A combination of power blackouts, uncertain tax rules and contracts that are not honoured make India a difficult place to do business, a senior Dell Inc executive said on Friday in unusually blunt comments by a foreign investor.
India's economy is growing at its slowest pace in nearly a decade, with stubborn inflationary pressures and high interest rates.
But what global firms often find hardest is the red tape and the policy paralysis that has stalled major reforms.
"Doing business in India is difficult because the problem is there are too many decision makers," Amit Midha, president of Asia Pacific and Japan for Dell, told Reuters in an interview.
"And decision makers change quite often. New decision makers come and they don't honour the contract previously signed."
Irked by a lack of opportunities, Germany's Fraport the world's second-biggest airport operator recently decided to shut its development office in India, becoming the latest in a growing list of companies exiting Asia's third-largest economy.
"When a company is trying to leave India and that company is well respected, then clearly it suggests that there is something, this place is not easy to work," Midha said.
Uncertain taxes, tough gestation
A lack of clarity in recent proposals aimed at targeting tax evasion, including retrospective taxation on foreign corporate deals involving Indian assets, panicked foreign investors. Those rules have now been put on hold.
"Policies like retroactive taxes are a huge risk for us to make an investment. We just do not know how to assess our results and how to report our results globally," said Shanghai-based Midha during a visit to New Delhi.
"That sort of a set up doesn't work for any global company for that matter."
Dell has operations in eight cities in India, where it has had a presence since 1996.
With 27,000 employees, India is Dell's biggest employee base outside the United States.
Chief Executive Officer Michael Dell told Reuters in July that Dell is bullish on India, along with China and Brazil.
Dell's experience in India has helped it deal better with the complications of doing business in a high-growth, but poor-infrastructure market, Midha said.
"From our experience, we tell people, in India, the initial gestation period can be hard, but once it's over, it can be a lot smoother," said Midha, who is also the chairman of Global Emerging Markets for Dell.
"If you don't have the resources, don't get into it. Because you need to make sure you have some staying power to go through the initial gestation period."
Midha said Dell had no plans to leave India and is now familiar with how to "navigate" in the country.
"There is a lot of progress made here in terms of infrastructure, but things like blackouts and other things doesn't give India a good position in the global stage," he said.
Hundreds of millions of Indians were left without power earlier this month in one of the world's worst blackouts when electricity grids collapsed two days in a row.
"I think the government is committed to promote investments in India, I see lots of signs of that," Midha said. "But, that said, proof is in the pudding."
Copyright Thomson Reuters 2012