Zia Mody: How U.S. Investors Can Do Better Business in India

This interview with Zia Mody is part of the Asia program’s Women's Voices From the Indo-Pacific Project, produced by Senior Fellow Manjari Chatterjee Miller and Research Associate Zoe Jordan, featuring influential women in India’s political, economic, technological, and social fields whose work matters for the U.S.-India bilateral relationship and India’s relationship with the world. 

Zia J. Mody, Co–Founder and Managing Partner of AZB & Partners, is one of India’s foremost corporate attorneys. She began her career as a corporate associate in the New York office of Baker & McKenzie, where she worked for five years before moving to India to establish the Chambers of Zia Mody, which became AZB & Partners in 2004. The Firm has offices in Mumbai, Delhi, Bangalore, and Pune with an integrated team of approximately 500 legal professionals. Zia is widely acknowledged for her expertise, ranking first in Fortune India’s ‘India’s 50 Most Powerful Women in Business’ list in 2018 and 2019, on which she has consistently ranked in the top ten since 2011. Previously, Zia has been appointed as Deputy Chairman (2013-2021) and Independent Non–Executive Director (2006-2021) of the HSBC Asia Pacific Board, a special invitee of the Ministry of Corporate Affairs to the Competition Law Review Committee, constituted to review the need for amendments to the Competition Act, and Vice President and Member of the London Court of International Arbitration, amongst other honors. 

What do audiences in the United States commonly misunderstand about corporate law, investing, and doing business in India?

A common misconception about investing in India is that the country is politically homogenous. The truth is that ease of doing business and the pace at which American companies can establish themselves in India is highly dependent on the Indian state in which they want to set up shop.^[1] In that sense, India is somewhat like the European Union, where different states offer considerably different experiences. State laws differ in terms of labor law, environmental law, and property laws. This can affect, for example, land acquisition terms for factory construction. So, it is very important, especially for large projects, to be mindful of different state laws.

But, if you have a party forming a strong center government – as is the case today with the ruling Bharatiya Janata Party – then  it may be a little easier to do business in the states where that same party is also in power with less chance of misalignment.  In states where there is a new state party that has won elections, such as in Andhra Pradesh, that party  may not always honor deals established by the electorally-defeated party.  Reading state politics right then is very important.

Another unique feature of India’s business landscape is that it is virtually the only country with mandatory Corporate Social Responsibility (CSR) laws. CSR is an obligation established by the center which requires companies under the Companies Act to donate a certain percentage of profits to a recognized eligible charity. India’s central CSR legislation has benefited rural India, because a lot of the money goes to non-governmental organizations which work in these areas. It has also allowed a certain percentage of company revenue to be used for purposes which it otherwise would never have been used for. This is not something an American company would likely be aware of, and this law applies regardless of the state they would like to do business in.

What are the most consequential factors that you think will play a role in India’s relationship with the United States or world in the next 3-5 years, based on your experience of advising multinational companies, equity firms, and investment banks?

The current pressing concern is India’s predicament being caught between the United States and Russia in the Ukraine war. It is critical for India to manage this crisis so it doesn’t end up in a lose-lose situation. The longer the war persists, the worse it will be for India. Both Russia and the United States will eventually demand India choose a side. And I wonder how long India will be able to continue its historically well-served policy of nonalignment. There has been a very robust United States-India dialogue at the leadership level, which has led to greater investment by the United States in India and more cooperation in all sectors. But bilateral corporate interactions and economic friendliness follow when security interests are aligned at a government-to-government level. Unless some sort of uneasy peace is engineered in Ukraine, it is not going to be a favorable situation for the U.S.-India bilateral economic relationship.

For U.S. companies doing business in India, I think one of the most critical decisions that any American company planning a joint venture with a local Indian company can make is the choice of the local partner. It is critical to choose a partner with aligned interests and integrity.  Cultural misconceptions and misunderstandings can lead to joint ventures collapsing. When an American client comes in, they normally negotiate, sign a contract, and then believe that is precisely what they have signed up for. But an Indian partner is generally less confrontational in these negotiation discussions, and will often allow some grey areas to remain – they do not like to say “no” flat-out.  Later these issues can surface leading to misunderstandings. U.S. companies can do better by really drilling down the details and making sure of the ultimate goals.

What inspired you to pursue your career path? How does your personal background inform your work?

My father was a senior barrister and I think his lifestyle was my inspiration to become a lawyer as well. The energy and excitement, which came from the fact that he was litigating cutting-edge cases from a constitutional perspective, and was really creating or assisting the court in creating jurisprudence,^[2] was very inspirational. It was a sense of osmosis, and I have never regretted my decision and thoroughly enjoyed my work.

Can you speak of the status of women in the work that you do?

The status of women in India’s legal profession can be divided into two types. One is the practicing barristers in our courts. Here, representation of women is unfortunately dismal, and it has not changed in the last few decades. In India, if you are going to court, then you are part of what is called the litigation practice of the firm – you are specifically engaged in court to fight cases that you are briefed to fight. However, when it comes to women entering corporate firms such as mine, certainly the percentage is higher, and has increased in recent years. Here, women work on mergers and acquisitions, issues of insolvency, banking and finance, intellectual property, etc. I think this will continue because in the war for talent, bright women simply cannot be ignored. Similar to women all over the world, there is a leaky pipeline. When we have an influx of freshers at our firm, about 65 percent of them are women. But the people that then leave, more often than not, are the women, either after marriage or their first child. If you can’t talk them through the process or give them a safety net that they believe in, they quietly slip away. So, retention is the most important criteria for advancement. In our firm, over 35 percent of women make partner, which is also one key index to measure the diversity quotient.

When you look at the state of corporate law, business, and banking and finance in India what are the most pressing priorities for you and your colleagues?

At the macro level, I think the biggest priority for India is building up hard and soft infrastructure, from roads and airports to health care and education. There is a government initiative to make India “self-reliant” which means a large push to set up projects across all sectors and invite foreign capital to join with Indian capital, or even on its own as long as the product is manufactured in India. The government has opened the manufacturing space up to foreign capital and given all the right incentives and made the right noises for companies to begin that process. There is a huge push for private sector spending and to allocate projects that were earlier run by the government.

Finance for infrastructure continues to be a big challenge. The government has realized it needs much more foreign capital (both debt and equity) and therefore needs to do its utmost to be as investor-friendly as possible. Thus, it is investing in identifying some of these pain points – for example, it has reduced income tax, it has created much more transparency in the taxation system by simplifying that system.  It has allowed foreign direct investment (FDI) in almost every sector. Even when FDI is not 100 percent allowed in a given sector, it has softened conditions so that they are not as rigid as they were ten years ago.

India has a massive crying need for jobs. We have such a young India – soon 50 percent of our population will be under twenty-five. But we don’t have jobs for them, and many are not skilled, so where are the jobs that they can turn to? We still have a long way to go, but opportunity is staring at us on the long road ahead.