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Foreign Direct Investments (FDI) in IT & IT Enabled Services in India-1: Lawyers Advice

 > E Commerce  > Foreign Direct Investments (FDI) in IT & IT Enabled Services in India-1: Lawyers Advice

Foreign Direct Investments (FDI) in IT & IT Enabled Services in India-1: Lawyers Advice

Entering Indian Market:
• India has emerged as the world’s major Business Process Management (BPM) destination with the IT-BPM sector having a stunning share of 45% in the total Indian services export. The sector is the largest employer in the private sector, employing 4.1 million people.
• 100% FDI is allowed in Data processing, Software development, Computer consultancy services; Software supply services; Technical testing and Analysis services, etc. under the automatic route.
• Up to100% FDI in the IT sector in India is allowed in B2B E-commerce.
• Further, since the activities of BPO companies comes under the purview of “IT enabled services” which permits up to 100% Foreign Direct Investment (FDI) under the automatic route for companies carrying on such businesses. However, the activities of a BPO are subject to the procedure as issued by the Department of Telecommunications (“DoT”).
• Moreover, 100% FDI is allowed in the Electronic hardware sector and the Software development sector under the automatic approval route.

Best Locations:
• Maharashtra (Nagpur, Pune)
• Himachal Pradesh (Kangra, Shimla)
• Uttar Pradesh (Lucknow, Moradabad)

Achievements made by Indian Corporations or in India:
• In around 80 countries, 200 Indian IT firms are present.
• The Indian IT firms generated the highest revenue in the year 2018-19 at US$ 181 billion.
• By 2025, revenue of General Insurance Corporation of India (GIC) is expected to reach US$ 50 billion.

Demand in the Market:
• India’s IT competencies have brought significant international awareness in terms of investments. In the term of 2000-2019, Foreign Direct Investment was about US$ 39.4 Billion.
• Major areas of investment under the IT and ITES lies in Artificial Intelligence, Block chain, Internet of Things etc. that come under the same folds of expertise.

Existing Notable Players in the Market:
• Google
• Amazon
• Microsoft
• Infosys
• Tata Consultancy Services

Company Registrations, Compliances, Licenses and Permits which are to be procured:
• Company or LLP registration
• Goods and Services Tax (GST) registration
• Application for permission for Right of Way for erecting towers, antenna and cables.

Precautionary Measures:
Global Environment– Operating across worldwide markets makes the firm open to the elements of risks pertaining in the political, social, financial, legal, scientific, environment, etc.
Currency Fluctuation– Currency appreciation/ depreciation has implications on the reported revenue and productivity of firms operating in different countries
Cyber Attacks– any security breach can lead to reputational injury, job losses, reduced customer loyalty, penalties, and legal/financial liabilities. With business moving digital, cyber security has become the biggest concern for top managements.
Growing Protectionist Approach– Various legislations which restrict the availability of work visas or apply onerous eligibility criteria could lead to project delays, increased costs and margin pressures

Functioning and Management:
• The challenge for many enterprises is to establish a synchronized, integrated framework that draws on all three of these standards. The Joint Framework of COBIT and ITIL, is a good beginning for the business. COBIT is a globally recognized framework, which helps organizations govern and manage IT efficiently. Five principles essential for the effectual management and governance are;
• Principle 1: Meeting stakeholder requirements
• Principle 2: Covering the venture end to end
• Principle 3: Applying a single incorporated framework
• Principle 4: Enabling a holistic approach
• Principle 5: Distinguishing governance from management
• The company that uses artificial intelligence which can be a multinational company or a startup venture need to understand that the most importance of patents. Under the Indian Patent Act, 1970 it will only be patented if it comes under the definition of “computer Software” and has a “technical effect” to it.
• The copyright act, 1970 will only protect the original aspect of the idea and not the functionality of the Artificial Intelligence Algorithm.
• Some players have articulated principles to be kept in mind while designing AI systems, in a way, a type of a self-regulation. Principles include equality, simplicity, comprehensiveness, consistency etc.
• Transparency is a vital prerequisite of natural justice. Transparency should be incorporated not only into the design of the algorithm itself but also its surroundings. Algorithms should be formulated and examined regularly within and across sectors to ensure that a common understanding of transparency permeates throughout.

Authored By: Adv. Anant Sharma

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