promising market.
Originally published by The Scotsman
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
