The project examines business climate surveys from Swedish companies operating in India between 2008 and 2013, aiming to identify major concerns, advantages, and trends affecting their operations. It highlights the challenges of corruption, bureaucratic red tape, and taxation, while noting favorable conditions such as a low-cost labor force and opportunities in various sectors. The conclusion suggests that, despite a declining perception of the business environment, recent government reforms may improve conditions for Swedish companies in the near future.

1. Business Climate
Survey Project
- Armaan Grewal & Anya Bharadwaj

2. Project Background
• Project is based on information collected from Business
Climate Surveys (2008-2013) answered by Swedish companies
operating in India
• Conducted by the Swedish Chamber, the objective of Business
Climate Survey’s (BCS) are -
• Gather thoughts of Swedish companies doing business in India
• Understand business climate perception in India by these
companies
• Help in future establishment of Swedish companies in India
• Project team is Anya Bharadwaj & Armaan Grewal as handed
over by Sara Larson of the Swedish Chamber

3. Project Description
• This project has the following aims –
• Highlight major concerns and advantages faced by Swedish
companies doing business in India
• A trend report of the main business risks and the areas of
concern over the years pointed out in the BCS
• Study policies, governmental structure & events to explain these
trends
• Forecast the future scenario on the basis of the changing
government and their promised mandate
• Identify possibly emerging trends and the affect these may have
on Swedish companies

4. Approach
• The findings and documents provided prior to this project were the
Business Climate Survey’s (BCS) of Swedish Companies in India for the
past 6 years (2008-2013). Using this information and through extensive
research the following information was compiled and observations were
made regarding the present and future business climate in India for
Swedish companies.
• Through this study and analysis of the BCS the main areas of concern (as identified
by Swedish companies doing business in India) were noted and these were
categorized
• Based on the identified trends and perception of the Indian market by Swedish
companies various conclusions were drawn.
• Next, a close look was taken at the policies of the Indian government and how
these possibly influenced or resulted in the identified trends.
• Next, a study of India’s new BJP led government, their policies and recently
announced budget was done to understand the possible changes India’s business
environment.
• This helped gain an insight as to how the activities and ease of doing
business for Swedish Companies in India would change. Applying of the
new laws and predicting the changes in trends led to conclusions being
drawn for the future Business Climate in India.

5. Challenges & Advantages
• Corruption, red tape, the uncertain tax regime and deficient
infrastructure.
• An added benefits to doing business in India is cheap and
talented labor force and lower production costs.
• Swedish companies mentioned various competitive
advantages that they hold over domestic producers in India
like product design, quality and superior technology, brand
name and better management.

6. Favorable Sectors/Activities
35%
30%
25%
20%
15%
10%
5%
0%
% of Swedish Companies Involved in Production
Activities
2008 2010 2013
• Swedish companies are majorly involved in life sciences, engineering,
medical, auto, IT and telecom.
• This changed slightly post-2011 with changes in Indian regulations, like FDI
• More and more companies involved in trading and services industries
• Main activities were marketing and sales but companies were increasingly
involved in production activities

7. Drivers to enter Indian Market
• Steady increase in the number of Swedish companies in India as
they doubled between 2006-2010.
• B2B and B2C demand are the main factors that attract Swedish
companies to India
• In 2013, close to 20% identified low cost production as main
driver for business in India
• Given the government’s future plans, the business climate in
various sectors should improve further attracting Swedish
companies

8. Business Climate Perception
• Perception of Indian business climate has decreased from 2010
onwards
• With India shielded from the global economic crisis prevailing in 2008-
10, Swedish companies operating in India were less impacted
• The Indian economic crisis from 2012 onwards resulted in high prices,
import controls etc. impacting business climate
Business Climate Perception By Swedish Companies in India
6 6.4
7.6 7.4
5.4
5
0 1 2 3 4 5 6 7 8
2008 2009 2010 2011 2012 2013
Rating (1-10)
Years

9. Change in Governance
UPA
NDA
BJP-led government
1. Pro-industry
2. Single window
clearances
3. Open market to
foreign investors
4. Emphasis on policy
reform
Thus, business climate in
India to potentially
improve

10. Indian Market
• When talking about B2B and B2C consumer demand in India it
is safe to say that in the coming years this is going to continue
to increase significantly.
• At present, 100% FDI in B2B e-commerce is permitted
however not in B2C e-commerce.
• Although the BJP has spoken publicly about its opposition to
FDI in multi-brand retail, the government has decided against
reversing the 51% limit for FDI in multi-brand retail. This will
come as a relief to Swedish retail houses planning to enter the
Indian market as it was
• The government has also opened up FDI opportunities in the
railway sector. This again provides opportunities to Swedish
companies looking to invest in this area.

11. Changes in FDI Policies
FDI Allowed By The Indian Government
% FDI Permitted
100
75
50
25
0
Insurance Telecom Defence Multi-Brand Retail E-Commerce Airports Mining
Sector
100 100 100
49 51
100
49
74 74
51
26
100
26
NA

12. Labor Laws
• Proposed changes by BJP will allow industries to hire
apprentices more easily.
• India has just 300,000 apprentices. This reform will help
incorporate up to 10 million youths and develop them into job
ready individuals. The proposed reform will see the state bear
half the cost for firms with less than 250 workers and hiring
apprentices. Above this ceiling it will absorb 1/4th of the cost.
• The ministry of labor recently announced that the government
is also exploring how to revamp the vocational training and
national career service. This bodes well for the future and
labor laws are sure to be relaxed in the coming months.

13. No. of Local
Workers
Employed
Employment
Table 1
2005 9800
2008 28100
2009 34300
2010 38100
2011 49100
• Employment of Indian 2012 65966
workers by Swedish companies increased
four-fold and Swedish workers in India doubled from 2005-2010.
• By 2012 more than 75% of companies had 250+ workers
• Swedish companies also created close to 300,000 indirect
employment opportunities as of 2012.
• Given the change in labor laws and enhanced vocational training of
labors, they will continue to increase employment
Direct Employment of Locals By Swedish Firms in India
No. of Local Employees
70,000
52,500
35,000
17,500
0
2005
2008
2009
2010
2011
2012
Year
65,966
49,100
38,100
34,300
28,100
9,800

14. Bureaucracy
Corruption
• Experienced
during
interaction with
public officials
and agencies
which makes it
hard to setup or
expand business.
Delays
• Many approvals
needed for
foreign
companies
including FDI
approval by the
Foreign
Investment
Promotion Board
(FIPB), RBI, SEBI,
FEMA, the
required Line
Ministry, etc.
Bureaucracy
• Foreign
companies are
subject to tariffs,
taxes which
egates the effect
of low
production costs.
• Domestic
producers get
unfair
comparative and
pricing
advantage
through
subsidies.

15. Changes in Indian Bureaucracy
• The new BJP-led government has also, proposed measures to
reduce the regulation and bureaucracy in industry.
• The new Government of Tamil Nadu, for instance, has
established a Single Window System to accord all such pre-project
clearances at the State Government level.
• The Guidance Bureau will work on providing quick clearances
thus, making it easier for Swedish companies to
conduct/expand business activities in India.
• This will result in immediate improvement in the speed at
which clearances/licenses are granted.

16. Taxation
• Since foreign investment generally comes in the form of a
two-tier structure it attracts a double burden of taxes.
• Portfolio investors from abroad will now have to pay 15% tax
on derivative transactions as income from derivatives is now
classified as capital gains.
• This will have a negative impact on Swedish companies hoping
to invest in India.

17. Changes in Taxation
• In the recent budget announcement, the government said not
resort to retrospective taxation in the future and this law
would not be reversed.
• He also aims to create a uniform taxation regime. This will
have a positive impact on Swedish companies – reducing the
risk of them being subject to a complicated tax procedures
and retrospectively imposed taxes.
• The new government is in the process of implementing the
GST (goods and services) tax in the coming months. This will
result in the removal of various indirect taxes like luxury tax,
state surcharges etc. It will reduce the tax burden on Swedish
companies and will potentially lead to an efficient tax regime.

18. Infrastructure
• These infrastructure deficiencies add to the cost of Swedish Companies doing
business in India.
• The 12th Five Year Plan of the government has targeted the following through Public
Private Partnerships (PPP):
• $1 trillion on infrastructure.
• Additional 180 airports
• 6000 miles of new Highways
• $60 billion investment in Ports
• In fact the Indian Government is also focusing on increasing the private sector
investment to 50% that would give an opportunity to Swedish Companies to
participate.
• The new government has also announced a number of initiatives and policies such as
a focus on access to financing, efficient land acquisition and environmental
clearances, progressive tax reliefs to incentivize developers and equipment suppliers
in order to boost infrastructure development in India.
• BJP Government is focused on the Country’s investment in infrastructure to increase
to 10% of its GDP by 2017 to achieve and sustain 8 to 9% GDP growth over a 5-year
period.
• If this happens the ease and quality of doing business in India will improve
significantly for Swedish companies.

19. Labor Force
India, with the second largest (after China) and one of the youngest labor
forces in the world, has an abundance of labor ready to be employed in a
variety of blue and white-collar jobs by Swedish companies.
• In 2011, the Indian workers directly and indirectly employed by Swedish
companies stood at half a million (5 times more than 2006).
• Low labor costs are a benefit of doing business in India and an
appreciating rupee vs. the dollar further reduces labor costs relative to
other countries.
• India has a complicated minimum wage structure – varying from state to
state and by occupation.
• Swedish companies in India pointed to the access to high quality white-collar
labor and English-speaking workers as benefits of business in
India.
• The BJP in its manifesto discussed vocational programs (National Multi-
Skill Mission) and development of women’s entrepreneurial clusters. If
implemented properly, these steps should give Swedish companies in
India benefits in the long term.

20. Low Cost Production
• India is considered a LCC or a low cost country for production.
The costs of entering the Indian market are extremely high
thus Swedish companies in India don’t recognize the
comparative cost advantage of doing business in India initially.
• In the long-term however, companies see the comparative
cost advantage in India as an attractive reason to set up
business in the country.
• Low labor costs and easy access to raw materials bring the
cost of production down. However, Swedish companies have
not realized the cost advantage in India to its full extent.
• As previously mentioned, firms are forced to spend large sums
on paying tariffs, obtaining licenses etc. and thus the
advantage of low cost production is often negated.

21. Special Economic Zones (SEZs)
Used to
encourage
investment,
generate
employment
and promote
economic
activity
Special
Economic
Zones
Operational
SEZs has
increased from
19 to 153
including a new
defense SEZ in
Gujarat
Benefits include
subsidized
electricity,
minimum
regulation, &
tariff removal
etc.
Plans to
accelerate
development of
IT SEZs and
restore tax
exemptions
(DDT, MAT etc.)

22. Financing and Banking
• A big advantage that Swedish companies highlighted about
business in India was the access to financing.
• India has an extensive financing system for large Swedish firms
including both traditional and alternative channels of funding.
• Sources of financing include domestic debt capital markets
(bonds, debentures etc.), equity capital market (domestic
listings, private equity players), external commercial
borrowings and both short and long term rupee funding from
domestic and foreign banks.

23. Changes in Financing
• The RBI recently gave out two new banking licenses for the
first time since 2004 and there is hope that there will be a
further expansion of India’s banking system in the years to
come.
• RBI governor, Raghuram Rajan, is also expected to announce
policy measure that allow firms to obtain banking licenses ‘on
tap’ if they meet certain regulations.
• For the last few years till 2013, foreign banks were only
allowed to set up branches in India. However, the RBI also
announced in late 2013 that foreign banks would escape many
regulatory measures if they operate as ‘wholly owned
subsidiaries.’

24. Land Availability & Office Space
• This area being less of a challenge for Swedish companies can be
attributed to the changes in FDI policies along with measures that
make it easier for foreign companies to set up office branches,
production units etc.
• According to FEMA (Foreign Exchange Management) Rules (2000),
foreign companies can buy land to set up branches or other places
of business to carry out a permitted activity and not for anything
else.
• Amendments to the Land Acquisition Act in 2013 made it much
easier for the government to acquire land all over the country.
• The government will now look to acquire non-cultivable land to
hand it out for industrial and research projects.
• These proposed measures along with the continued development of
infrastructure will lead to an easier process for Swedish companies
when attempting to buy land and new office space in India.

25. Investment/Expansion Plans
• Despite the decreasing perception of the business climate
Swedish companies have a long term operating plans
• Less than 10% of the Swedish companies experienced a loss of
revenue, resources during the years of Indian economic
slowdown (2010-2012)
• In 2013 over 30% companies were looking to increase their
investments by >21%.

26. Conclusion
• On the whole Swedish companies enjoy doing business in India for a
number of reasons.
• They hold competitive advantages in terms of product quality,
design, management and brand name. The companies experience
an increasing demand for their products and despite the increasing
costs of production. Swedish companies in India continue to
generate large profits.
• There are a number of factors that point to longer-term
commitment of Swedish companies. These include the increasing
employment of local workers; only 4% of the companies as of 2013
were planning to decrease future activities and an increasing
number of companies with multiple offices across the country.
Companies have come with the message of ‘Think global, act local’
by putting an emphasis on hiring Indian workers and adapting their
business models.

27. Conclusion (cont.)
• As India undergoes a huge change in its government and foreign
policies, Swedish Companies are likely to increase business activity in
the Indian Market. With a pro-industry regime, many benefits are being
provided to foreign investors such as single window clearances,
increased FDI in defense, e-commerce and insurance, no retrospective
taxation and easier taxation policies.
• A better-developed and more skilled workforce will improve the quality
of doing business activity in India.
• The government is now prioritizing infrastructure development, which is
a major challenge currently to business in India. This is being done
through PPP which is an advantage for Swedish companies.
• Despite the general trend of decreasing perception of business climate
in India as reflected by Swedish companies in the Business Climate
Surveys of 2008-2013, it has been concluded that this is likely to change
in the new future.
• After years of policy paralysis and economic slowdown affecting the
Indian economy, the coming of the new government and emphasis on
investor friendly policies will potentially result in the significant
improvement of the ease of doing business in India in the coming years.