2868 words
Estimated reading time: 7 minutes
Author | He Zhipeng
Editor | Rao Jinshan
Reviewer | Jiang Yi
Image source: "India Tong" WeChat Official Account
"Doing business in India, either become a legend or become a joke." This is not a joke, but a summary of the blood and tears of many multinational corporations.
Although India is known as one of the fastest-growing economies in the world, many international giants have suffered heavy losses here: Xiaomi's 4.8 billion yuan in assets were frozen, Ford burned through 20 billion rupees and left in disgrace, Walmart and Amazon are stuck in policy quagmires...
The question arises - is the Indian market a "delicacy" for global capital, or a "capital graveyard" full of traps?
Today, let's talk about the two sides of the business environment in India, and see why global big factories come and go repeatedly.
One, A side: The "big pitfalls" that foreign enterprises have stepped on in India
Doing business in India, foreign enterprises often come with hope and leave with tears. This place has so many pits that it makes you doubt your life.
This is the day, we will list several classic scenarios of failure, after which you will understand why people say: the Indian market, once in, may not be able to get out!
(1) Legal Pitfalls: Compliance? It depends on India's mood. Today's compliance may become a "default" tomorrow.
You think legal operation is just a joke in India. In India, the law is not dead, it is "alive" - too casual to give you a "backstab" at any time.
In 2022, Xiaomi India suddenly received an asset freeze notice from the Enforcement Directorate (ED), 4.8 billion yuan in assets were directly seized! The charge was "suspected tax evasion".
Wait, what did Xiaomi do wrong? It turned out that the patent fees paid to Qualcomm were "reopened" by the Indian tax authorities, and were deemed as tax evasion.
Another example is the international joke of Vodafone (Vodafone): In 2015, Vodafone was charged 20 billion rupees in taxes for a deal 10 years ago. Vodafone was不服 and took the case to the International Arbitration Court, won the case, but the Indian government said "sovereignty overrides everything" and refused to acknowledge it.
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Moreover, this "retroactive strike" is not an isolated case: Nokia, IBM, Kain Energy, Walmart, etc., have all been targeted by the Indian government for old accounts 5-10 years ago, requiring them to pay large amounts of back taxes. The reason is that the Indian tax system is extremely complex (central tax + state tax + local tax), and Article 9 of the Income Tax Act gives the government the right to retroactively tax - meaning that if you are compliant today, the government can change the policy tomorrow and make you illegal!
Therefore, doing business in India, even if you hire the most professional lawyers, you may still mysteriously become a "tax debtor". In India, the law is not a shield, but a "tightening spell".
(2) Policy Pitfalls: Policy "roller coaster", who says more between the Prime Minister's Office vs. local governments?
Online people joked: India's policies change faster than a roller coaster, and foreign enterprises haven't fastened their seat belts yet, and they're thrown out.
In 2020, Amazon spent 6.5 billion US dollars to acquire Future Retail, but two years later, the Indian Supreme Court directly ruled the transaction invalid!
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What's the reason? Amazon was also confused. It turned out that the government suddenly introduced new regulations, banning e-commerce platforms from selling goods from affiliated companies. The transaction was ruined, and Amazon's money was wasted.
For example, in 2016, Modi suddenly announced the abolition of large denomination currency to crack down on black money. The result was a national cash flow paralysis, Walmart India stores had long queues outside, customers used small denomination currency to rush to buy goods, and staff exclaimed "the end of the world".
Image source: "India Tong" WeChat Official Account
Even more absurdly, in 2021, due to conflicts between states and the central government, Modi's government suddenly abolished the agricultural reform law, causing Walmart's agricultural supply chain to collapse overnight.
Why are India's policies so surreal?
Because India has 29 states, each with independent legislative power, and the central and local governments have been fighting for years. Today the central government says "welcome foreign investment", and tomorrow the local government may jump in and cause trouble. When elections come, policies can flip at any time, and foreign enterprises often become victims of political games among parties.
(3) Supply Chain Pitfalls: "Made in India" becomes "Assembled in India"
Want to produce in India? The supply chain can make you question your sanity. Ford invested 20 billion rupees in India and struggled for 25 years before finally retreating.
On the surface, it was due to poor sales, but the truth was - Ford was driven mad by "localization" policies! Import tariffs on complete vehicles were 100%, and they were forced to purchase 30% of parts locally. However, there were less than five car plastic part suppliers nationwide, and the quality was terrible, and the factory experienced power outages three times a week, and logistics costs were 47% higher than in China. Ford: Goodbye, I'm not serving anymore!
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For example, in 2017, General Motors exited India, one reason being that there were tariff barriers between states, high cross-state transportation costs, and high consumption taxes, leading to vehicle prices lacking competitiveness. Another reason was "supply chain not keeping up," with workers striking to protest part quality, and production lines failing every few days, ultimately leading General Motors to pack up and leave in tears.
This "wanting you to come, but not wanting you to make money" approach has led many multinational automakers to rather withdraw than continue to suffer.
(4) Cultural Pitfalls: Not understanding India, you can't even enter the door.
In 2008, Unilever brought a jar of "Fair & Lovely" whitening cream into the Indian market, confidently believing it had captured the secret to wealth - after all, who doesn't want to be as white as lightning?
But Indians bought the whitening cream until it sold out, while at the same time criticizing the advertisement until they went bald: "Are you implying our inherited skin color is not good enough?" They accused Unilever of racism.
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The brand was completely confused: "Market research clearly said you love whitening!"
Indian consumers rolled their eyes: "We love beauty, not being manipulated into 'black is a crime'!" Finally, Unilever changed the name to "Glow & Lovely".
In summary, in India, the product's quality is one aspect, but whether it hits the nail is key. Cultural sensitivity is more important than marketing budget, otherwise you'll be mocked in no time.
Two, B side: What do those companies that survive in India rely on?
Despite the many pitfalls in India, the market's temptation is equally huge. A consumer market of 1.4 billion people, a growing middle class, and the manufacturing incentives promoted by Modi's government have made many companies still willing to take a risk.
Samsung is a typical success story. It chose to deeply cultivate the Indian market, using a phased localization strategy to avoid high tariffs, first assembling phones with SKD (semi-knocked-down) units, and then gradually increasing the local production ratio as the market matured, while also making full use of the government's production incentive policies to obtain subsidies. Now, Samsung India not only contributes 12% of the group's revenue, but its market share is also the first.
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Besides the hardware industry, the success of Japanese convenience store giant 7-11 in India is also worth learning from. It cleverly bypassed the restrictions on foreign investment in retail in India, cooperating with local companies through a franchise model, and leaving 30% of the shelf space for Indian handicrafts to meet the government's "local procurement" requirements.
At the same time, it focused on key stores in areas like Gujarat, where foreign investment special zones enjoy 5 years of tax exemptions, eventually establishing itself firmly in the Indian market, with single-store sales even far exceeding local brands.
Of course, the real attraction of the Indian market lies in the reorganization of the global supply chain. Due to the Sino-US rivalry, electronic manufacturing giants such as Apple are accelerating the transfer of some production capacity from China to India.
Foxconn's Chennai factory in India has already taken on iPhone production tasks, and the Indian government has also introduced a series of manufacturing incentive policies, such as the "Production Linked Incentive Scheme (PLI)", allowing companies to receive additional subsidies. These geopolitical factors have made India an important factor for foreign enterprises to reassess their supply chains.
Three, Survival Guide: How to Survive in the Indian Market?
To survive in the Indian market, first, build a firewall at the legal level, and make sure to hire a large Indian accounting firm and top-tier legal team. Add "Indian clauses" to all contracts, such as clearly stating that international arbitration takes precedence, and exemption from retrospective legislation, otherwise you may be "hit" at any time due to policy changes.
Second, political betting is crucial. You cannot just bet on the central government; the attitude of local governments also determines the survival of the enterprise. The best approach is to bet on both sides, under the framework of the central government's policies, divide key projects into two sets of filing systems: "central level" and "state level", to prevent policy changes at any level from causing the project to collapse entirely.
Finally, localization is the survival password for enterprises. The Indian market has its own game rules, and without understanding local culture and connections, it's hard to go far. Successful enterprises usually ensure that at least 30% of the management team are Indian executives, and the supply chain should adopt a "1+1 model", i.e., each international supplier must be paired with a local backup, to prevent the Indian government from introducing mandatory local supply chain requirements at any time.
Image source: "India Tong" WeChat Official Account
Four, In conclusion: The Ganges can carry a boat, and it can also sink it.
The Indian market is like the Ganges - opportunities and risks coexist. There is no formula for guaranteed profits, but there are survival rules summarized from blood and tears.
Want to survive in the most difficult business environment in the world? Use local thinking to deconstruct the rules, and use a global perspective to manage risks.
After all, those who can make money in India are the real business players!
This article is reprinted from the WeChat official account "India Tong" on June 26, 2025, titled "How Hard Is It to Start a Company in India? You May Not Imagine the Magical Reality!".
Original article: https://www.toutiao.com/article/7557027002318979584/
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