Doing Business in India: An Overview

India has established itself as a pre-eminent market for goods and services. With a robust demographic dividend projected to endure for decades, an efficacious ecosystem of regulatory processes, sustainable macroeconomic conditions, competitive factor markets and burgeoning domestic demand, India stands out as a beacon of hope amidst the global economic slowdown.

In recent years, the Indian government has implemented several policies aimed at promoting industry growth. These measures position India as an attractive destination for investment and business, and have resulted in significant improvements in India's ranking in The World Bank's Doing Business report, rising from 142nd place in 2014 to 63rd place in 2020. According to the same report, the country has made progress in seven out of ten parameters.

India's commitment to improving its business environment and implementing innovative measures to stimulate manufacturing and investment has unlocked the potential of its economy and created unprecedented opportunities for domestic businesses, multinational corporations and the government.

Commercial real estate

India's commercial real estate (CRE) market is poised for continued growth and expansion. The market size is estimated at INR55.26 lakh crores (USD67.08 billion) in 2023, and is expected to reach INR183.93 lakh crores (USD223.25 billion) by 2028, growing at a compound annual growth rate (CAGR) of 27.19% during the forecast period (2023–2028).

One of the major trends influencing the CRE market in India is the adoption of technology and innovation. According to Forbes, India is among the top five countries in the world that are leveraging tech trends such as generative artificial intelligence (AI), blockchain, decarbonisation, sustainability and contech (construction technology) to transform the real estate sector. These technologies are enabling more efficient, transparent and sustainable practices in CRE, as well as creating new opportunities for value creation and differentiation.

Another trend driving the CRE market in India is changing consumer preferences and behaviours. The COVID-19 pandemic has accelerated the shift to online shopping, e-commerce and digital services, which has increased the demand for logistics and industrial spaces. According to JLL, the logistics and industrial sector in India witnessed a robust recovery in Q1 2023, with occupier demand remaining resilient across most markets. The pandemic has also led to a rise in flexible work arrangements, hybrid models and co-working spaces, which has reshaped the commercial office space market. JLL reports that office leasing in India was higher in Q1 2023 than in the corresponding periods of the last two years, indicating the sector's strong resilience.

The new remittance law announced during the 2023 Budget session amends the Income Tax Act, 1961, and increases the taxes paid on investments made abroad from 5% to 20%. Economists opine that this will result in a larger number of investments in the Indian real estate sector, as there will be an influx of funds in the Indian market.

The education sector

One of the key trends in the Indian education sector is the growth of edtech start-ups, which are leveraging technology to provide affordable, accessible and personalised learning solutions to students across the country. According to a report by India Brand Equity Foundation, the Indian edtech market size is expected to reach INR24.72 lakh crores (USD30 billion) by 2031, up from INR5,769.54–6,593.6 crores (USD700–800 million) in 2021. The online education sector in India is growing rapidly, with growth of INR1.88 lakh crores (USD2.28 billion) expected during 2021–2025, at a CAGR of almost 20%.

Another trend in the Indian education sector is the increasing focus on research and innovation, especially in emerging fields such as AI, biotechnology and renewable energy.

The government has announced several initiatives to promote research and development (R&D) in higher education institutions, such as:

• setting up three AI Centres of Excellence in top educational institutions in collaboration with leading industry players;
• launching a National Research Foundation to fund and co-ordinate research across disciplines; and
• creating a National Mission on Interdisciplinary Cyber-Physical Systems to support research in cyber-physical systems.

The government has also increased the budget allocation for education by 8% to INR1.12 lakh crore (USD13.66 billion) in the Union Budget 23–24, with a special emphasis on upskilling the youth and increasing digitalisation in the education sector.

A third trend in the Indian education sector is the emergence of new models of education delivery, such as blended learning, experiential learning and competency-based learning. These models aim to enhance student engagement, retention and outcomes by combining online and offline modes of instruction, providing hands-on learning opportunities and assessing students based on their skills and abilities rather than marks or grades.

The government has also introduced several reforms to make the education system more flexible, holistic and inclusive, such as implementing the National Education Policy (NEP) 2021, which envisages a major overhaul of the curriculum, pedagogy, assessment and governance of education from pre-primary to higher education levels. The NEP also aims to increase the Gross Enrolment Ratio in higher education to 50% by 2035, provide multiple entry and exit options for students, promote multidisciplinary and liberal arts education, and encourage the internationalisation of education.

The Indian education sector is also witnessing some changes in the legal framework that governs its functioning. One of the notable changes is the enactment of the Higher Education Commission of India Act 2022, which replaces the University Grants Commission and other regulatory bodies with a single umbrella authority for higher education.

Another change is the amendment of the Foreign Contribution (Regulation) Act (FCRA) 2020, which relaxes some of the restrictions on foreign funding for educational institutions. The amendment allows educational institutions to receive foreign funds without prior approval from the government if they are registered under FCRA and have been granted certificates of registration or prior permission from the federal government.

Media and entertainment

The media and entertainment industry is one of the fastest growing and most dynamic sectors in India. According to a report by Boston Consulting Group) and the Confederation of Indian Industry, the industry is expected to reach INR45.33 lakh crores to INR57.69 lakh crores (USD55–70 billion) by 2030, driven by strong growth tailwinds such as rising digital consumption, increasing interactivity and an expanding user base. The industry is also witnessing significant shifts in revenue pools, consumer trends and content creation.

One of the key drivers of the industry's growth is the emergence of over-the-top (OTT) platforms, which offer online streaming of video content such as movies, shows and web series. The OTT segment has seen a surge in subscriptions and investments in content, especially during the COVID-19 pandemic, as consumers sought more variety and convenience in their entertainment choices. The OTT segment is projected to grow at a CAGR of 30% from 2022 to 2025, reaching INR5.68 lakh crores (USD6.9 billion).

Another driver of the industry's growth is the online gaming segment, which has seen a rise in popularity and engagement among users, especially among the younger generation. Online gaming offers interactive and immersive experiences to gamers, who can play various genres of games such as casual, fantasy, sports and e-sports. The online gaming segment is expected to grow at a CAGR of 34% from 2022 to 2025, reaching INR2.3 lakh crores (USD2.8 billion).

The legal changes that have been introduced or proposed by the government include the amendment of the Cinematograph Act 1952 to curb piracy, the regulation of OTT platforms and digital news media under the Information Technology Act 2000 (ITA), and the introduction of a new tax regime for foreign digital service providers.

Under the ITA, the government has also enacted the Guidelines for Intermediaries and Digital Media Ethics Code, which, inter alia, regulate the online gaming intermediaries that offer real money games. These intermediaries are required to display a “demonstrable and visible mark of verification” from the online gaming self-regulatory body before they can accept any money from the user. The gaming amendments are a positive step in a dynamic sector and provide a regulatory baseline for an industry that has long been unregulated.

Telecommunications

According to the Telecom Regulatory Authority of India’s annual report, India is currently the world’s second-largest telecommunications market in terms of the number of subscribers, and the telecoms sector is the third largest in terms of foreign direct investment equity inflows. The federal government’s recent initiatives in the telecoms sector include building a strong ecosystem for 5G mobile services, providing affordable broadband and mobile services in rural and remote areas, and committing to lay down optical fibre network in every Indian village by 2025.

In terms of legal developments, the Department of Telecommunications (DoT) has amended the Unified Licence Agreement for calculation of Adjusted Gross Revenue (AGR) for the computation of the licence fee. The DoT has excluded non-telecoms revenue from the definition of AGR.

Employment

The employment situation in India has been undergoing significant changes in the past year, as the country continues to recover from the impact of the COVID-19 pandemic and to pursue its vision of becoming a USD5 trillion economy by 2024–25. The government has been boosting public investment and capital expenditure to stimulate economic growth and job creation across various sectors. Notable trends and developments in the Indian labour market include the following.

• A surge in the formalisation of the job market, as evidenced by the increase in monthly net addition of Employees' Provident Fund subscriptions. The Economic Survey 2022–2023 reported that the net average monthly subscribers added under Employees' Provident Fund Organisation increased from 880,000 in April–November 2021 to 1.32 million in April–November 2022.
• A rise in employment opportunities in new sectors such as AI, cloud computing, data analytics, automation under IT/ITES, etc, which have shown resilience and growth despite the pandemic. According to a report by Business Insider India, specialised IT and telecoms sectors are expected to drive hiring in 2023, especially for digital skills. The report also mentions that tier 1 cities will dominate IT hiring, while tier 2 and 3 cities will also join them.
• A revival in sectors like tourism, property and construction, FMCG, etc, which have witnessed a rebound in hiring activity after being hit hard by the pandemic. For instance, the tourism sector saw a 68% increase in job positions in 2022 compared to 2021, while the property and construction sector saw a 28% increase, according to Michael Page India's Salary Guide 2023 report.
• A rising trend of start-ups hiring, which is changing the job market dynamics and offering more career prospects for young and aspiring professionals. Start-ups have emerged as the catalysts of change, fuelling innovation and disrupting traditional industries. The post also states that start-ups are offering competitive salaries, flexible work arrangements, learning opportunities and a culture of experimentation and risk-taking.
• A stabilisation of demand for Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) work, which indicates that the disruption caused by the pandemic is losing its sting and employment avenues are opening up in other sectors. The Economic Survey 2023 observes that demand for MGNREGS work peaked during the nationwide lockdown in 2020, but has since declined after the second COVID-19 wave.

In terms of changes in relevant laws, the government has enacted the following four labour codes to consolidate and simplify 29 central labour laws and to facilitate the ease of doing business in India:

• the Code on Wages;
• the Code on Social Security;
• the Code on Industrial Relations; and
• the Code on Occupational Safety, Health and Working Conditions.

The codes are yet to be fully implemented by the federal central government but have the following aims:

• to provide universal social security coverage to all workers, including those in the informal sector;
• to ensure minimum wages and the timely payment of wages;
• to promote industrial harmony and collective bargaining;
• to protect workers' health and safety; and
• to improve the ease of doing business and compliance.

Intellectual property

One of the most notable developments in 2023 was the acquisition of 127 patents for 6G technology by the Indian government, which demonstrated its commitment to innovation and research. 6G technology is expected to revolutionise the fields of communication, healthcare, education, entertainment and more. India is among the few countries that have invested in this cutting-edge technology, and aims to become a global leader in this domain.

Another significant development was the landmark ruling by the Delhi High Court in the case of Subway v Suberb, where the court held that the use of a similar name, logo and colour scheme by Suberb, a food delivery app, amounted to trade mark infringement and passing off of Subway's well-known mark. This case highlighted the importance of protecting the goodwill and reputation of well-known marks from dilution and confusion.

The Delhi High Court also declared the stylised logo of French luxury brand Hermès to be a well-known trade mark in India, based on its transborder reputation and recognition among consumers. The court observed that Hermès had established its distinctiveness and identity through its extensive use, promotion and registration of its mark across various jurisdictions, and restrained a local trader from using a deceptively similar mark to sell leather goods.

In the field of industrial design, the Delhi High Court upheld a lower court’s ad interim order restraining the defendant from selling and manufacturing musical keyboards with a design deceptively similar to that of Casio's keyboard. Casio had obtained a registered design for its electronic keyboard in 2009, which was valid until 2024. The court noted that Casio's design was novel and original, and that the defendant had copied its essential features without any substantial modification.

The courts have been demonstrating dynamism by granting protection to global brands by passing John Doe orders against infringers. The Delhi High Court has recently passed a John Doe order against a multitude of piracy websites, restraining them from streaming a popular show that streamed on another OTT platform.

The courts have also been granting huge punitive damages as a deterrent for habitual infringers. For instance, in a recent patent infringement case, the Delhi High Court imposed punitive damages of INR2 crores (USD43,000) on the defendant for violating an injunction already imposed on the defendant.

These developments indicate that India is evolving its IP rights framework to foster innovation, creativity and competitiveness in various sectors. India is also striving to balance its IP rights obligations with its socio-economic goals and public interest. India's IP rights landscape is expected to witness more changes and judicial activism in the coming years as it adapts to the changing global scenario.

Data protection and e-commerce

One of the most notable events of 2023 in this space was the introduction of the Digital Personal Data Protection (DPDP) Bill 2023 by the Indian government, which marked the country's fourth attempt at enacting comprehensive data privacy legislation. The Bill aims to safeguard the rights of internet users and their data privacy, by placing a premium on individual consent for data collection, storage and processing.

The Bill also seeks to make entities – including internet companies, mobile apps and businesses – more accountable for their data practices, by imposing stringent penalties of up to INR250 crore (USD30.32 million) per violation. The Bill also introduced a new concept of “Significant Data Fiduciary” (SDF), which refers to entities that process large volumes of personal data or sensitive personal data, or have a significant impact on individuals or society. SDFs are required to comply with additional obligations, such as conducting data protection impact assessments, appointing data protection officers and implementing data audits. The Bill also proposes to set up a Data Protection Board of India, which would have wide powers to handle data privacy and data breach-related issues.

Another key trend that has emerged is the rapid growth of e-commerce in India, fuelled by the increasing penetration of internet and smartphone users in the country. According to Invest India, India is expected to have over 907 million internet users by 2023, which accounts for ~64% of the total population of the country. This has led to a surge in online shopping, especially in categories such as fashion, electronics, groceries and healthcare.

Moreover, e-commerce businesses are focusing on offering personalised solutions to their customers, based on their preferences, behaviour and feedback. They are also adopting sustainable and socially responsible practices, such as reducing carbon footprints, minimising packaging waste, supporting local artisans and communities, and donating to social causes. Finally, e-commerce businesses have also adopted omni-channel retail strategies, which involve integrating online and offline channels to provide a seamless and consistent shopping experience to their customers.

The trends and developments in e-commerce and data protection in India in 2023 have significant implications for the international business and legal community. The DPDP Bill 2023 has been widely regarded as landmark legislation that aligns India with the global standards of data protection and privacy. The federal government has also taken initiatives to curb cybersecurity breaches in India, with India’s Computer Emergency Response Team (CERT-In) issuing directives mandating the reporting of cybersecurity incidents within six hours, obligations involving syncing system clocks to the time provided by government servers, maintaining security logs in India, and storing additional customer information. CERT-In has also set up sectoral CERTs to implement cybersecurity measures at a sectoral level.

Digital currency

India has announced its plan to launch an official digital currency in 2023. This currency will be like privately owned digital wallets, but will be backed by a sovereign facility.

The digital rupee, as it is called, will be issued by the Reserve Bank of India (RBI) using blockchain and other technologies. The digital rupee will have the same value and legitimacy as a banknote or coin, except that it will take no tangible form. This will make transfers and settlements easier and more efficient. The digital rupee will also enable greater financial inclusion and innovation, as well as reduce transaction costs and risks.

However, the regulation governing the Central Bank Digital Currency in India is still under discussion and is yet to be finalised.

Conclusion

The Indian government has demonstrated its commitment to fostering a favourable environment for both domestic and foreign businesses through comprehensive reforms and initiatives. Regulatory changes such as the implementation of a new education policy, the simplification of labour laws, the regulation of social media platforms, publishers and the gaming industry, the introduction of the DPDP Bill, mandating immediate reporting of cyber-breach incidents, the liberalisation of foreign direct investment rules, the launch of a national digital currency and the expansion of renewable energy projects would hopefully further the ease of doing business in India.

These developments reflect India's ambition to become a global leader in innovation, digitalisation and sustainability, and to attract more foreign capital and talent. However, they also pose some challenges and risks for investors and businesses, such as compliance with evolving regulations, protection of intellectual property rights, and competition from domestic and foreign players.

Although there have been increasing cybersecurity incidents and bank and digital payment frauds, there have been equally effective government initiatives aimed at handling such incidents and minimising the damage to citizens and the government. For instance, RBI’s recent draft of the Master Directions on Cyber Resilience and Digital Payment Security Controls for PSOs emphasises cybersecurity and the prevention of negligence by payment operators and banks while minimising frauds targeting users.

During the pandemic, the Indian courts underwent a paradigm shift; looking ahead, it is anticipated that digital transformation will influence the Indian judiciary's future, particularly by placing a greater emphasis upon technology adoption and the digitalisation of processes, including virtual hearings. As Phase III of India’s e-Court Project picks up, the Supreme Court of India just reopened, with three IT-enabled courtrooms for the first time. These courtrooms include pop-up screens for the judges and a digital library to replace law books. The e-filing of cases that was introduced during the pandemic has also matured and become more reliable. This digitisation of court processes makes the system much more efficient, faster and on a par with global systems.

Thus, India has witnessed significant trends and developments that have multiple positive implications for investors and businesses operating in the country.

Having said that, investors and businesses should closely monitor the legal and regulatory environment in India, as well as the political and economic situation, to identify opportunities and mitigate risks.