Connecting Businesses with Opportunities in India

Business Articles

Submitted by Navin Pathak on Sat, 03/26/2011 - 7:37pm.

- Updated on Feb 16th, 2019

India is going through exciting times. Developing into an open-market economy, India is certainly on high growth trajectory, which averaged nearly 7% per year from 1997 to 2016. Attributed to an increase in consumption and investment, the Projected GDP growth of India for the year 2018-2019 is 7.3% and this will make India the fastest growing economy in the world. Further, India's economy, which crossed the trillion dollar mark in 2007 and expected to become a $5 Trillion economy by 2025, is currently in 3rd position (PPP) after US and China.

The prospects of India’s long term economic growth, which is very positive, can easily be assessed from the following factors:

  1. The numbers are on your side:  564 million below the age of 20, 600 million growing middle-class, saving rates have tripled in last 12 years, etc.
  2. Growth Mindset of Indians:  Adaptability, competitive, entrepreneurial, believes in learning, earning and spending.

Now you require ‘opportunities’ and ‘political will’ for things to happen.

India is certainly a ‘Land of Opportunities’. Why? Because 1) there are tremendous challenges in India (mainly in areas such as transport and agricultural infrastructure, medical, power generation & distribution, education, healthcare) and solving these challenges means business & economic growth, 2) Availability of skilled manpower, 3) Geographical proximity to markets in South East Asia & Middle East, 4) English is well understood and spoken in India.

And, finally, the ‘political will’ that is necessary to create success is boldly shown by the current Indian Government (GoI). Under the leadership of Prime Minister Mr. Narendra Modi, GoI is implementing initiatives that not only will facilitate investments into India but will also make India a better and easier place to do business in. Some of the initiatives that the current government has started are Make in India, Start-up India, Digital India, Skill India and Smart Cities.

So far only Multi-National Companies (MNCs) with their vast resources, know-how and the right connections have been the major beneficiaries of this phenomenal growth in India. Small and Medium Enterprises (SMEs) and Entrepreneurs are just becoming aware of the growth story of India.

A simple analysis, taking into account the increasing population (See side box), growing consumption and the shrinking agricultural land, shows that there is a very lucrative market for US companies with products or technologies in the following areas:

  • Food & Beverages: food processing, food packaging, food warehouse and transport, health drinks, etc. 
  • Home based: home decor products, kitchenware essentials, bed and bath, etc. 
  • Healthcare: diagnostics and testing, medical equipment, health supplements, clean air and water products, etc.
  • Education: medical/nursing, 'train the teacher' programs, automotive mechanics, medical technicians, advanced courses in the upcoming fields of genetics and nanotechnologies.
  • Consultancy Services: engineering, business development, product development, security analysis, etc. 
  • Infrastructure: waste management, solar and wind technologies, temperature controlled warehouses, air and noise pollution control technologies, towing trucks, and automated parking lot equipment.

Similar business prospects abound in other sectors such as home land security, media & entertainment, hotel/motel, financial investment services, etc.

One of the business formats that is rapidly gaining acceptance is "Franchising". While legal infrastructure and ecosystem are in place in India, one must do a thorough research, and due diligence of the potential Franchisee and create binding agreements covering all important aspects of the Franchising before making any investments. One must also understand business norms of India and seek professional help in navigating the paper trail, IP protection, and Tax implications etc. before undertaking partnership agreements with the Franchisee. Top sectors with franchising opportunities are Education and Healthcare due to a huge mismatch between supply and demand now and in the coming years. Another popular model is Public Private Partnership (PPP) with the Government of India through a 'tender' process. 

For Urban Development, for example, Government of India has initiated a program called ‘Smart Cities Mission’ in 2015. As of Jun 2017, 90 cities have been selected for upgrade as part of this mission. US $15 billion has been approved by the Indian Government for the development of the selected cities. Details about this mission are available here https://en.wikipedia.org/wiki/Smart_Cities_Mission.  

All of the above present a historic opportunity for the SMEs and Entrepreneurs in the US to expand beyond borders to India. US companies with the right know-how are most preferred by Indian companies mainly for the reason that Indians have a very favorable view of the US according to a Global Attitudes Survey. Indian Government officials make regular visits to the US to meet with the industry experts and to promote business and trade opportunities.

I am so confident that with the efforts that not only Indian Government, Indian business conglomerates and entrepreneurs are putting towards India's growth but also the investments that foreign MNCs like Apple, Microsoft, Samsung, etc. are making in India will entice more international businesses mainly SMEs to do business with/in India. 

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.

 

Summary:

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. 

Submitted by Navin Pathak on Sun, 12/05/2010 - 9:47am.

Selling your products or services internationally is the key to your business growth. To assess whether you are ready for exporting, first ask yourself the following three questions:

  1. Do you currently have a successful product or service in the domestic market?
  2. Is your product or service reasonably attractive for the foreign markets? (To answer this, you may consider unique features of the product, not too easy to copy, attractive for foreign customers & their ability to pay for it, export and import regulations, etc.)
  3. Are you ready to commit dedicated resources (financial, manufacturing capacity, staff, time...) to support marketing abroad?

If the answer to each of these questions is an unqualified yes, you are way ahead of the game. There is of course a lot more to know and do before you are really ready to jump in the International arena, but all of it is rather straightforward and an extensive Eco system exists to support you to do it successfully. Here are some of the important items you need to do:

1. Market Research

This is the most important first step. You can do it yourself or hire a consultant to do all or part of the research. The objective is to choose an initial target market in a well-defined geographic territory and a local sales channel appropriate for your product. With the help of your local partner and potential customers, you will need to understand the selected market's requirements for price, style, packaging, labeling, etc. for your product taking into account export/import regulations and cultural preferences.

A lot can be gleaned from the trade magazines and the research reports available on the Internet. It is priceless, however to attend a trade show that attracts foreign customers and distributors. You can exhibit at the show, take a speaking role in a business forum, and hold meetings with the perspective buyers and distributors. It is also a good place to gauge customer interest, their ability to pay, getting feed back in modifying your product, checking what your competition is offering, what channels they are using etc.

2. Sales Channel management

If you intend to use a distributor for selling your product, you first have to select a distributor and create a legally binding agreement with the distributor.

Prior to committing anything in writing, conduct a thorough due diligence on potential distributors such as, checking on their track record, verifying their commitment to your product, etc.

Keep the agreement concise, cover all aspects of business operations, responsibilities and money flow in advance. For instance, does it cover who is responsible for and will pay for local product registrations?

You need to pay special attention to training, promotional material, customer support, performance tracking, delivery schedules, quality inspections, frequency and means of communications, etc.

Make sure both sides have a skin in the game, gain more or less equally from the terms and conditions because either both succeed or neither does.

Get the distributor up and running. Make sure to frequently visit the market, distributors, and prospects.

3. Shipping your product overseas

You can do it yourself but it will not be easy. A thorough knowledge of export paper requirements for your product is a must. Alternately you can use an international freight forwarder or an integrator for this purpose.

A friendly and experienced freight forwarder can be a very valuable partner that can take care of numerous export issues, reduce your shipping costs and free you to attend to what you know best: producing and marketing your product.

If you have simple and infrequent shipments with no personalized service required, an integrator such as UPS may be a good choice.

4. Develop working knowledge of export payment mechanisms

Your choices include cash, letter of credit, open account etc.

Cash payments can be in the form of wire transfer, check or credit card, wire transfer is the safest option. You need to be aware of the issues with checks and credit cards (processing fee, delay in collection, fraud etc.)

A letter of credit is issued by a bank on behalf of the buyer in favor of the seller. In effect, the bank promises to make the payment to the buyer upon presentation of the documents listed in the letter of credit. There are further nuances to various forms of letter of credit that affect terms and timing of the payment.

Open account i.e. waiting for the payment after goods are shipped and received by the buyer is the most risky of the methods and should be avoided or used only in a known and proven relationship.

5. Learn how to arrange for export financing

The availability of working capital for an export transaction is important for worry free operations. You may make use of the credit of the foreign buyer for this purpose (through a transferable letter of credit, for instance).

If you need working capital for exporting, you may use the US SBA's Guaranteed Export Working Capital Loan Program. US-based exporters can benefit from the programs by obtaining a working capital guarantee from Ex-Im Bank.

6. Know who can help you

Your local, regional, national, or international chambers of commerce are a good source of information and support.

Export.gov set up by the US Commercial Service has detailed research reports specific to many industry sectors in numerous countries written by experts in International trade. You can also sign up and make use of extensive services offered by the US commercial service.

Export consulting companies can be very helpful in getting you up and running in no time.

 

Have fun doing this and your business will go from surviving to thriving in no time.

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