About 70 per cent of Indian companies say cross-border trade has become more complex over the past three years, prompting a more deliberate approach to overseas expansion, according to the 2026 Cross-border Complexity Report by Avalara Inc. The findings come amid shifting tariff regimes, evolving tax compliance rules and tighter regulatory oversight across major global markets, which have added to operational and documentation burdens for exporters.
The report, which surveyed senior decision-makers, finds that 86 per cent of businesses experienced rising complexity in cross-border operations over the past year alone. While more than half still plan to enter additional markets, 78 per cent say they are slowing or reconsidering new market entry due to regulatory uncertainty. The findings suggest that Indian firms remain committed to global growth but are recalibrating their strategies as shifting regulations, tariff changes and uneven enforcement standards increasingly influence early-stage international planning.
“Indian companies remain committed to global expansion, but the pace of regulatory change means planning must be both grounded and forward-looking,” said Dulles Krishnan, General Manager, India Operations at Avalara. He cited rising tariff volatility, stricter documentation requirements and a rapid shift toward real-time reporting as key pressures. Companies, he added, need stronger systems, reliable data flows and purpose-built technology to stay compliant and manage risk without operational disruption.
Earlier, an MGC Global Risk Advisory’s report revealed that nearly 50 per cent of chief experience officers (CXOs) surveyed placed geopolitical instability at the top of the risk spectrum, ranking it as more severe than economic uncertainty, technology disruption or climate stress.
MGC Global report outlined a steep rise in other major threats that collectively heighten India Inc’s sense of vulnerability. A significant share of leaders, about 45 per cent, flagged a global demand slowdown as a growing concern, signalling that unpredictable consumption patterns and tightening external markets are pushing companies to rethink revenue and margin strategies.
Approximately 42 per cent of CXOs see policy instability as a high-severity threat, underlining a growing belief that regulatory predictability has become the new investment currency. MGC Global argued that capability deficits have become “the biggest brake on transformation”, especially for companies attempting digital expansion, international diversification or technology-heavy business models.
Tariffs And Border Controls Emerge As Primary Pain Points
In the Avalara report, tariffs and duties are identified as the biggest challenge by 47.2 per cent of respondents, followed by customs and border processes at 40.8 per cent and the interpretation of local rules at 37.6 per cent. The report indicates that the most acute pressure points occur at the moment goods cross borders, where small documentation errors can lead to delays, shipment holds or higher costs.
These challenges cut across finance, logistics and legal teams, underscoring that compliance decisions now have direct cost implications for multiple departments. On average, companies are spending 11.4 per cent of their cross-border revenue on customs, taxes and regulatory management, a level the report describes as making compliance a strategic cost driver rather than a back-office function.
Preparation before market entry has become more intensive. Tariffs, border procedures, documentation norms and local authorities’ interpretation of rules are shaping conversations long before companies sign contracts or open overseas offices. Firms cite South Asia, Europe and North America as regions where compliance expectations have risen, with the quality of preparation often determining whether operations begin smoothly or face early disruption.
Technology is playing a central role in managing the growing complexity. Eighty-nine per cent of respondents say they are using systems to reduce manual processes and create clearer visibility of compliance obligations across markets. Businesses report that such tools help teams keep pace with frequent rule changes and maintain documentation standards, particularly in jurisdictions where requirements are updated with little notice.
However, the report suggests that predictability does not necessarily improve once operations are underway. Regulatory changes are cited by 56.4 per cent of companies as an ongoing challenge, while 46.4 per cent point to border disruptions and 40 per cent to unexpected fines or audits as regular factors shaping day-to-day decisions.
As a result, many organisations are investing in stronger internal processes designed to remain stable even when external conditions shift. The overall pattern points to disciplined and structured international expansion, where market opportunity remains attractive but is increasingly weighed against compliance risk and cost.
India Corporate Earnings Show Resilience
India’s corporate earnings grew 16 per cent year-on-year in the December quarter, slightly above the 14 per cent estimate. Commodities and large-cap companies drove the momentum, with metals posting 33 per cent profit growth, oil & gas companies rising 2.4x, and financials, technology, and telecom contributing significantly. Out of 27 sectors, 19 delivered double-digit growth.
Large-cap companies recorded 16 per cent growth, extending 22 consecutive quarters of profit expansion. Mid-cap firms underperformed, growing 15 per cent against an estimate of 22 per cent, while small-caps fared better at 29 per cent, with 62 per cent of companies meeting or exceeding expectations.
For the first nine months of FY26, aggregate earnings grew 13.3 per cent, and excluding metals, oil & gas, growth stood at 9.3 per cent. Looking ahead, Q4FY26 earnings are projected at 14 per cent for the broader universe and 10 per cent for Nifty. FY27 PAT growth is estimated at 16 per cent, driven by financials, metals, and automobiles, with mid- and small-caps expected to outperform large-caps.
Credit metrics for medium and emerging corporates remain broadly stable, but firms with high leverage or thin margins face risks. Working capital utilisation rose to 81 per cent, revenue growth is expected at 8.6 per cent, and operating margins hover around 10 per cent, highlighting ongoing structural vulnerabilities in some segments.
Pay Hikes Tempered Amid Economic Concerns
Salary increases across corporate India are projected to average 9.1 per cent in 2026, with global capability centres (GCCs) set to record the strongest growth at about 10.4 per cent, according to an EY India report. Financial services firms are expected to follow with increments of around 10 per cent, while e-commerce may see rises of 9.9 per cent and life sciences and pharmaceuticals about 9.7 per cent. The findings point to sustained wage momentum in skill-intensive sectors.
The report highlights a structural shift in compensation practices, with companies placing greater emphasis on specialised capabilities rather than tenure or designation. Skills in artificial intelligence, machine learning, cybersecurity and cloud computing are attracting pay premiums of 30-40 per cent. Performance-linked rewards are also gaining prominence, with top performers earning up to 1.6 times more than peers, while variable pay rose to 16.1 per cent of fixed compensation in 2025 from 14.8 per cent a year earlier.
Employee turnover showed signs of moderation, with attrition easing to 16.4 per cent in 2025 from 17.5 per cent in 2024. More than 80 per cent of exits were voluntary, indicating job-switching driven largely by opportunity. Financial services recorded the highest attrition at 24 per cent, while GCCs reported relatively lower churn at 14.1 per cent, reflecting greater workforce stability in such centres.
Companies are also redesigning pay structures as artificial intelligence adoption accelerates. Nearly half of large firms now rely on analytics in compensation planning, and the use of AI in rewards and learning functions has increased sharply. Long-term incentives, particularly employee stock ownership plans, are being expanded beyond senior management, while median chief executive pay at Nifty 200 companies rose 12-15 per cent to about Rs 7-9 crore in 2025, with a significant share linked to performance-based incentives. |
