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.

India is a collective culture, meaning that individual's decisions must be in harmony with family, group and social structures. This is not a bad thing, but it can add to the risk of an American dealing with the babudom. American culture typically values individualism and often business is deemed more important than family life. For example, in America, if the boss calls the company cell phone on a Sunday morning, often corporate executives have little choice but to answer and drop social plans they had made for their day off.

Corruption in the babudom can be dangerous to a company and its employees. Technically, it is illegal for American companies to bribe foreign officials. Companies and their employees may be fined and may spend time in jail for bribing officials. Even if a company is able to somehow bribe an employee, it might not be worth it in the long run. For example, some businesses have found that once they start paying bribes, the requests get larger and larger. If a company or employee eventually refuses to pay a bribe, they may not only lose business, but they might receive physical or even death threats.

The babudom has many ways of wasting your company's time. You may have to visit multiple people at an administration center before you will be able to get anything done. There will probably be many different documents for your company to sign - possibly over a hundred. Raman Roy, a former employee of American Express in India, said that he had to visit twenty-five people and sign his name 119 times to open a service center in India.

The babudom has multiple methods of assessing fees to companies that would like to do business in India. There are taxes associated with much of the paperwork that companies process. There are state taxes. There are taxes required to transport products from one state to another. Some of these taxes can be waived, but there is of course paperwork that will need to be processed, which will result in more waiting.

There are other fees and loss of profits associated with the babudom. Companies have to pay employees to deal with the babudom instead of paying them to sell their products and services. Companies often hire outside people to help them deal with the babudom. For example, a company might hire an attorney or someone familiar with the law to help expedite the process of approval for their products.

Instead of telling someone negative information, Indians in the babudom will often communicate a negative response by endless stalling. This stalling could last for months