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India's expanding economy

If there is an appropriate time to engage in business with India, it is now, according to SP Joshi, country manager for Australian Business International Trade Services.

Joshi cites India’s burgeoning growth (8% to 9% annually) and a strengthening middle class of 350 million people (11% to 12% annual growth) as motivation for Australian companies – but the proviso is that they need to act now.

According to Joshi, India’s growing middle class has taken on the trappings of Western society. While poverty has not vanished, it is still visible on the streets, and the country has an insatiable appetite for everything Western.

"They have the purchasing power to be able to afford a range of products and services that they can’t necessarily find in their own country."

However, many Australian companies, Joshi believes, have been a little slow to respond to this growing consumption and expansion.

"It’s frustrating seeing businesses fail because they haven’t partnered with the right people who understand the Indian psyche and how business is conducted in the Sub Continent.

"I’ve seen some businesses collapse because they decide to go it alone, and considering India’s rapid growth, are wasting valuable opportunities."

Fast growing economy

Research organization McKinseys forecast that India will become the world’s third largest economy by 2025. As part of the BRIC (Brazil, Russia, India, China) community, it is already the second largest growing economy behind China.

What is fuelling much of this growth is the country’s leadership in IT and Business Process Outsourcing. India’s manufacturing base – an important component of the country’s economy ensuring cheap labour for exported goods - is growing at 10% per year.

"And while the focus by many Australian companies is on China, there are those businesses that tend to ignore India," said Joshi.

"Indians have a great perception of Australia and Australians considering our common language, the fact that both countries are part of the Commonwealth and each country adores cricket.

"Clever companies such as Fosters which set up operations in India when the country liberalised its economy in the 1990s have only been successful because they sought assistance from local partners in the first instance to use their knowledge of Indian market."

Other companies such as the highly successful franchiser, Cookie Man, have take the additional step and customized their product offerings and marketing programs to suit the Indian market.

"They have carefully identified partners in India to create finance, a sales network and train franchisees rigorously. They have effectively internalised their product and created loyal Indian customers in the process."

Take a long-term approach

Joshi warns businesses intent on trading with India: "you need to have a long term perspective and exercise patience as the gestation period for any business in India is long and Indian markets can often be slow to respond. He says the levels of bureaucracy are a maze but manageable with the assistance of experts ‘on the ground’.

Joshi is Australian Business International Trade Services’ man ‘on the ground’ and he has opened many doors for Australian businesses exporting to India.

The most successful entry strategies, he says, are for Australian businesses to either set up a subsidiary, create a distribution network, become part of a joint venture, co-manufacture or secure acquisitions.

"The best option for foreign businesses, when import duties are low in India, is to find a distributor. Conversely, if import duties are high then businesses need to consider joint ventures or acquisitions."

Australia imports light engineering components, handicrafts and ready-made garments from India; the country is Australia’s fifth largest importing country for Australian products namely coal and wheat with the Australian wheat board establishing an office in India).

Government incentives are making it attractive for the Australian food processing industry to open up markets in an economy which wastes 25% of its raw food produce. According to Joshi the biotechnology industry is gaining strength, however, it’s not an area that Australian businesses have necessarily entered.

"The retail sector is seeing an unprecedented growth with the increasing shelf space being filled by new and good quality products."

However, the shake up in the Indian economy, that is creating great interest is in the privatization of its healthcare systems.

"Medical insurance has entered the health care industry and as a result, a chain of modern facilities have been established throughout India. These are hospitals that require equipment, technology, and expertise," Joshi said.

And a new market – ‘medical tourism’ – is booming with tourists flocking for their cheap plastic face lifts, nips, tucks and complex operations.

It’s the perfect time for Aussie companies to take India seriously, says Joshi. "India is experiencing a boom, however, if you miss the bus now, someone else will have boarded and grabbed the opportunity."

If you are considering doing business in India contact our Indian specialists:
Ian Bennett in Australia on 02 9458 7443 or SP Joshi in India on +91 98102 81890.


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Gary Dawes
Senior Consultant, International Trade
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SP Joshi
Senior Advisor, India
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