India: Give It A Go

  • Dr Lockwood Smith
International Trade

India New Zealand Business Council
Canterbury Employers Chamber of Commerce
Kilmour Street
CHRISTCHURCH

Paddy Marra, Chairman of the India/New Zealand Business Council; Your Excellency Shehkholen Kipgen, High Commissioner for India; Ladies and Gentlemen.

It may have taken nearly six months, but finally we've found a day we're all available for this debrief on last October's trade mission to India.

I'm enthusiastic about India's potential, and the potential it offers our export sector.

Nearly a billion people. A growing economy. A middle class of up to 100 million. Perhaps more millionaires than any other nation on earth, including the United States. Consumer awareness of New Zealand through our historic ties and cricket.

Today I want to acknowledge those of you already operating in India, and encourage the rest of you, who have shown interest in India, to give it a go.

In case I'm successful, may I begin with some practical advice: pack your razor.

You probably won't find one in India.

Mind you, the men amongst you could go down to the side of the road, negotiate a price, and experience the half-hour extravaganza that is an Indian shave.

You'll be lucky to get away without a full facial and scalp massage.

Like most else in India, it may be fun and exotic.

But, to New Zealand eyes, almost nothing in India - not even a morning shave - is likely to be simple or easy, familiar or straightforward.

If you are looking to cut your teeth as an exporter, try Australia.

India is for the experienced international businessperson.

Working with India, and predicting India, isn't always easy.

I'll give you a couple of quick examples from my "business" of trade and economic policy.

You might know that many World Trade Organisation (WTO) members are trying to launch a new Round at the end of this year.

A Round would give New Zealand the opportunity to free up trade in our main export earner of agriculture, which reeks of protection around the world.

Another key sector where trade is severely restricted around the world is textiles - India's biggest export earner.

And India has the potential to develop a huge dairy export industry.

It seems to me it would make sense for India and New Zealand to work together to free up trade in these sectors.

But India doesn't see it that way right now, and doesn't yet support launching a new Round.

I hope it will reconsider.

I hope it is possible for us to get on the same side of the table and work together to free up trade in these sectors that are so crucial to both of us.

My other example concerns India's reform programme.

In 1997, the Indian Government presented a Budget that would almost have made Ruth Richardson proud.

It contained tax cuts and represented a major shift away from India's previous philosophy of self-sufficiency.

As a result, the Indian economy was looking in good shape, in spite of the downturn in most of Asia.

Growth was around 6% in 1997/98 and the economy is forecast to grow about the same in 1998/99.

When the business delegation and I were in India, we received a pretty clear message that the reform programme would continue.

However, signals in this year's Budget were a little more mixed.

On the upside, tariffs on our wool, coal and dried vegetables were cut, and some foreign investment rules were relaxed.

But tariffs on our timber and some dairy products were increased.

Personal and corporate taxes were increased by 10%, but subsidies and government expenditure weren't tackled, despite the fiscal deficit being forecast to reach 6.5% of GDP this year.

As I said, almost nothing in India - including its reform programme - is straightforward.

It's political machinations - with different religions, castes, regions and sectoral interests - make MMP in New Zealand look easy.

In India, it can often be a case of two steps forward, one step back.

Just to add to the picture, India announced last week that it would cut quantitative restrictions on almost 900 tariff lines, including dairy products, fruit and vegetables and fish, ahead of its WTO commitments.

I'm delighted by India's bold initiative to reduce quotas. It is a very very positive development.

It will create more opportunities for New Zealand exporters.

And the significance of one of the world's largest developing economies reducing its barriers to trade cannot be overlooked.

The thing about India is that it does tend to be two steps forward, one step back, not the other way round.

That's why I'm recommending it to you today, and there are three reasons in particular why.

The first is obviously the size of the population and the middle class, and the average Indian's knowledge of New Zealand.

The second is that I believe India will continue to reform and open itself to the world, despite the odd hiccup.

And, third, we have expertise in many of the sectors that are priorities for India's development.

Foremost is infrastructure development.

Paddy Marra's hydropower project on the Krishna River is potentially New Zealand's biggest single overseas investment project.

Fletcher Challenge has built three of India's first ready-mix concrete plants, in Bangalore and Hyderabad.

Fletcher Construction has built two state-of-the-art abattoirs.

New Zealand Airport Technology Group is negotiating a major joint venture to supply airport and ground handling technology.

ANZ Grindlays has helped upgrade India's banking sector.

In agriculture, ENZA has helped upgrade the apple industry in Himachal Pradesh, and Zespri has introduced India to kiwifruit.

Nine Indian textile manufacturers are brand partners in the Wool Board's Fernmark programme.

Our exports of plantation timber are helping to reduce the pressure on India's fragile forests, with exports likely to hit $40 million this year.

There are also growing opportunities to sell New Zealand timber harvesting and processing technology.

In education, our institutions have formed partnerships with their Indian counterparts, and plan to significantly increase the number of Indian students coming to New Zealand, from the current low level.

In sectors such as telecommunications, roading, and food processing and handling, there are similar opportunities for New Zealand.

Across the board, our increasing business relationships with India have meant our exports to the country have increased 23% in the last year, and our exports now exceed our imports.

Successful New Zealand ventures in India tend to have two common themes, and these are the two specific pieces of advice I can give you today.

The first is that they tend to be co-operative.

India's history makes it somewhat wary of outside businesspeople.

In the 15th and 16th centuries it was all too ready to trade with the Portuguese and then the British and French.

But, by the early 19th century, what had begun as trade turned into fully-fledged colonisation.

It wasn't until 1961 that the Portuguese were finally ejected from Goa, Daman and Diu.

Businesspeople going in to India today have to respect that history.

It's important India sees that it can co-operate with you to form win/win partnerships.

The example I'm personally most familiar with is the apple industry development I mentioned.

ENZA wanted to export our apples to India's nearly one billion strong population, and its massive middle class in particular.

But no country had access.

ENZA got alongside the local apple industry in Himachal Pradesh anyway.

It assisted the industry in developing a higher quality product and with marketing.

As a result, India granted New Zealand the privilege of being the first country in the world to be allowed to export apples to India, and our access has now been extended.

The plan is that India can now export high quality New Zealand apple varieties to Europe during our off-season.

In return, we can supply the enormous Indian market during its off-season.

It's win/win for everyone concerned.

It's an approach you may want to modify to suit your own industry.

The other common theme of successful ventures in India is that they tend to be localised.

No exporter entering the EU for the first time would seek to begin operations across that continent.

It is exactly the same in India.

It is an enormous country where regions are culturally very different, often with major geographic barriers between them.

Don't think that it is one homogeneous market.

It didn't even exist as one country until the arrival of the British.

Mumbai, Calcutta, Delhi, Chennai, Hyderabad, Bangalore and Ahmedabad all have populations bigger than New Zealand's.

At least 14 of its states have bigger populations than Australia's.

Uttar Pradesh alone has 160 million people - more than France and Germany combined.

Pick one city or one state and focus on that.

Then look to expand into another.

Co-operation to form win/win partnerships. Focusing on one part of India to start with.

That's the best advice I can give you to ensure you can make the most of this huge and growing market.

For more detailed advice on what to expect, and how to go about business in India, Paddy Marra and the India/New Zealand Business Council are available to help.

So too is Trade New Zealand, with its office in Delhi and its network of consultants in other major Indian cities.

I thank all of them for that work, raising India's profile amongst our business sector, and providing advice and support to new entrants.

Their confidence is well placed.

All the best. Give India a go.