JUST 10 YEARS AGO, if a U.S.-based company such as Microsoft wanted to sell a simple software package in India, the poor customer had to pay not just the retail price, but also an additional 114 percent import duty. Such was the price Indians paid for trying to do business with the world -- and vice versa. So fearful that foreign enterprises would sweep across India's borders and wipe out native merchants, the insular central government had erected a barrier of duties, tariffs and regulations so restrictive that they might as well have hung a "Closed for business" sign on India's front door.

But times have changed. Beginning in 1991, former Prime Minister Narasimha Rao (who, to be fair, was pressured by the International Monetary Fund and The World Bank, which threatened sanctions if India didn't loosen up) introduced a series of economic reforms to encourage freer world trade. Import duties were slashed (today the Indian customer pays no duties on imported software), and licensing processes were streamlined to actually encourage foreign companies to do business in India. In 1992, the Indian rupee became a convertible currency. Since then, even some long-protected industries such as power generation and telecommunications have at least begun to be deregulated and privatized.

Today, India is awash in foreign investment. Literally scores of U.S.-based companies have set up shop to produce or sell goods in India. The business opportunities are clear: With 1 billion people (and counting), India is a great resource for foreign companies seeking cheap labor and eager consumers.

Yet balancing these opportunities, several significant challenges remain for foreign companies wanting to do business in India. How do you maintain business continuity when India's poor infrastructure can't even support reliable power supply and telephone lines? How do Western businesspeople learn to navigate India's chaotic cities and cope with local social norms? These are just two of the obvious issues. Clearly, whether selling goods, setting up a satellite office, transplanting employees or hiring native workers, foreign business leaders encounter a daunting series of political, economic and cultural hurdles that can impede -- if not halt -- operations. To minimize the gotchas, we've boiled down our research and resources and developed a list of 10 tips for successfully doing business in India.

Understand That Open Doors Don't Mean Free Rein

Yes, India's central government has made it easier for foreign companies to do business in India, but there are still some significant catches:

* Foreign companies opening branch offices are not allowed to earn income (above basic operating costs) in India, and their expenses must be paid exclusively from funds received from the parent company. Any profits made by a foreign company in India must therefore be funneled back into the Indian-based enterprise. This might seem elementary, but the Indian government is quite explicit that it will not subsidize foreign companies doing business in India. Even visiting businesspeople are forced to produce documentation that their parent companies will assume their expenses while in

• Email
• Print
• Share
  • Slashdot
  • Digg
  • Stumble
  • Reddit
  • Newsvine