Are we witnessing the emergence of green shoots of growth, or is it just wishful thinking?
While recent reports that an economic turnaround may be in the offing are welcome, the structural weaknesses that plague India make it a challenge to talk up the country’s immediate prospects. Yet there is no denying the promise and potential of India. Even as companies within the country grapple with its often complex and opaque legislative and regulatory framework, those that are not yet in India look on with interest.
If India is to see the kind of investment that it requires, investors, both within India and outside, need assurances that the country can deal with the problems that dog it. This will require well designed and targeted policies backed by principled intentions. Delivering growth that can be sustained and which transforms the status quo will require more than sound bites. Is this too tall an order for India?
This issue’s Cover story analyses recent events at Nestlé India surrounding the much-publicized recall and destruction of its Maggi brand noodles. While a recent Bombay High Court decision to lift the ban on the noodles has given Nestlé hope for an end to its troubles, the saga is a poignant reminder of the inherent risks of doing business in India.
For as Nestlé has discovered to its peril, a lack of clarity in regulations often means that companies are left playing a guessing game. “People were waiting indefinitely, they had arbitrary rejections, and people went to court,” says Lira Goswami, a partner at Associated Law Advisors, describing the situation after May 2013, when India’s food regulator suddenly put in place a regime that required prior approval of products that caught many companies off guard.
In Embracing biodiversity we turn the spotlight on regulations for the preservation of biodiversity – another area in which ambiguities in the rules make compliance extremely challenging. Regulators have recently been exercising their powers under the Biological Diversity Act, 2002, which states that companies need their nod before accessing India’s biological resources and associated knowledge. But as we highlight, this is another area where a lot more clarity is required. Companies have been issued notices for non-compliance with the law and it is only a matter of time before the courts will be asked to resolve disputes triggered by inadequacies in legislation and regulations, rather than instances of negligence or ill intent.
The courts in India are well known for their excruciating delays. A further problem is that parties involved in civil disputes are painting complaints in the commercial arena as acts of criminality, and thereby invoking the jurisdiction of criminal courts. Writing in this issue’s Vantage point PM Devaiah of Everstone Capital argues that questionable litigation strategies such as these – without either the courts or the law enforcement agencies putting a stop to it – are tearing at the fabric of India’s justice delivery system.
Stating that such attempts are in fact “a coercive measure to blackmail and extract relief”, Devaiah says that to create a favourable investment climate, the focus needs to be on creating a reliable and predictable environment, anchored by the rule of law. “Any complacency in finding a cure for the plague of witch-hunts that are currently being carried out within the justice system will undermine the robustness of the rule of law in India.”
This issue’s What’s the deal? provides an in-depth analysis of cryptocurrencies such as bitcoin, and the need for India to regulate them. Looking at the how regulators in Singapore and the US have formulated know-your-customer and anti-money laundering guidelines for bitcoin businesses, our coverage explores appropriate regulatory and taxation policies for India. Like any emerging technology, cryptocurrencies require the support of all stakeholders, including governments around the world, and it is important to evaluate them holistically rather than providing knee-jerk reactions based on incomplete empirical data. Bitcoin presents an excellent opportunity to promote financial inclusiveness, which will be vital for the transformation of India.
It is against this backdrop that India Business Law Journal presents its eighth annual edition of our India Business Law Directory, which we believe is the most extensive directory of Indian law firms available. As in previous years, the directory is accompanied by in-depth editorial analysis of the state of play in India’s legal market.
This is a critical time for Indian law firms. After years of controversy, the country is finally poised to lower the barriers preventing the entry of foreign law firms, a move that will inevitably throw up new challenges for domestic players. Add to this the fact that Indian firms – both large and small – are experiencing difficulties as a result of the seismic shift in the market triggered by the split of India’s largest firm, Amarchand Mangaldas (see India Business Law Journal, June 2015), and on account of a steep decline in legal fees. “There is a price war out in the market,” says Rohan Shah, managing partner of Economic Laws Practice.
Lower fees will no doubt be welcomed by clients, who have slowly been gaining the upper hand in their relationships with law firms. But what of the long-term health of the market? With the fortunes of India’s law firms inextricably tied to that of their corporate clients, a lot will depend on whether India’s much-hyped green shoots of growth have deep roots, and if indeed they are real.