Business Requirements in India
Business Requirements in India
Titus (2007) revealed that the government laws and regulations of India are still being developed especially with regards to foreign investments. This is due to the fact that lobbying activities are normally being done through well connected individuals to influence business transactions (Titus, 2007). The outcome is the higher number of scams with regards to “lobbying” and the resulting effect is that the Indian legislators are perceived to be highly corrupt. The Indian law with regards to corruption is only seen in the Prevention of Corruption Act in 1988 and is perceived to be highly non-regulated (Titus, 2007).
However, corporate operations implement their own Code of Corporate Ethics in order to ensure that corporate governance practices are seen as aboveboard in India (Titus, 2007). This is to disclose to corporate shareholders that corporations operating within India conduct their business operations within the boundaries of the law (Titus, 2007). The development of a separate Code of Corporate Ethics is seen not only in foreign corporations but also domestic operations such as when Jindal Steel & Power transferred the Chhattisgarh thermal power plant to JSW Energy (Vantage, 2016, p.8). But the effect of corporate lobbying is considered to be advantageous to some industries especially with regards to the modification of the double taxation policies (Vantage, 2016, p.11).
Trade and Foreign Firms
India is considered by Prime Minister Narendra Modi to be open for foreign investment especially with regards to manufacturing facilities (Roy and Purnell, 2016). But most global corporations such as Apple prefer to be given additional financial incentives especially since they can provide a sustainable long-term growth for India (Roy and Purnell, 2016). This was due to the loosening of the investment restrictions to foreign-owned retailers but corporations are still required to purchase 30% of their manufacturing materials from Indian suppliers within a span of three years (Roy and Purnell, 2016). However, the main problem for Apple is that India is not considered to be a high-end phone part supplier and therefore makes it difficult for them to set up a retail outlet in Indian markets (Roy and Purnell, 2016). On the other hand other smartphone manufacturers such as Samsung and Xiaomi had already shifted some of their manufacturing facilities in India (Roy and Purcell, 2016).
Intellectual Property
The main problem seen in foreign national operations in India is the issue with intellectual property rights especially for drug manufacturers (Pipes, 2013). This is seen in the number of drug manufacturers that are being abused by the Indian government with regards to their drug patents (Pipes, 2013). This is because the Indian government has a history of taking the intellectual property rights of pharmaceutical companies in order to make a less expensive and generic version of valuable drugs (Pipes, 2013). One of the techniques used by the Indian government is to “compulsory” require drug manufacturers to file their patents within India (Pipes, 2013). These patents are then sold by the government for a licensing fee to other firms so that they can make a generic version (Pipes, 2013). Some of the pharmaceutical companies that have fallen victim are Pfizer and Roche so that India can boost its generic-drug manufacturing industry (Pipes, 2013). However these are not only limited to the pharmaceutical industry and even now has expanded to green technology and IT (Pipes, 2013).
Trade Restrictions, Barriers and the Law
The effect of this is that manufacturing giants are pulling out of the India market since the Indian government has required some industries to source their materials only from Indian suppliers (Pipes, 2013). But the problem for legitimate and legally compliant companies is that competition law is considered to be ignored (Raju, 2014, p.1) since the patents are forcibly taken by the Indian government (Pipes, 2013). Unfortunately this result to a minimal or no innovation on the part of the Indian industries since the Indian government encourages the domestic companies to copy the patent of foreign companies for a fee.
Patent infringement is perceived by Raju (2014, p.1) to be difficult to defend by foreign companies since India does not have an interface law with regards to settling intellectual property and competition disputes. The effect is that Raju (2014, p.1) believes that the Indian government needs to learn from other countries with regards to developing guidelines on the boundaries of intellectual property. But the main purpose of the law is to improve the country’s growth rate that resulted to the tightening of foreign trade and investment policies (Ghuge and Katdare, 2015, p.242). This is especially seen in the well-developed tax structure implemented by the government since the levying of taxes and duties is seen to be distributed amount the government tiers (Ghuge and Katdare, 2015, p.242). However, there are still some issues with the tax structure especially with regards to tax evasions, black money, parallel economy and the high reliance on indirect taxes (Ghuge and Katdare, 2015, p.244).
Risk Factors
The India business environment is perceived to be a double edged sword with numerous advantages and disadvantages. However, the Indian government is trying to comply with international standards with regards to the development of corporate laws (Vantage, 2016, p.13). One of the most significant is the Insolvency and Bankruptcy Code in 2015, which focuses on a more standardized proceeding (Vantage, 2016, p.13). The effect is an increased simplification for doing business in India when compared to the previous framework with its multiple legislative and judicial forums (Vantage, 2016, p.13). Another notable policy development is that Indian companies can be penalized for negligence as seen in the case against HDFC Bank where it paid USD$7,400 to Mohinderjit Singh Sethi (Vantage, 2016, p.14). The effect is that India law is seen to be slowly modifying itself to be more fair with regards to both domestic and foreign business operations. But some recurring problems that is still inherent within the country is the abuse of power by political individuals with regards to patents, technology and others (Pipes, 2013).
References
Ghuge, N. R. and Katdare, V. V. (2015). Indian tax structure-an analytical perspective. International Journal in Management and Social Science, 3(9), p.242-252.
Pipes, S. (2013). India’s war on intellectual property rights may bring with it a body count. Forbes. Retrieved from http://www.forbes.com/sites/sallypipes/2013/09/16/indias-war-on-intellectual-property-rights-may-bring-with-it-a-body-count/#7d365db33ffe
Raju, K. D. (2014). Interface between competition law and intellectual property rights: A comparative study of the US, EU and India. International Property Rights, 2(3), p.1-18.
Roy, R. and Purnell, N. (2016). Apple is discussing manufacturing in India, government officials say. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/apple-is-discussing-manufacturing-in-india-government-officials-say-1482217348
Titus, D. (2007). Corporate lobbying and corruption manipulating capital. India Law Journal. Retrieved from http://www.indialawjournal.org/archives/volume4/issue_3/article_by_diljeet_titus.html
Vantage Asia. (2016). Partnership: What it means and why it may matter to clients. India Business Law Journal, 10(1) p.1-72.
