India's liberalisation policy has put the economy back on the path to recovery. The bureaucratic constraints, which denied India growth and prosperity ended as the government introduced a series of economic reforms in 1991.
The macro-economic indicators prove the point, indicating improved export performance, a stable currency and declining interest rates.
The manufacturing sector and the capital goods sector (a precursor to economic growth) have both registered an improved percentage of growth compared to previous years.
The government of India is acutely aware of the need for economic reforms in the country and the need to streamline the legal system to meet the demands of the modern business world.
Serious efforts are being made to amend and upgrade legislation to support and strengthen the economic reform process.
Foreign investors entering the Indian market play their part in demanding that strict guidelines and independent regulators be put in place as they enter the new market.
For example, both domestic and foreign investors are pushing for the establishment of the Telecom Regulatory Authority of India.
Similarly, in the insurance sector, the Malhotra Committee has submitted recommendations to the cabinet for setting up an Insurance Regulatory Authority. The aim, for both the investor and the government, is to achieve a high degree of confidence in India's deregulated market.
An unprecedented increase in demand for efficient legal services has arisen, particularly in international trade and corporate legal practice.
Multi-nationals, foreign and Indian companies are demanding high quality legal services in keeping with international standards. The Indian legal profession has thus developed to meet the demands of this new business environment.
Until recently, the Indian lawyer was, in the main, a litigator. Few law firms existed as most lawyers practised independently, providing a one-man service. The trend, however, has changed over the past few years to meet the needs of foreign companies who prefer to work with 'firms' operating to international standards.
Furthermore, new areas of practice have emerged in the wake of the privatisation of many industries which were once the sole domain of the public sector such as civil aviation, power, telecommunications and infrastructure. Although some foreign law firms have opened representative offices in India, many others prefer to instruct local law firms. Using Indian law firms provides clients with a cost-effective service as well as local support which is beneficial when dealing with an unknown and diverse market.
There may well be questions in the minds of some potential foreign investors in view of the Dabhol power project controversy. Most people, however, realise that the previous 40 years of the Indian socialist system, with its emphasis on public sector growth and self-reliance involved in maintaining a closed market economy, only resulted in marginal growth rates and instead ran up foreign debts up to $90 billion, increasing government deficits and driving up interest rates and inflation.
Investors realise that criticisms against individual projects undertaken by foreign companies are not something specific to India – such criticisms exist even in developed countries such as the US, for example the resentment against Japanese companies acquiring US companies or the prejudice held against Euro Disney in France. The unfortunate controversy over the Enron project must be seen as a one-off case and cannot be extrapolated to other investment projects throughout the country.
Foreign investment continues to pour into the country. Tektronix, a leading US manufacturer of colour printers, video systems and network displays, has set up a subsidiary in India. The company intends: “To demonstrate a commitment to the strategic market India offers.” Honda Motor Company of Japan is entering into a joint venture agreement in India and is the second of such collaborations by a Japanese car company in India after Suzuki Motor Corporation. There is little doubt that the reforms are here to stay.