KEY POINTS:
Here's a Q&A session with Pradip Madhavji, Chairman of the India Beachhead Advisory Board:
Q: Why is this a good time for New Zealand exporters to focus on India?
A: The country is undergoing a dramatic transformation offering significant opportunities for high growth New Zealand companies. India has a population of more than 1 billion people, a vast geography and a rapidly growing middle income class. For example, there are now 200 million plus cell phones in India, something unheard of 3-4 years ago. GDP growth is 9 per cent plus and growing. The economy is robust, with foreign exchange reserves in excess of US$200 billion.
Q: India is a huge market, is there an awareness of New Zealand that can help our exporters get established?
A: Our countries share community and sporting links as well as common interests and traditions, particularly the language, openness and hospitality of the people. Bollywood has also discovered New Zealand. All Indians have heard of New Zealand because of your cricket team. When a foreigner comes and speaks cricket in India, he's your friend.
Q: Where are the best opportunities?
A: Wide ranging across many sectors. At least 50 per cent of the population is now relatively high net worth and there is more and more migration to the cities. There is a great future for companies that can give support with infrastructure development airports, roads, ports, rail, water and power. And the construction industry. The IT sector is going from strength to strength as is the manufacturing sector. Retail is growing very quickly, with large mall construction in towns and cities. Any products which can be targeted to large scale domestic consumption will do well. Consultancy and training, for example pilot training domestic civil aviation growth has been phenomenal. Tourism is another high growth area.
Q: What are some of the challenges of doing business in India?
A: There are states that have independent local governments which means there are local laws and market conditions. While English is the common language, there are linguistic and cultural differences between communities. A product suitable in South India for example, will not be acceptable in a major city like Delhi.
The bureaucracy is still very large and cumbersome getting permission can take much longer than elsewhere. Corruption is rampant, and while the judiciary is independent, justice is slow.
Indians are very unionised, there are very complex labour laws, and getting rid of employees is said to be more difficult than getting a divorce.
Finding the right people for the right job is difficult, and it's equally difficult to retain them. There is very little loyalty to the job and company left and there is a shortage of trained, skilled staff.
The financial cost of entering the market and the cost related to delays regulatory approvals, bureaucratic procedures, permissions, compliance, relatively high property costs in cities, unplanned escalation of costs and the level of corruption.
Q: What's the best way to approach this market?
A: Joint ventures are an ideal way rather than setting up business on your own. That's where the Beachhead can help. In my country what is important is who you know rather than what you know. The Beachhead won't necessarily be a door opener in all cases, but will give guidance on which door needs to be knocked on and when.
You need to choose your joint venture partners very carefully. A high number of companies are family controlled, particularly in South India. They need to join hands with people in New Zealand to ensure that their growth pattern is established. But family control can mean a conservative attitude, and sometimes control and power are more important than profits.
Q: What are some common mistakes that can be made when exporting to India?
A: Failing to understand the local culture and the different laws, regulations and market conditions between different states.
Not appreciating the time and cost of setting up business and the lengthy delays in India and the very complex labour laws.
Q: What examples are there of New Zealand companies doing well in this market?
We are seeing success from companies in traditional sectors such as coal, wool, logs, dairy, apples and kiwifruit and increasingly from companies selling non-traditional, higher value products and services. Examples include New Zealand Natural ice cream, Glidepath baggage handling, Wyma Engineering, Hamilton Jets.
The common success factor is to expect the unexpected in India. Keep that in mind and you will be successful. Local demand is enormous. You must come quickly to India before other countries realise we are growing at such a speed.
Q: What's the Beachhead's main focus?
A: To provide guidance. To set up a business you need to find the right contacts or partner. You can do it on your own but that is much more difficult and will take much longer. We can advise which doors to knock on, and how long it might take.
Q: How can the Beachhead add value to high growth companies?
The Indian market is large and complex and characterised by some very powerful barriers to new entrants, particularly in terms of access to business networks. We can use our contacts and expertise to overcome these barriers, to help find the optimal entry point for companies and to support them grow their business.
Top Tips
* Now is the time for entrepreneurial Kiwis and high growth companies to focus on India, before other countries realise how quickly the market is growing.
* What is important is who you know, rather than what you know.
* For New Zealanders looking to set up business in India, joint ventures are a good option rather than going it alone.
* There are a high number of family owned companies who need foreign partners to sustain their growth. Be aware, however, that they can have conservative attitudes, and power and control can be more important than profits.
* Understand the local culture and be sensitive to local customs.
* Market conditions and local laws and regulations can vary from state to state.
* The bureaucracy is very large and cumbersome and getting required permissions etc can take much longer than in other markets.
* Labour laws are complex. It's very difficult to get rid of employees. The labour laws can mean the cost of exiting India is more expensive than entering the market. That must be taken into consideration before you jump in and set up business.
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Pradip Madhavji has considerable experience and expertise in the travel and tourism industry and extensive business and government networks throughout India. He was managing director of Thomas Cook's subsidiary in India and has also worked for Dena bank where he was in charge of foreign exchange operations. Mr Madhavji sits on the Boards of a number of leading companies and is a president or past president of several international travel trade and tourism associations. He is New Zealand Honorary Consul based in Mumbai. As Chairman of the India Beachhead Advisory Board, Mr Madhavi is dedicated to using his networks and expertise to help New Zealand high growth companies realise the huge potential India offers.
