Check Out the Risks of Doing Business in India as a Potential Investor
India is a fast-growing economy that ranks as the World’s largest democracy with a keen eye by overseas investors. In recent years, the surge of economic growth now ranks India as the 5th largest economy by GDP. However, there are risks of doing business in India that should concern any investor planning to invest in India.
With that in mind, every would-be investor must essentially plan strategically, carry out due diligence, and exhibit patience to navigate these challenges.
Let’s look at the risks of doing business in India that investors should be aware of.
Lack of Cognizance of the Cultural Differences
Every society in the world has a cultural identity. India is traditionally a caste society, with Hinduism being a major religion. The Indian culture takes into cognizance the significance of authority and status. This means that communication between levels is relatively closed, and there’s less sharing of valuable insights from lower cadre employees with the superiors. As a foreigner, you must understand the complexity of Indian attitudes to authority and how they affect its operations. Without that, you might struggle to implement the changes as quickly as you’d want to run the business. Ensure you research the culture relating to employment before taking that bold step in venturing into business.
Un(der) qualified Work Force.
Despite its vast population, the risks of doing business in India for any investor are a concern, especially when it comes to labour. Now amid the hyper-growth, the existence of skilled talent is a worry in India. According to reports, 90 percent of jobs created today in India need vocational skills, and hardly 7 percent of the youth get any vocational training. There is a mismatch in terms of supply-demand part, a problem resulting from low quality of education. India’s economy relies on its agriculture and manufacturing sectors, which require a capable workforce. Therefore, this limits the idea of foreign investors looking for opportunities to invest in India.
Intellectual Property Protection
Every business intellectual property is a valuable business asset that could be your main competitive advantage. Having an IP management strategy is the beginning of your business success in India. However, IP protection is one of the risks of doing business in India. Each jurisdiction covers its IP protection, which means the IP rights must be registered within that region. However, the registration of trademarks, patents, and copyright takes several months or even years in India owing to substantial backlogs at the registrar.
Corruption and Bribery
Corruption in India is not a unique thing, and foreigners doing business must be aware that they will most certainly face it. This vice is posing a challenge to the country’s economic growth. Since the late 2000s, corruption scandals have damaged the government’s credibility causing a significant tax revenue loss. As a result, it has broadened income inequality and social unrest. Corruption has raised the cost of doing business and creating regulatory uncertainty affecting Foreign Direct Investment (FDI).
Every entrepreneur would agree that starting a business in a new country is often daunting. The risks of doing business genuinely exist that one needs to take into consideration. Like any other country, India has its fair share of troubles that businesses experience during their operations. Therefore, it’s prudent to have a solid grasp of the issues at hand to stand no risk of having tax penalties or civil or criminal ligation.
If you’re considering getting into the Indian market, it is vital to look for a partner who has more experience operating in India. Besides that, you can always contact us at 3E Accounting India for further assistance. We have highly professional workers who have experience in helping businesses in India.