RBI Vs. PayPal - A Few Million Indian Casualties

Reserve Bank of India (RBI) and PayPal has been up to arms for some time now- multiple times, multiple attempts, multiple regulations and the only casualties have been Indian freelancers and small Indian IT start ups that have been using PayPal for their payment processing.

I received the most recent PayPal email on this yesterday that says..

1. Payments from PayPal needs to be withdrawn to bank account within 7 days
   
   This is most likely because if they hold money for more than 7 days RBI would want them to be treated like a bank(also pay interest) and they would come under RBI regulations. RBI doesn’t seem to understand the “online wallet” concept yet and PayPal don’t want to have RBI as the big boss either. So, the burden is now on users to move their money out within 7 days.
2. Export related payments may not exceed $500/transaction
   
   We are still stuck with the FEMA rules that were framed pre-internet/ecommerce revolution and PayPal would need to report any transactions above $500 to RBI – which they want to avoid and so they have put the burden on their users.

Now let’s try to understand what this means for India as a country:

1. The whole process of accepting payments from International clients becomes a lot more hazardous and restricted resulting in client’s getting irritated about working with Indian freelancers. Think if a client needs to pay you $600 – he will have to make two separate payments – isn’t it an additional hazard? Why would they take this trouble when they have other people to do the work? ( India isn’t the only country that is good for outsourcing )
2. As a consequence of the above, some of the clients would move out – especially because they have tons of freelancers in countries like Philippines and Vietnam waiting to do similar work at an even lesser cost.
3. At least a few millions Indians earn their bread as freelancers and some more employed with really small IT setups that are currently using PayPal. As this problem takes a toll on the number of clients who outsource work to India, many of these people would be effected – lose their clients, resulting in lesser income or going jobless ( as if we don’t have enough of them already )
4. Lesser work coming to India with same number ( rather increasing) number of freelancers would mean a higher competition, resulting in even cheaper rates and lower quality of work offered by freelancers, earning Indian freelancers an even worse reputation.

And for those who are touting PayPal alternatives, I can say from firsthand experience, none of these alternatives have half the credibility that PayPal has and so most international clients would think ten times before using them.
While I am not even close to being called knowledgeable about banking regulations or economic reforms, after being in the industry for almost 9 years now and being working with International client for more than 5 years I have some understanding of how business works. Unfortunately I don’t see any positive impact of these regulations on the Indian freelancer community and the innumerous small businesses that are cumulatively earning at least a few million dollars every year for the country.

Isn’t it time we look back at our rule books that are way outdated and rather than putting more and more restrictions try doing things that help these people grow their business, earn more money for themselves ( I believe that adds to the country’s economy also).

Frustrated !!!!

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India Inc losing its shine? How can we resurrect brand India?

I hate to paint a gloomy picture but things certainly are not going well for India Inc. Started with Singur’s Nano plant shutdown, lynching a Noida CEO by the labour . Though these are not as catastrophic as what is happening in the US, these are warning signals to put our house in order. All this is punctuated with bomb attacks on key cities without fail.
The business confidence index is reducing as per the new report of NCAER.Following are the few factors, which are pulling down India’s brand value:

1. Rising inflation
2. Terrorism and lack of safety.
3. Political uncertainty and ambiguity
4. Strict regulations for Mergers and Acquisitions
5. Unfriendly labour laws to conduct business.
6. Lack of land regulation and reforms.

Amidst all this how can India show up a brave face and attract more investments and provide jobs for millions of young Indian who are ready to join the workforce?
The answer is not that simple. We need a government that understands that national security along with energy security is of paramount importance. Present government has spent too much time on energy security (nuclear deal) thus neglecting national security. Terrorists are exploding bombs at will. I understand that dealing with terrorism is not an easy task in India, because the enemy is within. But that is not a reason for inaction.
Next are the land reforms, which should denote what land should be granted to SEZ’s for development. This should not come at the expense of farmers. There should be a consensus driven decisions against unilateral decisions. What happened in Singur should drive this policy.
Easing the regulations on Mergers and acquisitions and increasing the FDI limit in key sectors like Insurance should serve as a starting point. The difficulties of Sahara acquisitions and the problems faced by Idea in acquiring Spice telecom should not be repeated.
Companies would like a pool of talented resources to hire. India provides that in plenty. However, Indian labour laws protect the employees from being fired. Though this is good from a employee perspective, it would be difficult for a company to do business in tough times. Striking a balance should ease these laws.
Inflation remained at 12.14% for the second week, which is both good and bad news. The apex bank is no mood to ease the interest rates anytime soon, which would reduce the liquidity and hence the demand. This would bring the inflation down. Looks like it is happening. If the predictions were anything to go by Inflation would come down to 10% by the end of this year – I hope it will. Unlike the Wild West, our RBI has always been cautious which has served us very well.
RBI should be commended for a job well down. China has reduced the interest rates in spite of inflation. Their logic is fuelling growth, which would reduce the inflation. Those are two different approaches taken by two different countries. Only time will tell that India’s measures have worked, but we will never know what happened with China because there is no transparency.
I still hope to believe India is the hottest destination for the investments, but we need to get our state in order. We need better governance.
What do you think can be done differently with the issues mentioned? What do you think India needs right now?

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Doing Business in India: Getting even worse !

I have been following the World bank reports for last 4 years and have featured it earlier on this blog as well. India is actually getting worse every year !

Infact, even in comparison to 8 South Asian Countries, India comes 2nd last just above Afghanistan. It is easier to do business in Bhutan, Nepal and

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Doing Business: Need for improving regulations & Empowering Entrepreneurs!

You have to give it to Google. It never ceases to surprise the world with its seemingly unorthodox style of operations. Be it their oh-so-cool work atmosphere, strategic marketing tactics generating tons of hype even before the product launch, the fascination with Beta launches, and last but not the least their acquisitions and business deals.
Google manages to pull out rabbits out its hat with such uncanny frequency that most of the times, the rest of the marketplace cannot predict what is going to come next. However, what is more interesting is that even after so many products and acquisitions, Advertising revenue continues to remain the Bread and Butter for Google.
However, with the dynamics of the marketplace changing, Google off late has gotten into a little diversification. The diversification though till now has been more from a “Seeing Beyond Internet Search” per say than monetization models. Android (OS) and now its own phone Google Nexus bear testimony to the fact that Google is indeed

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A week of Good policies & Bad policies!

Making a Difference for Entrepreneurs, the eighth in a series of annual reports published by IFC and the World Bank is a report to reckon with. The study conducted on the world’s economies gives ranking to countries after executing lot of calculations on various parameters on “ease of doing business”. The study is like report card for all the efforts put in by world’s economies covering the period June 2009 through May 2010.

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Doing Business in Singapore: Guide for Indian Entrepreneurs!

India and Singapore are on a path of increasing economic integration. The ties that bind these countries have a long history – they are rooted in a common culture and a shared legacy of being former British colonies.
Since 1991 (as a result of India’s Look East trade policy), cultural exchange, immigration and military links between both countries have increased dramatically. By 2001, Singapore-India bilateral trade had increased to S$2.65 billion. In 2005, both countries signed the India-Singapore Comprehensive Economic Cooperation Agreement (CECA).

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Top 5 tips to name your business!

We really don’t believe in people and blog posts that dole out fixed rules on naming a company. It’s not the name the makes the business famous, it’s the quality of services or products they provide.
Apple doesn’t have the ‘cool quotient’ today because it is merely named Apple. It’s the series of successful products they have given to the world. But there are some things you must keep in mind before naming your business only for the sake of convenience.

Here are a few overarching tips and guidelines.

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Mobile Roaming Charges may soon become Free – Draft Telecom Policy 2011

The new Draft Telecom Policy 2011, which is set to replace the existing Telecom Policy has number of amendments that should make Indian consumers happy and at the same may create more anguish for Telecom Operators – who are already reeling under tremendous margin pressure to keep themselves afloat.
One of the proposals in the new Draft Telecom Policy is to abolish the Roaming charges completely. This will be a very big positive for Indian consumers

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