Partnering with locals key to success in India

New Zealand’s exports to India are dominated by commodities such as coal, wood and wool. However, as Mike Booker explains, exciting opportunities exist in other sectors for New Zealand companies prepared to invest alongside Indian partners.

New Zealand exporters are increasingly participating in India’s rapid wealth creation. The International Monetary Fund forecasts the Indian economy will grow 8.8 percent in 2010 and 8.4 percent in 2011.

India now ranks as our 14th largest export destination compared with 21st in 2007. In 2009 New Zealand exports to India were worth NZ$629.66 million, up 15.8 percent on 2008.

India’s rise up the export rankings is expected to continue as its fast growing economy – it grew 6.1 percent in 2009 - creates more opportunities for Kiwi goods and services.

But to make the most of them, you need a local presence advise companies already exporting to India.

That will mean having your own staff in-country or a reliable and trustworthy local partner, says 4RF’s Atul Gautam, who is the telecommunication company's Vice President with responibility for Marketing & Business Development.

“This is the biggest challenge for Kiwi firms to address.”

He says doing business in India can be Byzantine, especially in the government or quasi-government sectors.  But on the flip side English is commonly spoken and the legal system is good.

Another company already selling in India is Gallagher Security Management Systems. Its Business Development Manager Ian Meadows says Kiwi company responsiveness to customer requirements, and ability to create niche products and services, is a strong match with the needs of the Indian market. (Pictured: Reliance Infocomm, Gallagher Security Management Systems' partner in Mumbai).

But, Ian Meadows warns, “business in India may not happen as fast as it does in New Zealand, and companies must be prepared to make regular visits. One visit to a potential partner is unlikely to generate business. And products which work well in New Zealand may not be accepted 'out of the box' in India - companies must be prepared to adapt to local requirements.”

Cliff Fuller, New Zealand Trade and Enterprise’s (NZTE) Trade Commissioner in New Delhi, says “every serious New Zealand exporter needs to have a view about exporting to India. You need to be clear about why you are not engaging in India.

“There might be a good reason, but you’ve got to know what that is.”

He says more Kiwi companies are thinking about India and “more are acting on their thinking than we have ever seen before”.

Fuller says exporters wanting long-term and significant success in India need to play by India’s rules. “The Indian approach is to look for partnerships with New Zealand companies so that they can work together to develop markets in India and elsewhere.

“They look at it as a long-term partnership to grow the business.”

And to make the most of these opportunities “you’ve got to be here.”

Dr Val Lindsay, Associate Professor at Victoria University’s School of Marketing and International Business, recently returned from India and was struck by the optimism of Indians.

The attitude is: “We are growing and nothing is going to stop that growth. Come and join the ride.”

Lindsay is part of the “Building a sustainable competitive advantage for New Zealand service firms in Asia” project.

Building on the partnership theme, she says Indians are “thirsting to know more about what we can do and how that is relevant to them”.

But it is not just the Kiwi product or service on its own that they will be interested in. “They will want to grow and enhance the opportunity together with the New Zealand company.

“Many Indian companies are growing fast in international markets and if a New Zealand company can become part of the supply chain, it is an opportunity to grow with them.”

“Scalability is essential.”

New Zealand companies, says Lindsay, are not always aware of the highly competitive pricing structures in India. “The local companies are developing very quickly – you will not just be competing with them on innovation, but also price and they generally have much lower cost structures.”

She says most of the world’s leading companies are competing in India as well.

It needs to be remembered that despite India’s rapid economic growth, it is still a poor country. In 2009 its gross domestic product per capita (PPP) was US$3100, the 164th lowest in the world (see source).

The opportunities

  • Resources: Most of New Zealand’s current trade is based on resources such as coal, wool and wood. India’s wood processing industry is one of its  fastest growing.

  • Infrastructure: Matt Roy in Mumbai, in an Action Asia Insight story says New Zealand should focus on winning access to food processing infrastructure, where India requires massive investment.

  • The growing Indian economy has also created a huge need for quality infrastructure like the booming aviation services and technology sector. The government is focusing on public infrastructure with opportunities for private participation.

  • Technology and innovation: Fuller says there are three main areas of opportunity for Kiwi companies: working with large Indian corporations to customise and scale up; IT products and services, particularly in the mobile market and Health IT.

  • India has one of the world’s fastest growing telecommunications markets and IT services have been the driving force of service sector growth.

  • Skills and education: Rising disposable incomes have led to greater demand for services such as education.

  • Since 2003 the number of Indian students studying in New Zealand has increased from approximately 800 students to over 4,000.

  • Clean technology: India wants to diversify its energy supplies and sources away from coal. Increasing energy costs, and decreasing supplies of fossil-fuels, make it vital for India to look at clean technologies.

  • It is one of the major world markets for wind energy. Major hydropower projects are underway or planned.

  • Fuller says another clean tech opportunity is in building materials and products, particularly FSC certified wood.

  • Aspirational consumer products and services: Fuller says the main opportunity here is with food and beverage products, especially in retail and the service sector. Retail, he says is just getting off the ground.

Negotiating freer trade with India

The first round of New Zealand’s Free Trade Agreement/Comprehensive Economic Cooperation Agreement negotiations with India was held in Wellington in early April.

A key priority in this FTA for New Zealand is the elimination of India's tariff duties. India’s average applied tariff overall is 11.9% but this varies greatly across different sectors, with higher tariffs being applied on many of the goods that are of interest to us

Other areas that will be covered in the negotiations include services, investment, technical barriers to trade, sanitary and phyto-sanitary measures. The New Zealand government also seeks commitments from India on intellectual property, competition policy, government procurement, trade and labour and trade and the environment

The next round will be held in New Delhi and it is hoped it will take place in late July or August.

The Ministry of Foreign Affairs and Trade is keen to hear about the barriers to market entry that New Zealand firms are experiencing in India, so the officials can seek to address these through the negotiations.

For further information or to make any comment, please contact Joanne Dow, India FTA Coordinator, joanne.dow@mfat.govt.nz or 04 439 8084.

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Last updated: 22 February 2012