Doing Business in India

We believe the single greatest risk of doing business in India is its bureaucracy. The Indian bureaucracy is often referred to as “babudom.” An Indian bureaucrat is often referred to as a “babu.” Today, babu may also mean “Sir” or “Mr.” The babudom was formed after India gained independence from Britain. It employs many more people than necessary and it is highly unproductive. Each geographic region of the babudom requires specific government permissions and taxes. Making progress in the babudom with limited local support is a difficult task, especially for a small U.S. firm with limited capital.

The babudom wastes your company’s time. It will cause delays in the completion of your goals. It may take years before your company is approved to sell your products or services in India. Instead of selling your products and services, your employees will be spending time trying to get them approved. The babu do not have a vested interest in your company and often do not care how long it takes to make progress. For example, the bureaucracy in India can be compared to getting a driver’s license at the DMV in the U.S.; it takes an excessive amount of time get the license, the employees are not friendly to the customers or to each other, and there is an array of forms to fill out before any progress can be made.

Dealing with the babudom will add costs to your company’s investment in India. These costs may be attributed to various taxes, consulting fees, and permits, among other things. These costs may not be obvious to someone who is not familiar with business practices in India. A company may not have planned for these added costs and may be forced to back out of a project if it exceeds its budget. These costs force companies to spend money that could have been used in more effective ways. For example, students are not always prepared for the many different fees that they will be charged for attending San Jose State. Besides tuition, students pay fees for books, the health center, activity cards, labs, and parking.

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