Changing Dynamics: Dealing With India Inc. Calls for Fresh Approach

Changing Dynamics: Dealing With India Inc. Calls for Fresh Approach

India is increasingly becoming a destination for Canadian businesses looking for international growth.

More than 600 Canadian companies have now entered this burgeoning market, according to Export Development Canada (EDC), taking advantage of opportunities in what is the world’s 10th largest economy by gross domestic product and third-largest by purchasing power parity.

The greater opportunities are driven by India’s liberalization of foreign direct investment (FDI) rules in 2005. The changes allow for up to 100 per cent FDI in companies, as well as reduced red tape on licensing and other requirements.

Another change has been with whom foreigners are conducting business. Previously, building inroads into India meant dealing mostly with government bureaucrats. Today, foreigners are making more deals with counterparts in India’s private sector, says Todd Winterhalt, EDC’s vice-president of international business development.

That has opened a lot of doors for Canadian companies looking for partners with like-minded interests, he says.

“Companies that have taken the plunge and have either invested in India, or were exporting and doing business in India prior to these changes, would find them to be moving things in the right direction,” says Winterhalt.

He says EDC has identified India as a “priority market” for Canadian exporters, helping them to develop business in both the public and private sector.

That support includes helping companies gain a better understanding of India’s business culture and climate.

While India and Canada have a lot in common, there are some differences that might require an adjustment in strategy, Winterhalt says.

For example, it may take longer to get results in India as compared with the North American market.

“With India it needs to be a longer-term strategy,” he says, recommending companies take a three-year view of their place in the market.

Having good partnerships is also important, especially with experts in areas such as law and accounting, who can help foreigners navigate the system and build relationships.

“It’s definitely worth overinvesting on the front end and then taking a bit of a longer-term view,” says Winterhalt. “When we’ve seen companies do that they’ve been very successful.”

Due diligence is critical when coming to India, says Akil Hirani, managing partner at international law firm Majmudar & Partners in Mumbai.

That includes legal, financial and accounting due diligence, as well as a reputation.

“Increasingly now I think it’s important to do a reputation due diligence and check on the Indian counterparty – whether they’ve had any run-ins with the government or had any tax issues,” he says.

The biggest adjustment for many foreign investors is the slower pace at which business is conducted in India, Hirani says.

“North America is probably the fastest-moving continent on the planet in terms of getting things done,” he says. “It’s not as efficient in India.”

Still, that shouldn’t be a deterrent for Canadians companies looking to for new international market.

EDC’s Winterhalt says India has many advantages over other international markets, including a diversified economy with strong private sector presence, a large domestic market and rising demand which is driven by its large demographic. India, after all, is the world’s second most populous nation, with 1.2 billion people.

India also has a large pool of skilled, educated and English-speaking workers and its economy is improving.

“It’s a market that feels comfortable to Canadians,” says Winterhalt. “We have a lot of compatibility.”

Categories Asia & Pacific

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