Want to do business in India? Do your homework
15 April 2015
By Mukesh Rajani
With a new government in India led by Narendra Modi championing change and innovation, the mood for doing business and deals with international partners is more positive than it has ever been. UK companies have opportunity to be part of the Indian growth story as the nation moves from a $1.5tr economy to a forecasted $11tr consumer powerhouse by 2050. At the same time though, the country ranks 134th in the ease of doing business stakes, so companies need to enter and nurture stakeholder relationships with care.
Though many UK companies talk about India as a growth market, and one in which they like would like participate, their knowledge of what this involves is often perilously low. The psychology of expectations is an area where ‘Western’ values most starkly mismatch the realities of doing business on the ground. Their approach is often way too short term. Success in India is a long game. Businesses may even lose money before they get established and turn a profit.
It’s also important to assess in detail the market place, what ownership structure will be permitted and the regulations with which your venture will need to comply. It’s likely you’ll need to team up with an Indian partner as regulations around foreign ownership structure are still tight in some areas such as retail and media. And regardless of your sector, you might well be better off with an Indian partner anyway, to guide and help you through opacity and complexity of the business culture. Due to the country’s vastness, Indian firms rarely have pan-Indian coverage so you may find yourself working with multiple Indian partners. For most UK companies, this will feel very new.
Partner selection is an activity which requires a great deal of in-depth research and due diligence, and not just on the finances of the enterprise you’re linking with, but also into the people involved. There are important cultural differences too. Indian companies will often rush to get a contract signed then begin tinkering with the terms, raising the risk of tangled legal disputes that could drag on for years.
There are the communication challenges too. Indian is proud of its culture of saying yes to everything and you must adjust your expectations accordingly. If something is said difficult it probably means it’s impossible. Clearly, all this is going to be hard to deal with on your own. With a partner you stand a much improved chance, but entering and exiting that relationship will also be challenging, so you need to do your homework.
It’s here that UK businesses small and large need to seriously step up their efforts. Doing business in India takes a lot of management time and if you’re serious about entering the market, the level of knowledge and contacts you need to assemble is not something you can throw together by looking at a few websites.
Assign responsibility to someone in your senior management team to research the market properly. Consider hiring a researcher. Consult advisors who have knowledge of local and international regulations and tax laws. Follow the activities of UKTI which organises regular trade delegations to the sub-continent. Buy a map. Learn about what goes on where; understand the differences in culture across the sub-continent. Reach out to the UK India Business Council and, when you’re travelling in the country, use the three drop in centres established in Delhi, Bangalore and Mumbai designed to help UK companies on business trips. Plan meticulously and above all have patience and commitment to the end game.
Mukesh Rajani is Partner & Leader, PwC UK India Business Group