India Business Law Journal – March 2013

In pursuit of growth and development

‘Growth is a necessary condition and we must unhesitatingly embrace growth as the highest goal’

No prizes for guessing whose words these are, as this is not the first time that finance minister P Chidambaram has said this. Delivering what was his eighth budget speech on 28 February, the minister went on to say that “it is growth that will lead to inclusive development” and that “without growth there will be neither development nor inclusiveness”.

The return to the often-repeated mantra of growth and inclusive development in the budget speech suggests that there is little appetite for anything that will further rock the boat. But is it enough to get the rhetoric right? As the minister acknowledged, “the Indian economy is challenged”, and the budget might have needed more than safe oratory if it was to be “yet another testimony” to the government’s commitment to correct its course.

This issue’s Cover story focuses on an area where growth and development appear to be in short supply: India’s troubled infrastructure sector. The poor state of India’s infrastructure is estimated to shave around 2% from the country’s economic growth each year. Furthermore, the recent decline in investment is having knock-on effects, as prospective investors in other sectors cite the country’s creaking infrastructure as a reason for staying away.

Nikhil Gandhi, the chairman of SKIL Infrastructure, believes that “tough times are the best times to invest in infrastructure”. Yet with the pace of development slowing markedly in recent years, it would appear that not all developers share this sentiment.

So what will it take to turn the sector around and for much-needed investment into roads, bridges, ports, and other vital infrastructure to flow again? Akshay Jaitly, a partner at Trilegal, suggests that “the risk has to be reduced”, and our timely analysis details several ways in which this might be achieved – both during the drafting of project documentation and through policy and regulatory changes.

It takes inspired thinking and vision for countries to reimagine and reinvent themselves during tough times. India managed it in the late 1990s, but the success of the country’s opening up depended in part on inspired thinking by another country: the island nation of Mauritius, through which the lion’s share of India-bound foreign direct investment is routed. The sophisticated financial services industry that Mauritius today boasts was non-existent in the early to mid-1990s.

As we detail in this month’s Spotlight, prompted by the uncertainty surrounding its future as an investment gateway for India and by emerging opportunities that lie to its west in Africa, Mauritius is once again reimagining itself. And after years of focusing on India, the country’s lawyers too are shifting their gaze. “While we are certainly not moving away from India, we are doing more with Africa,” says Stephen Scali at Conyers Dill & Pearman in Port Louis.

What will this mean for India? With the economy once again in need of large injections of investment, and little of this forthcoming from domestic companies, it may be a rather inopportune moment for Mauritius to turn away.

As India struggles to reinvigorate foreign investment, the country’s capital markets are facing different challenges. Prominent among them is the 3 June deadline for listed companies to increase their public shareholdings to 25%.

Writing in this month’s What’s the deal?, Rahul Guptan, a partner at Clifford Chance, examines the nuances of the year-old offer for sale (OFS) mechanism, which was introduced by the Securities and Exchange Board of India as one of the routes through which an increased public shareholding can be achieved.

Our coverage details the issues that lawyers must resolve before a transaction can get off the ground. With more OFS transactions expected in the next three months, it seems likely that this mechanism will become a permanent feature of the Indian capital market landscape. In-house lawyers would do well to take note.

Are lawyers ignoring the spirituality and humanity of their profession in exchange for what they see as advancement? Linda Spedding, an independent international legal adviser in environmental law, who has been involved in donor-financed environmental projects in Asia, thinks they are. Writing in this month’s Vantage point, she provides much food for thought – and reasons to pause and ponder – on why almost everything we do seems to be aimed at being bigger, better, faster.

This month’s Intelligence report provides food for thought of a different kind. It introduces 50+ small and mid-size law firms across India that in-house counsel and lawyers abroad would do well to know about, especially as they look to get more value out of tight legal budgets.

While some in-house lawyers and foreign firms already make good use of small and mid-size Indian law firms, many others are simply unaware of the sheer depth and diversity of services on offer. With this in mind, our coverage seeks to shed light on the unsung heroes of India’s legal profession and introduce in-house counsel and foreign law firms to a large number of high-quality Indian law firms they may not have been aware of.

After six years of analysing and studying India’s legal market, India Business Law Journal is convinced as never before that the depth and breadth of expertise in India’s small and mid-size law firms deserves attention.