Strategic Indo-European Business Relations: Insights on Trade and Investment Dynamics between Europe and India
Explore the strategic dimensions of trade and investment between Europe and India, focusing on the key partnerships, common pitfalls to avoid, investor-friendly policies, and the business environment in India. Learn about the opportunities and challenges in building successful business relations in these regions.
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Indo-European Business Relations: Strategic Dimensions of Trade and Investment The Example of France Europe as a mass ! Enjoys the premium position as a trade partner with India Although India has remained Non Alingned in many ways in the srtrategic area it has some close partnerships with Russia , Europe & lately with the USA to a significant extent We are today concerned with Europe & India- Closest partnerships in the Space, Nuclear, Aviation & defence sectors Post Pokran nuclear tests apart of Russia we had the closest support from France starting with an imediate visit of the PM to meet President Chirac France is not alone in this cooperation we have Germany as the largest partner when it comes to Trade & Investment PHADKELAW 1
Indo European what do we understand by it Europe as a mass today where are we today How India looks at Trade & Investment with Europe today Strategic relations play a role to shape trade & investment PHADKELAW 2
Common pitfalls to avoid while doing business in India. Patience Why, How & in What regulatory environment Partnerships with India in the Strategic Industries Opportunities to be Exploited Anecdotal Experience of an Indian Law & Tax Advisor: Explained PHADKELAW 3
Investor Friendly Policy Law & Taxation A driving force for foreign investments & Doing Business with India PHADKELAW 4
The worlds largest democracy India is a healthy, well functioning, vibrant democracy. Independent judiciary fosters healthy democracy. So the political risk in India is extremely low. The fourth largest economy in the world Then what is the reason for the slow growth & decline today PHADKELAW 5
Let us examine the Business Environment & conditions in India DOES POLICY & TAXATION HOLD A KEY TO SUCCESS !! PHADKELAW 6
Was it that the environment was more tame? Over regulated prior to 1991 May be TODAY as well Look back at growth experience and contemporaneous events International financial crises, Tense security environment, 26/11 attacks, and many more recently Pulwana & many other places Two major earthquakes, largest cyclone in recorded history, worst drought in four decades. We had resilience despite shocks. The Environment will only open up further ! What is the situation today Resistance to Constitutional changes & Reforms strikes & protests Governance is affected similarity with current situation in France 7 PHADKELAW
With this Background let us look at the Indian Market within the Regulatory framework & the different ways of doing business. PHADKELAW 8
Vente means different things in France & India In France it means EXPORT Whereas in India it means improving turnover & profits France is a STOREHOUSE of TECHNOLOGY made optimum use of it as we see several TOT collaborations in strategic sectors as well as civilian areas from bread to making solar batteries to submarines PHADKELAW 9
See More Bollywood Innovation Improvement Indigenisation The 3 i s Jugad A lot of similarity between India & France way of thinking try to find a way out !! PHADKELAW 10
Methods of doing Business with India TOT has always been a weakness for Indian policy & business !! Just Sales or Licensing is not the trend Added Value is in production & capturing local market alone or jointly Special focus on Defence & Strategic sector & Offsets in Defence has led to flow of high technology This is limited because the size of local market is not enough to sell the produce from Offsets Only exports are feasible due to this What is the reality on several offset obligations ? PHADKELAW 11
Depending on the degrees of exposure and willingness to take risks, the following methods could be adopted: Representative Offices - This is the least risk exposure method where it can be used to explore and get a feel of the market simple RBI permissions required no business transactions. Joint Ventures - This means more involvement when there is a local partner participation in order to make an investment as well as to take local risks with which the foreign company/ investor may not necessarily be familiar. - For Production & Distribution 100% Subsidiaries - You are free to open your own subsidiaries in order to conduct your business. * Sector specific restrictions & incentives. Defence 49% can be increased case to case , Telecom , Aviation , Retail etc. * Most sectors are open to foreign investment PHADKELAW 12
Contracting & Turn Key Projects Infrastructure, Strategic, Oil & Gas, Energy, Waste treatment etc kind of industries. The nature of the project will essentially resemble a break up where it has: 1) Indigenous supplies, 2) Imported supplies, 3) Civil works, 4) Erection & Commissioning and 5) Operation & Maintenance services. * An Element of TOT is normally built-in PHADKELAW 13
Plethora of Taxes in India Direct Taxes- Income Tax, & delays Rates Individuals : 5% - 30% Domestic Cos: 15% - 30% Foreign Cos Branches 40% - 50% Indirect Taxes - GST, Customs Duty, Etc Five different slabs: 0% 5% 12% 18% & 28% A special word about GST.. It has integrated the country so that there is one tax instead of so many !! 14 PHADKELAW
However it is taking too long to get a steady policy on rates & items to be brought under GST Multiple indirect taxes to a large extent done away by GST Strangely Petroleum products, alcoholic drinks and electricity are not taxed under the GST, and taxed by State Govt separately PHADKELAW 15
How it begins Tax Deducted at Source (TDS) At the outset note certain basic principles & peculiarities of Indian Income tax. Any person making payments to another person or company is under an obligation to deduct tax at source (withholding tax) before releasing the dues. The % at which TDS will apply depends on the nature of the payment. This TDS is treated as a deposit & is to be adjusted when final accounts of profits & loss are prepared in case of residents/ Permanent Establishments (PE) of non residents. In the event the actual tax is lesser than that was deposited then a refund is made. And vice versa should there be lesser deposit as against actual tax determined. Policy is to stay in credit !! France from 2019 started the TDS mechanism !!! PHADKELAW 16
Customs Duty Structure The imports are subject to following types of customs duties and cess:- (i) Basic customs duty (ii) Additional Customs duty (Countervailing duty) (iii) Education Cess @ 2% The Basic customs duty is meant to provide protection to the domestic industry in the nature of protective duty. All countries impose this type of duty. On import into India, the applicable rate is average 20% or specific duty on whichever higher basis on certain tariff lines. There has been a progressive reduction in the applied Indian tariffs over the years. The peak rates have been slashed TRYING to conform to WTO obligations undertaken by the Government. Protecting the local industry ad hoc treatment / non existent local industry. Priority Industries are exempt- Case to Case Uncertainties PHADKELAW 17
TRENDS - Clean Technologies, Environmentally friendly solar energy etc - ! Agribusiness- managing wastage !- Infrastructure transport, communications, water, ports, roads - !Defence Sales , offsets & long term joint manufacturing Nuclear energy ! - India is strengthening its ties with Asia & the middle east; business opportunities being explored PHADKELAW 18
UNCERTAINTIES - vague ill-defined exemptions not friendly to investment - policies well intentioned but chaotic, adhoc - extraordinary delays in tax decisions 2 to 9 years due to multiple levels of appeals PHADKELAW 19
Will India open to the International norms, the WTO & its stated priorities - is no longer a question but implementation is of extreme priority Policy Statements should be followed up by field level changes & obstacles to implementation removed wholesale Procedures to be revamped drastically This is the time for India to act When & How? Be present now - Have a head start. PHAKDELAW 20
Political & Strategic relations will continue to play an important role in Economic relations between India & the rest of the world as things stand today In the foreseeable future a triangular axis of relationships seems most likely & evolving steadily India + Europe + another Asian Country or set of Countries Business interests and co development & sharing of technologies , investments will be the trend to follow & promote. PHADKELAW 21
Conclusion Il ne convient pas deu tout a la sante de I Occidental de bousculer Un Asiatique car l Occidental persiste a s irriter et l Asiatique persiste a sourire aggravant l irritation de l Occidental. Aux terms du voyage est le tombeau portant le nom de notre feu ami et l epitaphe sombre est grave ici git la pauvre sot qui tenta de bousculer l Orient. It is good for the Westerner s health to hustle the Asians brown For the Westerner riles and the Asian smiles the Westerner down .. And the end of the flight is a tombstone white with the name of the late deceased : And the epitaph drear, A fool lies here who tried to hustle the east . Rudyard Kipling RUDYARD KIPLING PHADKELAW 22
THANK YOU Vijay Phadke PHADKELAW 7 rue Du Dr Germain S e 75016 Paris PARIS J 10 Green Park Main 1 Fl 110016 New Delhi NEW DELHI vmp@phadkelaw.com PHADKELAW 23
