Doing Business in India<br />S Subramonia Sarma<br />Indian School of Business<br />
Del<br />Ahd<br />Kol<br />Kol<br />Mum<br />Bub<br />Pune<br />Hyd<br />Blr<br />Mgl<br />Che<br />Cbm<br />kch<br />Tvm<...
Experiences fromLiving and Working in India as an Expatriate<br />Gerd Hoefner<br />Executive Vice President Siemens Infor...
“Experiences living and working in India” …<br />“What do people in Europe or the United States usually have in mind when ...
The Traditional Indian is …<br /><ul><li>God fearing – by and large a  harmless creature
Family oriented – long-term relationship, bonding
Not very ambitious – easily content
Intellectually oriented – information / knowledge seeking
Non confrontational - comfortable with directed performance
Very low level of risk aptitude
Shy, sensitive, a little passive – to radical change, to elders and bosses and to the opposite gender!</li></li></ul><li>T...
Hospitable – to outsiders
Adaptive attitude</li></ul>… and strong paradigms (slowly changing)<br /><ul><li>Age = respectNow: Deserve and get respect
Men = dominant, women = submissiveNow: Gender equality highly prevalent</li></li></ul><li>Experiences from Business – Mana...
India has a lot to offer in terms of culture, nature, history, philosophy, experience, and what not!<br />I myself as well...
British economist Joan Robinson said about India that<br /> “ whatever could be said about it, <br />so could the opposite...
Democracy<br />Education<br />Population<br />Poverty<br />Culture<br />Diversity<br />History<br />Space<br />
Different cultural approach<br />Everything is not put on paper<br />Lot of things are implied and on trust<br />Flexible ...
Communication – Some basic principles<br /><ul><li>No NO!
Yes 	= 1st   = I hear you</li></ul>			= 2nd  = I understand<br />			= 3rd   = I agree – without commitment<br /><ul><li>No...
Indirect, subtle communication
Not necessarily results in a first discussion
Face to face meetings are necessary
“No problem” does not mean that there is “no problem”!
To nod the head means not necessarily agreement!
More non verbal feedback</li></li></ul><li>India - snippets<br />India – ranked 7th in global trade in 2010 ~ 400 b  (Worl...
India - snippets<br />Number of listed companies<br />NSE – 1,400, BSE – 5,000(NYSE-3,000, NASDAQ-3,600)<br />Market Cap<b...
India - snippets<br />Housing <br />5% in urban and 23% in rural areas do not have permanent housing<br />Health care expe...
Rising From the Ashes<br />Two actions, dictated by compulsion, have been the key to India’s great economic leap forward<b...
Fastest Growing Free Market Democracy<br />9% Average GDP Growth Rate in last 3 years<br />Services and Industry – Twin En...
Meeting Challenges to Growth<br />Investing in infrastructure creation<br />Rises to $ 50 billion (4.9% of GDP) by 2009<br...
Infrastructure Gears Up<br />Telecom: Explosion in Connectivity<br />Tele-density improves dramatically<br />Almost 50% in...
Future Growth Engines<br />Service Sector story well known and will continue<br />Manufacturing sector prospects very attr...
Future Growth Engines<br />Manufacturing Competitiveness Driven By<br />Availability of skilled labour<br />Strong enginee...
Future Growth Engines<br />Agriculture<br />22% of GDP; 10% of exports<br />Accounts for over 50% of employment<br />Enorm...
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Doing Business in India

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Great presentation from the Indian School of Business that describes the nuanced culture of business in India.

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Doing Business in India

  1. 1. Doing Business in India<br />S Subramonia Sarma<br />Indian School of Business<br />
  2. 2. Del<br />Ahd<br />Kol<br />Kol<br />Mum<br />Bub<br />Pune<br />Hyd<br />Blr<br />Mgl<br />Che<br />Cbm<br />kch<br />Tvm<br />
  3. 3. Experiences fromLiving and Working in India as an Expatriate<br />Gerd Hoefner<br />Executive Vice President Siemens Information Systems Ltd., Bangalore, India<br />
  4. 4. “Experiences living and working in India” …<br />“What do people in Europe or the United States usually have in mind when they think about India?” <br />(“… and probably about the Indians?”)<br />
  5. 5.
  6. 6. The Traditional Indian is …<br /><ul><li>God fearing – by and large a harmless creature
  7. 7. Family oriented – long-term relationship, bonding
  8. 8. Not very ambitious – easily content
  9. 9. Intellectually oriented – information / knowledge seeking
  10. 10. Non confrontational - comfortable with directed performance
  11. 11. Very low level of risk aptitude
  12. 12. Shy, sensitive, a little passive – to radical change, to elders and bosses and to the opposite gender!</li></li></ul><li>The inherent strength …<br /><ul><li>Traditional wisdom
  13. 13. Hospitable – to outsiders
  14. 14. Adaptive attitude</li></ul>… and strong paradigms (slowly changing)<br /><ul><li>Age = respectNow: Deserve and get respect
  15. 15. Men = dominant, women = submissiveNow: Gender equality highly prevalent</li></li></ul><li>Experiences from Business – Management <br />Do not expect that all Indian managers to...<br />... flag known problems at the earliest<br />... proactively solve pending problems<br />... tackle uncomfortable situations<br />... take a firm stand towards customer (agree-culture)<br />
  16. 16. India has a lot to offer in terms of culture, nature, history, philosophy, experience, and what not!<br />I myself as well as my family, we definitely <br />love India! <br />
  17. 17. British economist Joan Robinson said about India that<br /> “ whatever could be said about it, <br />so could the opposite.”<br />(Land of contradictions)<br />
  18. 18. Democracy<br />Education<br />Population<br />Poverty<br />Culture<br />Diversity<br />History<br />Space<br />
  19. 19. Different cultural approach<br />Everything is not put on paper<br />Lot of things are implied and on trust<br />Flexible schedules and attitudes<br />Follow-up required in everything, with everyone, at all times<br />Regional clusters of skills and activities<br />Many times, loyalty more important than merit<br />Strong beliefs – destiny, karma <br />
  20. 20. Communication – Some basic principles<br /><ul><li>No NO!
  21. 21. Yes = 1st = I hear you</li></ul> = 2nd = I understand<br /> = 3rd = I agree – without commitment<br /><ul><li>Not black or white but complete color spectrum
  22. 22. Indirect, subtle communication
  23. 23. Not necessarily results in a first discussion
  24. 24. Face to face meetings are necessary
  25. 25. “No problem” does not mean that there is “no problem”!
  26. 26. To nod the head means not necessarily agreement!
  27. 27. More non verbal feedback</li></li></ul><li>India - snippets<br />India – ranked 7th in global trade in 2010 ~ 400 b (World USD 20 trillion, USA USD 5.5 trillion)<br />India – 300 b forex reserves (China – 2.6 Tr; Japan 1 Tr)<br />FDI – India 28 b in 2010(World 1.00 Tr, China 35 b)<br />Sales – IOC 150 b(Wal-Mart – 405 b)<br />Per Capita Income - $ 800(US - $ 47,000)<br />GDP Growth – 8.5% (China 13%)<br />Well known brands from India<br />IT services, Tata, Mittal Steel <br />TajMahal, Yoga, Bangalore, Goa, Cricket, Gandhi<br />
  28. 28. India - snippets<br />Number of listed companies<br />NSE – 1,400, BSE – 5,000(NYSE-3,000, NASDAQ-3,600)<br />Market Cap<br />India – 1.04 Tr(World 38 Tr) <br />Funds raised – 25 b<br />FT 500 – India 10 (market cap 210 b) USA 181 (6.2 Tr)<br />Populated metros 3 in top 10 - Delhi 20m; (Tokyo 35m; Seoul 22m)<br />20% of villages no electricity; 56% of rural households do not have electricity<br />66% Thermal; 26% Hydro; 2.8% Nuclear; 5% renewable<br />India needs 100,000 MW additional generation capacity by 2012<br />
  29. 29. India - snippets<br />Housing <br />5% in urban and 23% in rural areas do not have permanent housing<br />Health care expenditure<br />$ 125 per capita (US – 5,274)<br />61 doctors for 10,000 persons<br />Infant mortality 62/1000 (US - 2/1000) <br />Persons below poverty line – 24% (down from 56% in 1974)<br />Great market<br />Shampoo Sachet; Mobile telephone; Colour TV<br />Amul; Nestle; Bajaj, Tata Indicom; Nokia; Nirma; HLL<br />ITC - e-Choupal, Godrej - Adhar; Tata - Kisan; HLL – Shakti<br />Number of cars – 18/1000 (US – 765/1000)<br />
  30. 30. Rising From the Ashes<br />Two actions, dictated by compulsion, have been the key to India’s great economic leap forward<br />Economic crisis of 1991 (India’s rating downgraded to Junk status – and sold “family silver” or gold to recoup status)<br />Economy liberalised (Competition and free trade encouraged) <br />Led to building of a resilient economy<br />Y2K<br />Confidence that India can exploit global opportunities<br />Era of globalisation and free trade now seen as opportunity rather than threat<br />Virtuous cycle of growth, savings, and further growth<br />
  31. 31. Fastest Growing Free Market Democracy<br />9% Average GDP Growth Rate in last 3 years<br />Services and Industry – Twin Engines of Growth<br />Service Sector Share of GDP – 54%<br />Industry Sector Share of GDP – 26%<br />Large domestic market<br />Great supply of qualified man power<br />
  32. 32. Meeting Challenges to Growth<br />Investing in infrastructure creation<br />Rises to $ 50 billion (4.9% of GDP) by 2009<br />Roads, airports, railways and urban infrastructure receiving attention<br />Encouraging public-private participation<br />Special Economic Zones (SEZ) being created<br />Roads, Ports<br />Inland transportation (rivers/canal; rail)<br />
  33. 33. Infrastructure Gears Up<br />Telecom: Explosion in Connectivity<br />Tele-density improves dramatically<br />Almost 50% in September 10; 2.8% in 2000<br />Fastest growing telecom market in the world<br />600 million mobile subscribers (Sept 10); 1.6 million in 1999<br />One of the lowest tariffs in the world<br />NLD > 1000 km. (Rs 30 in 2000 to Rs. 1.00 now)<br />Broadband: A Revolution in Progress<br />User base 12.0 m (Sept 10) from 0.75 m (Nov 05)<br />$ 6 starter pack; 0.4 GB download/upload limit<br />Bridging the digital divide<br />Pipeline delivers e-education, e-health, e-governance<br />
  34. 34. Future Growth Engines<br />Service Sector story well known and will continue<br />Manufacturing sector prospects very attractive<br />Global trade opportunity higher<br />$ 14.5 trillion in goods in 2010<br />$ 5.0 trillion in services in 2010<br />CII – McKinsey Study<br />$ 300 billion in exports by 2012<br />$ 70 billion in apparel, auto parts, speciality chem., elec. Goods<br />World Bank survey on investment climate and mfg.<br />Companies can expect incremental, consistent, positive change<br />Govt. keen to encourage food, textile, leather industries<br />Can offer employment to rural and under-educated workers<br />
  35. 35. Future Growth Engines<br />Manufacturing Competitiveness Driven By<br />Availability of skilled labour<br />Strong engineering and managerial capabilities<br />Availability of Raw Materials<br />Enlightened focus on quality (many Deming Award winners: Mahindra & Mahindra, Rane Brakes)<br />Made in India for the World<br />Kodak KB 10 – Global sourcing from Bangalore<br />Toyota: Transmission components from Indian JV<br />
  36. 36. Future Growth Engines<br />Agriculture<br />22% of GDP; 10% of exports<br />Accounts for over 50% of employment<br />Enormous potential for growth<br />11% of world’s arable land<br />World’s second largest rice and wheat producer<br />World’s second largest vegetables producer<br />Produces 10% of world’s fruits<br />Largest milk producer in the world<br />
  37. 37. Future Growth Engines<br />Agriculture: Exploiting Potential<br />Critical infrastructure facilities for commerce to be set up<br />Cold chains, refrigerated transport, quality packaging<br />Share of crops with commercial potential in crop portfolio increasing<br />Horticulture and Floriculture seeing rapid growth<br />Fostering development of agro industries with non-farm employment potential<br />Focus on Organic Farming<br />Enormous potential: 70% of arable land does not use fertilizers<br />Over 600 Million T of agri-waste available for compost<br />
  38. 38. All pervasive government<br />Government Controls<br />Licensing<br />Investment levels<br />Joint ventures terms<br />Repatriation<br />Export obligation<br />Employee<br />Strong compliance requirements<br /><ul><li>Central and State laws
  39. 39. Factories laws, Excise & Customs laws, Income tax, Labour laws
  40. 40. Company laws
  41. 41. Capital market regulations</li></li></ul><li>India advantages<br />Cost advantages<br />Improving infrastructure<br />Pool of management professionals<br />24-hour operations<br />Large domestic market<br />Increase in quality orientation<br />Ideal location<br />
  42. 42. India - opportunities<br />India as market for global products and services<br />India as a source of products and services for global markets<br />India as a laboratory for products and services for other emerging markets<br />Growth - Middle Class<br />8% in 1980 (65 million)<br />Projected 32% in 2010 (400 million)<br />By 2020 reach 50% middle class – significant impact on politics<br />
  43. 43. Opportunities Galore<br />Media and Entertainment - 25 b USD<br />Pharmaceuticals  30 b USD<br />Retail  45 b USD<br />Infrastructure (road, power, rail, air)  350 b USD<br />Real Estate  50 b USD<br />KPO  8 b USD<br />
  44. 44. India – Specific Opportunities<br />Logistics <br />Knowledge <br />Educated Man power<br />Population <br />Services<br />Contract Manufacturing, marketing <br />Research and Development, Design services, Information Technology<br />Support services – BPO, KPO, Client support<br />Burgeoning market for goods and service<br />Hospitality, Tourism<br />
  45. 45. Doing business with India<br />Sourcing <br />from India<br />Industry <br />bodies<br />Market access, finance<br />Contract <br />manufacturing<br />Locate <br />partner<br />Market access, finance<br />Selling <br />to India<br />Industry <br />bodies<br />Supplier access, finance, <br />market intelligence<br />Contract <br />marketing<br />Locate <br />partner<br />Supplier access, finance, <br />market intelligence<br />JV<br />India<br />Set up shop <br />in India<br />Entire business operations<br />World<br />Own<br />
  46. 46. Risk-reward conundrum<br />High Risk<br />Low <br />Reward<br />High<br />Reward<br />Low Risk<br />Market, Regulatory, Operations<br />Set up subsidiary<br />Set up JV<br />Contract marketing<br />Contract manufacturing<br />Sell to India<br />Source from India<br />
  47. 47.
  48. 48. SME<br />Structural network created had contributed to the growth <br />Entrepreneur development (NISIET, SISI) <br />Marketing support<br /> (SSIDC)<br />Finance<br />(Bank, SFC, NSIC)<br />Technology support<br />(CSIR, Tool Rooms)<br />Ancillary development<br />Raw material supply<br /> (SSIDC) <br />Consultancy support<br /> (SISI,ITCO, NPC)<br />Fiscal and Non Fiscal Incentives and support<br />
  49. 49. RISKS<br />Reward Potential<br />Options in funding<br />PE Funds, Public equity<br />Commercial Banks<br />Venture Capitalists<br />TDB/ Angel Investors<br />TIFAC/ DST<br />GROWTH<br />Commercial<br />operations<br />Proof of <br />concept<br />Idea <br />Concept<br />
  50. 50. Micro Finance – an introduction<br />6.10 million Self Help Groups, covering 86 million lives<br />Main actors – MNC banks, Private banks<br /> NABARD, SIDBI, ICICI bank, Citi bank<br /> About Rs 18,000 Cr (USD 36 billion) lent <br /> e-choupal of ITC ; eKutir of Intel<br />Great effort to provide cash to the needy<br /> as against 3600% annualized interest level<br /> traditional credit channels not able to reach<br /> a major portion for productive purposes<br /> leverage group dynamics of the societal fabric <br /> capacity building and liberating rural women<br />
  51. 51. Micro-finance – Contributory factors and Challenges<br />Increasing aspiration levels of the target groups<br />Stipulations relating to Priority Sector<br />Became very fashionable – propagated by Nobel Laureate as also a great academic in the strategy area<br />Overall cost of credit is almost 35% to 42%<br />No attention to viability of trades/ small businesses taken up<br />Unmanaged risks in their lives/ livelihood<br />Low productivity in terms of poor yields or higher costs<br />Unfavorable terms in input/output market transactions<br />

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