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India isn't quite perfect but she has good opportunities for Australia

By Melissa Butcher - posted Monday, 1 March 2004


A financial services company I was working with a few years ago decided to move away from developing business in the Indian market and to concentrate on other parts of Asia. India had failed their ROTI test (Return on Time Invested). It would not be the first company that would feel it had been “burnt” by India. There have been some notable cases including Telstra and PBL. Even Rupert Murdoch was at one time threatened with arrest should he set foot in Delhi again as a result of contempt of court charges brought against him.

Transnational companies have found the Indian consumer a more fickle client than they expected and very demanding of value for their rupee. They have faced stiff opposition from local firms who have learnt the tricks of marketing and developing quality products for the new middle class. And foreign business has also had to deal with a government of coalitions and policies of cultural nationalism that have seen “calibration” (that is, limitations on foreign ownership) rather than immediate open doors.

India is without doubt a difficult place to do business. Liberalisation of the economy has only taken place in the last ten to fifteen years and there are still regulatory ambiguities and anomalies that are slowly being ironed out. Dealing with any department of the Indian Government can be time consuming and fraught with cross-cultural innuendo, lack of transparency and corruption (something which is also present in daily life such as getting phone connections, ensuring continuous electricity supply etc.).

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There are differences in project management styles, employer-employee relationships and methods of communication. “Yes” does not always mean yes in India. “Frustration” is a key recurring word in the narratives of Australian business people I recently interviewed in Delhi and the financial capital of Mumbai. And yes, outside the office, it is still possible to see cows wandering down the main street, so there is an element of truth to the stereotypes. Unfortunately, such images are overly reinforced by an Australian media that prefers to focus on disease, disaster and the odd.

From this description it’s probably understandable that Australian business hasn’t been mad keen on rushing to tap into a consuming class of now around 300 million people. India has also been just that bit outside the immediate sphere of political interest in Australia. Yet a palpable shift in thinking is occurring and I would argue not so much as a result of the realisation that the Pakistan/India conflict over Kashmir is a potential nuclear flashpoint, but more prosaically, over information technology and migration.

Firstly, the realisation of the strength of India’s IT industry, and the potential benefits to profit margins, has seen an increasing number of companies looking at outsourcing (of software development and call centre functions) to India. At present only one and a half per cent of India’s software exports comes to Australia but with predictions of their IT exports as a whole burgeoning to US$50 billion dollars by 2008 there is certainly room for growth. IT also turns on its head the standard image of India as an unsophisticated “developing” nation. The populations of the West have a daily relationship with IT hard- and software and India is now inextricably part of that conversation.

On the second point, the impact of migration, I would argue that interpersonal relationships are still the most effective form of communication, particularly if trying to convince someone that you are worth investing in. There is a growing Indian community in Australia that is lobbying and networking with businesses here and in India, creating vital connections. The numbers of trade delegations both to and from India has increased substantially in the last two years at an industry, state and federal level.

The importance of interpersonal connection can be seen in a major mining investment in 2003 by an Indian company, not so much inspired by any Austrade marketing but by a visit of the son of the family-owned company who decided he liked the lifestyle here. In fact I find Indian business has more inspiring ideas for promoting Australia than we do. For example, a senior manager of an IT firm believes that Australia could promote itself as an ideal base for Indian companies wanting to work in the Asia-Pacific region: English is our first language yet we have a rich source of bi-lingual young Asian-Australians; our lifestyle is relaxed; and it’s cheaper to live and operate here than in hubs such as Singapore or Hong Kong.

On the Australian side, the future of bi-lateral relations is also good if companies and policymakers look to a few basic guidelines when analysing the potential of India. Its consumer markets are growing (even the very poor are consumers) but it is a complex market that takes time to understand and it is necessary to include in that understanding the dynamics of power and social context. India is not a country that you can fly in and out of every few months and expect your business there to grow. There are local agents who can mediate but more often than not they will not be working for you alone. On-the-ground presence is essential and the most successful Australian companies in the market have established offices with both local and expatriate staff. Finding the right people, both Indian staff who can understand an Australian company and Australians who will love the country and all its challenges, is the hardest part.

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None of these issues are insurmountable as Australian companies such as Fosters (with its Indian accented “G’day” on their voice mail system), and BHP Billiton, have shown. There is an element of critical mass though. Even companies that were drawn in the early days of liberalisation by the rush of blood to the head that the thought of one billion consumers can bring about – and subsequently gaining an enormous headache – may find India increasingly more attractive again. This is as companies who temper their expectations and do their research and preparation succeed in establishing roots there.

If I may act as guru for a moment and make a prediction, India will become one of Australia’s most important trading partners. This will happen on Indian time of course, with a shift away from heavy industry (the most important trade sector at the moment) towards an increase in cooperation in the services sector, including tourism, education and media services (film and television) in particular.

One of Australia’s most important exports at the moment is the humble chickpea, a staple of the Indian diet. Australian apples are also popular but there is strong reason to investigate the potential of trade in high quality gourmet foodstuffs such as wine and dairy products aimed at upper income elite demographics (who may number only two per cent of the population but in Indian terms that translates to 20 million people). I would also argue that regional collectives of small to medium enterprises (at city, shire or state level) could play an increasing role in exports to Asia as a whole. They enable the costs and risks of entering a market such as India to be shared as well as the possibilities.

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Article edited by Nick Biddle.
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About the Author

Dr Melissa Butcher is an ARC Research Fellow at the Research Institute for Asia and the Pacific, University of Sydney.

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