Jan:Feb 2017 Credit Management magazine

COUNTRY FOCUS
MADE IN INDIA
Ask the average man in the street to name something that reminds
them of India and it’s a fair bet that Gandhi, tea and call centres will
be mentioned. A nation formerly ruled by the British and a gem in our
Imperial Crown, it’s steeped in history and importantly, for exporters
at least, is now a huge market waiting to be tapped by exporters.
Adam Bernstein takes a closer look.
INDIA it is the world’s second largest country by
population – 1.29 billion according to International
Monetary Fund (IMF) estimates and importantly
in terms of commerce, the world’s seventh largest
economy ($2.3 trillion GDP) sitting just beneath France
($2.4 trillion GDP). Its importance has grown now that
China has slowed and Europe has stagnated.
The Indian economy really ought to be on the
agenda for every exporter. However, doing business in
India is not as simple as it seems. Sure, the population
generally speaks English and there’s a strong common
heritage when it comes to the legal administrative
systems, but exporters have to contend with a country
spread over the world’s seventh largest by land mass
(1.26 million square miles) that’s split into 29 different
states and seven union territories.
Each of the states is almost run as a separate country
with its own language, cultural practices and etiquette.
This makes good local research essential just as
much as the engaging of a good local representative
while networking to build key relationships. The
UK Government suggests that many firms find that
success comes from appointing a series of agents
or distributors based on their local reach and
knowledge. Of course, it goes without saying that firms
should undertake due diligence before making any
appointments of an agent or distributor.
Other complications follow from the seven major
religions, plus many minor variants, and six main ethnic
groups – each has its own festivals and holidays which
The European Commission considers
India to currently be the fastest growing
economy in the world and a strategic
partner. To further this, the EU and India
are presently negotiating a Free Trade
Agreement, a process that started in 2007.
can make life difficult for those wanting to do business
in India. Planning around the calendar is key.
The appeal for many though, will be the fact that
India makes a superb springboard into Asian markets
and, just as importantly, the incomes for many are rising
rapidly. The population is young, mobile, concentrated
in a number of large cities (according to the Times of
India there are more than 50 with populations of more
than one million – by 2030 this could rise to 68), and the
workforce is skilled and low cost (compared to the UK
at least). Just as noteworthy is the state of the country’s
financial infrastructure – there’s a well organised
network of banks and an organised capital market.
HOMEGROWN PRIDE
While India offers much potential, the country suffers
from serious barriers to trade and investment in
some sectors because of regulatory constraints, local
sourcing requirements and import tariffs. Apple, for
example, has been fighting an uphill and very public
battle to open an official retail outlet (rather than
premium reseller) and it is still mired in the woods. The
sticking point is a government policy requiring at least
30 percent of all products that are sold in foreign owned
retail stores to be sourced locally – it’s all part of the
‘Make in India’ programme.
There are also issues linked to the protection of
intellectual property and bureaucratic delays (it takes
an average of 30 days just to get a business officially
registered); the acquisition of land can be difficult;
there’s a serious problem with bribery and corruption
(UK firms must bear in mind the implications of
breaching the Bribery Act 2010) – as Vikram Barhat
writing on the BBC noted, ‘people won’t ask for payoffs,
but that means that sometimes things just don’t
move forwards’; and finding the right skills in the local
workforce isn’t easy.
Further, the country is renowned for the parlous state
of its infrastructure – roads and rail (while the UK has
32 January / February 2017 www.cicm.com
The recognised standard