Many tangible opportunities exist for firms willing to invest in understanding the country
By all accounts, India should be a country brimming with potential, given its pool of undeniably talented people and huge capacity to achieve. The published figures are impressive - it's the world's top investment destination (US$63 billion or S$85 billion) last year, with the World Bank predicting that India will be the world's fastest-growing economy by 2018 at 7.9 per cent.
But to a sizeable number of Singapore companies, India remains a country that continues to pose a difficult proposition altogether. Over the past three years, IE Singapore has actively engaged over 300 companies on their plans in India, and spoken with many more on an exploratory basis.
In speaking with these companies, the word "challenging" often comes up early in conversations.
Dancing with the elephant
Many I speak with liken the Indian economy to an elephant - slow but yet undoubtedly imbued with the potential to be mighty and unstoppable when at speed. Such a stereotype is not without reason.
While not unique to a country like India, the lack of good infrastructure and connectivity contributes significantly to business inefficiencies. Mammoth jams continue to plague cities like Bangalore and Mumbai while factories and offices in less developed areas often find it difficult to access reliable power and water sources.
The regulatory environment can also make venturing into India an intimidating and vexing experience. These can range from tax laws and licences to environmental clearance and Customs procedures. For instance, India is proactive in evolving its regulatory environment to meet changing business needs (Companies Act 2013, GST Bill 2016). On the other hand, it retains rules that can obstruct the smooth operation of businesses (Shops and Establishments Act, 1953).
Some obstacles owe themselves to India's federal structure. Local state laws can differ greatly while operating under the larger national union. Such differentials between states affect businesses to the extent that the provision of services and goods beyond a single state is sometimes analogous to venturing into a new country.
The reality is that India is not one single homogenous market- different states have different characteristics. A good piece of advice I have often heard and shared is that a strong back office support team, with a trusted lawyer and accountant, goes a long way in navigating India. More importantly, it allows companies to devote more focus on the core work of business development. In a land as diverse as India, back office support has to be au fait with state peculiarities in a country so united (by cricket) and yet as individual as aspirations come.
Opportunities for the open-minded
Yet, despite its difficulties, India's economy presents tangible opportunities for companies willing to invest effort in understanding it. India's huge domestic economy does possess a measure of shielding, offering a measure of stability in the face of a global downturn for companies seeking to diversify its dependence on traditional major markets.
DEMOGRAPHIC DIVIDEND OF A GROWING MIDDLE CLASS
The growth of the middle class is a trend in India that needs little elaboration. The presence of global giants Unilever, Dell, Nestle and Samsung in India attests to the belief in the demographic dividend.
E-commerce is a global trend that has transformed the retail landscape in India. Forecasted to grow rapidly, e-commerce revenues are expected to reach over US$100billion by 2020. India's growing e-commerce market presents a spectrum of opportunities for our companies.
Singapore companies can consider the provision of services such as logistics (e-fulfilment) or mobile and Internet payment technologies. Some companies have already acted. YCH works with India's fourth-largest online marketplace ShopClues to provide back-end logistics support in order fulfilment. DBS Bank is focusing on e-services such as digital banking and mobile wallets.
On the consumer end, our brands can turn to online retail channels quickly, building up mindshare without having to consider the traditional brick and mortar set-ups immediately.
Of course, to be successful in India, understanding the Indian consumer psyche is key. It is often said that the Indian consumer is price-sensitive, but the truth of the matter is that most Indian consumers are value-sensitive. Ingrained into the Indian consumer is the pursuit of value - social status, physical need or otherwise. Samsung phones continue to lead smartphone sales in India despite being priced at a premium. Similarly, Singapore shoe retailer Charles and Keith continues to do well in India, competing on a par with local brands for over a decade.
PARTNER CITIES IN DEVELOPING THEIR INFRASTRUCTURE
The deficiency apparent in most developing countries is that of infrastructure - it is an area India has always recognised, and is taking steps to address and redress. Prime Minister Narendra Modi's Amrut and Smart Cities Mission are programmes that recognise the reality that infrastructure is a centrally pushed yet state-administered subject. In centrally-controlled agendas such as highways and railways, the merging of the railway and general budgets next year is a step in the right direction to align infrastructure development across India.
Infrastructure is a conduit for economic growth - and as India grows manufacturing to service domestic and global markets, efficient logistics linkages become especially critical. PSA Corp is building the fourth terminal of the Jawaharlal Nehru Port in Mumbai, which will double the capacity of what is already India's largest container port. Warehousing infrastructure requirements will also increase, for which third-party logistics (3PL) companies such as YCH and Quantium Solutions are planning for future assets to cater for increased goods flow.
The provision of urban solutions is another area where India's plans and Singapore companies' capabilities align. Our interaction with many municipal corporations tells us that the development needs of many Indian cites mimic Singapore's early years. Transport, utilities, urban design and planning emerge clearly as development themes. Our companies have the unique advantage of being able to provide such a value chain of services, including solutions in information and communications technology and e-government.
Singapore companies can consider working with municipal corporations on a pilot trial basis, as a proof-of-concept that Singapore technology can be effective in an Indian environment. A Singapore success story in this field is Sunseap, together with Charisma Energy, which won a 140MW solar farm tender in Rajasthan. When considering geographies to begin, Amaravati, Chennai, Jaipur and Pune are cities where urban solution companies can consider.
THE MAKING OF INDIA
"Make in India" is more than a fancy tagline. It is a critical policy that seeks to restructure India's economy, traditionally heavy in service and agriculture, towards higher value-added production. If successful, it will truly propel India into the forefront of the world economy.
Make in India also addresses the flip side of India's demographic dividend - the millions of young Indians will need jobs. Many of India's policies - GST for a unified market, simplifying doing business in India, labour and land acquisition - are in support of Make in India's employment objectives.
Singapore companies support the manufacturing initiative with assets and partners on the ground. Ascendas-Singbridge's OneHub Chennai industrial park is a 585ha next generation township that, when fully developed, would provide manufacturers access to integrated supply chain and supporting infrastructure services. L&W India, a joint venture between Lee Kim Tah and Woh Hup, is a strong construction player in India with capability to put up ready-built factories. SIA Cargo, utilising the Singapore Airlines network, can move critical and high-value machinery and products in, out and around India.
Going global from Singapore
Beyond our commercial links, Singapore and India share significant historical and cultural links. We have a strong people connection that serves as a base of our economic partnership.
There is a thriving Indian diaspora that has chosen to make Singapore their second home, and more than 6,000 Indian companies are registered in Singapore. There is a ready pool of expertise here that Singapore companies can turn to for knowledge and partnership when venturing into India. Consider even test-bedding your products or hypothesis among the Indian diaspora here.
In turn, Singapore's strong financial and legal frameworks, connectivity to international markets, coupled with the transparency, quality and rigour of the Singaporean work ethic, make our companies well placed to partner Indian firms looking to grow their international presence.
Remember that India is a 5,000-year civilisation, with a rich heritage ingrained deeply into everyday life and business. Kings, conquests and curry are both literary and literal in India's economic platform of vast potential.
The Indian market itself is not fully structured and still yields opportunities for arbitrage and first movers. Singapore companies, large and small, have found success in India, including CapitaLand, Heatwave, Super Group and Teo Garments. Given the enormity of the country and the potential it promises - one would want to get on the back of the Indian elephant before it starts to charge.
To paraphrase Jawaharlal Nehru, India today is a new star rising, a new hope coming into being. The country made a tryst with destiny years ago, and Singapore companies can well partner India in redeeming this pledge.
The writer is assistant chief executive officer of IE Singapore.
A version of this article appeared in the print edition of The Straits Times on October 03, 2016, with the headline 'Keeping in step with the India beat'. Print Edition | Subscribe
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