First Five Calls: India

With a billion-plus population and an economy that’s growing faster than China’s, India is much more than an emerging market: it’s a hot spot for global investment and trade. To tap into India’s opportunities, Canadian companies must learn to navigate an often difficult business landscape, making on-the-ground connections vital.

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India’s population of 1.3 billion people makes it a rich market for Canadian exporters.

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Close to $3.2 billion in Canadian goods are exported to India each year.

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This thriving economy boasts a GDP of US$2.1 trillion.

Start with these five connections:

OVERVIEW
Nathan Nelson
Nathan Nelson
Chief Representative, India, Export Development Canada
NNelson@edc.ca
+91 22 6749 4480

“Indians know their country is a hot market and they really want to look for long-term partnerships. They might have a deal for you the day you arrive, but they will make you wait for six months to a year to see if you are a dedicated partner or investor.”

How does India’s business environment compare with Canada’s?

More than anything, businesses in India want to see people return to India. There’s been a trend over the last 10 years in which many companies came here wanting to do business quickly, did their transactions and then disappeared. Indians know their country is a hot market and they really want to look for long-term partnerships. They might have a deal for you the day you arrive, but they will make you wait for six months to a year to see if you are a dedicated partner or investor.

What barriers can Canadian companies expect to face?

It’s such a big investment for Canadian companies that come to India. You need to spend time while you’re here and you need to come back multiple times. That’s a big expense, especially if you’re a small or mid-sized business.

How would you describe India’s regulatory environment?

Tough. Right now it’s very difficult to purchase land, for example. As well, in certain sectors foreigners can only own 49 per cent of a business, so there’s not enough control. But a lot of sectors have opened up so that foreign companies can own a majority stake.

MARKET ENTRY
Mike Manson
Mike Manson
CEO, TaraSpan Inc.
mike.manson@taraspan.com
+1 613 265 1942
Photo by Mark Halleron

“I can tell you that regardless of sector, having that local market presence is critical. You need somebody who understands the business culture and the negotiations culture and who has the ability to be with the customer at a moment’s notice.”

What’s your top advice for Canadian companies that want to penetrate the Indian market?

While we work exclusively in the technology space, I can tell you that regardless of sector, having that local market presence is critical. You need somebody who understands the business culture and the negotiations culture and who has the ability to be with the customer at a moment’s notice. You should also have a proof of concept – a demo that prospective customers can try – and have the local resources in place to support your customers as they go through that trial.

What market entry strategies work best in India?

Depending on the industry you’re selling into there are different ways to enter the market. If you have a software product for telco operators and you know exactly who you need to be talking to, you want a model that’s more direct, so you would set up a company or a liaison office. If you’re selling a product into the enterprise market you want to look at a distribution model and partner with a reseller who has the breadth and network to handle and reach the entire market.

What is the best structure to set up in India, a corporation or a liaison office?

The main distinction is that a liaison office is constrained in terms of function. It cannot transact directly, so customers in India would not be able to purchase products through this office but would have to do so through the parent office. The types of services it can provide would be constrained as well. It’s complex; you need to look at how you want to operate in India and then decide which structure works best with what you want to do.

BUSINESS DEVELOPMENT
Raj Narula
Raj Narula
Founder and CEO, Inca Synergies
rajnarula@rogers.com
+91 9971 699 697

“You want to look at your market in a holistic way and see India as an opportunity to scale across multiple provinces or states. For example, if you’re selling telco technology or services, you’ve got five operators in five different regions you can sell to.”

The majority of Indians earn low incomes. How can Canadian companies build a profitable business in this market?

In the Indian market, the average product or service price per user is significantly lower than in Canada. For example, for telecommunications services the average price in Canada is $40 to $60 per person per month, whereas in India it’s somewhere in the $5 range. You need to understand your product’s applicability to the market, your competitive advantage and if your pricing model is viable.

How can Canadian companies best position themselves for growth here?

You want to look at your market in a holistic way and see India as an opportunity to scale across multiple provinces or states. For example, if you’re selling telco technology or services, you’ve got five operators in five different regions you can sell to. Also, recognize that India is a great location from which to segue into other markets, including Malaysia, Singapore, Hong Kong, Vietnam, Indonesia, the Philippines and the United Arab Emirates.

Any emerging trends in India that Canadian exporters should know about?

Among Indian companies, there’s a progressive move towards acquiring the best technology and growing it. Their interest may be more than doing a tie-up, they’re possibly considering acquiring your company, or entering into a partnership or joint venture. So keep an open mind and remember that the Indian market presents more than selling opportunities; in some cases your products can be embedded into Indian products.

ANTI-CORRUPTION
Kelly Ohayon
Kelly Ohayon
Partner, Forensic Services Practice, PwC
kelly.ohayon@ca.pwc.com
+1 416 218 1392

“It is certainly possible to conduct business in India without paying bribes. One approach we would recommend is to make it clear that you are simply not going to make any such payments. Thus, as long as you are willing to do the right thing and wait, you can conduct business and succeed in India.”

How is corruption manifested in India’s business world?

Corruption can seem like an everyday occurrence in India, and may be experienced at a variety of levels. As a businessperson working in India, one often has to deal with multiple layers of government and bureaucracy for typical business activities, whether it’s getting goods into the country, across state borders or even something as ordinary as obtaining an official receipt. People often appear to expect some sort of payment when doing business, and can often be very open about it.

Given how rampant corruption can be in India, is it possible to do business there without paying bribes?

It is certainly possible to conduct business in India without paying bribes. One approach we would recommend is to make it clear that you are simply not going to make any such payments. Thus, as long as you are willing to do the right thing and wait, you can conduct business and succeed in India. If you send a consistent message that you will follow rules and push back against those asking for payments, it will eventually become clear that you are not going to pay and the bribe requestors often stop asking. Having the willingness to wait is the critical factor.

What are some other actions Canadian companies can take to reduce corruption in their own business operations in India?

We recommend developing and enforcing rigorous anti-bribery and corruption policies, and training your people effectively and frequently. You need to be assertive and ask your local employees about their business practices, including whether or not they're paying bribes. You cannot assume that nothing is going on and be wilfully blind to the realities of this marketplace. If you are going to deal with an independent agent or a customs broker, you will also need to do on-the-ground integrity due diligence from knowledgeable sources. It is crucial that you understand who you are really dealing with, and what programs, if any, they have in place to withstand the almost constant demands for payment.

HUMAN RESOURCES
Sonal Agrawal
Sonal Agrawal
Managing Partner, Accord Group India
sonal@accordindia.net
+91 22 6662 3831

“There's no central database of social security numbers so it’s hard to verify a candidate’s job experience. Some companies have success with hiring through word-of-mouth, but ideally you should be complementing that with a structured search.”

What's the labour market like today for foreign companies in India?

There was a time when the labour market was geared strongly towards foreign companies, when people would almost blindly work for foreign companies. Indian employees are now doing their due diligence. A number of Indian companies have grown substantially and are able to provide more interesting career opportunities. Indian multinationals may also have an edge over foreign companies because their decision making is in India. Another factor that has worked against foreign companies: given recent economic conditions, many of them have changed plans and left. So job candidates are a bit wary.

So what can Canadian companies do to make themselves more attractive to Indian workers?

Make sure their brand name and product offerings are well known, which I know is a challenge for small to mid-sized companies. If you're not a Coca-Cola or Microsoft, then work with partners such as search firms or consultants that are well respected in India. Invest a little bit to build your brand as an employer of choice.

How can Canadian companies ensure they’re hiring the right people to run their Indian-based operations?

They need to make sure they have contacts who know the local labour market quite well. Reference checking is really hard to do in India because people here tend to not say negative things about others unless they really know the person who’s making inquiries.

Also there's no central database of social security numbers so it’s hard to verify a candidate’s job experience. Some companies have success with hiring through word-of-mouth, but ideally you should be complementing that with a structured search.