In Episode #10, we discuss India with Hemang Parekh, a partner and transaction lawyer in Mumbai with DSK Legal. We cover:
- Recent notable developments in India’s business sectors.
- Why India is a good alternative to China from both a manufacturing base perspective and for financial investments.
- How India is benefiting from the US-China trade war.
- India’s relationship with China compared to the rest of its trading partners.
- The status and prospects of the India – U.S. relationship, including India benefiting from the U.S. seeking to relocate medical supply chains away from China.
- Reading, listening, and watching recommendations from:
- Hemang – Resources provided by India’s Ministry of Finance, Ministry of Labor, and Ministry of Electronics and Information Technology.
- Jonathan – The Absent Superpower by Peter Zeihan.
- Fred – United States Strategic Approach to the People’s Republic of China by the U.S. White House.
This podcast audio has been transcribed by an automatic transcriber.
Fred Rocafort 0:08
Global law and global business go hand in hand, but never seem to keep pace with each other, developing and developed nations wax and wane and their importance in the global stage. While consumption and interconnectedness both increase, laws and regulations change incessantly, requiring businesses to stay nimble. How do we make sense of it all? Welcome to global lawn business, hosted by Harris Bricken International Business attorneys. I’m Fred Rocafort.
Jonathan Bench 0:35
and I’m Jonathan Bench. Every Thursday, we take a bite sized look at legal and economic developments and locales around the world as we try to decipher global trends in law in business with the help of our international guests. We cover continents, countries, regimes, governance, finance, legal developments, and whatever is trending on Twitter. We cover the important the seemingly unimportant, the relatively simple and the complex.
Fred Rocafort 0:59
We hope you enjoy today. podcast. Please connect with us via email and social media to comment and suggest future topics and guests.
Jonathan Bench 1:18
India is a country with a population of almost 1.4 billion and is on track to surpass China as the world’s most populous nation by 2027. And India’s geographic footprint is roughly the size of the Western continental United States. About 12% of its population, or 129 million people speak English, which is almost double the number of English speakers in the Philippines and over four times the population of Canada. Unlike China, India’s population pyramid actually looks like a pyramid. It’s working class of people aged 25 to 65 is currently 600 and 50 million compared to China’s 800 and 30 million, but by 2040, India’s working class is projected to reach 900 million, while China’s will drop to 700 and 30 million India is strategically located between China, Southeast Asia and the Middle East, and is within striking distance of Australia and Africa. Its GDP growth rate has increased by at least 6%. Since 2013. India continues to be on the rise as it modernizes. Its infrastructure reforms its legal system, and capitalizes on its cultural and strategic affinity with the English speaking world as an alternative to China. And the Indian diaspora the largest in the world continues to make its mark as many highly educated Indians contribute to economies around the world, including the United States. Today we are joined by Hemang Parekh, a transaction lawyer working in a Mumbai with DSK legal where he advises domestic and international clients on a variety of transactions including cross border m&a, private equity, venture capital, joint venture and strategic investment transactions. He regularly represents a diverse range of clients on matters of corporate commercial laws, securities laws, foreign investments in India and outbound investments from India, employment laws and other general laws. Last year, Hemang was recognized as a 40 under 40 Rising Star by legal era, was nominated as dealmaker of the Year by Asian legal business, and was nominated as corporate and m&a lawyer of the Year for the legal era awards. Hemang, Thank you for being with us today.
Hemang Parekh 3:18
Fred Rocafort 3:19
Hemang, welcome to the show. And let’s dive right in. Could you tell us about some recent notable developments in India’s business sector to get things rolling?
Hemang Parekh 3:30
Sure. So India has been at the cusp of an economic development since the last few years. And as you mentioned during your introduction session, there is a lot of interest in India we continue to thrive as an economy. We are well poised from the perspective of addressing the requirements of the domestic people as well as international requirements. In the last two months itself. We’re only an in one Indian company has received billion dollars worth of investment from three or four American companies, Facebook, General Atlantic, Vista, and Silverlake all these investors have invested monies, which are to the tune of billion dollars in the Indian economy in just one company. In addition to this particular transaction, India is seeing a lot of interest from European companies, where they are trying to set their footprint in India and move their manufacturing base from China into India. Very recently, the Government of India has announced economic reforms and the stimulus package for boosting the economy because of the pandemic, the damage that has caused due to the pandemic to address that this package is equal to 10% of India’s GDP. So there’s a lot of activity that the government is doing to gear up the country for meeting the domestic requirements as well as to become an international hub and attract foreign investments in India.
Jonathan Bench 4:56
Hemang, you mentioned, India as a manufacturing hub, and countries around the world looking at India as manufacturing. Can you talk about that a little bit of why India is a good manufacturing base for potential investment as well.
Hemang Parekh 5:11
So from a from a manufacturing base perspective, I think India has bought every essential ingredient that a manufacturer would look for. When they want to set up a base in India, you’ve got a large population, which is which makes a labor available. You’ve got huge portions of land available, which makes it easy to set up large manufacturing units. We have lots of ports available in the country. So we have quite strategically located the Arabian Sea, the Bay of Bengal and the Indian Ocean has three sides of the country. So from a strategic perspective, also there is a lot of infrastructure which is available for setting up a base in India. And in addition to all this since 1991, when the Indian economic opened up to receiving FDI. The government has consistently made reforms to ensure That foreign investors feel at home and they find it easy to set a base in India. And as we speak, the government continues to promote its making India exercise, which is basically an effort to attract foreign investors. I think one of the key factors why India is such a prominent target for setting up manufacturing base is the size of population that we have. We have a good mix of skilled as well as unskilled labor. It’s getting easier for the company, the government is bringing in reforms to make doing business in India easy. And also there’s a lot of talent available. So for a manufacturer to look at India as an option. It’s just very simple to find the right kind of people to work for the labor forces available, you have the right kind of policies which are being drafted and ingress and egress out of the countries also equally easy. So I think all these factors combined make India a good option for setting up manufacturing base. If you see Historically, we have been a manufacturing base for a lot of companies across the globe. For example, the German and the Japanese companies have said automobile companies have said a large manufacturing business in India, for example, Apple has set up a manufacturing base Samsung has a manufacturing base in India. And in the present situation very recently, if you’ve read news about Apple trying to enhance its manufacturing capability in India. So it’s I think the whole concept of the government making reforms, the availability of skilled and unskilled resources, the availability of land, makes it very easy for a manufacturer to come into India and set set up a base.
Fred Rocafort 7:41
One of the trends we’ve been observing for the past few years, even predating the current tensions between the US and China has been the search by foreign companies that up until now have been operating in China for alternatives but certainly the the The trade war and the tensions that have gone along with that have intensified the the imperative to look for alternatives or to at least diversify. I would imagine that to some degree at least India is benefiting from that, given its position as an alternative. Could you talk about that a little bit, please?
Hemang Parekh 8:21
So I think, as you rightly said, there is a benefit for India from the ongoing trade war between US and China. I think the first thing that any country would look when it looks for an alternative to set up its business is a political stability in the host country, given the present situation in India, there is a lot of political stability between India, the leadership and in between India and US are at great terms. So I think that’s one of the key factors where India will benefit because there is a strong rapport there’s a strong understanding and faith between the two countries. In the leadership of two countries, that provides the first level of comfort that any American company would want to look at, or any other country would come to want to look at when they want to look as an alternative to China. I think the second big reason for that would be the the vast resources which are available in India. We have, we are ready in that sense for receiving board investments, we are ready in that sense for being a more integral part of the global supply chain. Since the onset of the pandemic, the Indian government and the state governments of India have taken multiple initiatives and are working on coming up with multiple schemes, which will provide as an incentive for the European and the American companies or the Japanese companies to come and set up their base in India. So as an alternative fee have everything which a manufacturer would look for which our investor would look for rich companies across the board in any kind of sector in technology in manufacturing, Big Pharma beat healthcare. Anything that a company would look for is available in India in addition to the political stability that we have. So I think that’s going to be really a game changer for India, where the a very suitable option for the Western countries and the other countries to look at India as an alternative. And, of course, between India and China, both these have been a strong hub for manufacturing, they’ve been a strong hub for economic activities with the US. So if one limb that China is going to weaken because of the ongoing situation, then there is going to be a little more opportunity available to the Indian companies and Indian Government to, you know, to service the requirements of the global needs, and therefore, I believe that’s where we will benefit from the situation.
Jonathan Bench 10:57
As you may know, Fred and I have both lived and worked in China. So we we love keeping pace with China. And we’re always interested in how China’s neighbors and China’s trading partners are dealing with China and what the temperament on the ground is in your country. Could you talk a little bit about that about your relationship with China, what you’re seeing with companies you’re working with, and then also how that compares to your other trading partners in the region?
Hemang Parekh 11:25
So I think because of the present situation, there has been a little bit of a strain between the India China relationship. Very recently, the government has come up with a circular but it has made investments from China under an approval. So any investment from now on from a Chinese company or even a private equity fund set up in China will require government approval. Having said that, I think that’s a measure that the government has taken to, to sort of protect the Indian economy. All the Chinese companies which are cash rich from making hostile acquisitions in India. So the intent here is to ensure that the Indian economic is also not as dependent on China as it used to be. I think that’s a universal fact which most jurisdictions, including the US is trying to follow, where we’re trying to isolate or trying to reduce our dependency from China to the extent possible, so that’s caused a little bit of uneasiness in the trade relations between India and China. But prior to this, the relation between India and China though we have our own land disputes at the border, etc. The relationship between India and China has been quite distinctly code. For example, China is one of our largest largest Indian companies, important lot of material from China. They are a huge market for Indian pharmaceutical companies for Indian electronic companies. So the relationship has gone a bit sour in the last few months. But other than that, generally the trade relations between India and China have been quite reasonably good. they’ve not been bad. But they’ve been these have not been great. But they’ve been reasonably good, I would say.
Jonathan Bench 13:16
And could you contrast India’s relationship with China to its other trading partners, like, for instance, Japan, companies in Europe, you know, how to, how does? How does that compare? So I think
Hemang Parekh 13:29
before the present pandemic situation started, the relationship between India and China was good. And the relationship that India had with other jurisdictions like Japan, like Germany, France, Netherlands and the UK and the US, were almost at the same footing that we had with China. There were no real business issues between the two nations. We were seeing a lot of interest that Chinese companies had it India, India was a huge market for them from a export perspective. So you were importing a lot of stuff from China. At the same time you were exporting a lot, a lot of stuff to China. Similarly, importing and exporting a lot of stuff to American to German to Japanese companies. So before the present situation started in the last two months, I think India’s relationship with China was India’s relationship with other jurisdictions was equally good the way it was with China. I don’t see him. I don’t think there was much of a difference in the way we treated them. We treated all foreign investors alike in that sense. So from the business of course, there are certain markets which are more active certain segments where they’re even more active with a particular jurisdiction. So for example, Japanese companies are big into India from a fertilizers and chemical perspective. Similarly, China was big into India from electronics perspective, India used to export a lot of funds Take us to the US, China. Okay. Similarly, India used to export a lot of agri-commodities to jurisdictions like Germany. So before this, if we compare the situation with other countries, it was almost the same. We never had an issue with any jurisdiction.
Fred Rocafort 15:18
Hemang,among these lines, could you tell us a bit about the India us relationship.
Hemang Parekh 15:25
So, I think the economic ties between the India and the US has been great. Since the past few years, we’ve seen a lot of activity, a lot of interest that American companies have in the Indian market, and then just continues to grow for a period of time. I think one of the main factor nozzles is their good ties and the good political relationship that the leaders of the two countries share, which has resulted into a large amount of foreign investment coming into India from the United States. Likewise, as a trade partner, it was also This foreign idea in almost every sector, the pharmaceutical the export of agricultural products, India and US have always been been great as trade partners. So we continue to see that activity. And as we speak, we see a lot of interest from American companies who are looking to invest in India, not just as strategic investors, but even as financial investors. And that has been a constant rise in the level of foreign investments that we’re receiving from America. I think that speaks volumes about the relationship between the two nations.
Jonathan Bench 16:37
you mentioned a minute ago about the pharmaceutical industry and love for you to talk for a minute about India’s intellectual property protections, laws that are in place to protect innovation, and specifically how that how that might impact the US medical supply chain, you know, has been talked about a lot in the US Media. The government is concerned about our dependence on China and so diversifying, either by bringing the bringing those investments home or moving them from a country like China to India, where we have much less of a concern that India might turn, turn off the valve and shut off our entire medical supply. We’d love to hear more about that from you.
Hemang Parekh 17:24
Sure. So, I think first important factor to understand here is that as for specifically for the pharmaceutical sector, there are a lot of Indian companies which are, which have set up their manufacturing bases in the US. So some of the top Indian pharmaceutical companies also manufactured in the US. That’s one. Secondly, the US FDA approvals are considered to be very stringent. And Indian companies are always striving to get us FDA approvals because that gives them a global access even to the European market. So I think from a pharmaceutical sector perspective. It’s a very active sector between the two countries. And it’s both ways where we have set up our base across in the US whereas, and at the same time the American companies have tried to look for investing investing in Indian pharmaceutical businesses. From intellectual property perspective. Our intellectual property rights are laws on special patient related laws are not as comparable with the American or the European laws, but they are quite stringent and there is a common law remedy which is available for protecting intellectual property. So in my more than 12 years of experience, I have never seen an American company suing an Indian company or an Indian individual for any kind of intellectual property violation on the patient, which is one of the key intellectual properties for pharmaceutical business, even in terms of our trademark laws and copyright laws can be fairly complacent. We are signatories to some of the global treaties and we are quietly In terms of providing intellectual property protection, and I think that the onset of American companies coming into India then trying to set up more activities in India, the government will definitely make note of this particular aspect and try to strengthen the intellectual property laws to ensure that is tight level of comfort, which is available to the investors, especially to the pharmaceutical companies so that they can they can make investments without hesitation, have there been any intellectual property violations.
Fred Rocafort 19:33
Hemang this has been a really interesting conversation. I’ve certainly learned quite a bit about India, and I think that our listeners will will also be able to draw much new knowledge in most cases about the country. sort of going one step further and helping our listeners get a sense for the kind of material that helps You learn and and develop your own opinions and viewpoints on things. Can you please share with us, you know, what is it that you’re either reading, listening or watching to these days.
Hemang Parekh 20:15
So there is a lot of information that the government itself is disseminating to ensure that the right messages are circulated. So the best source of information is, of course, to look at the official websites of various government departments. Read the Ministry of Finance Ministry of Labor Ministry of Information Technology, which is published, which is making all the reforms and concept papers available on their websites for general audience to look at. In addition to that, we, as a law firm, also come up with our regular newsletters. We have updates which are available on our LinkedIn profile, and one could look at those sources of information. causes the news reports. But those are not completely reliable because it has some level of interpretation that the journalism journalists would take to the news. Having said that there’s a fair amount of confidence and fair amount of reasonable information available through the news reports in India. So I think the best source for anyone who’s looking to read up on India is actually the government websites where they publish all information, including concept papers on things that they plan to do, the new reforms that the government is looking at, or even the new updates that the government is trying to implement change of laws, etc.
Fred Rocafort 21:40
Jonathan, what about you anything that you’d like to share with us today?
Jonathan Bench 21:44
A little while ago, I suggested a book by Peter Zeihan was called the Accidental Superpower that was about the US rise, post World War Two. He has a second book published a few years later that’s called the Absent Superpower and I think I really enjoyed this because it It focuses very much on on the energy crisis in the world, particularly how the us getting toward energy independence and becoming a net energy exporter instead of importer impacts how the US has engaged from a national security perspective with, for instance, the Middle East. And so talks about the, you know, the US role pulling back from the global energy market and protecting, you know, all the super tankers floating all over the oceans all over the world all the time, from pulling back that protection to how other countries as well that are that are growing in their energy dependence, and their hunger for energy resources will continue to grow, for instance, China and India, and how places like the Middle East and then countries or countries can natively produce on the energy scale. We’ll also how that all impacts the global energy demand. course that was pre COVID and And so we know that there was there’s quite a shock, you know, the price war between the Saudis and the Russians, of course earlier this year. So there are a lot of wrinkles. But I think from a from a heart numbers perspective and projected demand. Peter Zeihans research is always top notch. And I appreciate being able to look at the global world through the lens of very good data collection. What about you, Fred?
Fred Rocafort 23:28
Well, sort of taking a page from her mom’s recommendation, something along those lines. My recommendation today is also a government document. By the time this show is published, some time will have passed but but at that at this particular moment, it’s actually really, you know, hot off the presses. It’s the United States strategic approach to the People’s Republic of China, which is a strategy document, as the name suggests, that was issued by the white House on the 20th of May, I mean, no surprises, really in terms of the of the content, or very few, but, you know, the publication itself of the strategy is certainly very, very meaningful. And if you want to have a sense of where things are going into relationship with China, this is definitely the place to start. I mean, the US relationship with China, I should clarify, this is definitely where you will be able to get a pretty clear explanation of what the the government’s objectives are going going forward. So it’s available, you can go to the White House website and find it there.
Hemang Parekh 24:43
You know, as a as a concept, you know, the relationship between not just US and China but globally, there’s a huge outrage because Australia has been expressing its unhappiness over what has happened and there is a failure. Bit of retaliation which the Chinese government is, you know, is doing in terms of trying to correct the image or ensure that they’re not really sort of cornered in the whole situation. I think, you know, that has resulted into a lot of general stress between the trade relationships between US and China or other jurisdictions. And as you asked, you know, the question that you asked it does this benefit India? So I think one key factor to note in all this is India, as a country was really moving at a fast pace, even before this whole situation happened. So we were poised to be one of the, you know, top two economies in the Latin in the next few years. I, in my view, after the US and China India is the next big, big economic and a lot of statistics supports them. So I think as an alternative or as a support It’s not to be seen that India is more of an alternative to China now, we have always been a very competitive alternative for China even before the present situation happened. I think the question that you asked earlier on about the trade war between China and the US, will it benefit India, about the India us relationship? I think this is a very important perspective to keep in mind. We’re talking about the triangular relationship between India, China and the US. India and China have always been fierce competitors in terms of attracting foreign investments in terms of the offerings that both the countries have. And it’s not that the present situation has resulted in people looking at India as an alternative to China. India has always been there. We were always one of the best alternatives available to China even free. COVID Having said that, the openness of AWS acted as a booster where it’s made the US companies, the European, Japanese, the Japanese companies to start thinking whether their dependency on China is gonna be is gonna prove fatal for them. And I think that’s why there’s a sudden surge of interest that we see in India. But it’s not something new. If you ask me from Indian from an Indian corporate lawyers perspective, we’ve always seen a lot of activity, we’ve always seen a lot of interests that companies have had in India, it’s just at the present situation has made them realize that there was an over dependency which they need to kill. And that’s why India’s role has become more prominent in the scheme of things. To give you an example, even just a couple of months back, it was a large transaction, which was a probate transaction where two American corporates were very American company was selling its business to a private equity fund in the US and a large part of the business This was in India. So we were acting as counselors when we facilitate the sale of the business to the advisor to the to the American private equity fund. So this is a small example, that it’s not new. It’s not that India has suddenly come up to the horizon and people have started thinking about India, India has always been one of the, you know, one of the, one of the attractive jurisdictions and exists in the present situation has, has caused everyone to think about India more seriously, as everyone now wants to reduce their dependence on China. And as a country, we have a lot actually in common with the US at some level. As you mentioned, you know, we have a large English speaking population, which adds to the comfort level. We have a huge, huge potential, a lot of in terms of the manpower that we have, as you said earlier on, a lot of Indians are actually heading large as our seniors Yours are our chairman’s of a lot of large American companies, which goes on to show that there has always been a cultural bond between the two countries. And I think one looks at the culture and bond the phablets should match and thought processes should match before they look at business partners. And historically, all these factors have been very favorable for India and US, which in my mind has resulted in people taking India as a more seriously viable option to China for independent or for starting up their bases in India.
Fred Rocafort 29:37
And I would be remiss if I didn’t mention and I should have mentioned this better. When I first talked about the new US strategy, there is actually a mention of India and other like minded countries such as Australia, and Taiwan. This new US strategy specifically mentioned specific adresses cooperation with, with India as as one of the the prongs of the US strategy towards China. On that note, once again, I’d like to thank you for for being our guest, we will have to sit down before too long, because clearly there is a lot to talk about. And I’m sure that it will continue to be a very fluid topic that will give us lots to talk about. So come on. Thank you so much. And we really appreciate the insight you have provided.
Hemang Parekh 30:36
Thank you so much for this opportunity. I had a great time talking to you. And I look forward to having more interactive sessions because I as you rightly said, there’s a lot more. We’ve just touched the tip of the iceberg. There’s a lot more discussion that can happen. We can get into more granular details on on sector specific questions. be delighted to continue providing information about it. Yeah.
Jonathan Bench 31:03
Thank you, Hemang We really appreciate it. We’re looking forward to it. We hope you enjoyed this week’s episode. We look forward to connecting with you on social media to continue to discuss developments in global law and business. and tune in next week for another episode. We’ll see you then.
Transcribed by https://otter.ai