Joint Venture (JV) Agreements amongst the SMEs & FDI in India
In the wake of the recent global developments and the focus of the world economies on the FMCG sector and especially the healthcare has changed the way people were living and thinking. The need has arrived to not only get products at a lower price but also to have a more credible and reliable product which comes from a source which has integrity and trustworthiness. In this entire issue, India fits as the perfect destination and Indians have come as the true global partners whom can be entrusted and trusted by the entire world. Thus, the time has come for India to become the next “world factory”. Thus, I am penning down this article for Startups and small businesses including the SMEs & the MSMEs and would like to devise and propose a formula whereby the entire small business sector can be benefited.
In India, we lack the ability of mass production to a given extent and especially by the SME and the MSME sector which still requires an overhaul. Further, the adaption to latest technologies is not at par with some of the other countries and unfortunately we are lagging behind them. However, all these problems can be well overcome by joining hands i.e. if all the SMEs and the MSMEs under the particular geographical area in a particular industry can join hands and jointly work by way of a “Joint Venture” then the SMEs and the MSMEs of India can directly come at par with the other world economies with respect to the production capabilities and the costs and expenses and can attract Foreign Direct Investments (FDI).
To explain this further, a Joint Venture (JV) is a symbiotic business alliance between two or more companies whereby the complimentary resources of the partners are mutually shared and put to use. It is an effective business strategy for enhancing marketing, positioning and client acquisition which can definitely lead to better production capabilities under a very cost effective model. The alliance can be a formal contractual agreement or an informal understanding between the parties. Having said that, this type of agreement is preferred in situations that involve a temporary task or a limited activity, or the JV needs to be established for a limited term and is primarily focussed on certain defined activities which are to be carried amongst the contracting parties whereas there shall be no hindrances and/or impediments in executing the other tasks and normal functions of the contracting parties.
If all the Startups, SMEs and the MSMEs in India follow the above mentioned legal advice and form alliances in the form of contractual joint ventures (JVs) then all the resources can be combined together to enable mass production under a cost effective programme while sharing the technical and non-technical know how amongst the contracting parties respectively. The entire alliance is legit and is one of the most convenient ways to increase production and output vis a vis ensuring jobs and works throughout the year and increase in the revenue and the profitability of the entire small business sector.
Authored By: Adv. Anant Sharma