Putting Together Your Business Strategy for India,   Kumkum Dalal,  President,  Global Reach Consulting, Inc.,  Your Guide to Doing Business in India.

The Illinois Trade Center of Chicago and the State of Illinois, Department of Commerce and Economic Opportunity are taking proactive steps to persuade Illinois companies to export to India. The export potential is huge, as noted recently at a seminar in the Chicago area by John Peters, the Counselor for Commercial Affairs at the US Embassy in Delhi, India. His talk should have made every Illinois business run back to the office and develop their business strategy for India. The State of Illinois is sponsoring two trade missions to India in 2005. The April mission was intended for Illinois manufacturers and the October mission will target the pharmaceutical industry. While the Fortune 500 and 1000 companies and MNCs, such as Illinois based Motorola, are already deep in the Indian market taking advantage of the deregulated FDI (Foreign Direct Investment) climate and are thriving in the Specialized Economic Zones (which offer special incentives and tax breaks), the next tier of Illinois companies are barely aware that India is a huge and lucrative marketplace for partnering and collaborating.  

Today, India’s economy is still relatively small at $600 billion; however since 1991, the Indian economy has been thriving. 1991 was a watershed year, when the then Finance Minister and now Prime Minister Dr. Manmohan Singh, liberalized India’s economic policies. Since then India has experienced a steady GDP growth rate between 6-8%. It now does business with and writes free trade agreements with a number of countries it did little or no business with previously, such as several Southeast Asian countries, Argentina, Brazil, China, Israel, Russia, South Africa, South Korea, Singapore, to name a few. As the Indian economy grows so does the middle class which at present is 300 million strong. There is also a small, about 20 million strong, group of Indians that are well traveled, or have lived and worked in the US and European countries and are now back in India, who crave some lifestyle products they had become accustomed to but are not available in India. The westernized Indian makes a sizable niche market to pursue.

In the most recent budget there is considerable commitment to further deregulate FDI and liberalize trade policy. There are also new set asides for both urban and rural infrastructure development and additional schemes to promote small and medium sized manufacturing firms. All this should be very good news for US businesses as it provides a fertile and growing market for all categories of goods and services. India’s commitment to infrastructure development and the growth of the services sector has created many new opportunities for US exports particularly in a variety of equipment areas. Some of the categories the US Commercial Service identifies are equipment for electric power generation, distribution and transmission; computers and peripherals; machine tools; food processing equipment (absolutely huge!); medical equipment; pollution control equipment; water treatment equipment and renewable energy. As US-India trade grows, and US firms inevitably write local agreements with their counterparts in India, it may be prudent to have an Indian law firm review contracts as US laws do not apply in India. As a service to our clients, we are always happy to introduce the US exporters to an Indian law firm.

Trade is a two way process. For India to buy products from the US and elsewhere, it must also sell its goods and services to generate the revenues with which to purchase. Here is our list of items for US firms to consider as they build their business strategy.

• Review the export opportunities in India that the US Commercial Service identifies to find a sub-category for you to pursue.

• India is dominated by small and mid-sized companies. US firms should consider collaboration with like size firms, particularly in manufacturing.

• US manufacturers have to lower non-production costs. One way to do this is by contract manufacturing the work to an Indian firm. A US manufacturer could also consider India as a base for export to third countries.

• The US has an environment that supports venture capital and investment in innovation. India has a vast engineering and design intellectual pool.  Marry these to create the global company of the future – a hybrid company using US innovation and Indian engineering.

• India has a wealth of knowledge in the methodology and process needed to make for a successful outsourcing experience. After all, it honed its skills when the US faced a shortage of programmers in the late 1990’s during the dot com era and the Y2K panic.

• Indian exports of services are constantly moving up the value chain. It started with IT, was followed by back office functions, now the focus is on engineering. Tomorrow’s partnerships and collaborations will be on animation, video technology and the pharmaceutical and biotech sectors.  Build your expense management strategy with India in mind.

• The Indians are a good group to do business with – they speak English, the technical folks can speak directly to each other; the Indian judicial system, like the US is based on English common law; and India is a signatory to the WTO agreement that protects intellectual property.

• India produces 1 million college graduates a year including 250,000 engineering graduates. Some of India’s engineering and management institutions are world class.

• 58% of Indians are under the age of 25. That is approximately twice the entire population of the US. This makes for a large and lucrative export market for the US to invest in.