India Market Entry

India Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

As can be seen from the example of successful Czech companies in India, Czech goods and services can succeed in this demanding market, but they must be price competitive, original and innovative, they must be advanced technologies and systems, and sales must be accompanied by top advertising and marketing campaigns. In the World Bank’s ‘Ease of Doing Business’ ranking, India was ranked 63 out of 190 countries in 2020, an improvement of 14 places from the previous year. Among the worst-rated areas are still the low level of enforceability of contracts, the complexity of setting up a business, tax collection and real estate registration.

According to cheeroutdoor.com, the main sales and distribution channels include concluding an agency or distribution contract with an Indian sales representative, online sales (e-commerce), direct selling or franchising, or a licensing agreement. The key piece of legislation relating to business is the Companies Act 2013, but business legislation is contained in a number of other pieces of legislation. The main types of incorporated companies are the Limited Liability Company, LLC and the Limited Liability Partnership, LLP. These can be 100% owned by a foreign company (wholly-owned subsidiary) in economic sectors in which 100% ownership is allowed. Another possibility is the conclusion of a so-called joint venture with a local Indian company. The main unincorporated entities are the branch office, which can carry out business activities, the liaison office, which cannot do business and is basically a representation of a foreign company for the purpose of exploring business opportunities, and the project office, which is opened for the purpose of implementing a specific project. Different tax, financial and regulatory obligations apply to each of these entities, so when entering the Indian market, it is necessary to realistically consider the needs and possibilities of the Czech exporter.

The same principles for successful market entry apply in India as in other developing countries. The right choice of a reliable and capable local sales representative, consultant or business partner is very important. It pays to invest funds in market research, and it is worth considering using the services of a consulting firm, or acquiring an established local firm. Companies that are newly entering the Indian market can consult their plans with the trade and economic section of the Embassy of the Czech Republic in Delhi and with the PaulTrade agency’s foreign offices in Mumbai and Bengaluru. Entering the Indian market is certainly not easy, given its size, different business culture and many other factors, including demanding bureaucratic procedures.

Regarding import and customs conditions, an up-to-date overview of customs rates is available on the Indian Customs Electronic Gateway (ICEGATE) website, which is maintained by the Customs and is intended for traders and transporters. Individual types of goods and relevant customs rates can be found here using the basic six-digit HS code, which is marked here with the letters CTH. The search results also contain information about the requirements that the imported goods must meet. Several other charges are also associated with importation, such as the Social Welfare Surcharge, which is 10% of the basic duty. Goods are also subject to the indirect GST tax (Goods and Services Tax – similar to our VAT) upon importation, and local taxes determined by individual federal states must be added to goods not subject to GST. for alcoholic beverages). To search for customs rates on the ICEGATE website, use the “Custom Duty Calculator” for the relevant type of goods. The link to the calculator is located on the ICEGATE home page in the “Our Services” menu.

The Indian market is protected by a barrier of tariffs and administrative hurdles, which are being further stepped up under the government’s “Make India” initiative. India is trying to replace foreign imports with domestic production and generally support the development of its own industry. Government protectionism takes the form, for example, of raising tariffs, introducing import quotas and licenses, or mandatory quality audits of manufacturers of imported goods. As an example, the automotive industry has recently seen an increase in customs tariffs on components and parts used in the local assembly of cars of European brands (safety tempered glass, components of electrical lighting and signaling equipment, parts of ignition systems, wipers, defrosters and defogger). The customs tariff for these components was increased from 10% to 15%. At the same time, the import of foreign cars is subject to a 100% customs tariff, and their sale is taxed at the highest GST rate of 28%. Higher import duties on auto parts make it more expensive to make European cars in India, which translates into higher prices for customers.

Forms and conditions of operation on the market

Most Czech exporters use the services of a local agent or distributor, without the need to establish a trading company in India. This will leave most of the administrative burden on the local representative who has the relevant background, licenses, knowledge of the local market, environment and people. Since the activity of agents/distributors in India is not covered by commercial legislation, it is necessary to pay special attention to the agency or distributor contract (exact geographic and product delimitation, exclusive or non-exclusive contract, amount and conditions of remuneration/commission payment, sales targets, control mechanisms and responsibilities of both parties). Careful legal treatment of potentially disputed points and clear wording of the contract can prevent future legal disputes with an uncertain outcome.

Another way to enter the market is to set up a company under Indian business legislation (Companies Act 2013). Czech exporters with a long-term presence on the Indian market, and especially those with localized production activities in India, set up LLC or LLP companies, corporate branches (see chapter 5.1), or some type of joint venture (JV). Private LLCs must have 2 directors, at least one of whom must be an Indian citizen. The minimum share capital for private LLCs is 100,000. INR, then 500 thousand for public ones. INR. Depending on the economic sector, the Czech exporter can own 100% of the Indian company, or co-own the company with an Indian partner/s. Sectors in which the Indian government allows 100% foreign ownership of companies are: automotive, education, e-commerce, electronics, health technology and equipment, mineral extraction, pharmaceutical industry, textile industry, telecommunications and renewable energy sources. In some sectors, government approval is required to allow 100% foreign ownership, while in others it is possible without an approval procedure (the so-called automatic route). Due to the complexity of the legislative environment, we recommend using the professional services of one of the established local legal consulting companies, for example SAS Partners, E&Y, PWC or Deloitte.

Marketing and communication

Among the most widespread traditional Indian marketing tools are print advertisements, television commercials, radio advertising, outdoor and indoor advertising in the form of billboards and advertising spaces of various sizes. As everywhere in the world, the Internet and social media have probably become the most widespread marketing channel in India today. In 2020, India’s Internet market became the second largest after China’s, with more than 700 million users. It is estimated that the number of Internet users will increase to 975 million by 2025. It is important to note that approximately 75% of these users are young people (15-34 years old) who connect to the Internet through their smartphones. A quality business website will help build brand and product reputation and credibility in India. Think about it, that in India the functionality of the mobile version of the website is more important than its full-fledged, desktop version. Of course, social media is also a very widespread advertising channel in India. Relatively inexpensive promoted posts allow you to introduce products to customers, and social media is also an excellent platform for engaging customers and building customer loyalty. The most used social media in India are WhatsApp (320 million users), Facebook (300 million users), Hike Messenger (400 million users) and Twitter (20 million users).

Due to the size of India and the vast cultural and linguistic differences in the individual states, it is not possible to generalize which marketing and advertising strategy to choose. Big cities are, for example, much closer to Western consumption habits, they have a rich middle class willing to spend large sums on luxury European brands. On the contrary, the population of rural areas and small towns is incomparably poorer, and will always be guided primarily by the price of the given product. As for the language, English is widely spoken, so all promotional materials must be prepared in English. However, in various less developed corners of the country or among the poorer social strata, marketing materials will have to be translated into Hindi or other local languages. An extremely large role in Indian culture is played by symbolism, and its meanings associated with numbers and colors. Vibrant and vibrant colors are very popular and are therefore an essential part of all Indian festivals and celebrations. However, the color black is best avoided as it denotes darkness and evil. Although white can be associated with death (traditionally worn by widows), it also symbolizes purity and truth. The numbers zero, one, two and three are seen positively and are therefore encountered in many Hindu cultural and religious practices. Advertising should not incite, incite hatred or violence (e.g. between ethnic groups or religions), or disturb public order. Must conform to Indian standards of chastity (no nudity) and local regulations, and cater to Indian and local preferences, tastes and culture. A large number of specialized trade fairs are organized in India, which can be used for marketing goods/services and for business negotiations. For more detailed information about fairs, see ch. 5.9.

Issues of intellectual property protection

Intellectual property rights (IPR) protection in India remains problematic despite gradual progress. In general, relatively low awareness and motivation to protect IPR on the part of the population and entrepreneurs remains. The counterfeiting of medicines, the illegal distribution of protected content (especially digital) and the counterfeiting of global brands of electronics, clothing and fashion accessories are particularly problematic. Since joining the World Trade Organization (WTO) in 1995, India has been a signatory to the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement and is therefore required to ensure the minimum required level of IPR protection. India is also a member of WIPO (World Intellectual Property Organization) in Geneva. The laws relating to the protection of intellectual property underwent extensive amendments around the turn of the millennium, with the aim of bringing them closer to the Western standard (mainly British common law). IPR protection legislation is governed by the Copyright Act of 1957, which was comprehensively amended in 1999 and fully reflects the requirements of the Berne Convention. Trademarks are governed by the relevant Act of 1999 (Trademarks Act). Geographical indications are governed by the Geographical Indications of Goods Act 1999. The issue of geographical indications is an important point in the negotiation of the trade and investment agreement between India and the EU, as despite the modernization of the relevant legislation, the registration of geographical indications in India remains very lengthy and cumbersome for foreign companies. Industrial design is governed by the relevant Act 2000 (The Design Act), which provides the minimum protection required by TRIPS. The level of enforceability of IPR protection through the courts is still relatively low in practice in India, and is extremely lengthy. Therefore, before entering the Indian market, we recommend that companies thoroughly research the risks in their field, or Indian business partners. Intellectual property can be the main competitive advantage of a Czech company in a highly competitive market such as India, so we recommend registering a company’s trademark, geographical indication, patents and other IPR before entering the market. It pays to invest in an experienced local lawyer with knowledge of IPR issues and the Indian context. patents and other IPR of the company before entering the market. It pays to invest in an experienced local lawyer with knowledge of IPR issues and the Indian context. patents and other IPR of the company before entering the market. It pays to invest in an experienced local lawyer with knowledge of IPR issues and the Indian context.

Public procurement market

The public procurement market is quite large in India. In addition to state and self-governing bodies, the contracting authority can also be numerous and powerful state-owned companies that dominate some sectors of the Indian economy, such as banking, coal mining, the oil industry or the defense industry. At the same time, there is no comprehensive regulation that would deal with the issue of public contracts. Some of the general principles governing public procurement are derived from the Constitution of India. Other general, but also specific rules and regulations are contained in a number of legal regulations issued at the central government level, such as the Contract Act of 1872 (Contract Act), the Sale of Goods Act of 1930 (Sale of Goods Act), the on the Prevention of Corruption Act of 1988 (Prevention of Corruption Act), the Arbitration and Conciliation Act of 1996, etc. In addition, some Indian states, such as Tamil Nadu, Karnataka, Andhra Pradesh, Assam and Rajasthan, have enacted their own legislation to regulate the issue of public procurement. Detailed and specific regulation for the awarding of public contracts is contained at the level of implementing regulations and directives, especially in the General Financial Rules, which were originally adopted in 1947 and last amended in 2017. In addition, most departments have prepared their own manuals and rules for its purchases, such as the Indian Ministry of Defense’s acquisition manual. Last but not least, the Narendra Modi government issued the Preference to Make in India Order in 2017,

An important role in obtaining a contract is played by a local consultant, sales representative or partner company, because their presence on the market and contacts with tenderers are a prerequisite for obtaining the information needed for the preparation of a well-founded offer, which then has a better chance of success. India’s largest state-owned companies are further categorized by turnover and profit. The highest category is called “Maharatna” and this status is given to India’s giant state-owned companies whose annual turnover has exceeded INR 200 billion for three consecutive years. The lower categories of Navratna, Miniratna I and Miniratna II follow. As of 2016, India’s Government e-Market Place (GeM) has been operating under the control of the Ministry of Commerce and Industry, Ministry of Electronics and IT and Ministry of Finance. So far, the stock exchange has primarily mediated purchases for central ministries, state-owned enterprises and central authorities. At the same time, however, most of the Indian union states joined the initiative. The portal offers procurement tools such as e-auctions, reverse e-auctions and demand aggregation to help government users achieve the best performance/price ratio. Another useful source of information on public procurement is the Central Public Procurement Portal, which allows all central government organizations to publish details of procurement, repairs and procurement. The main goal of this portal is to provide uniform access to information about public contracts. More and more tenders are reserved only for Indian companies, possibly for JVs with the participation of an Indian company. The future FTA between the EU and India should improve the access of European companies to the Indian public procurement market.

Payment terms, payment ethics and resolution of commercial disputes

Considering the very slow pace of Indian courts and the generally low level of enforceability of contractual obligations, most legal experts recommend resolving commercial disputes through conciliation out of court. According to World Bank data, it takes an average of 1,445 days for companies to resolve a dispute before a court of first instance through court proceedings. This is almost three times longer than the OECD average. An alternative to court proceedings are (domestic) arbitrations, which are usually faster. Risks associated with business transactions can be reduced by using appropriate payment instruments (letters of credit) and hedging mechanisms. Before establishing business cooperation, it is appropriate to check, for example, whether the company is registered in the commercial register (Registrar of Companies, Ministry of Corporate Affairs). Smaller companies are not registered in the register, however, they may have membership in professional associations. The risk of insolvency also exists when doing business with state-owned companies. Prolonged resolution of, for example, defects in the implementation of public contracts can block the completion of the project for a long time, and thus the payments associated with deliveries. The OECD ranks India in the category of countries with a slightly increased investment risk (level 3 on a scale of 0-7). According to the Export and Guarantee Insurance Company’s (EGAP) risk barometer, India has a ‘B’ rating on a scale of A to F.

Visas, fees, specific conditions for traveling to the territory

To enter and stay in India, citizens of the Czech Republic must meet the conditions set by its laws. The current conditions are available on the website of the Embassy of the Republic of India in Prague. The following information is intended for basic orientation only. We recommend that you check with the Indian embassy before you travel whether the conditions for entry and stay have not changed. To travel to India, a Czech citizen needs a valid passport with a validity of min. 6 months from the end date of the intended visit to the country. A visa is also required, which will be issued by the Embassy of the Republic of India in Prague (address: Milady Horákové 60/93, near Hradčanská metro station). Visa processing takes an average of 10 days, sometimes longer. If a citizen travels from India to another country (e.g. Nepal) from which he will return to India, he must have an Indian visa for multiple entry (so-called MULTIPLE). There are 2 ways to apply for a visa: through the Embassy in Prague, or through the Indian government’s e-visa web portal. If the application is made through the Embassy, ​​the applicant must first fill out the online application, then print it and deliver it in person to the Embassy. In the case of an application for an Indian electronic visa, the applicant does not have to come to the Embassy – he will receive a confirmation of obtaining an electronic visa (so-called eTV) by e-mail and must print it and take it with him on his trip to India. This method is therefore significantly easier and more time-saving. Subsequently, the visa is issued in the passport upon arrival in India. However, a citizen of the Czech Republic must obtain a visa before leaving for India – it is not possible to obtain a visa until arrival at the border crossing.

Traveling to India is associated with certain health risks, therefore it is recommended to take some vaccinations according to the planned length of stay and the places visited (detailed information will be provided by specialized doctors). It is necessary to observe personal hygiene. It is recommended to be careful when eating, to consume only well-heated food, fruits and vegetables that can be “peeled”. It is best to drink water only from closed bottles that have an intact cap. Some areas of India are at risk of increased incidence of malaria and dengue fever. In the wild, it is necessary to watch out for snakes, poisonous spiders, intrusive monkeys, etc. In India, there is often a problem with paying with Czech credit or debit cards, especially when paying online via the Internet, but also in brick-and-mortar stores. We therefore recommend carrying a reasonable amount of Indian Rupees in cash. At the airport, or through a hotel or agency, you can arrange a car with a driver, or you can order a taxi or use the extended Uber platform, which allows you to rent a car with a driver at a very favorable price. Mass public transport is available but most of the time it will not be at a level suitable for the western visitor. It takes approximately half an hour from the Indira Gandhi International Airport in Delhi (IGA) to the Embassy of the Czech Republic in New Delhi in normal traffic. For accommodation, we recommend choosing one of the five-star hotels of international chains, or local luxury hotels (The Leela Palace, ITC Maurya, The Oberoi, Taj Palace, etc.), which will satisfy even demanding travelers with their level of hygiene, comfort and service. Currently (May 2022) all restrictions on entry into India have been lifted and air travel has been normalized (the so-called “air bubbles” have been abolished).

Employment of citizens from the Czech Republic

Labor law in India is not codified collectively into one code of the type of labor code as we know it here. Conditions, rights and obligations related to employment and related procedures are governed by a total of 13 Acts covering commencement, course and termination of employment, insurance, minimum wages, severance pay, trade union activities etc. Moreover, labor law as a whole is undergoing a renaissance in India, as its extensive reform is underway. Foreigners can be employed after receiving the appropriate work visa. The consular office of the Embassy of the Republic of India in Prague is competent to assess which visa to apply for. A foreigner who wants to stay in India for more than 180 days must apply for a so-called registration confirmation, which is actually a long-term residence permit. They must do so within 14 days of their arrival in India.

Earnings can be repatriated by foreign workers through a bank after paying the relevant taxes to the Indian government. A bilateral agreement on social security was negotiated between the Czech Republic and India, which is under the responsibility of the Ministry of Labor and Social Affairs, and which regulates the conditions of payment of insurance premiums within the pension system when Czechs are employed in India and vice versa. Czech workers who are sent to work in India for a longer period of time must have work visas. Previously, foreign companies circumvented this regulation by securing “business” visas for their employees in India, but the Indian side now strictly requires work visas. The visa is tied to a specific job with a specific employer. The Indian labor market is regulated and foreign workers can be employed for a minimum wage of INR 162,500 per year in 2019. However, there are a number of exceptions to this rule, for example when it comes to language tutors or volunteers working for NGOs. Summary information on visas, including work visas along with minimum wage rules are available on the website of the Ministry of Home Affairs of India (the above information is for basic guidance only).

Communicating information about the conditions and rules of entry and stay in the territory of a foreign country is the responsibility of the relevant embassy of the given country. This also applies to India, which is why it is necessary to contact the Embassy of the Republic of India in Prague before leaving for India for the purpose of a long-term work stay. In contrast to rural areas, large cities offer relatively decent health care, but corresponding to local possibilities. In general, only people in good health should travel to India. It is advisable to take with you a sufficient supply of used medicines, disposable syringes and needles, as these are not always available. Medicines are relatively easily available in pharmacies. The state network of hospitals is not of a very high standard. However, there are quality private hospitals (e.g. the Apollo Indraprastha Hospitals network, Fortis Hospitals or Primus Hospitals and others). Vaccination before traveling to India is not mandatory, however vaccination against jaundice type A, B, meningitis, tetanus and typhoid is recommended. It is not necessary to use antimalarials. However, you must protect yourself from mosquito bites, which can transmit, for example, dengue fever or chikungunya. In the winter months, high levels of particulate matter in the air in smog-infested major cities such as the capital Delhi pose a health risk to people sensitive to air pollution.

Fairs and events

A large number of specialized trade fairs, which can be used for marketing goods/services and for business negotiations, take place especially in the less hot months between October and March. More detailed information about fairs can be found, for example, on the websites of the India Trade Promotion Organization or the websites of companies organizing fairs and large business associations FICCI, CII, PHD Chamber of Commerce, Assocham or SIAM, which may organize some fairs and figure in some fairs as organizers of accompanying events and conferences. Selected Trade Fair Organizers in India:

  • Koelnmesse YA Tradefair Pvt. Ltd. – mainly organizes fairs focused on food, packaging and processing technologies
  • Messe Düsseldorf India – organizes fairs in a number of fields, but especially in the health, engineering and food industries
  • Messe Frankfurt India – organizes trade fairs in construction, media and creative industries, environmental technology, textiles, fire safety, mobility, engineering, and more
  • Exhibitions India Group – focuses on the field of digital and disruptive technologies (fintech, gaming, IoT) and construction in the context of sustainable development (smart cities, use of renewable energy in buildings, intelligent building systems, etc.)
  • Engineering Export Promotion Council of India – EEPC – engineering trade fairs l UBM/InformaMarkets – organizes specialized B2B matchmaking events
  • Tafcon – organizes industry and specialized B2B matchmaking events and fairs
  • Society of Indian Automobile Manufacturers – SIAM – automotive industry

India Market Entry