Long before the East India Company emerged on the subcontinent in the early 1600s, scores of traders had graced India’s shores to bolster their business profits. Today, multinationals flock to India to augment their business processes and IT services and to search for growth in India’s burgeoning market. With an economic growth rate of 8.6 percent year on year in 2010/11, the future is looking bright for the world’s largest democracy. Like any emerging market, however, doing business in India comes with its share of risks and challenges.

The World Bank ranks India as 134 (out of 183 countries) for Ease of Doing Business, with government bureaucracy and inadequate infrastructure existing as major limiting factors. Protecting intellectual property, enforcing contracts and communicating cross-culturally can also present significant challenges. Nevertheless, the economic reforms of 1991 and subsequent economic liberalisation policies have opened India to foreign direct investment, which surpassed 37 billion in the 2009/2010 fiscal year. Many Indian states have established Special Economic Zones, successfully attracting investment from IT, BPO, and manufacturing sectors. Other industries experiencing significant growth in India include telecommunication, energy, construction, education and retail.

Business culture in India

Indians are generally accommodating and will make great efforts to adapt to the cultural preferences of expatriates. This is not to say that foreigners will not need to adapt their work and communication styles in order to succeed. Expats doing business in India have often remarked on the following cultural influences.

1. Value of personal relationships  

In Indian society and business, trust is established more through personal relationships and connections than through legal contracts or a company’s reputation. As a result it is very difficult to establish a strong business relationship without first forming a personal relationship. Sharing information about your family, engaging in discussions about personal hobbies and interests, and spending time with your Indian partner out of the office will build the necessary relational capital and trust to sustain the relationship when business demands and negotiations heat up.

2. Indirect communication style  

A hallmark of Indian communication is the desire to maintain harmony in relationships. Although many have adapted to the direct style of their western business partners, most Indians prefer to communicate bad news in an indirect manner. This is especially true when communicating with a superior or with a client. Expats unfamiliar with indirect communication will often misunderstand their Indian counterparts by failing to read between the lines. For example, Indians will rarely express a negative response by directly saying “no”. Responses such as, “yes, but it will be a bit difficult,” or, “that may be possible - what do you think?” are more common and should be considered the same as a “no”.  Asking open-ended questions, inquiring into the potential problems of a proposal, and actively listening for subtle clues are a few tactics which go a long way in avoiding miscommunication.

3. Hierarchy  

Most Indian organisations are run from the top down. Indians are very astute in negotiating power in business relationships and maintain a fairly rigid hierarchy. This is demonstrated in the Hindi language, which has four forms of addressing someone based on their relative status to you. Status is highly valued in Indian society and those in positions of power are often given greater lee-way than the average Indian citizen. Expats are encouraged to partner with the highest possible level of an organisation and to anticipate delays from both internal and external politics. Expats who are able to demonstrate patience when facing bureaucracy and who respect Indian values which differ from their own will discover that almost nothing is impossible in India.

4. Adapting versus planning  

In India – as in many emerging markets – business objectives are accomplished by adaptation and improvisation rather than by implementing carefully constructed plans. While some expats may prefer to factor in known variables and develop contingencies for every foreseeable scenario, Indians place greater emphasis on flexing to emerging circumstances in order to achieve objectives. Expatriates who not only localise their products and services but also their way of doing business are rewarded with success more often than those who attempt to rigidly implement pre-formed plans. American corporations facing frustration with their Indian counterparts in this arena are encouraged to engage the services of cross-cultural consultants to obtain operational synergy.

Starting a business in India

The process for starting a business in India depends on several factors including the nature of the business, number of employees, size of the market area, capital requirements, and the industry in which the business operates. While the paperwork required is extensive, an experienced accountant can make the process largely pain-free. As with most government interactions, expect delays at various stages of the process. The IFC’s and World Bank’s doingbusiness.org website outlines the following steps for starting a business in India:

• Obtain director identification number (DIN) online from the Ministry of Corporate Affairs portal (1 day, INR 100)
• Obtain digital signature certificate online from private agency authorised by the Ministry of Corporate Affairs (3 days, INR 1500)
• Reserve the company name online with the Registrar of Companies (2 days, INR 500)
• Stamp the company documents at the State Treasury (State) or authorised private bank (1 day, INR 1300)
• Get the Certificate of Incorporation from the Registrar of Companies, Ministry of Corporate Affairs (5 days, INR 200  for MOA + INR 1,000 for AOA for every INR 500,000 of share capital or part thereof + INR 100 for stamp paper for declaration Form 1)
• Make a seal (1 day, INR 350)
• Obtain a Permanent Account Number (PAN) from an authorised franchise or agent appointed by the National Securities Depository Ltd. (NSDL) or the Unit Trust of India (UTI) Investors Services Ltd., as outsourced by the Income Tax Department (7 days, INR 67)
• Obtain a Tax Account Number (TAN) for income taxes deducted at source from the Assessing Office in the City Income Tax Department (7 days, INR 57)
• Register with the Office of Inspector, Shops, and Establishment Act (State/Municipal) (2 days, INR 6500)
• Register for Value-Added Tax (VAT) at the state Commercial Tax Office (12 days, INR 5,100)
• Register for Profession Tax at the Profession Tax Office (2 days, No cost)
• Register with Employees’ Provident Fund Organization (12 days, No cost)
• Register for medical insurance at the regional office of the Employees’ State Insurance Corporation (9 days, no cost)

Doing business in India: Fact Facts

Business language: English

Hours of Business: Traditionally Indians work from around 10am to 7pm Monday – Saturday. Most Indians will not leave the office until their supervisor does. A five day work week is becoming more common and hours are often adjusted to accommodate the needs of international business partners.

Dress: Suits are expected for executive level business interactions. Smart business casual is appropriate for mid-level managers and employees will often dress casual. Indian businessmen generally do not wear short-sleeved shirts or polo/golf shirts in the workplace. Pantsuits or skirts are appropriate for women, provided that they are at least knee-length.

Gifts: Gifts are appropriate but should not be overly expensive. Always accept gifts in both hands, and do not open them in the presence of the person who gave them to you. Invitations to a business partner’s home for dinner are common, as personal relationships are the basis for establishing trust in business.

Business cards: Traditionally cards are presented and received using two hands.

Gender equality: While India has had both a female prime minister and president, women remain underrepresented in the workplace. International businesswomen are generally treated as equals, as their position and status often override traditional gender roles.  

Do’s and don’ts of business in India

• DO - show respect and deference to authority figures. Use appropriate titles to address your Indian counterparts. Use “Mr.” or “Ms.” if you are unsure.
• DO - wait for a female business colleague to initiate a greeting. Indian men do not generally shake hands with women out of respect, although this practice is becoming more accepted in certain regions of the country. A slight nod of the head can be used to greet a female colleague if she does not initiate a handshake.
• DO - remain polite and composed at all times in order to prove that your objectives are sincere. Avoid expressing anger as this will damage the relationship and cause you to lose ground in negotiations.
• DO - share aspects of your personal life such as information about your family and your hobbies and interests.
• DO - accept invitations to a colleague’s home, and sample the food or drink that is offered. Bringing a small gift such as flowers or sweets is appropriate. Avoid giving large or expensive gifts as this may cause embarrassment.
• DON’T - be overly aggressive in your business negotiations. While Indians are generally tough negotiators, outward displays of aggressiveness or lost tempers will lose you respect.  
• DON’T - refuse food or drink offered to you during business meetings as this may cause offense. If you do not drink tea or coffee, you may ask for a glass of water. When dining with Indians, it is best to assume that they are vegetarian and that they do not drink or smoke. Let your Indian partner initiate ordering or offering alcohol.
• DON’T - point the bottom of your feet at anyone as this may be seen as an insult.
• DON’T - gesture for someone to come toward you by using an open hand.
• DON’T - be confused by the Indian head shake. It is generally used as a non-verbal expression to indicate that the listener has heard what you said. If you are in doubt in regards to a colleague’s opinion, ask open-ended questions.