The first in a series of blogs, from BDO, on their take on the way in which business is done in different locations, plus the opportunities and pitfalls – starting with India
REPORTS of India’s demise are greatly exaggerated. Despite reports to contrary, opportunities remain for British businesses to continue to invest and succeed in the country.
Having just returned from a two week UKTI-sponsored visit to Mumbai and Delhi, it is clear that neither the recent fall in the value of the rupee nor the slowdown in GDP growth – which, at 5%, remains very attractive by international standards – should discourage British companies from setting up in India.
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.
Take a sector focus
Investors should also look beyond the headline numbers; they need to consider focusing instead on specific sectors, regions and product categories and trends. 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. Many entrepreneurs have made the mistake of building their business plans on finger-in-the-air calculations about expected future revenues. As the overall numbers are so large, this tends to lead to the unrealistic expectation that a small proportion – but still a large absolute number – of that business will come automatically and immediately. This is rarely the case.
Prepare for paperwork
Moreover, 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 earlier this year, will have wide ranging implications, and mandatory audit rotation (every five years for a partner and every ten 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. The days when speculators could pile in and make a quick buck are long gone, if they ever actually existed; the future belongs to more selective, considered investors.
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