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India

Business Culture

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India Business Culture

India has a long-standing tradition of enterprise in trade and commerce. However, the sheer geographical size, disparities in regional development levels and the enormous cultural diversity in various parts of India have supported a highly scattered and dispersed business system, with local business thriving on local demand. Very few businesses operate at a national level characterised by high penetration levels in semi-urban areas.

Business control is mostly patriarchal and dynastic, even in large enterprises. Several enterprises are managed by the main shareholders themselves, through management control at the board, unlike the delegated control found in some other economies. However, the occidental structure of management based on professional trained manager is becoming increasingly popular even in family-owned business enterprises. It is useful to keep the following considerations in mind while dealing with family owned Indian business:

  • Family-owned businesses often reward allegiance more than competitive skills, which can frustrate younger professionals, some times.

  • Businesses often diversify into totally unrelated areas, especially in trendy new economy sectors.

  • Young family members and scions are given charge of new businesses at a young age, despite inexperience in the chosen areas of business.

     
  • Doing business with foreigners is considered prestigious, and joint venture partnerships are coveted, and the prospecting stage is marked by lavish gifts, ostentatious hospitality, invitations to family events such as weddings.

  • With foreigners, it is friendship before business. Personal rapport with the owner/key persons underlines business negotiations, and joint ventures are considered symbols of brotherhood and friendship rather than profit centres.

  • Involvement of advisors is disliked, and often considered a sign of distrust or doubt over the proffered friendship.

  • Low price is a major factor in clinching deals, and financial negotiations can be bargained very hard. 

  • Until money is actually put into the venture, everything is retractable and re-negotiable, technically and legally.

  • Important events, signatures and nowadays even the selection of a business site/ premises can be subjected to clearance by the family astrologer, after all negotiations are over.

  • Family members and loyal employees may be appointed or seconded to the JV with inflated remuneration terms and perks, not in line with market rates.

  • Disagreements are often acerbic and can lead to frustrating and vindictive conduct Manipulation, favouritism, tax evasion and speed money are part of business practices in India, and often, an executive's 'contacts' have considerable weight in career advancement.

  • To an extent, adulteration and consumer/ investor fraud are also known to exist in India, exposed by scandals every few years. Social contribution and environment protection are generally not voluntary activities in corporate India, and are mostly induced by tax-saving schemes or strict rules by the Govt. or intervention by court acting on public interest.

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Corruption

  • The international NGO Transparency International ranked India among the ten most corrupt countries in the world. While many citizens do not go on record about their experiences, people would be quick to admit in private that life in India sees brushes with corruption at various levels.
  • India's prevention of corruption Act, 1988 deals with corruption and bribery amongst public servants, and covers all persons in the pay or service of Govt departments, local authorities, Govt. owned companies, persons of the judiciary, arbitrators, employees of any educational, scientific, social or cultural institution, and other types of persons who are required to perform public duties.
  • The Act defines as a criminal misconduct certain acts and practices by public servants, which include: accepting, agreeing to accept or attempting to obtain any gratification other than legal remuneration as a motive or reward for doing or forbearing to do any official act, showing a favour/ disfavor to any person or for rendering any service/disservice to any person.
  • However, the penalties for corruption- prison sentence of six months to five years and a fine- are rather light in relation to the larger consequences of corruption on the social fabric.
  • Increasingly, Govt. bodies dealing with the public have mandatory vigilance cells and encourage the public to report any harassment or bribes sought by officials. Frequently, departments such as the Police, Municipal authorities and Income Tax advertise the details of their vigilance department and exhort the public to lodge complaints about demand for bribes or harassment by any official.
  • The Indian Government agreed to set up an Ombudsman with powers to investigate corruption allegations against top public officials, including the PM. A Joint Committee of senior Ministers and civil society representatives is now working up a draft 'Lokpal' Bill for tabling in the next Parliamentary session. This was a striking victory for a largely middle-class movement against corruption, driven by the English-language media and by new social media. The episode reflects strong middle-class disenchantment with the failure to act effectively against corruption. But few people expect a new Ombudsman to make a significant dent in India's pervasive corruption problem.

 

Source:
Europe Asia-Invest and UK Trade and Investment (UKTI)

 

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