INVESTING IN INDIA

KAITLYN ARNOLD
MUIN-445
11-16-2010

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 TABLE OF CONTENTS

Executive Summary………………………………………………………………………………6

I. Background
……………………………………………………………………………………...7
Geography
Brief History
Crown Jewel
Independence & Coercion
Cultural Divides
People
Current Population & Demographics
Education & Literacy
Culture
Languages
Religion
Education
National Identity
Indian Diaspora
Government
Structure
Political Parties
Current Leaders
Economic Reforms
International Relations & Foreign Affairs
Stability
Human Rights
Health Issues
Corruption

II.
Economy…………………………………………………………………………………………..20
Currency
GDP
Unemployment
Trade
Imports
Exports
Growth Overview
Challenges to Economic Growth

II. Business………………………………………………………………………………………….28
Starting a Business
Relevant Laws
Sectors
Types of Incorporation
Business Climate
Government Influence

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 Legal Considerations
Business Practices
Capital Sources
Bank Loans
Microfinancing
Existing Foreign Investment

IV. Consumer Market………………………………………………………………….37

Personal & Household Income
Personal & Household Expenditures
Durables

VII. Intellectual Property: Copyright………………………………………………...41

Governing Law
Background
Types of Works
Musical Works
Sound Recordings
Cinematographic Works
Definitions
Registration
Copyright Enforcement Advisory Council
Copyright Royalty Board
Performers’ Rights
Indian Performing Rights Society
Phonographic Performance Ltd.
Broadcasters’ Rights
Moral Rights
Compulsory Licenses and Covers
Fair Dealing
Work-for-Hire
Joint Authorship and Transferral of Copyrights
Foreign Works
Berne Convention
Universal Copyright Convention
Infringement Remedies
Piracy
The Indian Music Industry

VI. Technology…………………………………………………………………………..54
Consumer Electronics
Internet/Broadband
Mobile

VIII. Entertainment & Media Industries…………………………………………….

…….58
Music
Indian Music

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 Classical
Musical Instruments
Folk & Tribal
Religious
Bhangra
Filmi
Brief History of Filmi
Music Business
Recorded Music
Physical Sales
Marketing Non-Film Music
Downloaded Music
Radio Broadcast
Licensing
Live Performance
Venues
Outlook
Film
Television
Advertising
Internet
Radio
Television
Print
Out of Home

IX. Immigration ………………………………………………………………………………….79

Employment Visa
Business Visa
Entry Visa

X. Taxation………………………………………………………………………………………..82
Residency
Non-Resident
Resident
Not Ordinarily Resident/Ordinarily Resident
Taxable Income
Salary Income
Self-Employment Income
Social Security Taxes
Corporate Tax
Capital Gains Income
Wealth Tax
Withholding Tax
Double Taxation Agreements
Service Tax
VAT
Entertainment Tax

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XI. Investment
Recommendations…………………………………………………………….89
Infrastructure
Technology
Content

X. Issues with
Investment……………………………………………………………………....93
Tax & Royalty Considerations
Macroeconomic Considerations

Bibliography……………………………………………………………………………………...95

Appendices……………………………………………………………………………….……….98
A 99
B 101
C 102

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EXECUTIVE SUMMARY
As the second fastest growing economy in the world, India’s rich and diverse culture is

making its presence felt through technological innovation, music, film, and impressive economic

reforms. Nearly every industry in India is growing at gathering speed as the unemployment rate

gradually decreases, wages and disposable income gradually increase, and the government works

to lower the number of its population at or below the poverty line. The Indian market is vast,

ready and willing to be developed; the government is slowly welcoming foreign investors and

business into the country to share its awesome growth potential in exchange for financing the

entrepreneurial spirit of Indian companies.

Although India’s legal framework is relatively sound, lack of implementation and law

enforcement threaten India’s prospect for growth. It is a country comprised of many different

ethnicities, ideas, and ambitions, and so its democracy is a slow process and hefty producer of

bureaucracy and corruption. As future generations of Indians shape the national identity—the

notion of what it means to be Indian—the government may be better suited to address its

weaknesses and create an infrastructure which can support the rapidly growing IT, mobile, and

wireless sectors which could very well be India’s door to securing its place as a leading player on

the global stage.

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 BACKGROUND

Geography

According to the U.S. State Department, India occupies a land mass that is 3.29 million sq. km.

(1.27 million sq. mi.), which is approximately about a third of the size of the United States. Its capital is

New Delhi, among other and more populated cities such as Mumbai and Kolkata. India’s populations are

situated in terrains ranging from the Himalayas to river valleys, to deserts in the west of the country, so the

climate also varies from alpine to temperate to subtropical monsoon.

Brief History

Birth of Hindu and Islamic Culture

After the Kushan Empire defeated the Romans in the 2nd century C.E., the region of what is now

northern India entered into commercial trade and began its climb to prosperity. The Empire reached the

height of its prosperity during the 4th and 5th centuries C.E. under the Gupta Dynasty. This period, now

referred to as India’s “Golden Age,” is the era in which Hindu culture and political administration

flourished.

Beginning early in the 7th century C.E., Islam gradually took hold of the subcontinent over

approximately 700 years. The Islamic Arab Muhammad of Ghor successfully invaded India in the 12th

century, leading to the formation of the Delhi Sultanate, a series of dynasties under which India expanded

in its Islamic culture. By the 16th Century, the Mughal Dynasty had ended the Sultanate, taking control

over vast areas of what is now southern India and more firmly establishing Muslim traditions. Although

political struggle did not generally effect much of Indian society, the culture of its courts “evolved into a

unique blend of Hindu and Muslim traditions.” (U.S. State Department, par. 11)

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The Crown Jewel

The British established the East India Company in 1619, located on the northwestern

coast at Surat. By the 1850s, their influence had expanded its reach to present-day Pakistan, Sri

Lanka, Bangladesh, and the majority of India. After an unsuccessful attempt by Indian soldiers to

restore the Mughal Emperor in 1857, British Parliament transferred the East India Company’s

political power to the British government. India later became known as the “Crown Jewel” of the

British Empire.

Independence & Coercion

Through the Indian National Congress, Mohandas K. Gandhi led the party into a mass

movement against colonial rule. The British partitioned India with concerns of civil wars

between Hindus and Muslims, the Hindus remaining in India, and the Muslims moving to

present-day Pakistan. The newly forming Indian government negotiated accession agreements

with each state separately, “bribing, threatening, and, in some cases, militarily coercing”

(Zakaria, p. 163) about 500 rulers to join India. India became a Commonwealth of Great Britain

on August 15, 1947, and remained as such after it established its constitution in 1950.

Cultural Divides

The outbreak of World War II ended cooperation between Indian National Congress and

the Muslim League, competing constituencies in call for India’s independence. When British

Viceroy declared war without consulting with the INC, many of its leaders campaigned against

the war effort, and were arrested and jailed as a result. The Muslim League took the opportunity

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to support the British, eventually using the leverage it gained with its loyalty, in combination

with violent threats, to call for a state of its own.

When the war ended, the INC demanded that the British leave behind a single state and

the opportunity for the constituencies to compete for power under a democratic rule. The Muslim

League feared it would be “coerced and crushed” (Schaeffer, p. 212) in the name of democracy.

The British decided that partition was the most promising resolution to the conflict between the

parties, hoping that it would prevent civil war.

Over the following fifty years, India and Pakistan have engaged in four wars over

disputed territories and the rights of Muslims still living in India.

People

Current Population & Demographics

Boasting the world’s second largest population, the U.S. State Department estimates

India’s current population at 1.2 billion, and growing at a rate of approximately 1.4%. (par. 2)

Over all, the male to female ratio is about one to one. As of 2008, 29% of the population lived in

Urban areas comprising 200 towns and cities, the rate of urbanization increasing 2.4% each year.

(U.S. State Department, par.7) By 2030, 40.8% of India's population will be living in urban

areas. (U.S. State Department, par.7)

The Indian government defines urban areas as regions where 75% or more of males are

employed in some field which is not agricultural. (Euromonitor, p. 20) Analysts expect

urbanization to extend beyond the major cities of Delhi and Mubmbai to smaller cities and

satellite towns, due to the lessening quality of cosmopolitan infrastructure and growth of smaller

cities spurred by investment incentives in those areas.

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 The remaining 71% of the population live in more than 550,000 villages. (U.S. State

Department, par.7) The service and industrial sectors employ more than half of rural population,

agriculture employing the remainder. In its consumer lifestyles report on India, Euromonitor

International proposes that “as urban areas become increasingly competitive, rural areas will

represent the next frontier.” (Euromonitor, p. 12)

Education & Literacy

Although the government requires children to attend school from kindergarten through grade 10,

19.5% of the population has no education at all. This is often because children from low-income families

are forced into child labour. (Euromonitor, p. 19) In 1988, the National Literacy Mission was established

to achieve a 75% literacy rate by 2005; (p. 19) this figure has not been met, as the country’s literacy rate

stands at about 61%.

After achieving independence, the government invested greatly in higher education, establishing

institutions such as the Indian Institutes of Technology and Management, which produced successful

businessmen and engineers in Silicon Valley, among other areas and prestigious global institutions. Those

able to boast higher education qualifications increased 183.5% to 13,982,000 by 2007. (Euromonitor,

p.19)

Through its “Education for All” initiative, the Indian government has prioritized female education.

The initiative emphasizes the achievement of gender parity in an effort to curtail one of the highest

percentages of illiterate females in the world.

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Culture

“Over the thousands of years of its history, India has been invaded from

the Iranian plateau, Central Asia, Arabia, Afghanistan, and the West;

Indian people and culture have absorbed and modified these influences to

produce a remarkable racial and cultural synthesis.” (U.S. State

Department, par. 7)

Major Ethnic Groups in India

O thers
Dravidian 3%
25%
Indo-Aryan
72%

Source: U.S. State Department

While the national census does not recognize racial or ethnic groups, it is estimated that there are more

than 2,000 ethnic groups in India.

• Languages

Although the government has recognized 18 official languages, Indian language can be

generally segmented into three categories: Hindi, which is most widely spoken among the

population; English, which is spoken by and between government officials, and the

remaining other languages spoken by tribes or subcultures in India’s 28 states and seven

territories.

• Religions

Despite the British partition and the fact that 81% of its people are Hindu, India also hosts

138 million Muslims which is among the largest of Muslim populations. (U.S. State

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 Department, par. 8) Smaller portions of the country’s population include Christians, Sikhs,

Jains, Buddhists, and Parsis.

• Education

The low female literacy rate in India is due greatly to the society’s traditionalist attitudes

which allow for the subjugation of women; if a family can afford to send only one child to

school, the male child will be sent over the female child in most rural areas. However, urban

India is adopting a very progressive attitude towards female education and independence. The

2001 census indicated that the gap in male to female literacy decreased by 3.1% over a ten

year period.

National Identity

A nation of 28 states and countless languages, tribes, and cultures, India struggles to unify under a

common national purpose or ideology. As is often the case with post-colonialist nations, even the Indian

government struggles to define what it means to be Indian. “So many times people think in terms of their

own state,” says one government official. “Not that they are Indian, but that they are Bihari, etc. Only in

calamity do we have a national feeling.” (Lal, p. 72) An economist from Bihar explains, “most Indians…

don’t know the boundaries of the country…what concept [of national identity] there is that exists in India

is from the educated class.” (p. 72)

Diaspora

Those with whom the concept of national identity allegedly rings so true has led them to leave the

country to pursue higher education and business opportunities. The “educated class” has led what is now

known as the Indian Diaspora. In 2002, India’s Prime Minister established a High Committee to “look

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after the affairs of overseas Indians.” (NIC, par. 3) The committee’s website defines the Indian Diaspora

as “a generic term to describe the people who migrated from territories that are currently within the

borders of the Republic of India” and their descendents, who “have succeeded spectacularly in their

chosen professions by dint of their single-minded dedication and hard work. What is more, they have

retained their emotional, cultural and spiritual links with the country of their origin.” (par. 2) The

committee estimates the members of the Diaspora to total over 20 million. (par. 1)

Government

Structure

India’s government is largely based on the United Kingdom’s parliamentary system. 545

directly-elected members of the Lok Sabha and 250 indirectly-elected and appointed members of

the Rajya Sabha compose the Indian Parliament. The Lok Sabha, or “House of the People,” is the

lower house, similar to the British House of Commons or American House of Representatives;

the Rajya Sabha, or “Council of States,” is the upper house, much like the British House of Lords

or the American senate. Twelve members of the Rajya Sabha are nominated by the President,

and the remainder represent the states and Union Territories, totalling no more than 250

members.

The President holds executive power, and is to act on the advice given him or her by the

Prime Minsiter and Council of Ministers. All of the President’s advisors are members of

Parliament, and are jointly and severally accoutnable to the Lok Sabha. Both houses of Indian

government hold “votes of confidence” on a regular basis; should any individual minister or all

ministers receive a vote of no confidence, then each individual who receives the vote must resign

from his or her position.

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 India’s judiciary branch is comprised of the Supreme Court of India, as well as other

High Courts (state courts), District Courts and Session Courts (district and local courts). The

President appoints one Chief Justice and thirty associate justices to Supreme Court.

Political Parties

The two major political parties in are currently the left-wing Indian National Congress

(INC), and the right-wing, Hindu-nationalist Bharatiya Janata Pary (BJP).

Goals of BJP: national security & anti-terrorism; universal health & education; free

market. Goals of INC: welfare of the economically and socially disadvantaged sections of the

society; now adopted free market policies; nonalignment.

Current Leaders

Pratibha Devisingh Patil is the first woman to have been elected president. Her Vice

President is Shri Mohd. Hamid Ansari, and her Prime Minsiter is Dr. Manmohan

Singh.

Economic Reforms

In 1991, the Indian government took drastic action to save itself from a balance of

payments crisis. The reform program shifted government policies toward fiscal deficit reduction,

infrastructure and social sector development, as well as new approaches to industrial and trade

policy, and agricultural policy. As a result of the reforms, most central government control over

industry has been removed, import licensing has been discontinued, a flexible exchange rate has

been implemented; foreign investors are now allowed 100% ownership in a vast number of

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industries, and majority ownership in all industries except banking, insurance,

telecommunications, and airlines. Complications arising from a new policy allowing private

companies to invest in and build the infrastructure India so desperately needs have prevented

those reforms from being successful.

The Indian Finance Secretary explained that “26% [of the population] are below the

poverty line. We brought it down from 34%...in the past 10 years. We need to get them above the

poverty line. We need to get them employment.” (Lal, p. 73)

The motives behind the reforms were to maintain economic growth, become more

efficient, and be better position the country to compete in the global market, though some would

claim that the reforms were and continue to be politically motivated to earn popularity for the

governing party. In the long run, the government intends the economic reforms to enable India’s

state sovereignty in respect to trade rules and human rights, such that the world recognizes it as a

developed country.

International Relations & Foreign Affairs

Seeking a permanent seat on the UN Security Council—a move endorsed by President Barack Obama

on his recent visit to India—India is focusing on reinforcing its commercial and political relationships

with China, the European Union, Iran, Japan, and the United States.

• Indo-Pakistani Wars

Since the first Indo-Pakistani War over Kashmir in 1971, Pakistan and India have made a kind of

recurring and remitting progress toward stable relations. In June 1997, after the fourth Indo-Pakistani

War, the foreign secretaries of both states decided on eight "outstanding issues" around which

15
 continuing talks would be focused. Disagreements over the regions of Jammu and Kashmir remain the

greatest barrier to peace.

• China

In 2006, bilateral trade totaled $24 billion (U.S. State Department, par. 76), making China India’s

largest trading partner, second only to the United States. This is in great part due to the fact that both

countries have been working towards reduced tension along their borders over the past two decades.

Both countries are using their growing economic prowess to improve counterterrorism; although

border disputes persist, Sino-Indian relations remain strategically stable.

• South Asian Association for Regional Cooperation (SAARC)

The members of SAARC include Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan,

and Sri Lanka, and are guided by People's Republic of China, Iran, Japan, European Union, Republic

of Korea, and the United States. Established in 1985, the purpose of SAARC is to promote cooperation

in the areas of agriculture and rural development, cultural appreciation, health, population control,

scientific and technological advancement, narcotics control, and anti-terrorism efforts among its

members. The intentional emphasis on these core issues is to avoid the contentions which tend to

divide the members rather than unite them.

• United States

A rapidly growing democracy, the United States and India view each other as having much in

common on a strategic level. With the Next Steps in Strategic Partnership in January 2004,

the U.S. and India launched initiatives which include HIV/AIDS solutions, disaster relief, a

Trade Policy Forum, CEO Forum, and Energy Dialogue.

Stability

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 “Its society is open, eager, and confident, ready to take on the world. But its state—its

ruling class—is hesitant, cautious, and suspicious of the changing realities around

it….India’s society will stay ahead of the Indian state in the new global game.” (Zakaria,

p. 166)

• Human Rights

In addition to the casualties perpetuated by Indo-Pakistani territory disputes, the Human

Rights Watch group reports that “millions of children in India still have no access to

education and work long hours in the worst forms of child labour.” (Human Rights Watch, p.

275) Although child labour laws have been established in the past decade, “without proper

implementation and adequate rehabilitation of child workers, [child labour laws] are of very

limited utility.” (p. 275)

• Health Issues

According to HIV/AIDS advocacy group, Avert, India is spending about 5% of its health

budget on HIV and AIDS. In 1986, there were 20,000 cases of AIDS worldwide, none of

which were reported in India. (Avert, par. 4) Currently, 2.27 million people are living with

HIV/AIDS, (par. 1) making HIV more prevalent in India than in any other country and

leading the CIA world report to rank India at number four in comparison to the world for the

number of people living with aids.

The third stage of the National AIDS Control Programme was launched in the summer of

2007, and will continue to run until 2012. Two thirds of its $2.6 billion dollar budget is

supposed to be designated for AIDS prevention, and one sixth of it is supposed to be

allocated to treatment. (Avert, par. 36) Additional funds support local level initiatives and

raise awareness of HIV/AIDS through various national campaigns.

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 According to a report issued by the World Bank, India will have to spend 7% of its health

budget on AIDS by 2020 if it cannot curtail the epidemics spreading through New Delhi,

Mumbai, the north and the north east of the country. As Avert states, “this would put further

strain on a struggling health sector which, on top of HIV and AIDS, faces a growing

multitude of health challenges including malaria, diabetes, heart disease and cancer.” (Avert,

par. 63)

In addition to the HIV/AIDS outbreak of the past 25 years, the U.S. Central Intelligence Agency

reports that other major infectious diseases prevalent in India include food or waterborne diseases

such as hepatitis A and E, and typhoid fever; and vector borne diseases such as dengue fever,

Japanese encephalitis, and malaria. In its analysis of India’s competitive advantage, the World

Economic Forum ranked India’s health issues as follows:

Health & Primary Education

(Ranked out of 133)
Business Impact of Malaria 100
Malaria Incidence 103
Business Impact of Tuberculosis 87
Tuberculosis Incidence 99
Business Impact of HIV/AIDS 92
HIV Prevelance 69
Infant Mortality 108
Life Expectancy 100
Source: World Economic Forum

Corruption

One of the greatest obstacles businesses in India face is government corruption. In 2006, the

World Bank surveyed over 4,200 Indian companies to measure the amount and forms of

corruption they faced in conducting their activities; the survey was based on the following

concerns:

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 A % of Firms Expected to Pay Informal Payment to Public Officials (to Get Things

Done)

B % of Firms Expected to Give Gifts to Get an Operating License

C % of Firms Expected to Give Gifts In Meetings With Tax Officials

D % of Firms Expected to Give Gifts to Secure a Government Contract

60

50

40

30 India
World
20

10

0
A B C D
Source: World Bank

The amount of corruption reported in India is significantly greater than that reported by the rest

of the world on average. These reports of corruption come in spite of anti-corruption legislation

that the Indian government has enacted since the 1960s. Research hub Informa World proposes

that “India's ineffective anti-corruption strategy can be attributed to the lack of political will of

its leaders and its unfavourable policy context, which has hindered the enforcement of the anti-

corruption laws.”

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ECONOMY

Currency

India’s currency is the Indian National Rupee (INR). INR 100,000 is equivalent to one lakh,

while INR 10,000,000 is equivalent to one crore. The Economist Industrial Unit reported that the

rupee appreciated by 7.4% against the dollar from 2009 – 2010. This appreciation is represented

in the strengthening exchange rates between the rupee and the dollar, indicated in the chart

below.

Exchange Rates of Chief Trading Partners (EIU)

In October of 2009, India’s foreign currency reserves were “among the highest in the world”

(Economist Intelligence Unit, p. 9), reaching as much as $285.52 billion.

Gross Domestic Product

In terms of its official exchange rate, India’s GDP in 2009 was estimated by the U.S. State

India's when
Department at $1.236 trillion. However, GDPthe
(ppp)
GDP 2007 - 2009
is measured taking into account

purchasing power parity1, the GDP

3.8 more than doubles.
GDP (In Trillions)

3.6
3.4
1 3.2
the amount of money the country could spend if transaction costs were not a factor
3
2.8
2007 2008 2009 20
Year
 Source: U.S. State Department

Landing at $3.57 trillion for 2009, the GDP in terms of ppp has increased steadily from 2007 to

2009, despite a global recession.

Per Capita GDP (ppp)

3,200
Per Capita GDP

3,100
3,000
2,900
2,800
2,700
2,600
2007 2008 2009
Year

Source: U.S. State Department

Because of its large population, India’s per capita GDP is relatively low compared to the rest of

the world, the State Department ranking $3,100 per person figure at 163. However, in

accordance with the GDP, this number is also increasing, indicating that the population is

working its way towards greater and (eventually) more disposable income. If growth rate of last

five years can be sustained, “the average Indian will double his income in less than ten years.”

Trade

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Imports

The U.S. Central Intelligence Agency reported that in 2009, India spent 17% less on

foreign goods than in 2008. Spending $268.4 billion, India earned itself a U.S. State Department

ranking of 14 in comparison to the rest of the world. Its major imports were crude oil, precious

stones, machinery, fertilizer, iron and steel, and chemicals, which it received from China, the

United States, Saudi Arabia, the United Arab Emirates, Australia, Germany, and Singapore.

Import Partners 2009

4.02%
7.16% U.S.
4.86% Saudi Arabia
UAE
Australia
5.36%
Ge rm any
5.02% Singapore
5.18%

Source: Economic Intelligence Unit

Previous to August 2009, Foreign Trade Policy reforms enabled India to reach its goal of

doubling exports over a five-year period, resulting in new employment and lower transaction

costs. The Ministry of Commerce and Industry enacted a new policy, aiming to double India’s

exports over the next five years yet again. The policy’s objective is 15% annual growth rate in

exports until March 2011, followed by a 25% growth rate until 2014. (Economic Intelligence

Unit, p. 92)

India’s import duties are generally on an ad valorem tariff basis2. The total duties on

imports are comprised of a .1 % basic duty (with an exception for farm and dairy products), as

well as additional duties equal to excise duties. (Economic Intelligence Unit, p. 92) In 2007, the

2
Duty or other charges levied on an item on the basis of its value and not on the basis of its
quantity, size, weight, or other factor. (Businessdictionary.com)

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government brought down the peak rate of import customs duties from 12.5% to 10%; in 2009,

importers enjoyed an additional duty reduction on items such as bio diesel and cotton. (p. 92)

Although there are provisions for tariff concessions and exemptions, these are gradually being

sacrificed for lower tariffs overall.

Exports

Ranked 22 in the world, among India’s most lucrative commodities are petroleum products,

precious stones, machinery, iron and steel, chemicals, vehicles, and apparel.

Its exports took a hit in 2009,

Export Partners
decreasing 19% from 2008 to $164.3 billion.

This is probably due to the global recession, 5.59% 12.59% United States

and the reluctance of India’s second-largest United Arab

Emirates
trading partner—the United States—to spend China
12.87%
on foreign goods in its struggling economic
Source: Economic Intelligence Unit
climate.

In 2009, its top three trading partners were the United Arab Emirates, the United States,

and China.

The Economic Intelligence Unit reports that the only exports now subject to the 10%

export tax are goat, sheep, and bovine leathers. In 2000, India launched the Export Import

(“Exim”) policy, based on a similar Chinese model, which designated special economic zones

(SEZs) that grant 100% foreign-equity rights to investors which promote exports. Through

amendments made to its Foreign Trade Policy in 2004, the Indian government also allows a

special category of the SEZs known as free-trade and warehousing zones (FTWZs), whose

23
purpose is to create the infrastructure to facilitate the trading of goods and services. Units within

the FTWZ can trade without currency restrictions. The SEZs can be proposed by any state

government or corporate entity, and essentially render the area duty-free, foreign territories for

the purpose of trade operations.

The Exim Policy is made possible through a series of international trade agreements

“under which India is receiving tariff preferences for its exports.” (Exim Policy, section 2.21.1)

After obtaining a certificate of origin that includes “details regarding the rules of origin, list of

items covered by an agreement, extent of tariff preference, verification and certification of

eligibility etc.,” (Exim Handbook) the export should qualify for preferential treatment under the

Exim Policy.

India requires that “all export contracts must be denominated in freely convertible

currencies.” (Economic Intelligence Unit, p. 96) Export financiers can insure their commercial

and political risks through the government-owned Export Credit Guarantee Corp, or ECGC. The

ECGC covers buyer insolvency, protracted default, contract violation, war, expropriation and

natural disasters, and offers financial protection of up to 75% of losses resulting from export

financing. (Economic Intelligence Unit, p. 97) When bands use the ECGC to cover their entire

export lending the coverage increases to 85%. (p. 97)

Growth Overview

India’s economy grew at a rate of more than 7% from 1997 to 2009. Foreign portfolio and direct

investment contributed to the $283.5 billion in foreign exchange reserves by December 2009.

(U.S. State Department, p. 48) A Goldman Sachs BRIC study projected that India’s economy

will match Italy’s by 2015, and Britain’s by 2020.

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Challenges to Economic Growth

Along with hyperinflation and a national distrust in the government and its officials, the greatest

challenge facing India’s rapidly growing economy is its severe lack of infrastructure to support

brisk and vast changes in technology and market penetration. To address this challenge and

many others, the World Economic Forum held an Indian Economic Summit in 2009 to

collaborate with the Indian government. They propose the following solutions:

• Eliminate the infrastructure deficit;

In 2009, the Indian government launched a pubic-private partnership to

spend $20 billion on six “mega road projects” in the larger cities of Rajasthan,

Madhya Pradesh, Gujarat, and Maharashtra. The private sector is set to contribute

60% of the funding for this project. (World Economic Forum, p. 8)

• Improve governance and maintain economic reforms;

The strength of India’s government lies in its laws and legal frameworks,

but its weakness resides in it ineffective implementation of those laws and their

enforcement. The World Economic Forum report on India suggests that if the

government can expand its reforms to reduce the costs of starting up a business, it

can create jobs and “realize India’s enormous internal and external market

opportunities.” (World Economic Forum, p. 8)

• Boost rural markets by focusing on their strengths.

“Escalating rural consumption is potentially the next big trigger of

growth.” (World Economic Forum, p. 8) In July 2010, the Indian government

25
 announced it was contributing INR 180 billion (about $4.1 billion) to a project by

Indian telecom giant BSNL to bring wireless communication to rural India.

• Use government subsidies or foreign investment in exportable products to continue

development of exports.

A World Bank Explore Economy survey found that it currently takes an

average of 15 days to clear direct exports through customs, more than twice as

long as the world’s average of 6 days. 12% of Indian firms export, and about 10%

export directly; 18% of firms in the rest of the world are exporters.

• The country needs to invest in education and training.

Of the 22 million children who attend school only 12% pursue a degree in

higher education. The government's goal is to raise the rate of those who attend an

institution of higher learning to 20% by 2020 (World Economic Forum, p. 14)

• Closing the gender gap could unleash economic potential.

Education and employment of women could reduce the unemployment

rate and provide businesses with additional qualified workers. If society and

corporations can overcome old traditions, gender equality is achievable.

In September 2010, the BBC reported that changes in the way India’s inflation rate is calculated

led it to drop to its lowest levels since January. Typically fueled by petroleum products, the new

price index upon which inflation is based includes a wider variety of products, such as

computers, scooters, and refrigerators. Under the new calculations, India’s rate of inflation for

September was 8.5%. (BBC News, par. 1)

26
BUSINESS IN INDIA

Starting a Business

Sectors

The Companies Act of 1956 distinguishes between private and public companies in the

way they can be traded, not necessarily in that a public company is controlled by the government

and a private company is not.

Public

A public company, as defined in the Companies Act, has freely transferable shares to

which the public is free to subscribe; unlimited membership, with a minimum number of seven

members3; the word “limited” or abbreviation “Ltd” must be displayed at the end of its name.

Private

At its incorporation, the Companies Act requires a private company to adhere to certain

restrictions. These include restrictions on its shareholders rights to transfer shares; on the total

number of members which cannot exceed 50--excluding past or present employees who are

members of the company--and must be more than two; on invitations to the public to buy shares

or debentures of the company; on invitations or acceptance of any funds from anyone who is not

a member, director, or relative of a member or director. The words “Private Limited” or

abbreviation “Pvt Ltd” must be displayed at the end of its name.

3
As defined in the Companies Act of 1956, “members” are owners of a company who are not entitled to stock in the
company.

27
Types of Incorporation

Sole Proprietorship

A sole proprietorship is the oldest and the most common form of business. It is an

organization where a sole individual owns, manages and controls the business. Although easy to

form, sole proprietorships have limited capital, a limited live (the life of the individual), and

unlimited liability. Through its website, the Indian government suggests that sole proprietorships

are best suited for businesses which face low to moderate risks, and require small financial

resources. The majority of Indian businesses are sole proprietorships.

Public Limited Company

A public limited company is a voluntary association of at least seven members which is

incorporated. Incorporation recognizes that the company has a separate legal existence from its

members, and the liability of the members is limited.

Private Limited Company

A private limited company is a voluntary association of not less than two and not more

than fifty members. Its legal existence is independent of its members, entailing that it will

continue to exist even if all of its members die or desert it. It also enjoys limited liability such

that members of the company may not be held liable for the financial or legal responsibilities of

the company. The shares designated to each of its members are not transferable between them,

28
and the private limited company is not permitted to offer stock to the public. It is not required to

report its earnings to the public.

Partnership Firm

On its business website, the Indian government defines partnership as “a relation between two or

more persons who have agreed to share the profits of a business carried on by all of them or any

of them acting for all.” Individually, the owners are known as "partners;" collectively they are

known as the "firm". Partnerships are not recognized as entities separate from their owners, and

the liability of the partners is unlimited. The firm must be dissolved if any partner is unable or

unwilling to remain involved for any reason. Although the government does not require

partnerships to register formally, unregistered partnerships cannot take full advantage of the legal

benefits provided to businesses by the government. Partnerships are formed by either written or

oral agreements.

Joint Hindu Family Business

In certain parts of India, a family business may be eligible for recognition as a Joint Hindu

Family Business. The members of the family joined under the Karta (head of an undivided

estate) are known as “Co-Parceners.” The co-parceners own the business.

Hindu law recognizes the joint Hindu family business, as opposed to being formed by a

contract, so the rights and liabilities of the co-parceners are determined by Hindu law. Those

family members of three successive generations of the Karta (grandparent, parent, son/daughter)

are co-parceners; relatives of co-parceners are eligible to join the Hindu family business at the

time of the co-parcener’s death. There is no maximum limit on the number of co-parcenors.

29
 The Karta alone has unquestioned authority, and the ability to secure loans and otherwise

manage the company. The Karta also has unlimited liability, while each of the co-parceners’

liability is limited to value of their stakes in the company.

Limited Liability Partnership (LLP)

Limited Liability Partnerships (LLPs) are corporate structures enabled by the Limited

Liability Partnership Act of 2008. Like private companies, the firm must register with the state,

who recognizes the business as an entity separate from those partners who own it, and so it exists

even if one of the partners dies or deserts the firm. Like partnerships, the partners’ rights and

responsibilities are governed by an agreement, either between the partners, or between the firm

and the partners. Its liability is limited to the total value of its assets, and each partner is liable

only for her contribution to the firm as per the partners’ agreement.

Every LLP must have at least two partners and two designated partners, one of whom

must be an Indian resident. The LLP must file a statement of accounts and solvency with the

Indian Registrar on an annual basis. Unlimited liability firms, private companies, or unlisted

public companies may be converted into LLPs.

Co-Operatives

Most similar to the facilitation of unions in the United States, a co-operative organization

is a society whose objective is the promotion of the interests of its members, as opposed to

earning profits. It is a voluntary association of ten or more members who join together on the

basis of equality to fulfill economic or business interests. The liability of each member is limited

to his financial contribution, and all co-operatives must be registered.

30
Registration & Regulations

To register and incorporate, the company must file an application containing selected names for

the company, a Memorandum of Association, Articles of Association, and perhaps other

documents specific to the type of incorporation requested with the Registrar of Companies in the

state in which the company is to be incorporated. The state requires that each corporation adhere

to all environmental regulatory guidelines and parameters.

Business Climate

Government Influence

Although it generally opposes large-scale privatization of state-owned institutions such as

banks, the current government is continuing to pursue economic reform and the encouragement

of foreign investment. Government-controlled public companies are known as Public Sector

Undertakings, or PSUs, and are often characterized by low productivity and the inability to

maintain a profit. Though the government has said it is willing to offer 5-10% stakes in PSUs, it

will only consider privatization on case-by-case basis, and will refuse its own stake in public

banks to fall below 51%. (Economic Intelligence Unit, p. 10) The government owns up to 100%

stakes in 28 public-sector banks. (p. 12)

The media is largely controlled by the government. In 1999, the government granted 10-

year licenses in 40 cities to 28 private FM-radio broadcasting companies. (Economic Intelligence

Unit, p. 13) By November 2005, the government began allowing 20% foreign investment in FM-

31
radio, and starting in February 2006, it issued an additional 280 licenses in 91 cities to privatized

FM-radio broadcasting companies. (p. 13) Even so, private FM stations are not permitted to

cover news or current affairs.

In 2000, the government began allowing direct uplinks from India to both Indian and

foreign satellites and direct-to-home television services. Entertainment television channels up-

linking from India may be fully owned by foreign companies and investors, but there is a limit

on foreign equity in news channels at 26%. (Economic Intelligence Unit, p. 13)

The Economic Intelligence Unit’s Commerce Report describes clarifications made by the

Indian government in 2003 to provisions regarding foreign investment in news channels: “news

channels up-linking from India [have] to have one dominant Indian shareholder (an individual,

company or group of companies) with a holding of least 51%; that stakes held by financial

institutions [will] not be counted towards this 51%; and that any foreign-equity holding in the

Indian shareholder companies of the applicant company [will] be counted pro rata towards the

26% foreign-equity cap.” (p. 13) It also stressed that editorial materials and management “had to

rest with Indians.”

Legal Considerations

To avoid what in India may become a years-long arbitration process, foreign companies

build clauses into their contracts allowing for international arbitration. The Arbitration and

Conciliation Ordinance of 1996 has helped the Indian arbitration process, but the structure of

many local-level authorities remains indifferent to the progressivism of higher level official, and

can be a hindrance to settlement.

32
 As demonstrated in the above chart included in the World Economic Forum’s Global

Competitiveness Report from 2009, the greatest challenges India faces when it comes to

establishing its economy as a major player in the global market are part and parcel to its

government’s effectiveness in governing. Lack of roads and other infrastructure segments the

country, keeping “big city life” in the big city and agriculture in the rural areas. Bureaucracy,

corruption, and overburdening governmental regulations—then coupled with difficulty accessing

financing through government-controlled banks—prevents businesses from being as efficient

and productive as their global competitors. The strength of India’s economic structure in spite of

the government’s relative inefficiency may soon leave India’s businesses in a conflict between a

developed economy and a developing nation. As Fareed Zakaria observes in his book, The Post-

American World, “India’s political system is weak and porous and thus not well equipped to play

its rightful role in this new world…If governance does not improve, the country will never fully

achieve its potential.” (Zakaria, p. 166)

33
.Business Practice

Capital Sources

Bank Loans

The State Bank of India provides finance options including corporate term loans, working

capital finance, and project finance. Corporate term loans support expenses arising from establish

new ventures, expansion, and renovation; working capital finance is umbrella financing for the

service sector; project finance provides funding for specific projects related to the nature of a

particular business.

Micro-financing

For those who are unable to secure loans from banks or other lending institutions, the

notion of microfinance has been gaining popularity across the globe. Lenders are individuals

who loan out relatively small amounts of money to small businesses. According to a

microfinance report by N. Srinivasan in 2008, the microfinancing industry increased by 11.15

million clients in 2007. (Srinivasan, p. 21)

Non-governmental organizations are considering turning their attention from volunteer

work with the poor to microlending, especially in urban areas. To date, much of India's

microfinance movement has grown largely in the southern states.

Existing Foreign Investment

Inflows of foreign direct investment (FDI) into India reached US$33.61bn in 2008/09,

according to the Secretariat for Industrial Assistance, an agency within the Department of

Industrial Policy and Promotion. FDI outpaced portfolio investment by a hefty margin; net equity

34
and debt investment by foreign institutional investors (FIIs) was negative. The sectors that

received the most FDI during 2008/09 were services ($6.11 billion USD), housing and real

property ($2.80 billion USD), telecoms ($2.55 billion USD) construction activities ($2.02 billion

USD), and computer software and hardware ($1.67 billion USD). (Economic Intelligence Unit,

p. 14) The top foreign countries investing in India during 2008/09 were Mauritius, Singapore,

the United States, Cyprus and the Netherlands. India considers FDI to be particularly

beneficial for infrastructure, energy, telecommunication services and software development.

35
CONSUMER MARKET

Personal & Household Income

Traditionally, households in both urban and rural areas consist of large joint families, sons

continuing to live with their parents even after being married. However, nuclear families are

growing in urban India—two to four person households comprise 38.8% of India’s total

households. (Euromonitor, p. 35) The number of single-person households has grown the fastest,

at a rate of 121.8%. (p. 35) While households of five or more continue to constitute the largest

number of households, their growth rate is the lowest. Increased education and employment

opportunities for women, as well as urban migration, are the most likely contributors to shrinking

households.

Although the size of household has decreased, the increasing number of smaller

households, especially in the larger cities, has similarly increased demand for property. Growing

demand for items such as home furnishings, appliances, and consumer electronics led Frost and

Sullican India to project an annual growth rate for electronics manufacturing services of 30%,

totaling $2.5 billion by 2010.

The growth of India’s economy over the past decade in hand with some successful

economic reforms has led to a significant increase in disposable income: 41.7% of households

had a disposable income of $1,000-$1,750 in 1995; by 2007, 31.3% had experienced an increase

in disposable income to $2,500-$5,000. (Euromonitor, p. 35) According to Euromonitor’s

Consumer Lifestyle Report, “the increase in disposable income made a strong impact across all

consumer markets.” (p. 36)

36
Personal & Household Expenditures

As disposable income increases, low-income families are abandoning home remedies for

medical services, and bicycles for motorbikes; Middle-income families have increased spending

on mobile phones and televisions; high-income families purchase more consumer electronics. In

fact, what Euromonitor attributes to “a high desire for increased connectedness” (Euromonitor, p.

36) has allowed communication services to experience triple-digit growth.

Durables

Urban areas ushered the majority of growth for consumer durables from 1995-2007, but

the urban outskirts and rural areas are expected to drive growth by 2015. In 2007, the range

cooker was present in 62.3% of households; (Euromonitor, p. 37) as more women enter the

workforce, spending on items like vacuum cleaners and washing machines is expected to

increase.

37
 India’s low literacy rate has rendered television a vital source of information and

entertainment for those unable to read a newspaper or magazine. Present in 47.4% of households,

color televisions were the second most popular durable in 2007. (Euromonitor, p. 37) The cost of

a color television entails that urban families are the most likely to purchase one.

The third most popular durable was the bicycle, though analysts believe car ownership

will grow at a rate 5.13% as prices fall, (Euromonitor, p. 37) and disposable income and

financing rise, supposing that proper infrastructure could support the growth.

An increasingly popular durable is the phone. 14.4% of households owned a telephone in

2007; the mobile phone industry grew at a rate of 13.1% and is expected to continue growing.

(Euromonitor, p. 37) The style and design of handsets are contributing to their positions as status

symbols, with demand increasing for phones supporting mp3, radio, and camera functions. The

growth of mobile phones with multimedia features has slowed sales growth of portable mp3

players, digital cameras, and radio in the mass market. For instance, consumers are generally

choosing to upgrade their phones as opposed to purchasing a separate camera. Competition in the

mobile market is leading to reduced phone prices, making the phones more affordable, and also

more accessible to first-time buyers, especially in rural areas. In rural India, wireless phones are

considered basic necessities because of poor telecommunications infrastructure; telecom

companies are taking advantage of this necessity and collaborating with the government to

expand their reach into the rural market.

25-29 year-olds comprise both the largest and smallest proportion of the employed

population, and spend most of their discretionary income on “consumer electronics, such as

televisions, videos games, digital cameras and iPods.” (Euromonitor, p. 48) Because music is a

centerpiece of Indian culture, mobile music players are incredibly popular with this

38
demographic; if the economy continues to grow, and businesses continue to hire these

technology-savvy individuals, the entertainment industry may stand to benefit from their

increasing amounts of disposable income.

39
INTELLECTUAL PROPERTY

Governing Law & Provisions

Background

Indian copyright law is laid out in the Copyright Act of 1957 and Copyright Rules of 1958. In

general, and Indian work is considered to be a literary, dramatic, or musical work, whose author

is, or was at the time of the work’s creation, an Indian citizen or which was first published in

India. Although the Copyright Act covers an extensive array of works, we will focus on musical

works, sound recordings, and cinematograph films.

Types of Works

Musical Works

The Copyright Act defines a musical work as one which consists of music and includes

“any graphical notation of such work but does not include any words or any action intended to be

sung, spoken or performed with the music.” (Copyright Act of 1957, I.2.(p)) The author of the

work is called the “composer,” who enjoys the exclusive rights of reproducing the work,

distributing copies of the work, performing the work, communicating the work to the public,

translating the work, making the work into a film or sound recording, or making any adaptation

of the work; the duration of these rights with respect to the musical work is 60 years after the

death of the composer.

40
Sound Recordings

As defined in the Copyright Act, a sound recording is “a recording of sounds from which

sounds may be produced regardless of the medium on which such recording is made or the

method by which the sounds are produced.” (Copyright Act of 1957, I.2.(xx)) The author is

called the “producer,” which the act defines for the purposes of authorship as “a person who

takes the initiative and responsibility for making the work” .” (Copyright Act of 1957, I.2.(uu))

and whose exclusive rights include rights to duplicate the sound recording, to sell or offer for

sale any copy of the sound recording, to communicate the sound recording to the public. Should

anyone wish to use the sound recording in a public performance, the government requires

licenses from all rights owners of the recording, including the composer, the lyricist, and the

producer. The producer may exercise his rights for 60 years after the first date of publication of

the sound recording.

Cinematograph Film

A cinematograph film is “any work of visual recording on any medium produced through

a process from which a moving image may be produced by any means and includes “a sound

recording accompanying such visual recording,” and “any work produced by any process

analogous to cinematography including video films.” (Copyright Act 1957, I.2.(f)) As with

sound recordings, the author is called the producer (which is defined the same) whose copyright

gives her the exclusive rights to make a copy of the film, including photographs of any images

contained therein, to sell or offer for sale a copy of the film, and to communicate the film to the

public for 60 years after the first publication of the film.

41
Definitions

Right of Reproduction

The right of reproduction commonly means that no person shall make one or more copies

of a work or of a substantial part of it in any material form… without the permission of the

copyright owner. Reproduction occurs in storing of a work in the computer memory. (Copyright

Handbook4)

Right of Communication to the Public

The right of communication to the public means making any work available for being seen or

heard or otherwise enjoyed by the public directly or by any means of display or diffusion. It is

not necessary that any member of the public actually sees, hears or otherwise enjoys the work so

made available…The fact that the work in question is accessible to the public is enough to say

that the work is communicated to the public. (Copyright Handbook)

Adaptation

Adaptation involves the preparation of a new work in the same or different form based

upon an already existing work. The Copyright Act defines the following acts as adaptations:

• Conversion of a dramatic work into a non dramatic work

• Conversion of a literary or artistic work into a dramatic work

• Re-arrangement of a literary or dramatic work

• Depiction in a comic form or through pictures of a literary or dramatic work

4
The government of India provides the Copyright Handbook through its official website, but does not delinate
sections or subsections, or page numbers. Please see bibliography for full citation of this source.

42
 • Transcription of a musical work or any act involving re-arrangement or alteration of an

existing work.

The making of a cinematograph film of a literary or dramatic or musical work is also an

adaptation. A work cannot be translated without permission of the copyright owner. (Copyright

Handbook)

Registration

In accordance with the requirements of the international copyright treaties to which India is a

party, copyright vests automatically with creation of a work. However, creators must register

their works with the Registrar of Copyrights in order to receive certain remedies from a court of

law for copyright infringement. The creator must file an application for each work they wish to

register, signed by the applicant or an authorized power of attorney, and pay a required fee. If a

registered work is also unpublished, the applicant may modify his application for an additional

fee.

The Registrar of Copyrights is vested with the powers of a civil court in respect to

matters such as “summoning and enforcing the attendance of any person and examining him on

oath; requiring the discovery and production of any document; receiving evidence on affidavit;

issuing commissions for the examination of witnesses or documents; requisitioning any public

record or copy thereof from any court or office; any other matters which may be prescribed.”

(Copyright Act of 1957, XV.74)

43
Copyright Enforcement Advisory Council (CEAC)

In 1991, the Indian government established the Copyright Enforcement Advisory Council

to periodically review the progress of the Copyright Act’s enforcement. Each member of the

CEAC serves a three year term such that the CEAC is comprised entirely of different members

every three years. The members of the CEAC include the Director Generals of Police of several

major states and their governments; representatives of each of the Authors’ Guild of India, the

Federation of Publishers and Booksellers Association, the Film Federation of India,

Phonographic Performance Ltd (PPL), the Indian Performing Rights Society (IPRS), and the

Cine Artistes Association; and the Secretary of Higher Education.

Copyright Royalty Board

The Copyright Royalty Board is a semi-judicial body composed of three to fifteen

members. The chairman of the board has powers equivalent to those of a High Court judge. The

Board has the authority to adjudicate certain cases pertaining to copyright, including hearing

appeals against the orders of the Registrar of Copyright; granting compulsory licenses to publish

or republish works (in certain circumstances), or to produce and publish a translation of literary

or dramatic work; and fixing rates of royalties in respect of sound recordings under the cover-

version provision.

Performers’ Rights

The Copyright Act defines a performer as an actor, singer, musician, dancer, acrobat,

juggler, conjurer, snake charmer, lecturer, or “any other person who makes a performance;” (I.2.

(qq)) the performer’s rights in “any visual or acoustic presentation made live by one or more

44
performers,” (I.2.(q)) which is considered the performance, include the right to make a sound

recording or visual recording of the performance; right to reproduce the sound recording or

visual recording of the performance; right to broadcast the performance; and the right to

communicate the performance to the public otherwise than by broadcast5. Unless she consents to

incorporate her performance in a cinematograph film, these rights belong to the performer for 25

years.

Indian Performing Rights Society (IPRS)

IPRS was established in 1969 to represent copyright holders such as composers, lyricists

and publishers. IPRS is the only association authorized to issue licenses for the use of

compositions to be sung, spoken, or otherwise performed along to music within India.

IPRS’ governing Council of Directors is elected by its members. According to IPRS, the

Council is equally represented by publishers and writers from North and South India. The society

licenses compositions from its offices in Delhi, Chennai, and Kolkata.

Industry research conducted by Price Waterhouse Coppers reveals that composers often

do not receive royalty revenues from the music they compose for films. There is an amendment

in the Sabha which could give independent rights to the authors of literary and musical works in

films to ensure the authors receive royalties for commercial exploitation of their works.

Phonographic Performance Ltd. (PPL)

The performing rights society for sound recordings is known as PPL, and has been

conducting business since 1996. One of PPL’s priorities is to negotiate licenses for the use of

5
There is an amendment before the Rajha Sabha to include some cable and satellite broadcasts in the Copyright Act’s definition
of “communication to the public.”

45
sound recordings in connection with television, internet, mobile (ie ring tones), radio, and events

or public performance in clubs, restaurants, cinemas, etc. The licenses are usually on a blanket

basis, and PPL then regularly distributes royalties to the society’s members based on the

proportion of performances against its database of sound recordings.

According to PPL’s website, it administers performance rights on behalf of 137 recording

companies, including Sa Re Ga Ma India, Universal, and Sony Music.

Broadcasters Rights

In light of the Indian government’s recent program to gradually privatize radio,

broadcasters’ rights have become increasingly relevant to independent, private telecom and

broadcasting companies. The Copyright Act defines a “broadcast” as a communication to the

public by an means of wireless diffusion, whether in one or more of the forms of signs, sounds or

visual images; or by wire. Broadcasting organizations have the right to re-broadcast; cause the

broadcast to be publicly communicated on payment of any charges; and to make any sound or

visual recording of the broadcast, reproduce any such sound or visual recording, and sell or offer

to sell to the public any such sound or visual recording. (Copyright Handbook) The broadcaster’s

rights are in duration fro 25 years.

Moral Rights

The Copyright Act does provide for Moral Rights, stating that “The author of a work has

the right… to restrain or claim damages in respect of any distortion, mutilation, modification or

other acts in relation to the said work…if such distortion, mutilation, modification or other act

would be prejudicial to his honour or reputation,” (Copyright Act of 1957, XII.54) although, the

46
act does clarify that a failure to display a work to the creator’s satisfaction will not infringe on

her moral rights. A creator retains her moral rights even if she has assigned or transferred her

other rights, as they are independent of copyright.

Compulsory Licenses & Covers

Two years after a song has been published, it is eligible for a compulsory license. It is

stipulated that because of the popularity of Bollywood films and the fact that performers receive

royalties for public performance of sound recordings, the two year period allows for maximum

marketing and monetization of the song for its original purpose. (Sen, par. 5)

Fair Dealing

“Fair Dealing” is a term which is used to describe exceptions to the copyright law in

a similar manner as the United State’s principle of fair use. In India, contenders for fair

dealing include: private use, such as research; criticism or review; use in the activities of a not-

for-profit club or organization; performance in connection with an amateur club or society, if the

performance is given to a non-paying audience, or for the benefit of a religious institution;

reporting current events, through any medium; reproduction in print, in an informative article

concerning current economic, political, social or religious topics; a public lecture; or duplication

of no more than three copies of a book.

Work-for-Hire

Works made-for-hire can fall under one of two categories: a work prepared by the

employee within the scope of his or her employment, or a work commissioned by a third party,

47
typically a publisher, rendering the author and independent contractor. To be considered an

independent contractor, the work must be created in connection with one of the following: a

collective work, such as a magazine or newspaper; a cinematograph film or audiovisual work; a

translation; a supplementary work, such as an introduction to another author’s work; a

compilation; an instructional text; a test; answer material for a test; or an atlas. Only work-for-

hire agreements made in writing and signed by all parties concerned are considered binding.

In many cases, music written or recorded is done so in connection with a film, where the

production company is also the record label. In these, cases composers generally do not retain

the copyright to their works, and most never see royalties from public performance since they are

not often the performers of their works.

Valuable Consideration

In the case of a work created for valuable consideration at the instance of any person,

such person shall, in the absence of any agreement to the contrary, be the first owner of the

copyright therein. (Copyright Act of 1957, IV.17.(a))

Joint Authorship & Transfer of Copyright

A work of joint authorship is a work produced by the collaboration of two or more

authors in which the contribution of one author is not distinct from the contribution of the other

author or authors. (Copyright Act of 1957, I.2.(z))

Transfer of copyright must be in writing, identifying the specific works and rights

assigned, as well as the duration and territory of the assignment; royalties payable, if any, must

be specified also; the assignor or her duly authorized agent must sign the agreement. Should the

48
duration of the assignment not be identified, the law will recognize it as five years from the date

of the assignment; should the territory not be identified, the law will presume the territory is for

all of India. If the assignee does not exercise his rights within one year, the law will consider the

agreement expired. The author may transfer her rights in whole or in part by giving notice to the

Registrar of Copyrights.

Foreign Works

Because the Indian Copyright Act is valid only within the country itself, India has

become a member to several international copyright conventions and treaties to secure rights for

its creators outside of the country. These include the Berne Convention for the Protection of

Literary and Artistic works6; the Universal Copyright Convention7; Convention for the

Protection of Producers of Phonograms against unauthorized Duplication of their Phonograms;

Multilateral Convention for the Avoidance of Double Taxation of Copyright Royalties; and the

Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement.

Foreign nationals whose countries are also members of the Berne Convention, Universal

Copyright Convention, and TRIPS agreements are protected in India through the International

Copyright Order. A list of these countries is provided in Appendix ___.

6
Britain’s signing of the Berne Convention while India was still under its control has the Convention recogising India as a
signatory since 1928. All U.S. works protected under U.S. Copyright law after the U.S. became a Berne Member-State in 1989
are protected in India;
7
because India signed the UCC in 1957, all All U.S. works protected under U.S. Copyright law after 1957 are protected in India
as well.

49
Copyright Societies

IPRS, PPL, and SCRIPT are registered copyright societies, and have reciprocal

agreements with similar societies in foreign countries which are also members to the respective

international conventions. The societies obtain or issue licenses in India on behalf of the foreign

counterparts.

Infringement Remedies

Any person who knowingly infringes or encourages the infringement of copyright

commits a crime punishable by six months imprisonment and a minimum fine of INR 50,000

($1100 USD). (Copyright Handbook) Subsequent infringements are punishable by one year’s

imprisonment and a fine of INR 100,000 ($2300 USD). (Copyright Handbook) Copyright

owners are entitled to injunctions, damages, and accounts, as deemed appropriate by the District

Court in whose jurisdiction the infringement occurred.

Should the event arise wherein a company has infringed copyright, the Copyright Act

provides that “every person who at the time the offence was committed was in charge of, and

was responsible to the company for, the conduct of the business of the company… shall be

deemed to be guilty of such offence” (Copyright Act of 1957, XIII.69.(1)) along with the

company, and may face legal charges. For instance, if the owner of a for-profit venue allows his

hall to be used for a public communication of a work as defined by the Copyright Act, and public

communication infringes on the copyright of a work, he has committed a crime unless he was not

aware or had no reasonable grounds for believing an act of infringement was occurring.

50
Piracy

The trade organization Indian Music Industry defines piracy as “the unauthorized duplication of

an original recording for commercial gain without the consent of the rights owner.”

The Indian Music Industry

The Indian Music Industry (or IMI) is India’s equivalent to the United States’ Recording

Industry Association of America (or RIAA). The IMI was first established in 1936 as the Indian

Phonographic Industry (IPI); in 1994, IPI changed its name.

Claiming to be among the world’s second oldest music companies' associations, IMI is

not-for-profit organization affiliated with the International Federation of Phonographic Industry

(IFPI). Its priorities are to defend, develop, and preserve the rights of the producers of sound

recordings, and “actively [promote] and [encourage] advancement of creativity and culture

through sound recordings. “ (IMI, par. 1) IMI’s members include Sa Re Ga Ma, Universal, and

Sony BMG, as well as other national and regional labels “that represent over 75% of the output

in [India’s] legitimate recordings.” (IMI, par. 2)

In 2000, IMI established its internet anti-piracy initiative. Shortly thereafter, IMI claims

to be responsible for the closure of 500 sites. It attributes this success to functions of its

initiatives, which include indentifying manufacturers and retailers of pirated materials; training

police and assisting law enforcement in conducting raids; and providing necessary

documentation for investigations into infringement cases.

In 2007, Euromonitor’s Consumer Lifestyle Report found that music piracy accounted for 56%

of the acquisition of media. Forrester research recently reported that Indian consumers spend an

51
average of 9.2 hours per work online, and that those who are online generally use the internet as

means of communication and creating content. 24% of India’s online consumers have uploaded

video, audio, or music clips, the majority of which were uploaded to video sites like Youtube,

rather than being created by the users themselves. (Klevchuk, p. 9) Despite IMI’s restless appeals

against illegal downloading, the United States-India Business Council published a report in

March of 2009 claiming that up to INR 16,000 crores ($36 million USD) and 80,000 jobs in the

entertainment industry are lost to piracy. (CITE ME- Internet & Society)

But given low internet penetration of the country, piracy of physical product is more

prevalent. The BBC suggests that “half of the music sold on the streets is illegal, while 60% of

movies sold in India are allegedly fakes.” It goes further to estimate that foreign businesses lose

about $500 million per year in India due to rampant piracy. Indian-based companies such as

Moser Baer are trying to work with the financial needs of pirates and production companies to

cut back on piracy’s effects. A prominent manufacturer of blank recordable CDs and DVDs,

Moser Baer began selling large quantities of DVDs with content for only slightly higher prices

so “reformed” pirates can still make a profit while the production company shares in the

revenues.

While Internet & Society claims that India is “the fourth largest global hub on online film

piracy,” it still has to overtake Canada, Britain, and the United States before it can take the

number one spot.

52
Technology

Consumer Electronics

Datamonitor estimates that consumer electronics generated revenues of $4 billion in 2009, with a

compound annual growth rate of 8.6% for four years previously which is expected to continue

through 2014. In comparison, China and Japan’s markets grew at 10.4% and 4.5% respectively,

achieving values of $28.1 billion and $22.3 billion by 2009. (Datamonitor, p. 8)

Despite the coupling of rampant piracy and relatively low revenues for the consumer

electronics market as a whole, 98.9% of its revenues were generated by audio visual equipment,

(Datamonitor, p.8) indicating a growing willingness of Indian consumers to invest in

entertainment. The remaining 1.1% was generated by games consoles. (p. 8)

Compact Discs and audio cassettes remain the formats of choice in the category of

physical music players. However, the increasing penetration of internet and mobile carriers has

slowed both the sales of these players and the music they are able to play.

Internet/Broadband

The internet access

market has been

growing at double-digit

rates—between 2005

and 2009, the number

of Indian internet

subscribers increased

53
by approximately 25%, totaling 13.5 million and generating $3 billion by the end of 2009.

(Datamonitor, p. 7)

By 2014, the number of subscribers is expected to reach 28 million. (p. 7)

The Indian government declared 2007 as the “Broadband Year.” (Euromonitor, p. 91)

State-owned telecoms account for 69% of internet subscriptions, although two private-sector

companies share 84% of the market with the other two government of the top four Internet

Service Providers (ISPs). (Datamonitor, p. 13) Euromonitor’s Consumer Lifestyle Report claims

that “Favourable broadband policy and other initiatives by the IT and Telecom Ministry have

encouraged Internet use by the masses.” (Euromonitor, p. 93)

Internet subscriptions range from individual consumers to large companies, price

depending on certain factors, such as the required speed of the connection. Oftentimes

consumers change ISPs when they believe it results in better value for their money. Some

companies offer internet as a standalone service, others bundle it, usually with cable TV or

54
telephone lines. Though internet penetration is quite low (5% of Indian population, and about 7%

of the Asia-Pacific internet access market), (Datamonitor, p. 2) and the disparity between urban

and rural areas is vast, its growth is rendering the technology vital for businesses and convenient

for consumers.

Indians use the internet for a number of activities, namely email, chatting, job searches,

and banking, although they are increasingly using the internet or gaming, news, blogging, and

research. As e-commerce also continues to grow, consumers use the internet more for ticketing

and shopping. The Internet and Mobile Association of India (IAMAI) reports that in 2007, 33%

of India’s intern users were working, and 11% were working women, while 21% were college

students; the remaining 35% were older men, nonworking women, and school-aged children.

The introduction of computers into schools has increased internet access there, and while most

users access the internet through cybercafés, the cybercafé is becoming less popular as more

people are able to access the internet from their offices—especially considering the growth of

India’s IT sector.

Pricewaterhouse Cooper’s suggests that barriers to the growth of India’s internet market

include the initial costs of owning a computer as well as computer illiteracy, in some cases, a

lack of interest, and a definite lack of infrastructure. But by providing entertaining content in

local languages, it is possible to develop segments outside of currently specific segment of young

and wealthy males who speak English.

Mobile

In 2007, the Telecom Regulatory Authority of India (TRAI) claimed India was home to 185

million mobile phone users. (Euromonitor, p. 94) From 2005 to 2007, mobile penetration by

55
household grew an estimated 19.5% and the phone replacement cycle shortened to every two

years for about 65% of users. (p. 91) The increase in mobile phone popularity is due in great part

to their increasing affordability and accessibility to low-income and rural families. Bundling

products and services is becoming standard, and more manufacturers are expected to increase

their manufacturing capabilities to better serve the demand of the mobile market more quickly

and cheaply.

The traditional PDA market is declining, thanks to growing sales of smart phones and

businesses which prefer voice-enabled devices. For certain segments of the population, the

growth of smart phones has slowed growth of sales for items such as digital cameras portable

mp3 players, and radios. Mobile commerce currently consists of ringtone, game, and video clip

downloads, and pre-paid card recharges.

Pricewaterhouse Cooper’s claims that the activities conducted on mobile phones are very

similar to those conducted on personal computers. While consumers do use their phones for non-

internet activities such as games and music listening, they are increasingly involved in online

activities like checking sports news and updates. Service provider, PayMate, launched a service

in 2007 that connects banks, retailers and customers using SMS. PayMate’s customers primarily

use the service to buy items like flowers and movie tickets. (Euromonitor, p. 95)

56
ENTERTAINMENT & MEDIA INDUSTRIES

Music

Much of India music has evolved out of various interactions between India’s numerous

ethnicities and cultures. The foundation of Indian music is sangeet, a combination of vocal

music, instrumental music, and dance. The musical system is composed of rag and tal, or the

melodic and rhythmic forms, respectively. Rag is a scale system of seven notes, and tal is based

on repeating patterns of beats.

Classical

The two most prominent realms of classical music are north Indian Hindustani Sangeet

and south Indian Carnatic sangeet. Though similar, the traditions differ in nomenclature and

performance.

Musical Instruments

Though the most famous instruments of India are likely the sitar and the tabla, Indian

classical music performers employ a wealth of other instruments in their performances, including

woodwind-like instruments such as the nadaswaram, plucked-string instruments such as the

sarod, and even the western violin.

Folk & Tribal

Due to India’s wealth of cultural diversity—especially in rural areas—folk and tribal styles

of music are seeming endless; in fact, each region has its own unique style. Folk music is

generally considered a “rustic reflection” of Indian society, while tribal music is

57
 representative of cultures in particular. Some traditions of tribal music are thousands of

years old. In villages, music is learned through experiencing it; every wedding, harvest,

and birth has a live soundtrack. Most fold and tribal musicians fashion their own

instruments, and the instruments of these traditions vary, sometimes widely, from their

classical counterparts.

Religious Music

Qawwali is the prominent form of Islamic devotional song, linked to the sufi tradition which

instructs observers to remember God either silently or vocally. The aim of the song is to

invoke a trance-like state which enlightens the listener by repeating the lyrics until they

seem to lose their meaning. As films gained popularity, there was a period when qawwali

was a mandatory factor in Hini films’ formulae. The very nature of a cinema inhibits direct

interaction between the performing artist and his audience, setting a precedent for the

detached quality of modern qawwali performances.

Other forms of religious and devotional genres include Bhajan and Kirtan, which are

Hindu devotional songs sung in praise of God through the languages of farmers,

merchants, and other members of the working class. Bhajan is typically performed solo,

while Kirtan are centered around a call and response with the audience.

Bhangra

Originating in folk song and dance, this genre now comprises Indian’s urban commercial

genre, most popular with the youth and diasporic Indians. The dance component of

Bhangra originated in rural Punjab. Bhangra developed in the 1970’s as an international

58
 genre in Great Britain where the Indo-Pakistani emigrants felt the severe lacking of a

cultural identity. Though they could no longer relate to a changing India or Pakistan, they

could not assimilate into the traditional British society. Bhangra became “an important

symbol of their self-identity,” (Courtney, par. 2) evolving into a subculture and lifestyle,

similar to the West’s embracing of disco. At present, the once folk-like music of Punjuab

has embraced elements of rap, hip-hop, and other forms of Western commercial music.

Filmi & Bollywood

Filmi sangeet is widely considered to be the most popular musical genre in India at present.

Generally, the genre is termed Bollywood, although traditionally Bollywood films refer to

those Hindi films produced in Mumbai. In India, filmi is comparable to Western Top 40.

Brief History of Filmi

India’s first motion picture with sound was titled “Alam Ara” and premiered in 1931.

Shortly thereafter, Mumbai, Kalkotta, and Chenai became the film centers of the country.

Mumbai generally distributed its films nationwide, while Kalkotta and Chenai focused on

regional films. In the 9 years following the release of India’s first ‘soundie,’ 931 Hindi films

were produced, featuring an average of 10 songs each. During this period, the actors and singers

were one in the same.

For the ten years to follow, India’s independent film business evolved. Ironically, the

influx of new talent led distributors to streamline their process into the formula prevalent in films

today, determined by a certain number of lead actors, songs, dances, etc. They also introduced

the “playback singer,” who pre-records the songs to which the actors sing and dance.

59
 Though television came to Indian households in the 1970s, it was not until the 1980’s that

the government began privatizing channels. Cinema attendance was slightly effected, but

producers made use of the new outlet for their musical productions.

Traditionally monopolized by Mumbai, the Hindi film industry controlled the majority of

India’s film music until rising costs of production and increased unionizing led producers to

Madras where conditions were more favorable for them. Madras-based musical directors include

A.R. Rahman, whose music featured in the Academy Award-winning film Slumdog Millionaire

has earned him world-wide recognition.

Satellite TV has facilitated the recent increase in popularity of Hindi films around the

world. As music and films become more widely accessible outside of theatres, decreasing

attendance and increasing entertainment taxes are making it difficult for some cinemas to remain

profitable. (Courtney, par. 16)

The Music Business

Pricewaterhouse Cooper’s defines India’s music market as consumer spending on physical

goods8, mobile VAS9, and online downloads10, as well as ad revenues generated by radio

broadcasters11 and royalties earned by public performance.12 (Pricewaterhouse Coopers, p. 80)

Estimated at INR 7.5 billion ($168 billion USD) in 2009, the value of the music industry grew

8.5%. (p. 80)

The increasing adoption of satellite television over the past twenty years has led the

music industry to shift away slightly from relying on film and devotional music to highlighting

8
CDs and cassettes through distributors and retailers who operate through modern retail and online.
9
Products including ringtones, songs, and ring-backs.
10
Music downloaded via internet, not including pirated or other illegal downloading.
11
Includes government radio stations and private FM stations, satellite, and performance royalties
12
Measured by royalties paid by event organizers to use music in public places

60
non-film albums and remixes. The Indian Music Industry (IMI) alleges that new local companies

are centering around “high-end classical devotional [music] and other niche genres” rather than

film music. The Hindi language dominates the physical music market, followed by Tamil and

Telugu.

Recorded Music

Physical Sales

Traditionally, CDs and cassettes are the primary income stream for

music companies. According to Pricewaterhouse Coopers, physical

sales contributed 53% of total revenues in 2009, a decrease from

76% in 2008. (p. 82) The downward trend has been maintaining for

several years, and is expected to continue as digital revenue streams

such as mobile and the internet gain momentum, and piracy

continues to

run wild.

CDs account for the majority of

physical sales, film music being the most

popular genre. Though film music is the

most popular genre in general, devotional

music accounts for 12% of physical sales,

(PwC, p.82) the popularity arising from

demand by housewives and religious places.

61
 As retail continues to organize in India, CDs sales are expected to rise slightly, although

sales of cassettes are expected to continue decreasing. Pricewaterhouse Coopers suggests that the

competition of piracy could drive price points lower.

Marketing non-film music

The music industry relies on the film industry for 62% of its revenues. (PwC, p. 83) The Indian

Music Industry explains that companies selling non-film music, however, develop brands and

charge premium prices to build loyalty among consumers in an effort to sell a lifestyle and

“implement aspirational products.”

Downloaded Music

Although internet music downloading is a huge market, Pricewaterhouse Cooper’s

estimates that only 5-10% of downloads around the world are legal. However, as internet

becomes more accessible and Government initiatives are implemented, PwC expects

downloaded music to increase at a compounded annual growth rate of 52% over the next five

years. (p. 84)

Euromonitor’s consumer lifestyle report alleges that for Indian consumers, shopping is

“an experience in itself.” (p. 94) The draw of e-commerce is in its convenience and oftentimes its

discounts. A study by the Internet and Mobile Association of India revealed that the three

primary factors contributing to the growth of e-commerce are time-savings, convenience, and the

availability of a variety of products. Because of the limited reach of physical distribution outlets,

online shopping is the only way for consumers in small towns to obtain the goods they desire.

The consumer lifestyle report also stated that from 2000 to 2007 the number of internet users

62
searching for entertainment and information decreased by 15%, although e-commerce users

increased by 5%. (p. 94) Audiovisual retailers slowed expansion in 2007 due to increased piracy

and the growing popularity of mp3s. MusicWorld maintained its position as the most prominent

music store, boasting 350 outlets and a market share of 34% in 2007. (p. 99)

As featured in the Wall Street Journal, Google recently launched a music service aimed

at helping internet and e-commerce users to search for legal online streaming and downloads.

Users type a song into the Google search bar, and several links appear at the top of the page from

Google’s partners. The links lead to a pop-up player whereby users can stream music for free.

India’s largest label, Saregama has said that it is giving users access to 94,000 tracks from its

catalog.

Icon Group reports that the potential demand for downloadable music was estimated at $657.3

million in 2009, with Maharashtra, Uttar Pradesh, ad Gujarat leading the rest of the country by

most potentially profitable regions. (IconGroup, p. 15) These cities account for 33.43% of the

growth potential for India’s downloadable music sector. (p. 15)

Radio Broadcast

As phase III of the government’s plan to privatize radio companies continues,

Pricewaterhouse Cooper’s estimates that 700 new stations will be added across India. This phase

will focus on bringing radio to tier II13 and tier-III14 cities, boosting penetration in less urban

areas. The most recent figures indicate that radio currently contributes 13% of the music

industry’s total revenue, (PwC, p. 84) which is not expected to change. Still, in 2009 during the

13
Cities with a population of less than 1 million.
14
Cities with a population of less than 100,000.

63
hours of five to seven in the morning and nine to twelve in the evening, radio listeners increased

the most. Pricewaterhouse Coopers attributes the growth to the proliferation of the radio

capabilities of cell phones.

According to EconTrends Analysis, the top five grossing radio broadcasting companies in

2009 gathered a combined market share of 61%, with Zee Entertainment Enterprises leading the

pack with a market share of almost 19%.

Radio operators must pay a performance royalty based on the per-needle-hour to PPL and

IPRS; until August of 2010, the rate was INR 661 ($15 USD) per needle hour regardless of the

category of the city or number of listeners, (PwC, p. 75) and for stations in smaller cities with

respectively few listeners, the rate is quite harmful to revenues. Accordingly, a dispute has arisen

between radio companies and music companies over the rate. The radio companies wish to lower

the rate because they believe that radio helps to promote labels’ artists and music, and because

the amortization of the stations’ One Time Entry Fee over the license period can range from 25%

64
to 100% of revenues. (p. 75) Rather than a royalty model, the Association of Radio Operators of

India is seeking a revenue-sharing model based on stations’ advertising revenue potential.

To avoid the music royalty costs and freshen the listening experience, radio stations have

begun airing talk shows, game and quiz shows, like Radio One’s Music Ka Shahenshah. The

show quizzes listeners about composers, music, singers, songs, etc. to dub India’s “most

passionate music lover.” (PwC, p. 73) Musicale-Azam is a live music festival broadcast over the

radio with performances, interviews, merchandise, and meet-and-greet opportunities for

listeners.

In August of 2010, the radio stations’ wish was granted when India’s Copyright Royalty

Board eliminated the performance royalty rate that radio stations must pay to music companies in

exchange for sharing 2% of net advertising revenues. (Business Standard, par. 1) The CRB did

this with the hopes that greater affordability would spur growth of phase-III of privatization in

the coming months. In addition to the changing royalty scheme, radio operators are also lobbying

to offer news and current affairs (currently only broadcast by government stations), tradability of

licenses, and permitting a single operator to broadcast across multiple channels in one city.

Because of India’s wealth of diversity, regional radio stations represent the greatest

potential growth of radio broadcasting. With region-specific content and adequate support from

government policies, radio can shift away from being a purely urban phenomenon to a national

phenomenon.

Mobile Music

Mobile music is the fastest growing segment of the music industry as reported by

Pricewaterhouse Cooper’s. An increasing base of radio listeners, radio stations such as Radio

65
Mirchi have collaborated with mobile carriers to create subscriptions services that allow users to

stream the stations’ broadcasts on their phones. The subscription prices are incredibly low—for

INR 10 ($0.22 USD) per week, subscribers can stream 100 minutes of radio. (PwC, p. 73)

Television companies are also working with mobile carriers to provide portable content.

UTV@play is a catalogue of Bollywood and international music videos available on mobile

phones provided by BSNL, MTNL, and Vodafone, India’s largest carriers.

In 2009, Reliance Communications launched what it calls a “mobile jockey portal” which

enables users to call in to a live mobile radio jockey 24 hours per day from any location to

discuss anything from celebrity gossip to current events and recipes. “Music Box” is another

service offered by Reliance that enables users to download several songs, bundled in various

“boxes.” Vodafone provides subscribers value-added services (VAS) such as ringback tones, as

well as “Mobile Box Office,” a service which offers dialogue from or the synopsis of films or

songs, and teasers of upcoming films.

Icon Group estimates that the potential demand for India’s mobile music sector to be

around $277.4 million.

Licensing

Because most Indian music is created on a work-for-hire basis for the film companies

utilizing it, synchronization licensing is not a large source of revenues for the industry.

Mechanical royalties account for 10% of the market, (Butler, par. 3) but foreign publishers tend

to have a difficult time obtaining their share. Indian record companies generally claim that the

law is ambiguous regarding mechanical royalties, that such royalties are voluntary and only paid

to local publishers as a courtesy. There is also disagreement between publishers and record

66
companies about how mechanical royalties should be calculated, whether as a percentage of the

published price to dealer or the retail price. The managing director of BMG India estimates that,

if publishers and labels can, in fact, work out a solution, the Indian publishing business could

generate upwards of $25 million annually. (par. 9)

Live Performance

Pricewaterhouse Cooper’s reports that Live Performance is emerging as a promising

industry, estimated at about INR 130 billion ($3 billion USD) in 2008, and is expect to grow at a

compound annual growth rate of 23% until 2014. (PwC, p. 84) Event management companies

are collaborating more with advertising firms and professional firms, the latter wishing to

minimize regulatory issues. Event management companies bargain with PPL and IPRS to

determine how much of their revenues for each performance will be paid into the music industry;

PwC reports that it is currently “a small contributor to the industry.” (p. 84)

Outside of corporate events, religious festivals very often incorporate devotional music

and dance, and many live performers are classical musicians who play more traditional halls.

Dance performers seem to be the most popular performers, most likely because of the range of

cultures across India’s many regions.

IPRS charges a fee to what it deems—as per its website—to be “traveling showmen

moving around without any fixed place of Performance or in connection with roundabouts,

riding devices, side shows etc. on open spaces or temporary fairgrounds by way of radio, tape,

television, video or any other mechanical means or by live means.” Most likely applicable to

circus-like performers, some festival performers may also fall into this category.

67
 A number of widely witnessed live performances are broadcast in the form of awards

shows. After the International Indian Film Academy’s 2010 awards show, India Today reported

that the show was “is not just about the awards anymore, it's about which star is performing on

the stage.” (IndiaToday, video)

However, while some international artists have stopped in India on their world tours, the

visits are few and far between. Although U2 claimed the title for highest-grossing tour in 2009,

their endless traveling did not include a performance in India, despite a Facebook group petition;

nor did Bruce Springsteen’s tour, which came in close behind U2’s. India’s lack of infrastructure

makes it difficult to organize a large tour of the country, as does its lack of large venues.

Venues

The Hard Rock Café has three locations in India, among them HRC Mumbai, which

features two stages for performances; and New Delhi, its newest location, with a single stage and

a facility targeted at its relatively high-class clientele. Blue Frog is another popular venue in

Mumbai for contemporary musicians, but it is more than just a performance venue. Blue frog is a

project which also includes four recording studios, a music production house, an independent

record label, and an artist management service.

In addition to an Entertainment Tax payable to the Indian government, venues are subject

to pay IPRS a minimum royalty of INR 75,000 ($1,700 USD) per show for a commercial

exploitation of the show, whether or not admission is charged, and may be charged a royalty of

INR 75 ($1.70 USD) per seat with a minimum capacity of 40%. (Delhi Entertainments and

Betting Tax Act of 1996, section 6) Performances including those by a celebrity are considered

68
premium events, and are subject to higher royalties. Discounts are available to those venues

which secure licenses at least eight days prior to the event.

Outlook

Pricewaterhouse Cooper’s expects global consumer spending on recorded music to

decrease slightly in 2010, but rebound thereafter as growth of the digital market offsets declining

physical sales. The recorded music market is expected to increase at a compound annual growth

rate of 1.1% between 2011 and 2014, to reach $27.9 billion. (PwC, p. 85) Asia-Pacific is

expected to be the fasted growing region, however, growing at a compound annual growth rate

of 4.3% to $10.4 billion and surpassing EMEA (Europe, Middle East, Africa) to become the

largest region in 2011. (p. 85)

While physical distribution is expected to decline in each region, the digital market will

be propelled by new digital stores and mobile streaming services, as well as increased

penetration of broadband and smart phones. Internet Service Providers to users have begun

issuing threats to stop service if it is being used to share files, which has significantly helped

deter piracy in those territories where

the warnings are implemented.

The music industry is expected

to grow at a compound annual growth

rate of 29% to INR 26.5 billion ($594

million USD) in 2014, growing at a

faster pace as the proportion of non-

69
physical sales overtakes the proportion of physical sales. (PwC, p. 86) While physical sales

currently account for 53% of recorded music revenues, PwC estimates that the physical format

will contribute only 9% of revenues by 2014. (p. 86)

Film

Pricewaterhouse Cooper’s defines filmed entertainment as “consumer spending at the domestic

and overseas box office in the form of ticket sales, home filmed entertainment…and ancillary

revenues from broadcast syndication rights, mobile VAS,” (p.54) and other new media related to

films.

Films are produced in a number of genres and languages. 235 Bollywood films were

released in Hindi in 2009, and an additional 1,053 films were released in Tamil, Telugu, and

several other Indian languages. (CITE ME) The time period that a film is in production varies

from six to eighteen months. According to the Indian Independent Film Association, 23 million

people see a film every day.

PwC estimates the Indian film industry in 2009 at about INR 95 billion ($2.13 billion

USD), a decrease of 11.3% from 2008. (p. 56) The

decline can be explained by a multiplex strike

which resulted in an absence of new releases for

eight to ten weeks in 2009, as well as a swine flu

outbreak which drove audiences away from

theatres. In 2009, PwC estimates there were 3

Source: PwC
billion viewer admissions at the domestic box office, mostly to Hindi Bollywood films,

generating INR 70 billion ($1.6 billion USD) in revenue. (p. 59) PwC divides overseas

70
distribution into three territories: the United States, the United Kingdom, and rest of the world.

The United States contributes the greatest revenues to overseas distribution. Overseas box office

sales were INR 8 billion ($180 million USD), (p. 59) down from 2008 because of the recessions

abroad.

The multiplex strike was the result of a disagreement between cinemas and film

producers over the revenue sharing system. Producers sought an equal revenue share from films

regardless of their success, while cinemas wanted to continue linking revenue shares to the box

office performance. The strike cost the film industry INR 3.5 billion ($78.4 million USD) and

caused nearly 450 theatres to shut down in an effort to control costs. (PwC, p. 54)

Broadcast syndication and mobile are emerging as the two largest contributors to the

ancillary revenue stream. Broadcast Syndication consists of pre-recorded, live action, and

animation content. 85% of broadcast syndication is comprised of film content aired on television

channels. (PwC, p. 60) High acquisition fees in 2008 led to a stalemate in 2009 when

broadcasters were not willing to pay such high prices for expensive films produced and released

in 2008, contributing to a lull in the segment. With respect to mobile distribution, telecom

operators anticipate using the grater bandwidth provided by 3G to provide services in the form of

VAS such as Airtel Talkies, a service providing access to a film’s soundtrack, storyline, and even

dialogue clips before its release.

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The Indian Film Company Limited is an investment fund attempting to establish a library of

intellectual property rights for film in a variety of formats, such as satellite, home video, and

mobile. It aims to generate returns on investments in a portfolio of Indian films generally

targeted at the Indian audience.

Television

A $5.8 billion industry, Pricewaterhouse Cooper’s defines the television market in terms

of distribution (subscription revenues from broadcasts), advertising (revenues from ad space sold

by programs and service providers), and content.

According to Euromonitor’s consumer lifestyle report on India, 47% of the population

owned a colour television in 2007. (Euromonitor, p. 91) Subscriptions contribute 62% of

revenues to television’s total in 2009, up 10% from 2008. (PwC, p. 24) Households which pay

for television are those who have cable, satellite, or a service provided through internet protocol

television15 (IPTV). In 2009, six satellite broadcasters controlled an estimated 35% of the market

with 14 million subscribers, and are progressing quickly in rural India. (PwC, p. 25) Because

high-speed broadband connections are not numerous, IPTV remains a niche market with a wealth

of potential, as it bundles entertainment, internet, e-government, and video streaming for the

consumer in her own home. MTNL, BSNL, and Bharti currently control the IPTV segment.

Carriage fees are typically paid in a negotiated agreement between the broadcaster and

the subscriber as a fee for services. The fee depends on broadband speed for digital carriers and

the number of channels the subscriber wishes to view. There are currently 461 television

15
Live television over an internet connection

72
channels in India, an increase of 18.5% from 2008. (PwC, p. 29) Most of the growth is

attributable to regional channels, broadcasters beginning to cater to regional customers’ interests.

The majority of channels are general entertainment channels (GECs). Reality television

has seen the greatest surge in television content since 2008, although daily soap operas remained

at 60.4% of content generated by GECs, (PwC, p. 31) though storylines have moved away from

unrealistic depictions of the characters to focus on positivity, family values, and more realistic

plotlines. Many channels went global in 2009 to take advantage of the Indian diaspora. NDTV,

after entering the US, UK, Middle East, and North African markets, has arranged to enter

Canada.

Sports channels have increased many times over, thanks in great part to India’s love for

cricket. The value of the rights for the 2010 World cup increased from $8 million in 2006 to $42

million. (PwC, p. 121) Many channels are also in the

process of launching sports news channels.

Most prominent music channels rebranded

themselves or changed content offerings in 2009, as

they increasingly offer non-music programs. The cost

of acquiring music for television has increased

significantly—up to INR 4,000 ($90 USD) per song,

per airing16, (PwC, p. 35) in combination with the

marginal costs of airing in certain markets. Each

channel has a separate deal with each of the music owners, generally with an annual term, in

addition to high carriage fees. It is likely that the content on these channels will continue to shift

towards non-music with a time slot for pure music.

16
Compared to INR 1,000 ($22 USD) several years ago

73
Pricewaterhouse Coopers expects the television industry to grow by 12.9% from 2010 to 2014, to

reach INR 488 billion ($10.9 billion USD). (PwC, p. 41) The growth will be driven by

digitization and the expansion of the rural market, as well a continued expansion of GECs into

the global television market.

Advertising

Internet

One of the fastest-growing segments of India’s entertainment and media industry,

components of the Indian internet advertising market include displays, classifieds, paid searches,

and videos. Growing by 20% in 2009, internet advertising hit INR 6 billion ($133.5 million),

(PwC, p. 90) growth fueled by a similarly growing internet user base. Coupled with increasing

reach of broadband penetration and mobile internet capabilities, projections indicate internet

advertising to grow at an even faster rate.

The effectiveness of advertisements are measured in cost per impression (CPI or CPM

per 1000 impressions) in which advertisers pay for a certain number of impressions, cost per

click (CPC) in which advertisers pay on the

number of times the advertisement is actually

clicked, or cost per acquisition (CPA) in which

advertisers pay if a user both clicks the

advertisement and completes at least one step in the sales process.

Online video ads are gather momentum; AC Neilson reports that 85% of users recall

online video ads, as opposed to the 54% who are able to recall the same ads on television. (PwC,

74
p. 92) Mobile phone advertisements lead the product categories advertised with online videos,

closely followed by bank loans, then entertainment sites, job sites, and investment options.

To realize its full growth potential, internet sites must overcome their own images. A

survey by the Indian Internet and Mobile Association revealed that 70% of internet users feel

that online information is inaccurate, (PwC, p. 90) and advertisers generally distrust the

effectiveness of online advertisements because the effectiveness of the ads are difficult to

measure. But as broadband households increase, there can be little doubt that online

advertisements have a larger audience. By 2014, the internet advertising segment is expected to

generate INR 15 billion ($333.9 million USD) in revenues. (PwC, p. 94)

Radio

In 2009, radio

generated INR 9 billion

($200.3 million) and

represented 4.3% of the

total advertising industry. (PwC, p. 68) Television channels spend the most in advertising on

radio, followed by mobile phone service providers. By 2014, PwC projects the radio advertising

industry will be worth INR 16 billion ($356.1 million USD). (p. 68)

Television

Although advertising rates decreased in 2009, volumes

increased, leading to a growth of 6%, despite less

spending by corporations having financial difficulties, hitting INR 89 billion ($1.9 billion USD),

75
and is expected to grow to INR 170 billion ($3.5 billion USD) by 2014. (PwC, p. 22) Mobile

phones service providers and manufacturers cut advertisement spending, while toilet soaps,

shampoos and toothpastes increased it.

Print

Regional markets—especially regional newspapers—are expected to contribute

significantly to print advertising in the next five years. Local advertisements grew up to 20% in

2009. (PwC, p. 44) Online advertisements are next expected to produce serious competition for

print media over the next five years, as online print market is limited to e-newspapers and e-

magazines. English newspapers account for the bulk of print advertisement revenues—about

51%. (p. 44) Education and services make most use of the print advertising medium, contributing

49% of revenues in 2009. (p. 44)

Advertisements will continue to drive 67% of revenues in the print sector, (PwC, p. 52)

but the overall proportion of print advertisements is decreasing in relation to total advertising

revenues.

Other Venues for Advertising

The Out-of-Home sector includes billboards, bus advertisements, bench (or street

furniture) advertisements, and other signage. Billboards are being replaced with digital billboards

upon which clients can upload their ads from their offices; some buses and elevators display

content that can be updated in real time; the government is making use of street furniture to sell

ad rights for a period of seven years (currently). The OOH market declined 17% in 2009 to INR

76
12.5 billion ($278.2 million USD), but is expected to grow to INR 21 billion ($467.4 million

USD) by 2014 as advertisers participate in more interactive forms of OOH media. (PwC, p. 101)

77
IMMIGRATION

The Indian government requires all foreign nations who are visiting the country to be in

possession of “a genuine and valid national passport or any other internationally recognized

travel document establishing his/her nationality and identity,” (India Visa Centre) which must be

accompanied by the foreigner’s photograph. Nepal and Bhutan nationals are not required to have

passports to access India, so long as they enter the country from the border; they are still

required to carry proof of identity.

Visas are available in different categories, depending on the reason the foreigner wishes

to enter the country, and issued by the Indian Consulate in the applicant’s territory. The visa

issued to the foreigner lists specific numbers of entries allowed, as well as his permitted duration

of stay. Should the foreigner not be in possession of a visa upon his landing in India, an

immigration officer may grant him a Temporary Landing Permit (TLP), which allows him to

stay in the country for 72 hours. TLPs are issued for an additional fee, provided that the foreigner

has a confirmed “onward journey” within the 72 hour period, and that he is not a national of a

non-eligible TLP country. Visas are valid from the day they are issued.

If a foreigner is planning to stay in India for more than 180 days, he must register in-

person with the Registration Officer in his area within a specified period denoted on his visa.

Registration facilities are not located at airports, but are located throughout India’s major

townships and cities.

A foreigner may be denied entry if he is not in possession of a valid passport and visa; is

insane; is suffering from an illness which could be contagious and a danger to the health of the

78
general public; is involved in or has committed a crime wherein he can be extradited; or he is

prohibited entry by the Central Government.

Employment Visa

Also known as a Work Permit, employment visas17 are issued to foreign nationals who are

employees or paid interns of Indian companies, or volunteers with Non-governmental

organizations (NGOs). Employment visas are generally granted for up to one year, and may be

extended for up to five years in one-year increments. To qualify for an employment visa, the

foreigner must command an annual salary at least $25,000.

Should the foreigner arrive on a Long-Term Employment Visa18, she must register within

14 days of her first arrival in India. To register, the employment visa-holder must furnish the

Registrar with an original passport; three copies of her registration form; a copy of her

employment contract or appointment letter; income tax papers for durations of more than one

year; notarized lease agreement, hotel confirmation, or other proof of residence; and a request

letter and an undertaking19 on company letter head “duly stamped and signed by an authorized

signatory.” (India Visa Centre)

Business Visa

Business Visas are reserved for foreign nationals who are establishing20 contracts, etc. on behalf

of countries outside of India. Though visas can be valid for more than one year with multiple

entries, the period of stay per each visit may not exceed six months. Foreigners who have
17
Pricewaterhouse Cooper’s states that income received in India cannot be repatriated unless the emigrant holds a
valid employment visa.
18
Duration of stay exceeding 180 days
19
See appendix C.
20
The Indian government requests that applicants who are employed in projects or contracts should apply for
employment visas.

79
established or who intend to establish joint ventures in India may be eligible for visas which are

valid for up to ten years.

Should the foreigner also need to register, he must provide the Registration Officer with

his visa; a valid passport; proof of a residential address; documentation of the business purpose

as well as permission from the Reserve Bank of India and Indian government in the cases of joint

ventures; and an undertaking on company letterhead.

Entry Visa

The government states that “if the applicant does not meet any other visa type standards, they

should apply for an Entry visa.” (India Visa Centre) The Indian Ministry of External Affairs

grants entry visas under circumstances in which the applicant is a person of Indian origin, or who

has held Indian nationality or is a child or grandchild of a person who has held Indian

nationality; is a spouse or child of a person of Indian origin; is a spouse or dependent of a foreign

national entering the country on a long-term employment, business, research, or student visa, in

which case the duration of the entry visa is granted co-terminus with that of the principal visa

holder.

80
TAXATION

Tax payers are required to have a Permanent Account Number (PAN), for which a foreigner can

also apply. The tax year is designated as the “previous year,” or the year during which income

subject to tax is computed; and the “assessment year,” or the year during which the previous

year’s tax is calculated. The Indian tax year runs from April 1 to March 31, where March 31 is

the end of the previous year, and April 1 is the beginning of the assessment year.

Residency

Residency for tax purposes is dependent on the intended length of stay; staying longer than

intended could effect residency status. If a foreign national spends more than an aggregate of 182

days in India during any previous year, she will be considered a resident.

Non-Resident

If an individual has been in India for more than 60 days, but less than 182 days; and if

the foreign national has not been in India for an aggregate of 365 days over the four years

preceding the previous year, she will not be considered a resident.

Resident

Should an individual stay in India more than 182 days of the previous year; or more than

60 days in any previous year and an aggregate of 365 days during the 4 years preceding the

previous year, she will be considered a resident.

81
Not Ordinarily Resident / Ordinarily Resident

If an individual has been a non-resident for nine of 10 years preceding the previous year;

if she has been in India for less than 729 days during the seven years preceding the previous

year, she will be considered “resident but not ordinarily resident,” or RNOR. If an individual

cannot be classified as RNOR, or a non-resident will be classified as a “resident and ordinarily

resident” (ROR).

An ROR’s worldwide income is taxable in India, whereas non-residents or RNORs are

only taxable on income they earned or received in India.

Taxable Income

Salary Income

Salary income for employment in India is subject to tax if services or employment were

rendered in India. Any other income received, accrued, or arising from activities in India will

also be subject to income tax. All amounts arising from employment or an office are considered

taxable income.

Additionally, and employer will deduct and contribute 12% of an international worker’s

salary—including basic wages, but excluding bonuses— toward India’s Provident Fund. The

contribution is subject to a maximum INR 100,000 ($2,200 USD) per year. (PwC, p. 20)

Common remuneration items are allowances, personal expense reimbursement, cost of

education, and employee benefits. Housing benefits are usually taxed at 15% of either the rent

paid or the salary paid, whichever is less. (PwC, p. 7) Hotel accommodations may be taxed at the

lesser of 24% of salary or amount paid to hotel. (p. 7) If the employer provides a car and driver,

82
the facilities are taxable at INR 1,800 to INR 2,400 ($40 USD - $54 USD) if they are available

for both professional and personal use. (PwC, p. 7)

Resident women who earn an income of up to INR 190,000 ($4,200 USD) and

individuals older than 65 who earn an income of up to INR 240,000 ($5,400 USD) are not

required to pay income tax. (PwC, p. 20) For an income of between INR 160,00 and INR

500,000 ($3,600 - $11,100 USD), a tax of 10% is generally applied; for an income of INR

500,000 to INR 800,000 ($11,100 - $18,000 USD), a 20% tax is applied to income as well as a

tax of INR 34,000 ($760 USD) on income less than 500,000; for income greater than INR

800,000 ($18,000 USD), a tax of 30% is applied in addition to an INR 94,000 ($2,000 USD) on

income less than INR 800,000. (p. 20)

Source: PwC

An education-cess of 3% of the tax will be applied regardless of income level.

Even if compensation for services rendered in India are paid to a bank account outside of India,

the compensation for those services is taxable in India. Pricewaterhouse Coopers suggests that

when arranging a transfer within a company, an employee should bear in mind: “where salary

should be delivered; if salary is to be paid outside India, would it be charged back to the Indian

entity; current exchange control regulations for delivering salary; corporate tax implications

83
(permanent establishment exposure), withholding tax, the transfer pricing regulations and service

tax implications.” (PwC, p. 11)

Self-Employment Income

Profits or gains from activities of self-employment which are conducted within India are

subject to tax regardless of residency status; Indian residents will be subject to Indian tax on

profits or gains resulting from their self-employment regardless of where they conduct their

business.

Social Security Taxes

As of November 1, 2008, all International Workers working in an Indian establishment

which employs more than 20 people are required to register for social security unless the worker

is a national of a country with which India has a Social Security Agreement21 or the

establishment is “engaged in an exempted activity.” (PwC, p. 9)

Corporate Tax

The government proposed a new tax law in August of 2009 expected to go into effect

sometime in 2011. The new law replaces the current Income Tax Act, and would bring corporate

tax rates down to 25% from the present 30%. (Economic Intelligence Unit, p. 66) Foreign

companies pay a 40% tax rate at present, but may pay the 25% rate Indian companies are

expected to pay under the new law. (p. 66)

21
So far, India has signed social security agreements with Belgium, France, Germany Luxembourg , Netherlands, Switzerland,
Hungary, Denmark, although the agreements with Belgium and Germany are the only one to have been made operational.

84
Capital Gains Income

Capital assets situated in India and subject to capital gains tax include all forms of

property, stocks, shares, buildings, and goodwill transferred or sold in the previous year, but do

not include personal effects. Assets held for more than three years are known as “longterm

capital assets,” and capital gains from long-term capital assets are subject to a 20% flat tax rate.

(PwC, p. 6) Foreign nationals and non-residents are prohibited from making investments in

“immoveable property” (p. 6) in India before obtaining approval from the Reserve Bank of India.

Wealth Tax

Only income greater than INR 3 million ($67,000 USD) is subject to a wealth tax of 1%,

valuated as of March 31 of each year. (PwC, p. 6)

Withholding Tax

Employers are required to withhold tax on salary earnings for services rendered in India,

whether or not the employer is based in India. If the employer fails to do so, it is the employee’s

responsibility pay to the government the advance tax payments, which, if late, may be charged

interest. Refunds can be claimed in the annual income tax return.

Double taxation agreements

India has double taxation agreements with various countries in which a resident of one

country is exempt from tax on employment income in India if her stay in India is for less than

183 days of the tax year. A list of countries with which India has double taxation agreements is

given in Appendix B.

85
Service Tax

Section 66 of Indian tax law provides that a service tax may be levied against services received

by individuals from businesses outside of India. According to Indian tax law, the maximum

service tax which can be charged is INR 1,000,000 ($22,300 USD).

Entertainment & Media Industries subject to Service Tax

Broadcasting services

Sound Recording Studio or Agency Services

Copyright Services

Event Management Services

Source: PwC

Value-Added Tax (VAT)

VAT is based on the value of the goods added to a product at every level of production

(or the aggregate value of goods added to the final level of production if vertically integrated),

not just the profit. VAT is typically charged to the consumer, much like sales tax.

Entertainment Tax

Large-scale entertainment shows, privately sponsored festivals, movie tickets, video

game arcades, amusement parks, etc. are subject to an entertainment tax in India. The tax is

typically accounted for in the price of the ticket or product, and runs at about 25%-30%,

depending on the kind of entertainment.

86
 Promoters or venues for live performances must obtain permission from the

Entertainment Tax Department before producing commercial shows. Hotels, restaurants, and

clubs are generally subject to an entertainment tax on any tickets, meals, or refreshments served

in connection with a performance “organized on a special occasion…with a view to attract

customers.” (Entertainments and Betting Tax Act of 1996, Section 7)

Performances “wholly of educational character;” (Entertainments and Betting Tax Act of

1996, 14.1.(a)) for non-profit scientific purposes (14.1.(b)), and for non-profit societies

promoting public health and interest, may be exempt.

Generally, a ticket-seller may stamp tickets to denote payment of the tax. The tax is

typically paid in a consolidated payment of a percentage of the gross income the seller receives

for admission.

87
INVESTMENT RECOMMENDATIONS

India’s low literacy rate, increasing disposable income, and incredibly large market make

the country a prime entertainment investment opportunity. Illiterate Indians rely on audio visual

programming for news and entertainment; as more literate, and generally younger, Indians are

employed, they spend their disposable income on consumer electronics, music, and films; as

technology expands into the more rural regions of the country and new distribution outlets

emerge, the demand for entertainment will flourish.

To facilitate its growth and capitalize on the vast opportunities emerging in the Indian

market, it is recommended that the following areas be reviewed for an investment of $1.2 billion:

Infrastructure

It is recommended that 10% of the funds allocated to the Indian market be invested in

supplementing government programs to develop city and rural infrastructure.

As consumer and household income increases, car sales are expected to overtake bicycle

sales. However, the extent of growth in the automobile industry depends on whether roads within

and between cities, currently in desperate need of repair or even existence, can support it. It is

likely that those with the income to purchase cars are also purchasing music and electronic

devices, which could potentially lead to sales of music with increased penetration of in-car audio

systems.

Additionally, increased infrastructure could make live performance tours more feasible,

especially for international acts. The number of potential ticket-buyers in each of India’s highly

populated major cities is staggering; facilitating travel between cities could open up further the

88
most recently emerging segment of the music industry, which is the live performance and event

market.

To help realize IconGroup’s estimate of potential demand of mobile music at $277 million,

it is recommended that 15% of the funds allocated to the Indian market be invested in

financing technological infrastructure for wireless and broadband penetration in India’s

rural regions.

With 72% of India’s population of 1.2 billion living in non-metropolitan areas, the

market for technology is vast and underdeveloped, as broadband and wireless penetration have

yet to extend to the reaches of many of these areas. Indian telecom giant, BSNL, and the Indian

government began a multi-billion dollar project in 2009 to build wireless towers across rural

India. As BSNL’s competitors seek to expand into rural regions, financing additional projects

could lead to large returns on investment as rural populations adopt wireless technology, such as

3G.

Technology

It is recommended that 35% of the funds allocated to the Indian market be invested in

companies providing internet service for broadband and wireless access.

5% of the Indian population generated $3 billion in subscription revenues in 2009. At this

rate, the potential growth of the internet access market is $57 billion. The number of subscribers

is expected to more than double by 2014, then valuing the market at more than $6 billion,

assuming the proportion of total penetration to subscription revenues remains the same.

89
It is recommended that 15% of the funds allocated to the Indian market be invested in

existing radio broadcasting companies, and 5% be invested in radio broadcasting

companies which receive licenses during phase III privatization.

As phase III of the Indian government’s plan to privatize radio unfolds, the growth of

radio is expected to increase by $122 million in 2014. However, this estimate by

Pricewaterhouse Cooper’s could be rendered inaccurate by the Indian Copyright Royalty Board’s

recent decision to eliminate performance royalties in lieu of sharing revenues, which the CRB

decided knowing and intending to give radio stations the upper-hand, indicating that the segment

could be more profitable than currently projected.

Content

Given the expected rise in mobile and internet technology over the next four years,

Pricewaterhouse Cooper’s projects that the Indian music industry will grow to approximately

$594 billion by 2014. Developing content which incorporates India’s film music-centered

business model as well as emerging digital distribution channels will be the key to reaching

PwC’s projection.

In addition to potential licensing revenues from ringtone sales, it is suggested that 20% of

funds allocated to the Indian market be invested in content development such as:

• applications for use with smart phones which can be tied in with music and video

downloads or subscription-based streaming; users can have access to an entire catalogue

of content or periodic selections such as “videos-of-the-week;”

• 10 to 15-minute Bollywood-like short films which can be streamed online or via mobile

90
 phone as webisodes, with an option to purchase songs at the end of each webisode as well

as options to purchase season packages;

• “Making the Video” reality series broadcast on television and online which takes

audiences behind-the-scenes of their favorite music videos or scenes from upcoming

films, and can be tied into video-of-the-week applications, song and video bundles, and

streaming or purchasing of songs featured during the season.

91
ISSUES WITH INVESTMENT

Tax & Royalty Considerations

If adequate infrastructure could enable increased touring, the venues hosting performers

may face increased entertainment taxes and IPRS performance royalties, which could drive up

ticket costs and likely hurt attendance. To counteract this potential setback when artists do tour

more actively, it would be wise to encourage venues to pressure the government to either

decrease or restructure the entertainment taxes it charges some venues, and to renegotiate their

terms with IPRS as to how they must pay performance royalties.

Macroeconomic Considerations

Although India’s recent economic growth has been instigated by government reforms,

government policies remain the greatest hurtle to overcome in taking up business in India, and

despite sound legal frameworks, a general lack of implementation and law enforcement

continues to hold India back. The questionable efficiency of the Indian government ultimately

rests on the idea that India is a democracy serving quite literally a billion voices, ideas, and needs

without a clear unifying goal or sense of national purpose. A nation of 2,000 ethnic groups,

India’s cultural disorganization is as much its greatest liability in the marketplace as its greatest

asset. As incumbents are rarely re-elected, the constant overturn of government policies and

reforms makes significant long-term change difficult to achieve.

In trying to pull 25% of its population out of poverty, the government’s priorities may

often conflict with those of music companies or composers. The reality is that democracy moves

slowly, and India’s democracy moves slower. Though its economy is growing quickly,

92
government policies struggle to keep up, ultimately causing an increase in the costs and

disadvantages of doing business in India.

As for most self-determining nations, it is likely that as India’s population gradually

defines itself on a national, rather than regional, scale, more consistent governmental

administrations and policies can enhance the government’s efficiency and enable the

infrastructure which would make sustainable growth possible.

93
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96
APPENDICES

97
APPENDIX A

List of Countries included in the International Copyright Order, 1999

I. Berne Convention Countries which have ratified/accepted/acceded to the 1971 Text of the
Convention

Albania, Argentina, Australia, Austria, Bahamas, Bahrain, Barbados, Belarus, Benin, Bolivia,
Bosnia & Herzogovina, Botswana, Brazil, Bulgaria, Burkina Faso, Cameroon, Cape Verde,
Central African Republic, Chile, China, Colombia, Congo, Costa Rica , Cote d’Ivoire, Croatia ,
Cuba, Cyprus, Czech Republic, Democratic Republic of the Congo, Denmark, Dominican
Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Estonia, Finland, France, Gabon,
Gambia, Georgia, Germany, Ghana, Greece, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti,
Holy See, Honduras ,Hungary, Iceland, Indonesia, Italy, Jamaica, Japan, Kenya, Latvia, Lesotho,
Liberia, Libya, Lithuania , Luxembourg, Malawi, Malaysia, Mali, Malta, Mauritania, Mauritius,
Mexico, Monaco, Mongolia, Morocco, Namibia, Netherlands, Niger, Nigeria, Norway, Panama,
Paraguay, Peru, Philippines, Poland, Portugal, Republic of Korea, Republic of Moldova, Russian
Federation, Rwanda, Saint Kitts & Nevis, Saint Lucia, Saint Vincent and the Grenadines,
Senegal, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Suriname ,Sweden, Switzerland,
Thailand, The Former Yugoslavia Republic of Macedonia, Togo, Trinidad and Tobago, Tunisia,
Turkey, Ukraine, United Kingdom, United Republic of Tanzania, United States of America,
Uruguay, Venezuela, Yugoslavia, Zambia, Zimbabwe (Total - 116 Countries)

II. Berne Convention Countries which are yet to ratify/accept/accede to the 1971 Text of
Convention

Belgium,Canada,Chad,Fiji,Ireland,Israel,Lebanon,Liechtenstein,Madagascar,New
Zealand,Pakistan,Romania

III. Universal Copyright Convention Countries which have Ratified/Accepted/Acceded to the

1971 Text of the Convention Convention

Algeria, Australia, Austria, Bahamas, Bangladesh, Barbados, Bolivia, Bosnia &Herzegovina,

Brazil, Bulgaria, Cameroon, China, Colombia, Costa Rica, Croatia, Cyprus, Czech Republic,
Denmark, Dominican Republic, Ecuador, El Salvador, Finland, France, Germany, Guinea, Holy
see , Hungary, Italy, Japan, Kenya, Mexico, Monaco, Morocco, Netherlands, Niger, Norway,
Panama, Peru, Poland, Portugal, Republic of Korea, Russian Federation, Rwanda, Saint Vincent
and the Grenadines, Saudi Arabia, Senegal, Slovakia, Slovenia, Spain, Sri Lanka, Sweden,
Switzerland, Trinidad and Tobago, Tunisia, United Kingdom, United States of America,
Uruguay, Yugoslavia,

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 IV. Universal Copyright Convention Countries which are yet to Ratify/Accept/Accede to the
1971 Text of the Convention

Andorra, Argentina, Belarus, Belgium, Belize, Cambodia, Canada, Chile, Cuba, Fiji, Ghana,
Greece, Guatemala, Haiti, Iceland, Ireland, Israel, Kazakhistan, Lao People’s, Lebanon, Liberia,
Liechtenstein, Luxembourg, Malawi, Malta, Mauritius, New Zealand, Nicaragua, Nigeria,
Pakistan, Paraguay, Philippines, Tajikistan, Ukraine, Venezuela, Zambia Democratic Republic

Source: http://copyright.gov.in/Documents/handbook.html

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APPENDIX B

Source:
Pricewaterhouse
Cooper’s

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APPENDIX C

Format of Undertaking:

We take full responsibility for the activities and conduct of Mr./Mrs/Ms__________National

of______________during his/her stay in India. If any thing adverse come to notice during this
period, we undertake to repatriate him/her at our own cost.

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