Doing Business in a democracy! Part 2.

Doing business in a democracy pays off, as: 5 highlights!

1.      Large employable workforce (incentives to employ)

As the government is unable to cater to and provide employment to all, they provide incentives and subsidies to budding entrepreneurs and industrialists as they are provide mass employment. The rationale behind setting up SEZs and EHZ was purely to dole out employment to the rural population.

2.      Better pricing flexibility

A business has both types of clients. The niche’ clientele and the masses. In India, we have three, the uber rich, the middle class and the LIGs. (Lower income groups) Therefore, a business can have top of the line and basic products in their offering. For e.g. Mercedes Benz offers the S class for the 1^st group, the C class for the second, and a pre-owned & lease system for the ambitious third. A diverse client base allows you this.

3.      Working on national interests/products of national importance

It is only in a democratic set up that a company (even a private limited) can discharge sovereign functions. Who had thought to reliance entering into the fuel and natural gas biz. ONGC was earlier the only licenses one. One an organization proves its mettle; the government goes all out to share their chunk of responsibility towards citizens. Last IC session, we also understand how Lawrence & Mayo is helping measure the highways and so on. Even professionals get to work and defend the government even when they are not full time employees. Nani Palkhiwala was a jurist regularly hired by the govt to defend them in international cases. Please note, Mr. Palkhiwala was a private practitioner and in no way connected to the government. (Even the tax speeches he gave were widely publicized through various government mediums)

4.      Best of both worlds

As a developing democracy is hungry and just waiting for opportunities. One can either take a franchisee of a successful business (like McD) or start a quasi-biz. Many entrepreneurs have observed great business during their tours abroad and have simply replicated them in their home country. The reason why many domestic social networking sites have thrived in spite of there being google+ and facebook. (Fropper & fan2go are some examples)

5.      Accommodative governmental system

The government goes out of its way to promote entrepreneurs. There have been instances of the government letting Air India flight slots to the more successful ones like Indigo and Jet airways. Similarly, 100% EOUs don’t have to pay taxes, Industries like IT and others, which do not pollute get amazing 10-15 year income tax exemptions.

The government also stripes of the uber wealthy and royal families of their status and wealth. For eg. The pataudi family lost their nawab status and had to surrender much of their ancestral property to the government, as under the IT Act, 1961, the government has introduced caps on how much property can be held. This is enforceable in developed countries. Sometimes, I agree that this accommodative nature of the govt is taken for granted by some of the MNCs who are thriving here, but the pros clearly outweigh the cons.

Happy business you'all :)

Why starting a business in a democracy like India is good!

Five reasons why start ups prefer democratic country

1.       Freedom to choose your trade/profession

The government is very proactive in providing subsidies and benefits to start ups whose service area is that of catering to a mass audience. For e.g. Logistics & e commerce companies like flipkart & redbus have thrived in a democratic Indian set up.

Most of the areas except defense and atomic energy had open for an entrepreneur. This is a rare scenario in communist countries like China.

2.       No fear of monopoly

As the government is elected, they need to keep all their stakeholders happy. This ensures a healthy debate before protecting any sector and to maintain a competitive atmosphere at the market. E.g. the entry of Walmart is/was highly debated as it would stifle the domestic players.

3.       A larger diverse audience/client base

In a country like India, even if your business caters to a single community, you have an enormous client base.  A tailor made business (expertise) will always thrive in a democratic set-up.

4.       Peaceful modifications in the Government are possible

Democracy offers modifications in the government without hostility. Authority can be shifted from one party to another, based on their performance. What we experienced first-hand this elections.

5.       Feeling of gratitude/power in the hands of people/businessmen

As they have complete authority and responsibility, they can have the constitution amended, file an RTI and get all the info they need, sue the government, make the government accountable and so on.

Many businesses have cajoled the government by enacting special laws for them. The government too has established the CCI to regulate competition and unfair trade practices. It helps start ups grow.

The reason why many industrialists start their own trusts and provide services which ought to be provided by the government, in a amicable PPP (pub-private partnership) set up.  This is not the case in many developed countries. Might be the most important advantage of operating in a democratic setting