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BW Businessworld

Welcome To India

To attract and retain investors, we urgently need to re-assess the regulatory demands placed on business

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Harry (not his real name) is exactly the type of investor India needs to attract. Harry leads a family-owned business based in the US that manufactures technical sub-assemblies which are sold to OEMs in various industries.   

Harry loves India, the people, the culture, the beaches, mountains and forests, and especially the food.  He has many Indian friends through his various professional and educational networks.  He is convinced by the potential of the economy and the capability of Indian managers, engineers and young workforce.  

Harry wants to create a new low-cost engineering and manufacturing centre outside the US.  The operation will employ both skilled engineers and manufacturing staff.  It will first absorb technology, then begin to innovate new applications and designs.  The operation will initially be export-oriented but, as the local market evolves, it will also sell domestically.

After a detailed assessment of various locations, especially China and Mexico, Harry overcame family resistance and secured his board’s reluctant agreement that their first plant outside the US should be in India.  After many visits, he decided where to build his factory, in a second-tier city with a sound engineering culture.  Construction work is under way and his local CEO has started to recruit and train a team.

But Harry is being driven crazy already, before his operation has even started production, by the bureaucracy and compliance regime in India.

Harry wants to do everything correctly, employ people safely and fairly and pay his taxes.  He is advised by an array of lawyers, accountants and consultants, all of whom charge fully for their expertise.  He is an experienced, internationally-minded businessman who thought he knew India. He is yet to say it but he must be wondering if he has made a mistake by selecting India rather than China. 

Setting up the company took weeks longer than Harry had been told.  Opening a bank account with a leading private-sector bank was a nightmare due to the KYC regime.  The team has started to grapple with the myriad applications for sanctions and licenses that the factory will need to operate.  Harry has signed more forms, in more copies, in the past few months than in his career to date.

Take one simple example. Harry transferred an initial sum to the new bank account of his new company to pay the first set-up costs.  India, of course, wants to attract such inward remittances for a new manufacturing unit in line with the Make In India policy.  The challenges Harry faced to secure the FIRC to file for the FC-GPR were extraordinary.  The RBI is, in my experience, one of India’s best institutions and most pro-active regulators.  Yet, it is entirely unclear why such a complex regime still exists to monitor and control inward investment, something which is now substantially liberalized.  The Authorized Dealers charged with providing the required documentation seem incapable of doing so in a timely and proper manner, making compliance a real challenge.

India needs many more investors like Harry.  But to attract and retain Harries, we urgently need to re-assess the regulatory demands placed on business.  Many, like lingering capital controls, should be scrapped forthwith.  Those that are necessary should be made simple and cheap to comply with.  We don’t want Harry’s family to be proved right about India.  Harry should enjoy a warm and hassle-free welcome as he seeks to build a successful business here which employs people, pays taxes and exports.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Alan Rosling

The author is an entrepreneur and strategic adviser. He co-founded Kiran Energy and was earlier an Executive Director of Tata Sons. He was a Special Advisor to the British Prime Minister during 1991-93. He now lives in Hong Kong but is frequently in India. He is the author of Boom Country? the New Wave of Indian Enterprise.

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