India: An Overview
India today is the fastest growing market outside of China, and potentially represents the largest market surpassing China as we approach 2020. Should you consider India as an export market or a place to set up domestic manufacturing to serve the local market and/or other export markets? We think the answer is yes, as the culture of the Indian people lends itself to Americans learning and understanding how to conduct business in India. This guide is designed to help the business person frame and understand some of the important cultural and economic aspects before landing in India the first time.
India Heritage
As a visitor it is important to observe that Indian people as a whole are very accepting of the visitors political, economic, social and religious beliefs. This acceptance can be characterized as the ability and outlook of the host to bring all of the visitors ideas into harmony with the hosts ideas. While much has been discussed about Chinese Feng Shui in the harmonious orientation of buildings and objects, the Indian culture progresses further to harmonize beliefs and ideas. What does this mean for the visitor? It is much easier to find areas of common interest to build a long term relationship in India.
Guide to Conducting Business in India
Business Etiquette
Meeting and Greeting The Indian people are very friendly and at the same time quite formal in their greetings with visitors. When two Indian people meet for the first time, they typically show respect by saying Namaste, which means I bow to you, and is usually accompanied by a slight bow where the hands and palms are pressed together, with the fingers pointed upward I front of the chest. When an Indian host meets a visitor, especially when the Indian person is familiar with Western visitors, a handshake may be offered instead. By careful, as the forceful hard gripping American handshake is not acceptable. Instead offer your hand but do not close your hand upon your host other than a light touch. If your host is female, or if females accompany your host, it is typical to be introduced, but do not offer a handshake. Titles are very important as professional titles such as Doctor or Professor plus the family name should always be used, unless your host indicates first names are okay to use. In the absence of professional titles, always use Mr., Mrs., or Miss. The exchange of business cards is very important, and if possible the visitor should have their cards translated into Hindi, and have the Hindi translation printed on the side opposite from your home language. Guests always appreciate the touch of dual language cards as this intimates the visitor will be making a special effort to understand the culture and establish a relationship with the host. Building Relationships Americans are taught very early that there are places to go, things to see, and much to accomplish. We call this task orientation. On the other side of this spectrum is the idea that events and things will happen at the right time, where there seems to be, at least to American’s, no urgency in the actions of the host. This means that the usual American “let us accomplish this” attitude may not be received well, and in fact may be offensive to the Indian host. Consequently, the visitor should respect the time and follow the time lead by the host. Geert Hofstede has described a cultural dimension named Uncertainty Avoidance. India as a group has received a low score, which means the Indian culture accepts ambiguity and vagueness. The implication is the visitor may need to explain their objectives, the reasoning behind the objectives, and then ask many questions to clarify what is important to your Indian counterparts. It may also be wise to apologize in advance for the number of questions, and explain that is part of the American culture. Geert Hofstede also described India’s cultural Long Term Orientation index as being quite high. This means the Indian culture as a whole takes the long term view and wants to establish a long term relationship, perhaps spanning generations. That means do not expect to accomplish everything in one meeting, as your counterpart will want to be certain the visitor has a long term relationship and objectives in mind too. Another suggestion is to confirm appointments the day before the meeting, but even so do expect rescheduled meetings and delayed meetings. Do not let change exasperate you and do not let your host see any exasperation on your side. Remember to stay calm and expect change. The Indian culture has a difficultly saying no, as that would be considered rude by the counterpart. Therefore, if in response to your questions you receive a reply “that will be difficult”, or “we may require some time to study this issue”, that is the polite way of saying no. We suggest that if in response to a question, you do not hear specifically “yes”, then the reply should be considered no, and find another way to approach that issue. Language In India there are several hundred languages spoken across various states. It is not necessary to know all of these languages, but it would be very helpful to know a little Hindi, the official language of India. The host would be very appreciative if the guest knew how to say “nice to meet you”, “my name is”, “good morning”, “good evening” and “thank you”. Below are some examples: Hello - Namaste My name is
Best Practices Leadership: India
The biggest word in leadership today is sustainability. This concept did not originate in the US or Europe, but in India, and according to ITC, they “believe that businesses exist to subserve larger societal goals. Therefore, their contribution is best measured and judged in terms of the total value they create for society, namely wealth creation that goes beyond traditional profit and loss statements to encompass a much larger contribution to sustainable development.” ITC goes further to describe how their business model produces sustainability by “synergizing long-term shareholder value creation with enhancing societal capital. This commitment is reflected in ITC's 'Triple Bottom Line' approach of contributing to the economic, ecological and social capital of the country.” This means the visitor can expect the potential partner to be not only interested in profitability, but what can the potential partners do together to enhance the social well being of the area and region in which the host company operates.
Market Entry Strategies & Options
The traditional market entry opportunities are available in India, which include direct sales, distribution networks, licensing and joint ventures. Note we have not included wholly owned subsidiaries as direct foreign investment is typically limited to 49%, although some sectors like telecommunications allow up to 74% foreign ownership to help attract investment in highly attractive sectors. As the investment thresholds change often, the visitor should research the current investment limits and this will help frame the ability to manage the day to day operation of the joint venture.
Economy
GDP India’s GDP reached number 11 in the world in 2009 according to the World Bank, at US$1,296,085 (millions). It has been forecast that India’s GDP will surpass the US by 2050. This infers a large rising middle class with a savings rate to help propel consumer spending and further grow the economy. Various estimates place India’s population at 1.18 billion, which equates to a Per Capita GDP of US$1,098 in 2009 US$. According to the US Census Bureau, in 2009 India US Trade totaled US$37,607.4 (millions), with India Exporting to the US goods and services valued at US$21,166.0 (millions) and India Importing from US goods and services valued at US$16,441.4 (millions). While the US – India trade is at a deficit for the US, the rising income levels in India make exporting and local manufacture especially attractive. As of July 29, 2010 the US$ traded at 46.72 Rupee which represents an increase in value of 8.6% since April 2009. This means the Indian host can buy 8.6% more US goods and services for the same number of Rupees’ making US sourced goods a good value.
Political System
The Indian political system is modeled after the British system, in that the government is formed through democratic elections of two chambers of the Parliament of India (The House of the People, known as Lok Sanha are elected by direct vote of the people, and the Council of States, known as Rajva Sabha are elected by the State legislative assemblies), where laws are enforced by the Federal Government with an independent Judiciary. The local states, of which there are 28, also write and enforce their own laws, and the state governments can greatly influence the incentives for companies to invest in India. The potential business should consult with the Federal and State governments when any investment is being considered. Geographic India is divided into 28 states as listed below (source Wikipedia):
Links and Resources
Country Commercial Guide Doing Business in India Material Attributed to Mark Evans, President, MPE International, LLC
