Exposing India’s dark underbelly

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Is business driven by innovation or ill-gotten gains?

According to Rajeev Chandrasekhar, the former owner of BPL Mobile and a respected commentator on corporate affairs in India, it is the latter. His comment about the existence of “a dark underbelly of government-business-media nexus” in Delhi, was prompted by the recent arrests of employees of several major Indian companies for allegedly buying stolen government documents.

But does the uncovering of instances of espionage by Indian companies really come as a surprise to those with their ears to the ground?

LeaderProbably not. A 2012 study by industry body Assocham quoted in BusinessLine found that over 35% of companies in India engaged in espionage. While such data reinforce misgivings about the murkiness of India, it is encouraging to see the government taking action. But it is only when the fear of employing devious means to gain an upper hand reaches the upper echelons of corporate India that meaningful change is likely to be forthcoming.

This month’s Cover story looks at a more immediate issue: the 2015-16 budget and how it will impact businesses across India.

Outlining the key developments, our coverage highlights the decisions that will confront general counsel and the steps they should take as a result of the budget. A much talked-about feature has been the reduction in basic corporate tax that will trigger the removal of certain tax exemptions, incentives and deductions. While it remains to be seen how these changes will impact businesses, we highlight the need for companies to begin examining the exemptions, concessions, deductions and incentives that they currently enjoy, so as to be able to factor in the changes that are expected.

Continuing on the theme of taxation, in Time for action Girish Vanvari and Santosh Dalvi of KPMG look at the wider business implications of the goods and services tax (GST) that will be introduced a year from now. They argue that GST needs to be understood as a business reform, as it will impact all areas of business, including the use of depots and warehouses across the country, cash flow and IT systems. As companies prepare for the GST in the coming 12 months, proactive decisions made now will pay off as the challenges that accompany the overhaul of the indirect taxation system become apparent.

While corporate India grapples with issues relating to the introduction of GST, the country’s law firms have pressing issues of their own. These issues come under the spotlight in Taking stock, where we identify and analyse many of the challenges facing India’s legal profession.

The upgrading of skills for legal professionals is one significant hurdle, and along with it comes the need for an appropriate continuing education curriculum. Cautioning that the manner in which such a curriculum is implemented will determine its success, Himavat Chaudhuri, the chief legal and regulatory affairs officer at Tata Sky, stresses the need for “a flexible approach, so that it’s actually interesting and not a chore”.

Writing in this month’s Vantage point Kalpana Tyagi, a competition and intellectual property rights law scholar at the Max Planck Institute in Germany, calls for an innovative approach to the emerging competition law challenges that are being triggered as a result of the blurring of lines between telecommunications, retailing and other sectors. As Tyagi points out, in the next five years the Competition Commission of India will almost certainly be confronted with complaints triggered by the convergence of the telecommunications industry with retail and other traditional brick and mortar industries. The authorities therefore need to define the criteria used for assessing market power in what is essentially a novel environment.

In Capital crunch we look at what may lie ahead for Indian companies looking to access overseas debt markets. The past year has seen several debt issuances that have lit up the market, but can this continue? We look specifically at recent bond issues by two issuers – one with impeccable ratings and another whose rating is less desirable – to try to understand the future challenges of doing such deals.

With the US Federal Reserve indicating that cheap credit may soon be a thing of the past, Indian companies may be forced to look elsewhere for sources of capital. It is fitting, therefore, that our coverage is supplemented by a practitioner’s perspective on capital raising opportunities in the UK.

Rounding off this month’s lineup, our Intelligence report returns to the important question of gender parity in the workplace. Rules introduced under India’s new Companies Act may mean more women in the country’s boardrooms, but will this prompt a change in attitudes? More importantly, will it help correct the gender imbalance across Indian businesses and legal services?

While Shruti Sodhi, the chief compliance officer at Aircel, worries that the new rules may be “counterproductive” as companies find ways to circumvent them, or relatively innocuous ways of complying, Dipali Talwar, the group general counsel at Tata Steel, is more optimistic. She believes the new rules have “forced companies to [consider an] untapped talent pool of professionals who happened to be women”.

With the plight of India’s women currently grabbing global headlines, small steps along the road to gender parity are to be welcomed, even though there is clearly a long way to go.

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