“Due to recent budget cuts, fuel prices and the continued decline of the economy, the light at the end of the tunnel has been turned off. We apologize for any inconvenience.”
So reads a joke circulating on the internet. Ironic, yes; painfully so. As this issue of India Business Law Journal illustrates all too clearly, the severe economic downturn has already wreaked a terrible toll on business activity in India – a toll that may yet worsen.
Our coverage examines the fate of dozens of India-focused business transactions that have been postponed or cancelled amid the financial chaos (Deal or no deal?). “The IPO backlog is the most significant sign of the impact of the global crisis,” says one prominent commentator.
Whether there is light at the end of the tunnel for any of the postponed deals is a matter of intense debate. Some observers predict that a significant pool of liquidity is poised to enter the country at the first signs of an upturn. Others are less optimistic. One area of agreement is that India, with its growing middle class, colossal infrastructure demands and hunger for economic growth, will emerge from the storm in better shape than many of its international counterparts.
Until that day comes, India-focused corporations and law firms are hunkering down and reining in expenditure. For corporate counsel, the first target of any cost-cutting exercise is often their external legal advisers. As this month’s Cover story reveals (Trimming the fat), a growing number of in-house professionals are turning to legal process outsourcers (LPOs) to achieve this goal. Virtually all of the LPOs surveyed in our coverage report an increase in business over the last six months. Some speak of a wholesale change in attitude towards their services, which have often been viewed with scepticism in the past by members of the mainstream legal profession.
The numbers speak for themselves: who would pay a traditional law firm US$200-300 per hour to undertake legal support work when a competent LPO can do it for US$50? In the face of shrinking budgets, it is no surprise that legal departments are embracing LPO opportunities. And as our coverage shows, the work being undertaken by such organizations is moving slowly but surely up the value chain.
Does this spell danger for law firms? Are LPOs staffing up just as many law firms are downsizing?
The future remains uncertain. Lingering fears over data protection, inadequate levels of expertise and a lack personalized service continue to plague the prospects for LPOs. Political sensitivities to outsourcing loom large and the Satyam debacle has given rise to critical concerns over corporate governance.
In-house legal departments in search of cost-savings or better services also have a wealth of other options at their disposal. For a start, they may take a closer look at India’s rich tapestry of law firms. Just a handful of the country’s largest firms are well-known names on the international stage. But dig a little deeper and uncover a goldmine of seasoned and experienced providers of legal solutions.
This month’s Intelligence report (Rising stars, unsung heroes) does just that. Our extensive survey profiles a diverse range of highly accomplished, yet in many cases, lesser-known Indian law firms. The enthusiasm of corporate counsel quoted in our coverage speaks for itself.
How international law firms are responding to clients’ India requirements is another important part of the picture. Many are seeking eligible Indian firms for tie-ups, often with a view to eventual mergers if and when regulations permit.
In one of this month’s Spotlight features (Making an entrance), India Business Law Journal investigates the entry strategies of several leading multi-jurisdictional practices. “We will invite the best and brightest Indian lawyers and an Indian firm to join [us],” says a partner at one international firm.
Whether India entry strategies that were formulated prior to the financial crisis still pass muster in today’s harsh economic climate is a question that will be addressed in depth in our April issue.
International strategies of a different – arguably more significant – nature are the topic of this month’s Vantage point (Burying the hatchet). Claudia Astarita, a specialist commentator on regional economic integration at the University of Hong Kong’s Centre of Asian Studies, argues powerfully in favour of stronger ties between India and China. Urging both nations to bury their long-felt mistrust, Astarita asserts that cooperation could offer each country its best chance of withstanding the global downturn. But she is not overly optimistic that such change will come.
Staying on the prospects for cross-border cooperation, in filmmaking, Bollywood and its US namesake are taking some interesting steps towards closer collaboration. The impetus, it seems, is a recession-busting combination of government liberalization and booming domestic demand. As our coverage reveals (On with the show), India’s entertainment industry is one sector of the global economy in which tangible investment opportunities really do beckon.
At last, we may have something to sing and dance about!
