India: New Zealand's Fastest Growing Export Market
India: New Zealand's Fastest Growing Export Market
By Vaibhav Gangan
A recent Auckland seminar reiterated to the New Zealand audience what rest of the world already knows - doing business with India is not only profitable but also inevitable.
Organised by the India New Zealand Business Council and aptly titled "India Ascends", the seminar was attended by over 100 people from a range of industries, and was a testimony to New Zealand's awakening to the changing global economic order - albeit late!
"We (in New Zealand) were late off the mark in realising India's potential," conceded Paul Vaughan, New Zealand's Trade Commissioner to India. "But in the last 10 months alone, the workload at my office has doubled." That growth is not surprising. India is now New Zealand's fastest growing export market, having seen 71% growth in the latest quarter alone.
But for many people in New Zealand, the India message needs to answer some basic questions - do they speak English there? "I haven't had to use any other language other than English in India. No other language is spoken across the country like English," Paul told the audience as if he had read their mind.
But what's the hype about India? To start with, it is home to some 450 million middle-class people with growing purchasing power. For businesses, money grows faster there - India's return on investment is the highest in the world at 19% compared to China's at 14% because capital is efficiently used. Which is why, despite attracting only a fraction of foreign direct investment compared to China last year, India is still recording 7%-8% growth, according to Professor Sunil Ashra, Area Chairperson (Economics) and Associate Professor, Management Development Institute, India. And this growth is not ad hoc or seasonal. "It's sustainable growth. India's World Competitiveness Ranking has improved to 29th this year from 55th two years ago, and will improve further," Paul says. Well, he is right - India has consistently recorded 6% growth over the last 25 years - higher than any industrialised country.
The future looks even more promising for the US$650 billion economy. While the population in most western countries is aging, India's is young population and is expected to stay that way for the next 25 years. "By 2010, India will be the only country in the world where the number of people entering the workplace will be more than people retiring. Indians don't start to age until 2030," Paul asserts.
Cost of doing the business in India is also lower, with inexpensive labour and advanced telecommunications. "World's cheapest international call can be made from India," Sunil informs.
Of course, India is not without her challenges. Poverty, security and healthcare are key issues, according to Paul. "There are problems, but they are being addressed," Sunil adds. "For example, new Electricity Act was introduced last year, and it'll address the power shortages." Infrastructure is another area that needs attention. There are four major airports projects underway, according to Paul. Privatised ports are being built. Some New Zealand companies are already involved in these projects in India, and others see an opportunity there to get involved.
Overseas Indians are noticing opportunities in India, and driving domestic demand. "Many from India's strong Diaspora are returning to India for good. Rolls Royce has opened a showroom in India for the first time after Independence, underpinning rising conspicuous consumption," Paul says.
I was amazed when Paul told me that many New Zealand companies are now already doing business in India. "You name a sector, and I'll tell you a list of companies there." Paul says. And this major change in perception has been in the last year alone. But for companies that are still apprehensive, there's help. "There can to be another New Zealand company in India that can work as a mentor for the new entrant," Paul says. Also, a few Indian management institutes now offer a 'cultural adaptation course' for foreign companies in India. "There isn't much cultural adaptation required in India anyway," he says.
And New Zealand has much to benefit from India's growth. According to Paul, New Zealand can find many opportunities, especially in retail. "This industry has huge potential because only 3% of current retail sales are by the organised sector. UK retail giant TESCO is investing in the backend of the retail industry."
Healthcare is another area of growth. "Over 180,000 medical tourists visited India last year alone," Paul informs. Many American insurers not only approve Indian healthcare providers, but also pay for the partner to travel, and provide cash incentives too.
If that's not reason enough, Commonwealth Games 2010 offer many opportunities for New Zealand. "A big Indian delegation attended the recent games in Australia, and came back highly impressed. They are likely to use the 'Australian' template for the next games in Delhi. So, if New Zealand can provide any reference to work done in Australia, we'll automatically be favoured by Indians," Paul feels.
New Zealand's other strengths are wood, education, ICT, biotech, creative and niche manufacturing. India's biotech industry will outperform its IT sector soon, according to Sunil. Other industries are food processing and wine. Fast food industry is growing at 40% annually. Packaging and frozen vegetables could be another area of opportunity, since over 35% of fresh fruits and vegetables go waste, Sunil explains.
Many companies still look towards China for doing business, but Malcolm Cone, Senior Lecturer, Department of Management, University of Otago prefers India. "Compared to China, doing business in India is walk in the park," he says. China does business on its own terms, Malcolm feels. In India, there is less government intervention. According to the Harvard Business Review, India ranks sixth in governance, while China ranks 19th. "Business in China is dominated by state sector and overseas Chinese investors, where corporatist state prevails and network capitalism plays a vital role. India offers pluralist democracy," Malcolm adds.
Vaibhav Gangan is the editor of The Global Indian, a leading Indian publication in Australasia - www.theglobalindian.co.nz
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