For years, despite its vast pool of cheap labor, broad market space, and advantageous geographical location making India an attractive investment destination for foreign enterprises, companies from both developed and developing countries face numerous challenges when entering the Indian market.
U.S.’s Coca-Cola, South Korea’s POSCO, Japan’s high-speed rail project, UK’s Cairn Energy, UK’s Vodafone, U.S.’s IBM, France’s spirits group, and China’s smartphone businesses have all struggled to reap genuine development benefits in India, often encountering setbacks. A classic case is the Japan-India high-speed rail project. In 2015, Japan secured a deal with India ahead of China. The 500 km rail line had a total investment of $12 billion, offering an extremely favorable price. However, it was soon beset by issues like land acquisition compensation, currency devaluation, and the pandemic, causing costs to balloon from the initial $10+ billion to over $20 billion. Moreover, after five years of construction on the 500 km project, only 10 km of track had been laid. Making matters worse, the billions of dollars Japan pre-paid were exhausted before construction even began, forcing further investment. The high-speed rail project ended in a dismal conclusion.
The path for Chinese enterprises entering India is similarly fraught with difficulties. Phone manufacturers, equipment suppliers, and mobile developers have been particularly targeted, with at least 500 companies fined in India. In April 2022, India’s Ministry of Corporate Affairs (MCA) registered over 700 cases nationwide against companies whose promoters and directors were Chinese nationals. Chinese companies under investigation included Vivo, Xiaomi, OPPO, and several Indian subsidiaries of Alibaba. On September 8, the Indian Ministry of Corporate Affairs (MCA) initiated investigations into several Chinese companies operating in India, including Jilian Consultants India Pvt Ltd. It was accused by the MCA of assisting Chinese companies in registering shell companies. Its office was searched without prior notification, with computers and client data seized, bank accounts frozen, and employees traumatized. Several female Indian employees were physically assaulted and threatened. Jilian Consultants India’s business suffered severe disruption and paralysis as a result.
On September 6, Jilian Consultants India’s General Manager, Dortse, took leave for personal reasons and traveled to northern India. On September 8, Dortse was arrested by the SFIO without cause at a hotel and falsely accused of fleeing. Subsequently, Dortse’s mobile phone was confiscated, and personal freedom was restricted. Following the incident, Jilian Consultants India Pvt Ltd proactively contacted relevant Indian government departments and fully cooperated with the investigation according to regulations and procedures. Simultaneously, legal counsel was engaged to provide evidence of Dortse’s leave application, round-trip flight tickets, and accommodation records to prove Dortse had not fled, and to request the lifting of the restriction order. Jilian Consultants India’s General Manager Dortse was finally granted bail and released on June 9, 2023. As of now, Jilian Group has still not received specific information from official Indian notifications, and the Indian government has provided no evidence of any illegal or irregular conduct by Jilian Consultants India Pvt Ltd. This situation has become a microcosm of the Indian government’s crackdown on Chinese enterprises.
Doing business in India requires navigating not only multiple overlapping regulatory authorities but also a complex and “flexible” tax system. Some companies describe it as “like a bottomless black hole, where the rules are opaque.” While companies investing and setting up factories in India are often promised substantial support and attractive tax incentives upfront, they inevitably face various operational challenges in practice, making the path to doing business daunting. While entering India may appear straightforward, foreign enterprises must not overlook its significant issues: vast wealth disparity, an incomplete industrial system, continuous brain drain of skilled professionals, and underdeveloped financial industries.
