About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

29 Franchise L.J. 248 (2009-2010)
Franchising in India: A Brave New Frontier - Economic Policy Reform Paves the Way

handle is hein.journals/fchlj29 and id is 248 raw text is: Franchising In India: A Brave New Frontier Economic Policy Reform Paves the Way ERIK WULFF AND KIRAN LINGAM I ndia is an ancient, complex society. A blend of old and new, it is said to be living in all centuries simultaneously. It is the seventh largest and second most populous country with over 1.15 billion people. Despite stunning economic growth, a sizable urban middle class, and growing pockets of significant wealth, India is a coun- try burdened by extreme poverty: 80 percent of the population lives on less than $2 per day, and 25 percent lives on less than $1 a day. In Mumbai, for example, with a population in excess of 20 million people, over 50 percent live in shantytowns or on the streets. Despite the disparity of wealth within its population, there is very little violent crime, and as a foreigner one is gen- erally less concerned about personal safety than in many other developing countries. Violence tends to be fueled by ethnic and religious tensions with religious attacks, counterattacks, and mob justice. Another major problem in India is human traffick- ing for forced labor and sexual exploitation. The disparity of wealth among the population in India, com- bined with the multiplicity of cultures, languages, and religions, leads to a complex and chaotic political landscape. Politicians must seek to balance the needs of business interests, the rural agricultural community, and the urban poor, all while looking to promote long-term economic growth. India is a parliamentary democracy run by coalitions of polit- ical parties. Neither of the two major Indian political parties, i.e., the Congress Party and BJP, has enough support to form a majority government without bringing in other parties to form coalition governments (the Congress Party and BJP combined received fewer than half the votes cast in the last election). In the recent national election, though, the Congress Party alliance won a solid victory over the BJP coalition. Some com- mentators credit the victory on the Congress Party's focus on economic issues for the rural voters, understanding that popu- lar support for economic liberalization cannot continue without this class reaping some of its benefits. With its surprisingly decisive victory and a strong mandate to continue reforms that have spurred Indian economic growth,' the Congress Party, many hope, will be more aggressive with respect to liberalization and economic reform. India's traditionally strong Communist Party also lost nearly half of its seats, further reduc- ing the need for the Congress Party and the new government to back away from economic reform. In light of these develop- ments, most believe that the business environment in India will Erik Wulff is a partner in the Washington, D.C., office of DLA Piper US LLP Kiran Lingam is an associate in the Corporate & Securities Group at DLA Piper US LLP Mr. Wulff is co-chair of the India Com- mittee of the American Bar Association, and Mr. Lingam is a member of the Committee s Steering Group. continue to improve as evidenced by the Sensex's (India's equivalent of the Dow) 17 percent surge on news of the election results. Despite these recent develop- ments, conducting business in India remains a challenge. India's pro- vincial governments and its union government (akin to our federal government) are often characterized by political gridlock, incompetence, ErikWulff and accusations of corruption.2 It is often said that the British invented bureaucracy, and the Indians perfected it. The legal system is based on English common law. Indians tend to be litigious (India has more lawyers than the United States), resulting in incredibly overburdened court systems.3 There are twenty-five million cases pending in India with an average of ten judges per million in population, the lowest ratio in the world. The judges are under- paid and are prone to accusations of corruption. Civil cases can take twenty years or more to get to trial. Notwithstanding these challenges, India is expected to become a major economic power in the future. For instance, India has the twelfth largest economy in the world4 and the fifth largest in terms of purchasing power.' Even with the global recession, India's economy grew 6.7 percent in 2009, and the International Monetary Fund projects it to grow by 7.7 percent in 2010.6 It is clear that those companies that can successfully navigate the chaotic economic, political, and cultural climate in India stand to reap significant benefits. India has increasingly close political and economic ties with the United States. The Atomic Energy Treaty was a significant symbolic gesture of trust and cooperation between the coun- tries. Moreover, the United States was actively involved in assisting India in resolving the diplomatic quagmire resulting from the Mumbai terrorist attack in November 2008. The U.S. government is seeking to foster strong relationships with India, with more State Department personnel located in India than in any other country and the Department of Commerce having a presence in all major cities in India. Most recently, President Obama hosted Manmohan Singh, India's prime minister, at his first state dinner on November 24, 2009 with the theme of forging friendships, exchanging knowledge and building bridges that last for years.' During the dinner, President Obama delivered an apt toast to Prime Min- ister Singh: To the future that beckons all of us. Let us answer its call. Let our two great nations realize all the triumphs and achievements that await us.8 Serious interest in franchising as a business model is relatively 248 Franchise Law journal U Spring 2010

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most