Doing Business in India

GB Club Conference, East Lansing, MI November 2011

Michigan in January

India in January

GDP of $ 1.7 trillion (4th largest economy in the world)

GDP growth rate of 8% ( year ending March 2012)

FDI inflow of $ 48 billion in the last two years

Key Statistics

Positive Trend

Population 1.1 billion ( 70% rural)

27% of the population below the poverty line in 2005 vs. 53% in 1978

63% literacy rate in 2006 vs. 53% in 1978

Melting Pot!

29 major languages and more than 2000 ethnic groups

Indus Valley Civilization flourished during the 3rd and 2nd

millennia B.C.

The Classical Indian culture dates from around 1500 B.C.

Influence spread through seaborne trade

British rule from the 19th century till 1947

Parliamentary system, based on the Constitution, with power divided between the Center and the States

History

The Turning Point

The collapse of the Soviet Union, which was India's major trading partner, and the Gulf War, which caused a spike in oil prices, resulted in a major balance-of-payments crisis for India, which found itself facing the prospect of defaulting on its loans

In response the Govt. initiated economic liberalization in 1991

The reforms did away with the “License Raj” reduced tariffs and interest rates and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors.

Results

India has progressed towards a free-market economy, with a substantial reduction in state control of the economy and increased financial liberalization.

This has been accompanied by increases in life expectancy, literacy rates and food security,

Sector % of GDP % of the Labor

Force

Agriculture 18.5% 52%

Industry 26.3% 14%

Services 55.2% 34 %

The Economy

Agriculture Industry

Rice,Wheat,Cotton, Oilseeds,Sugarcane,Tea,Onions,Potatoes, Jute, Dairy,Poultry,Fruit

Textiles,Chemicals, Steel,Mining,Cement,Transport,Pharma,Food Processing,Machinery

Globalization’s promise has been fulfilled

High-productivity employment opportunities have expanded and structural change has contributed to overall growth.

Not so much in productivity growth within individual sectors, where performance has been broadly similar across global regions, but in ensuring that the broad pattern of structural change contributes to, rather than detracts from, overall growth

Foreign Trade

Major export commodities include engineering goods, petroleum products, chemicals and pharmaceuticals, gems and jewelry, textiles and garments, agricultural products, iron ore and other minerals.

Major import commodities include crude oil and related products, machinery, electronic goods, gold and silver.

Private consumption has reduced from 60% to 50%

of GDP while investment has grown from 42 to 50% India will see further reduction in poverty Middle class is expected to grow tenfold. Urban areas will continue to grow-there are already

20 cities with more than 1.6 million inhabitants –potential consumers, entrepreneurs and industrial/service workers

Economic Prospects

Citibank since 1902 Colgate since 1937 P&G (predecessor) since 1951 IBM since 1951(left in mid-70’s and came back in

1997) Cummins since 1962 Bank of America since 1964

American presence in India

Europe’s there too…

Unilever Nestle Siemens HSBC Bosch Bayer BASF Scandinavian multinationals

US-India Business Council Silicon Valley and other networks Five US Consulates in India Rotary, Lions, Alumni groups NGO’s: Ford, Rockefeller and Gates Foundations Cooperation in Defense, Scientific Research, Higher

Education

Indo-US Groups

US Govt. Presence

The new consulate compound will house all United States Government offices in Mumbai, including the Department of State, the Foreign Commercial Service, the U.S. Food and Drug Administration and the Foreign Agricultural Service.  

Ford GM Delphi Flint Haworth How about a Michigan in India “team effort”?

Michigan in India

Pharmaceuticals/ Health Care IT Auto components Other services Cut Diamonds Garments Engineered products Chemicals

Strengths

Electronics manufacturing

Infrastructure/Transportation/Power/Water

Green technologies

Agriculture/Food Processing

Weaknesses

Urgent need for:

Zero Waste/ Landfills

Low Emission

Reduction in water use/ Wastewater recycling

Energy Saving/ Renewable Energy

Improved productivity from small holdings Soil degradation Irrigation Food storage and processing Low-cost nutrition Diabetes- from two sources

Meeting Food Needs

Liaison office Through an Agent/Distributor Assembly or Manufacture in India Technology licensing US Exim-Bank support The Partnership route

How to go in

Growing economy and large numbers of wealthy and

middle-class people

Diversified economy, with competitive business people looking for new technologies and opportunities

Why go to India

Support

Established set-up for doing business: English speaking, Banking & Trade Finance, Law firms, Media ( print, television, social media), CPAs, Insurance

International airports accessible from East and West, international standard hotels, communication and health care.

Automatic approval except for certain sectors

Investment in restricted sectors or where there are sector caps: approval of the Ministry of Finance-Foreign Investment Promotion Board

Inflow and outflow of funds under the authority of the Reserve Bank of India

Investment Procedure

Laboratory to adapt products and build up a supply

base for developing markets Export location for Middle East, Africa, Russia/CIS

and SE Asia American systems, procedures and efficiencies can

build competitiveness Large population of educated young people-

welcome a chance to work in a professional environment

Unique Reasons to go to India

Source of technical and managerial talent-men and

women

Indian companies are venturing overseas-deals worth $5.89 billion during the first half of 2011

India is a Democracy

More Reasons

National pride and confidence in their education,

achievements, background and culture Awareness of global issues Interest in discussing political and other current

topics Negative issues

CULTURAL FACTORS

80% Hindu, 14% Moslem, 2% Christian, 1.3% Sikh

Close family ties-arranged marriage

Vegetarian

Each State is unique

CULTURAL FACTORS

“You’ve got to start with the customer experience and

work backwards to the technology. You can’t start with the technology and try to figure out where you’re going to try and sell it…” –Steve Jobs

The Wisdom of Jobs

The Wisdom of Hoffman

“Entrepreneurs, he says, often spend too much time creating products and too little figuring out how to get people to use them.”

Reid Hoffman of LinkedIn (as quoted by the New York Times, which describes him as “Tech’s Go-To Guy”