Submitted by Navin Pathak on Wed, 12/08/2010 - 8:23pm.
Driven by a growth rate of over 8% in 2010 and a 350 million strong middle-class with growing purchasing power and appetite to spend, the Indian market is reshaping the world’s economy. Investment in almost every sector (Education, Food, Energy, Health care and Retail) of the Indian economy has a promise of high returns that has caught the attention of investors and businesses across the world.
Indian economy is, however in transition and so are its tax and investment laws. New guidelines, policies, programs, and incentives for investment are being introduced into the system regularly and frequently.
Indian government is offering various incentives for the foreign companies and investors who want to
- Lower labor costs
- Explore new market/s (in and around India)
- Develop and Commercialize/Industrialize new products and services
- Open up export oriented units in India
Government incentives include:
- Duty free import of capital goods and raw materials
- Reimbursements of Central Sales Tax
- Tax holiday for specified period
- 100 per cent repatriation of profits for subcontracting facilities
- and more
However, there is a considerable risk for players who are not fully prepated to do business in India and may not fully understand how local markets operate in India. Hence the challenge of the investor is to assess what opportunity to tap and how to minimize the associated risk.
I outline below an eight step plan with action, resources and contacts to help you benefit from the booming Indian Economy while minimizing your risk.
1. Know WHAT you want..
Have clear objectives for your company and ensure that your India strategy is aligned with your objectives.
Buyusa.gov provides excellent information on assessing your objectives and provides what you need to know for doing business in India.
2. Understand the Economy you are investing in
India is a diverse country with many languages, different business norms and a complex regulatory structure. In addition, foreigners must know how to deal with corruption, bureaucracy and labor market rigidities at the state and the central level.
World Bank's Doing Business site provides excellent information on these topics. Read through the following papers and presentations:
- Doing Business 2010 ‘India’ by the World Bank Group
- Doing Business in India by Ernst & Young
3. Identify and Assess Opportunities in India
You need to do a thorough market research to qualify the opportunity for selling your products/services or for making other investments in India. Get the research tailored to your needs from the following resources:
- Market Research Reports are available on buyusa.gov
- The country commercial guide for India from US Department of Commerce
- Indian Brand Equity Foundation group from India
- Wealthtree for custom market research
4. Are you ready?
Assess if your company is prepared to do business or invest in India. Is your company committed to succeeding in India? Is there a market for your product? Is your product/service unique enough? Are the regulatory requirements straightforward to implement?
5. Attend Trade Events
Trade events are probably the best way to identify opportunities, meet subject matter experts, showcase your products and services, connect with potential partners, suppliers and buyers and check out your competition.
Upcoming Events by Entry India is an excellent source for upcoming business events in US and India.
6. Find one or more local partners in India
It is essential to have a local partner who understands the language and culture of the country. This will make it easy to negotiate, develop sales and distribution channels, price the product and services appropriate for the target market segment, and to protect intellectual property of your company. Due diligence and sound contractual agreement with the partner are a must for success.
US Department of Commerce has excellent services for US companies to find the right Indian partner.
7. Market Entry Options
Options include creating a wholly owned subsidiary, a joint venture with a local company or opening a branch or liaison office in India.
Department of Industrial Policy and Promotion under government of India provides excellent information for foreign companies pursuing entry into India.
8. Know Industry and Professional Associations in India
Through membership with key Industry associations, businesses gain access to local business resources, make valuable contacts, keep track of changing laws governing their business etc.
- Depending on the industry/sector of interest Confederation of Indian Industry, FICCI, AMCHAM, ASSOCAM, and NASSCOM are a few industry associations that a foreign business must look into. India One Stop provides a comprehensive list of professional organizations in India that foreign companies must know.
- Export Assistance from US: The U.S. Commercial Service helps U.S. companies to expand their business to worldwide markets and has the largest presence, outside US, with 7 offices in India. U.S. Commercial Service offices are located in 107 U.S. cities and 145 U.S. Embassies and Consulates worldwide to take advantage of.
A thorough planning before expanding your business to India or making your investments in India will go a long way for a profitable and worry-free operation in India.