Chapter 1: Doing Business in India page 3
terms of buying power urban India would rate higher, the ruralmarket has shown rapid growth in recent years. The mainreason for such growth, apart from awareness created byvarious media, is increased availability of products in ruralareas due to the adaptation of distribution channels to servethe needs of the rural market.
Key Economic Indicators
: Estimated 8 percent in 2008
Services equal 54 percent of the GDP; industry andagriculture equal 46 percent
Per capita income:
$720 in 2006 - of India’s 1.2 billion people, 39percent live on less than $1 per day
In 2006, approximately 180-200 millionpeople had growing purchasing power, thus creating a growingmiddle-class consumer population
Over 58 percent of the Indian population is underthe age of 20, representing over 564 million people, nearly twicethe total population of the United States
U.S. – India Trade*Trade Balance
: Total bilateral trade in 2007 was $41.6 billion
U.S. Exports to India
in 2007 reached $17.6 billion, an increaseof 75% over 2006, which saw 25% growth.
Imports from India
in 2007 totaled $24 billion, a 10 percentincrease over 2006.
The 2007 trade deficit
with India was $6.4 billion, a 45 percentdecrease over 2006.
Problems with the country's roads, railroads, ports, airports,education, power grid, and telecommunications may be thetoughest obstacles for India’s economy to grow to its full potential.Nonetheless, a process of liberalization in these areas has beenunderway, led by a more liberal environment in the informationtechnology, airline, and telecom sectors, with increasing roles forthe private sector in ports, roads and other key sectors. However,the absence of a clear policy framework has hindered criticalprivate investment in infrastructure overall.
Slow Reform Process
AsIndia gradually opens up its markets, many tariff and non-tariffbarriers remain.Multiparty coalition governments since the mid-1990s have made some progress in this regard. However, theduties continue to be comparatively high which hamper India’sefforts to achieve its potential as a global economic power. Inaddition,India's customs tariff and excise tax system remainsconfusing and laden with exemptions. Further, heavilybureaucratic investment processes, poor IPR enforcement,government inefficiencies and corruption have also discouragedforeign investors. As a result, FDI has not grown to its full potentialand was only $15.7 billion in Indian fiscal year 2006-2007.However, Foreign Institutional Investors (FIIs) have a growingpresence in India with net inflows for India totaling around $16billion for the calendar year 2006.
Best prospect sectors and business opportunities.
Ranked onthe basis of estimated Indian imports from the U.S. for 2007, thebest prospects (in alphabetical order) for U.S. exports follow:
Airport and Ground Handling
Computers and Peripherals
Electric Power Generation, Distribution and TransmissionEquipment
Food Processing & Cold Storage Equipment
Franchising and Retailing
Mining and Mineral Processing Equipment
Oil and Gas Field Machinery
Pollution Control Equipment
Market Entry Strategy
Finding partners and agents.
New business must addressissues of sales channels, distribution and marketing practices,pricing and labeling, and protection of intellectual property.Relationships and personal meetings with potential agents areextremely important. Due diligence is strongly recommended toensure that partners are credible and reliable.
U.S. companies, particularly small andmedium-sized enterprises, should consider approaching India’smarkets on a local level. Good localized information is a key tosuccess in such a large and diverse country. The U.S.Commercial Service posts in New Delhi, Mumbai, Chennai,Ahmedabad, Bangalore, Hyderabad and Kolkata provideindispensable local information and advice and are well plugged inwith local business and economic leaders. Multiple agents areoften required to serve each geographic market in the country.
Market entry options.
Options include using a subsidiaryrelationship, a joint venture with an Indian partner, or using aliaison, project, or branch office.It is strongly urged that U.S. companies consider a regional plan,focusing on multiple locations and markets within India and findingthe appropriate partners and agents within each region.