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Putting
Together Your Business Strategy for India,
Kumkum Dalal, President, Global Reach
Consulting, Inc., Your Guide to Doing Business
in India.
The Illinois Trade
Center of Chicago and the State of Illinois,
Department of Commerce and Economic Opportunity
are taking proactive steps to persuade Illinois
companies to export to India. The export
potential is huge, as noted recently at a
seminar in the Chicago area by John Peters, the
Counselor for Commercial Affairs at the US
Embassy in Delhi, India. His talk should have
made every Illinois business run back to the
office and develop their business strategy for
India. The State of Illinois is sponsoring two
trade missions to India in 2005. The April
mission was intended for Illinois manufacturers
and the October mission will target the
pharmaceutical industry. While the Fortune 500
and 1000 companies and MNCs, such as Illinois
based Motorola, are already deep in the Indian
market taking advantage of the deregulated FDI
(Foreign Direct Investment) climate and are
thriving in the Specialized Economic Zones
(which offer special incentives and tax breaks),
the next tier of Illinois companies are barely
aware that India is a huge and lucrative
marketplace for partnering and collaborating.
Today, India’s
economy is still relatively small at $600
billion; however since 1991, the Indian economy
has been thriving. 1991 was a watershed year,
when the then Finance Minister and now Prime
Minister Dr. Manmohan Singh, liberalized India’s
economic policies. Since then India has
experienced a steady GDP growth rate between
6-8%. It now does business with and writes free
trade agreements with a number of countries it
did little or no business with previously, such
as several Southeast Asian countries, Argentina,
Brazil, China, Israel, Russia, South Africa,
South Korea, Singapore, to name a few. As the
Indian economy grows so does the middle class
which at present is 300 million strong. There is
also a small, about 20 million strong, group of
Indians that are well traveled, or have lived
and worked in the US and European countries and
are now back in India, who crave some lifestyle
products they had become accustomed to but are
not available in India. The westernized Indian
makes a sizable niche market to pursue.
In the most recent
budget there is considerable commitment to
further deregulate FDI and liberalize trade
policy. There are also new set asides for both
urban and rural infrastructure development and
additional schemes to promote small and medium
sized manufacturing firms. All this should be
very good news for US businesses as it provides
a fertile and growing market for all categories
of goods and services. India’s commitment to
infrastructure development and the growth of the
services sector has created many new
opportunities for US exports particularly in a
variety of equipment areas. Some of the
categories the US Commercial Service identifies
are equipment for electric power generation,
distribution and transmission; computers and
peripherals; machine tools; food processing
equipment (absolutely huge!); medical equipment;
pollution control equipment; water treatment
equipment and renewable energy. As US-India
trade grows, and US firms inevitably write local
agreements with their counterparts in India, it
may be prudent to have an Indian law firm review
contracts as US laws do not apply in India. As a
service to our clients, we are always happy to
introduce the US exporters to an Indian law
firm.
Trade is a two way
process. For India to buy products from the US
and elsewhere, it must also sell its goods and
services to generate the revenues with which to
purchase. Here is our list of items for US firms
to consider as they build their business
strategy.
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Review the export opportunities in
India that the US Commercial Service
identifies to find a sub-category for you to
pursue.
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India is
dominated by small and mid-sized companies.
US firms should consider collaboration with
like size firms, particularly in
manufacturing.
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US manufacturers
have to lower non-production costs. One way
to do this is by contract manufacturing the
work to an Indian firm. A US manufacturer
could also consider India as a base for
export to third countries.
-
The US has an environment that
supports venture capital and investment in
innovation. India has a vast engineering and
design intellectual pool. Marry these to
create the global company of the future – a
hybrid company using US innovation
and Indian engineering.
-
India has a
wealth of knowledge in the methodology and
process needed to make for a successful
outsourcing experience. After all, it honed
its skills when the US faced a shortage of
programmers in the late 1990’s during the
dot com era and the Y2K panic.
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Indian exports of services are constantly
moving up the value chain. It started with
IT, was followed by back office functions,
now the focus is on engineering. Tomorrow’s
partnerships and collaborations will be on
animation, video technology and the
pharmaceutical and biotech sectors. Build
your expense management strategy with
India in mind.
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The Indians are a good group to do business
with – they speak English, the technical
folks can speak directly to each other; the
Indian judicial system, like the US
is based on English common law; and India is
a signatory to the WTO agreement that
protects intellectual property.
-
India produces 1
million college graduates a year including
250,000 engineering graduates. Some of
India’s engineering and management
institutions are world class.
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58% of Indians are under the age of 25. That
is approximately twice the entire population
of the US. This makes for a large and
lucrative export market for the US to invest
in.
US firms
should not underestimate the strategic
importance of being in India.
Dispute
Resolution Clause in Contracts with Indian
Entities Shourya Mandal, Esq.,
Fox Mandal Solicitors &
Advocates, India.
It is very
important for US companies to choose the
right forum for dispute resolution in any
contract with an Indian party.
It is common
for US contracts to provide for exclusive
jurisdiction of US courts and contracts to
be governed by US law. Under the Indian Code
of Civil Procedure, judgments of US courts
cannot be enforced in India. Such judgment
would have to be enforced by filing a
substantial action in the appropriate Indian
courts. Therefore, US companies would have
to go to Indian courts in order to take
legal action against an Indian company.
A provision in
the contract that US law would be the
governing law on the contract will be
enforced by an Indian court. However, an
exclusive jurisdiction clause in favor of US
courts may not be strictly enforced in
India. Under Indian law, the parties can
choose a specific court for vesting
exclusive jurisdiction only if that court
has jurisdiction to try that dispute (as per
Indian law). An Indian party may initiate
action in Indian courts in spite of the
exclusive jurisdiction clause in the
contract. In such cases the proper remedy
for the US company is to apply to the Indian
court at the first opportunity for stay of
the Indian action on the grounds of the
exclusive jurisdiction clause.
On the other
hand, having an arbitration clause in a
contract with Indian companies is a better
option. Although India has enacted an
arbitration law (the Arbitration &
Concilliation Act, 1996) based on the
UNCITRAL rules, it is advisable to have the
arbitration governed by an international
body such as International Chamber of
Commerce (ICC), UNCITRAL or the American
Arbitration Association (AAA) and the venue
of the arbitration be kept outside India
(either in the US or a neutral place). This
will minimize the chances of intervention
from Indian courts. An award passed in such
arbitration proceeding can be enforced in
India under the New York Convention.
In view of the
long delay in getting judgment in Indian
courts and non-enforceability of US
judgments in India, it is advisable to have
an arbitration clause with arbitration
outside India.
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