Should you expand into India

Reports of India's demise are greatly exaggerated, explains Arbinder Chatwal, head of BDO's India advisory team. Having participated in a two week UKTI-sponsored visit to Mumbai and Delhi at the end 2013, it is clear that neither the recent fall in the value of the rupee nor the slowdown in GDP growth should discourage British companies from setting up in India. Despite reports to the contrary, opportunities remain for British businesses to continue to invest and succeed in the country. Rather than a mass exodus of foreign companies, what we're actually seeing is that businesses with a longer term outlook are recognising the value in the rupee right now and investing in the knowledge that they are getting good value for their initial set up and business development costs. In addition, as the business grows and the owners eventually seek to repatriate, they will be able to do so at a much more favourable exchange rate. Despite the recent economic slowdown, the chemical, food & beverage and healthcare industries, for example, are still growing at double digit rates. The opportunities are there if you know where to look.

That said, business should not be under the illusion that success in India is somehow guaranteed. Despite the similar legal system and language, doing business in India is inherently difficult. The tremendous amount of paperwork, compliance and regulatory red tape in India are still major headaches. Businesses also need to get used to a rapidly-changing regulatory landscape: the new Companies Act, introduced in 2013, will have wide ranging implications, and mandatory audit rotation (every five years for a partner and every 10 years for a firm) comes into force in 2016 but is already having an impact on companies and their advisers. India continues to offer attractive opportunities to businesses and potential returns remain impressive if you get it right. However, like with any other major investment, it is vital that decision makers take time to actually understand the market and identify their unique selling point in what has become a highly competitive environment. India is a dynamic and constantly evolving country and you and your business needs to evolve with it. Regular reviews of your approach and status quo in the market is advisable; take nothing for granted and set yourself a long-term goal of where you want to be in the market. The rest, with a sound approach and good support, will follow. Each individual challenge needs to be addressed on a case-by-case basis and with the right local support and oversight, establishing and running a business in India should be no harder than anywhere else in the world.

Arbinder Chatwal, Head of India Advisory Services - BDO LLP The above article was published in India Inc′s print edition of the India Investment Journal launched in April 2014 in conjunction with the Global Wealth Management Conclave 2014.