Question: Can foreign insurance companies set up wholly owned subsidiaries in India? There are several well known foreign insurance companies which are interested in making a 100 per cent investment in an Indian venture.
ANSWER: In the life insurance business, the foreign direct investment regulations do not currently permit 100 per cent investment in an Indian company. However, the government is seriously considering amending the rules to permit foreign enterprises to set up a wholly owned subsidiary company in India to undertake the life insurance business.
An amendment will have to be moved in Parliament for this purpose as and when a decision is taken. Most analysts are of the view that there is no risk in permitting 100 per cent investments in companies involved in the insurance business because there are detailed guidelines of the insurance regulatory authority. Several checks and balances are already in place to monitor overseas investments which provide reasonable guardrails. The 100 per cent limit, when permitted, will definitely benefit the life insurance business because promoters need to keep capitalizing the company to satisfy the solvency norms which are prescribed by the Insurance Regulatory & Development Authority of India.
Question: I have been in the hospitality business both in India and the Gulf. My son has now qualified from an international school and he is keen to set up a chain of fast food outlets in India. Is there scope for doing so considering the presence of well established global chains dominating the Indian market?
ANSWER: In the first quarter of this year, profitability of most well known quick service restaurants (QSRs) has been under pressure. This is partly due to the fact that new Indian QSRs have entered the market and are offering bargain deals. In the past, global brands were preferred by aspirational consumers. However, there is a new market which is growing in India comprising of young, experimental Gen Z customers who are dictating consumption patterns and are not just attracted to the brand name. The Indian consumer today is spoilt for choice and has the facility of ordering different kinds of food on account of food delivery aggregators.
Customers are getting experimental and if they find the user experience to be favourable in any of the new age Indian brands, there is a consumption shift. Of course, the global brands are trying to meet the new challenges posed by local brands by offering attractive discounts and promotion deals. Indian brands are having no difficulty in marketing in view of the food delivery aggregators and are able to reach thousands of customers and gain scale.
The formalisation and continuous expansion of domestic QSR chains has impacted the growth story of international brands because domestic chains are more adept at offering food having regard to the regional tastes of consumers and providing a wider variety of fast food snacks. Your son is therefore right in his aspiration to set up a fast food chain in India because the prospects are enormous having regard to the fact that India has a large pool of around 300 million middle class consumers which is more than the population of England, France and Germany put together.
Question: I have been offered a five-year assignment by a company in Hyderabad which is providing critical services for healthcare management in the United States. I am worried that this facility may not continue for long. Hence I am not sure about the prospects.
ANSWER: Your worries are unfounded. Global capability centres have been set up in India which serves as a hub for critical functions in the healthcare field. These functions include clinical applications, product development, data and advanced analytics and digital operations. The GCCs are developing state-of-the-art products in genomics, clinical research, personal care, and predictive scheduling which is part of the healthcare ecosystem.
Indian GCCs are grappling with challenges faced by the American healthcare system, such as rising care costs, nationwide staffing shortage, and high rate of workforce burnout. Artificial Intelligence is being used as a technology tool to solve major problems and specially to free up time of caregivers, doctors and nurses so that they can improve the quality of patient care. AI-powered tools help patients to find information and place requests for appointments, medication refills, etc. Teams in India are working round the clock to provide patients any-time any-where care.
The American healthcare system has greatly benefited by GCCs operating in India and accelerated and integrated the latest healthcare technologies to improve patient outcomes and increase the access to affordable care. Therefore, there is a great future as some of the Indian GCCs are each employing around 1,500 techies, and by the end of next year the number is expected to double.
HP Ranina is a practising lawyer, specialising in corporate and tax laws of India.