A brief background
Despite a stable economy, a huge consumer market, and a powerhouse in IT, the pitfalls of doing business in India perhaps outweigh these positive factors. The highly bureaucratic environment makes it very cumbersome to start a business.
To set up a private limited company which is speedily executed in the UK will take ten to fifteen days in India and will exhaust the proposed foreign directors with endless KYC verification.
There are 28 states in India all of which have their own culture, language, and talent. Each state has their own subjective interpretation of the national law. This combined with laws which are specific within each state make it quite impossible to operate across India in uniformity. The country’s infrastructure although improving has a lot to be desired.
Are you thinking of doing business with India or considering setting up a branch office in India?
Hello! My name is Vinod Sejpal. After a long period of living and working in the the UK I moved to India in January 2022 predominantly to explore this fascinating country. With my vast experience in business and finance I considered apt to run a small business which would enhance my experience and provide a better insight to India’s commercial sector.
India is a tough place to conduct business unless you are born and bred in India and even then, it’s a long shot. The legal compliances and reporting requirements are very convoluted and only understood by professionals who have studied and qualified in India.
A land of opportunities
India however is a land of opportunities. Given its huge potential it can be viable to invest in India but take extreme caution in setting up a business in India. Before diving in, it is strongly advisable to conduct a business feasibility study to measure the likelihood of the outcome of the success of your project. If it does look viable on paper, then your next step is to spend at least six to ten months in India in just understanding people psychology. This by far is the most significant study you will undertake. Foreigners in India are perceived as people with immense wealth and generally considered quite dumb! Prices for foreigners are hiked up anything up to five times that a local person would pay. It is therefore vital that you scrutinise this mentality under the microscope to fully understand the Indian mindset.
To get a glimpse of how foreigners get coned in India there is a very interesting video on You Tube, https://youtu.be/SE-Z6awQ_d8 This gives you an insight of what you will come across when setting up a business in India. Take the example of the street vendor in the video who hiked up her price for a handbag from INR 850 to INR 1200 for the foreigner and when confronted she says the price of INR 850 is for the small handbag! This happens at all levels, and you could easily end up paying highly inflated prices. Avoid making hasty decisions and shop around with at least five to ten vendors before concluding a purchase. Delivery of goods and services is not always as agreed. What you order is not what you get. It is common practice for vendors to show you high quality goods whereas the item you receive will be of an inferior quality.
Your first step - set up your company
To set up your Indian company you are best advised to appoint a local firm of chartered accountants or company registration agents who will take care of all the formalities. A foreign company setting up in India is required to have a person of Indian origin on the board of directors. In the absence of a shareholder agreement the Indian director will be allotted 0.01% of the paid-up capital. The cost of setting up a private limited company is between ₹6000 to ₹25000 depending on the complexity of the company structure. Avoid Google search for finding your company incorporation agent as a lot of them charge extortionate prices. If your advisor wants to charge you in US$ that is perfectly fine but your initial negotitations for fees must be in Indian Rupees. You are best advised to appoint someone recommended. If you do not have any connecctions in India, we will be happy to help you to find a company incorporation agent. Please email us.
Renting commercial premises
If you are considering renting office space, it’s not an easy task. There are several online portals where you can search for your property requirements. Most of the properties shown on these portals have not been updated and you may be seeing some very old data. The contact details of the estate agent (widely known as brokers) are also unreachable. You may need to send contact requests to twenty plus brokers and with some luck one or two may respond. Property viewing is never easy. The broker will invariably request you to meet at a place some one to two kilometres from the actual property location. The broker fears that by giving the exact location the prospective tenant will contact the landlord directly resulting in a loss of his commission. The broker normally charges the tenant commission equivalent to15 days rent or in some cases it could up to one month’s rent, If you are renting offices say at US$ 1000 per month the broker may want a commission of US$ 1000.
Legal compliances, lawyers and lawsuits
Legal compliances in India are abundant and you will invariably need a lawyer to watch your backside. Lawsuits can take years to conclude and will exhaust your energies. Whereever possible in any dispute try and reach a settlement but if going down the legal path remains your only option then so be it.Payment for fees arising can be easily paid in Indian Rupees by wire transfer from the UK and USA. If your advisor wants to charge you in US$ that is perfectly fine but your initial negotitations for fees must be in Indian Rupees. Lawyers in India charge a fixed fee and not by the hour. Again, avoid Google search for a lawyer, always get a recommendation. If you do not have any connections in India, we will be happy to help you to find a lawyer. Please email us.
Various online employment agencies should competently avail candidates for your recruitment. Potential candidates should be thoroughly scrutinised as fake university certificates are commonplace. Before confirming your candidate for a job you are best advised to carry out a background check which can be obtained by hiring the services of a private detective agency. The ratio of the number of applicants to a vacancy is very high and you may even come across an engineer applying for an artist’s job! The bare truth is that it is very hard to find a job in India and applicants will try their luck. If you do not have any connections in India, we will be happy to help you with your recruitment. Please email us.
Time is not money
In India time has no value. Most people will not keep to the scheduled timing and as well they will not call you to keep you informed of them being late. It could well be they never turn up; this particularly applies to people in the construction industry. Plumbers, carpenters, electricians, and the like are notorious for not showing up. At professional and business level time keeping is not at its best.
Indian culture is very rich and known for its diversity in traditions and heritage. Very animated in their conversations, Indians like to talk and gossip and are known for creating conspiracy theories. When it comes to work ethics, Indians are no different from the rest, every person to their own.
Frauds and scams
The chances of being scammed in India are very high and as well fraud and deception are rampant. To get some insight into the type of scams where innocent people are targeted do watch this video on You Tube https://youtu.be/7CZReZ24-to Businesses, particualry foreign companies should remain extra vigilant against frauds and scams.
India is a country full of rich culture and heritage. Foreign companies thinking of investing in India the opportunites are many.
Some key economic facts about India
GDP per capita: USD 2277 – Year 2021
Unemployment:6.4% Sept 2022
Interest Rate: 6% - Oct 2022
Inflation: 7.4% - Sept 2022
Corporation Tax 34.94% - Dec 2022
Personal Tax: 42.74% - Dec 2022
my views above apply to small and medium size foreign businesses who are considering setting up business in India, for the conglomerates it's a different playing field. If you need any assistance in setting up your business venture in India please feel free to contact me.