Wednesday, December 31, 2008

Should foreign law firms be allowed to operate in India?

In a very well reasoned article, Som Mandal, the Managing Partner of a leading law firm in India, FoxMandal Little gives us three solid reasons why we should allow foreign firms and also allays our fears on two counts.  Take a look:

One, as more and more Indian companies begin to do business outside India, foreign legal advice is increasingly needed.  Hence the presence of foreign law firm in India is going to be of help to India Inc's increasing appetite for investing in foreign shores.

Second, it gives greater opportunity, better pay to our young lawyers and also exposes them to international best practices.

Third, those service sectors that have fully liberalised have experienced much higher growth than those that are still closed.  Biotechnology, IT and telecom, for instance, have achieved growth rates of between 30% and 37% in 2005-6.  Legal, accounting and railways are all closed and achieved only single digit growth in the same period. 

Then coming to some fears:

On the fear that foreign law firms will take away the litigation work of Indian lawyers in Indian courts; it can at best be an unfounded fear.  They will find it that their learning curve in this respect is far steeper than imagined.  Besides, the rules can be easily amended to keep the foreign firms away from this work.

On the fear that the Indian firms will not be able to compete with the foreign firms because of their size, it should be remembered that in the presence of a level playing field in India for the legal services sector, there are glaring disparities among law firms in terms of size, revenue and quality.   So, mere presence of bigger firms does not necessarily mean no work for smaller firms.  Presence of bigger firms need not necessarily sound death knell for the smaller firms.  Experience proves this.

Saturday, December 06, 2008

Query on the offset policy answered

Ashish informed me that he could not get the meaning of "mandatory offsets would mean that its armed forces would get less from the nation’s defence expenditure" in the article on defence offset policy.

Here is my take on the subject:

To understand the full meaning of it, let us look at what is meant by offset; once again. An offset is a compensation that the buyer is seeking from the seller; isn't it? And what is the form in which this compensation is being expected? In the form of co-production, licensed production, technology transfer, outsourcing of components, etc., related to the defence item imported or investment, collaboration and similar compensatory arrangements in civilian areas.

Is the seller going to give it to the buyer for free? The obvious answer as we all can guess is a big NO. Then for every Rs. 100 that you spend on procuring defence equipment, how much worth of actual equipment are you getting? Isn't the answer clear that it is Rs. 70? (Because the offset policy mandates about 30%.) Had the offset policy not been there, what would have your Rs. 100 bought? Equipment worth Rs. 100; isn't it? There lies the answer for the query raised.

But then, why should we go for an offset in the first place? Again it is obvious. That's a conscious choice the government is making. It is not just the equipment that really matters. What equally matters is the ability to manufacture the equipment by way of technology transfer or by having a component of it manufactured in the country for improving our technological capability and for generating employment in our economy out of the money that we are spending.

Hope this answers the query raised.