All eyes on the government

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From bank accounts to foreign investment and infrastructure, Modi’s challenges are piling up

As India races to catch up with the rest of the world, providing all sections of the population with access to banking is the next big step. This is good news for both the people and the state. For while financial inclusion is expected to help people pull themselves out of poverty, the bank accounts will also provide the state a less expensive method of distributing welfare payments.

LeaderBank accounts for all are also expected to provide less room for corruption at the grass-roots level. India’s prime minister, Narendra Modi, describes it as “a weapon which will strengthen us to combat corruption”. But will it ultimately lead to less corruption? This is a tall order, but if it does make corruption less endemic, the ultimate beneficiaries will be companies, both in India and outside, that need to stay compliant with global anti-corruption regulations.

An even taller order is revitalizing India’s creaking infrastructure. The 10 July budget included several measures aimed at kick-starting development in this area, but as we detail in this month’s Cover story the measures are short on detail and will need to be fleshed out before they can be expected to bear fruit. According to Upendra Joshi, a Mumbai-based partner at Khaitan & Co, “changes at a more granular level will be necessary to translate the robust intentions into reality”.

Our coverage of the challenges facing India’s infrastructure sector includes analysis of what is needed to make public-private partnerships (PPPs) work better in the country. The budget made it clear that PPPs are the preferred vehicle for infrastructure investments, but existing PPPs are notorious for their propensity to become mired in disputes. This problem needs to be addressed if PPPs are to help India overcome its infrastructure woes.

In the search for a solution, inspiration may be found in Singapore, which is busy enhancing its image as a global dispute resolution hub. The island state is already ahead of much of the competition with its dispute resolution offerings, but the establishment of the Singapore International Commercial Court, which will be a specialized commercial court to hear cases with little or no connection to Singapore, is set to give it an even greater edge. Our coverage (Fighting fires) provides a taste of what to expect and what it will mean for India.

From dispute resolution, we shift our gaze to one of the finer points of India’s 2013 Companies Act. In Amplifying minority voices, we hear that for the first time Indian companies may include entrenchment provisions in their articles of association. Amending or removing entrenchment provisions requires a larger majority of shareholders than that required to pass a special resolution. As such, their introduction is a significant step forward in the protection of minority shareholders’ rights.

Writing in this month’s Vantage point, Veta Richardson, the president and chief executive officer of the Association of Corporate Counsel, argues that collaboration among in-house counsel is essential in today’s rapidly changing global business climate. She goes as far as to say that collaboration with peers in other organizations can help in-house counsel to turn possible perils into manageable opportunities. But while in-house counsel are encouraged to collaborate with their peers in other organizations, what of their private practice brethren?

The reality is that private practice lawyers are already streaks ahead when it comes to collaborating. Such collaboration is readily seen at legal conferences, some of which are attended by lawyers from hundreds of different firms, and when lawyers from multiple firms team up to advise on business deals. It is also manifesting itself in other ways, such as the establishment of networks of independent law firms.

In Clubs are trumps, we investigate the virtues of such networks. With an increasing number of Indian firms flaunting their memberships of invitation-only clubs and associations – often as the exclusive member in India – we ask whether such affiliations are meaningful partnerships or merely expensive badges of honour. Stakeholders in law firm networks are adamant that membership helps individual law firms improve their level of service, but the jury is still out on what this really means for clients.

Another question over which the jury is still out is whether recent changes to the foreign direct investment (FDI) regime will succeed in enticing investors back to India. Last month, India Business Law Journal detailed the key FDI policy changes that had been announced since the new government took office in May. In this month’s issue, we follow up by investigating the results of these reforms (Golden days ahead?).

While early signs of a rebound may be difficult to read, legal advisers are generally bullish about India’s potential. Glenn Gerstell, a partner at Milbank Tweed Hadley & McCloy who coordinates the firm’s India practice, notes that India has “tremendous potential both in the short and the long term”. However he says it is a mistake to think that “mere regulatory reform” is suddenly going to draw in investors.

Be that as it may, there is a lot at stake. As Ashok Lalwani, who heads Baker & McKenzie’s global India practice, points out, “the positive uptick in activity will either gain further momentum or fizzle out, based on what the government does next”.

All eyes are on the government as it rewrites the ground rules.

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