DOING BUSINESS IN INDIA: OPPORTUNITIES
India's economy is growing fast, on course to overtake Britain's within years and predicted to be second only to China by 2050. Is your company missing out on its potential?
SINCE the Brexit vote prompted a fresh analysis of the UK’s future trade, many have viewed India with fresh eyes.
A free trade agreement could produce a ‘win-win situation’, yielding a 25% increase in trade between the nations and increasing British exports by half, Commonwealth research suggests.
India’s high commissioner to the UK, YK Sinha, has declared the prospects of a deal ‘very bright’, with Theresa May choosing India for her first non-EU bilateral trip as prime minister and Chancellor Philip Hammond leading a fintech delegation to Mumbai.
According to the Department for International Trade (DIT), the UK exported £6.35bn in goods and £2.24bn in services to India in 2014. British companies employ some 700,000 people there, raking in an estimated total revenue of US$54bn.
But are we missing out?
Kevin McCole, of the UK India Business Council (UKIBC), reckons many British SMEs are failing to explore its opportunities. Britain is only India’s 12th largest trading partner, behind Indonesia, Germany and Japan. And while UK-India bilateral trade grew 170% in the decade to 2014, India’s overall trade grew eightfold.
“Too many British companies think of India as a low-cost outsourcing destination and don’t realise that there’s an export market of hundreds of millions of affluent middle-class people who see British food, drink, fashion and beauty products, and other goods, as highly desirable,” says McCole.
Some 10% of India’s 1.3bn people are thought to speak English, making it the second-largest Anglophone population after the US, while it shares common legal and administrative frameworks with the UK.
While annual growth has slowed since hitting 8% in 2015, with the IMF recording an increase in GDP of 6.7% last year, India’s remains one of the world’s fastest-growing economies.
Membership organisation the UKIBC offers consultancy and research to companies hoping to tap into that market, and can source information about the goods and services Indian businesses need.
McCole says the business environment is constantly improving.
“People might have looked five years ago and thought it wouldn’t work but that situation is changing,” he says.
“The Indian retail sector was largely unorganised… corner shops. Now wholesalers are expanding and supermarkets are being set up. They want a better range of products so are investing in the back-end supply chain and logistics.”
Last year, a VAT-style nationwide Goods and Services Tax replaced the previous fragmented regime across the country’s 29 states that had punished companies every time they crossed an internal border.
“Now bigger companies can operate across India,” says McCole.
Reforms allowing faster access to credit and delivery of construction permits have helped India up the World Bank’s Ease of Doing Business rankings. The time taken to obtain an electricity connection was slashed from 138 to 45 days within four years, while it’s earned praise for advanced corporate law and securities regulations.
Still, the country sits in 100th place, retaining many cumbersome processes. No fewer than 12 procedures are required before you can set up business and it takes nearly four years (1,445 days) to enforce a contract. World Bank country director Junaid Ahmad said new laws, online systems and deepening investment in state institutions were required to sustain the improvement.
McCole says UK firms have profited from recent liberalisation of rules on foreign direct investment, particularly in insurance, defence and retail.
International Business Festival director Ian McCarthy expects to welcome more than 30 Indian delegations to next year’s event in Liverpool, having recently returned from a second mission to the country. Those engaged with the Festival include retail and cosmetics entrepreneur Samir Modi, the Federation of Indian Chambers of Commerce and Industry, the Bombay and SME chambers, state leaders in Gujarat and Andhra Pradesh.
“They’re hugely enthusiastic about the prospect of hearing about best practice from the biggest names in industry and making connections in key businesses,” he says. “We’re keen to give India a high profile throughout the three weeks of the Festival.
What do Indian businesses want?
McCarthy says the New Delhi government’s Make in India campaign, which is set on bringing about best-in-class infrastructure by encouraging innovation and foreign direct investment, has provoked particular interest in manufacturing. Delegations of around 25 start-ups each are expected from the Indian Angel Network and DIT’s Tech Rocketship programme.
Likewise, India’s growing population – some 59 of its city agglomerations are home to more than a million people – ensured keen interest in the Festival’s Urbanisation and Cities, Sustainable Energy and Future Transport day themes.
|Mineral fuels & oils, gems & precious metals|
|Electrical machinery, equipment & parts|
|Reactors & boilers|
|Iron & steel|
|Animal or vegetable fats & oils|
|Medical, optical, photographic, measuring, precision medical or surgical equipment|
|Source: Department for International Trade|
“The country has to both manage the challenges that come with a growing urban population and seize the business opportunities involved in managing waste, public transport, traffic, sustainable lighting and energy,” says McCarthy
“We have a strong history in civil engineering, water management, urban regeneration and so the Indian delegations will be keen to hear from businesses who can provide that expertise.
“But India is executing a plan to develop 100 smart cities, so it’s also an area of real expertise for many of its own companies. We heard from a number of businesses that are interested in working here in the UK to help upgrade and modernise some of the UK urban infrastructure.”
Those doing business in India should expect customers to drive a hard bargain in what is a highly competitive market, warns the Institute of Export. Meanwhile, exporters should watch out for duties on goods, which are likely to be a minimum of 35%.
The UK government warns visitors to plan business trips carefully, being mindful of multiple religious, ethnic and annual variations in holiday timings. It says accessing skilled people, acquiring land and coping with temperature extremes present challenges.
“It can be difficult to get food and drink to India because of labelling requirements, experience of customs procedures at the docks that aren’t slick, and there haven’t been enough cold-storage transport facilities,” says McCole.
“But all these things are changing.”