EMIS Emerging Market Information Service IndiaBPO

Government Policy Apart from cost advantages, India's success as a global outsourcing hub can be attributed to its world-class IT education, its large graduate population and its historic ties to the English language, global business consultancy AT Kearney said in a report. The telecommunications industry, which is the backbone of IT and IT-enabled services (ITeS), was one of the early beneficiaries of the economic liberalization that started in 1991. Both domestic and foreign businessmen have recognized India's potential to become a global outsourcing hub. One of the leading Indian outsourcing companies, Tata Consultancy Services (TCS), was set up in 1969. U.S companies General Electric, Texas Instruments and Motorola set up captive centers, meaning wholly-owned offshore subsidiaries performing various tasks for the parent company, in India in the mid-1990s. Special Economic Zones (SEZs) have been in operation in India since 2000 and are available to both Indian and foreign-owned ITO and BPO operations. SEZs have preferential tax rates and in some cases, an outright tax holiday for BPO firms. Tax exemptions may include income tax on export income, minimum alternate tax (MAT), central sales tax (CST), service tax and state sales tax and other levies extended by the respective state governments. SEZs operate under a single-window clearance for central and state-level approvals. External commercial borrowing without maturity restrictions is also available. Another common option for Western companies is to set up captive organizations in India, which will have to comply with a number of laws, including the Foreign Exchange Management Act of 1999 (FEMA); the Information Technology Act of 1999; the Companies Act of 1956; the Customs Act of 1962; the Indian Contract Act of 1872 and the Industrial Disputes Act and Workmen Compensation Act of 1951. As a common law-based legal system, India's legal environment is broadly familiar to the international business communities in countries in which English is the first language. According to British legal firm Berwin Leighton Paisner LLP, lawyers trained in common law jurisdictions and Indian corporate lawyers advising the Indian outsourcing providers are generally comfortable with their respective jurisdiction's legal principles and ways of contracting. Both local and foreign litigants have the right to have their cases tried by an independent judiciary in various High Courts with the ultimate right of appeal to the Supreme Court. In addition, the UK is amongst the reciprocating territories, whose court judgments can be enforced directly in an Indian court. Reciprocating territories are countries or territories outside India that the Central Government has declared reciprocating in the Official Gazette. Liberalization SEZs, captive units Legal and Judicial System Source: AT Kearney, Berwin Leighton Paisner LLP, bpooutcomes.com Any redistribution of this information is strictly prohibited. Copyright © 2013 Internet Securities, Inc. (trading as ISI Emerging Markets), all rights reserved. - 13 -

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