Doing Business in India

All the signs are that India's rapid economic expansion will continue, making it a compelling option for Australian businesses looking to expand their operations into Asia.

India is one of the world's fastest growing economies, and one of Asia's giants. It is also the largest democracy in the world and with a rapidly growing population of more than 1.3 billion, India is expected to overtake China as the world's most populous nation within a decade.

If there is a single serious long-term rival to China as an economic powerhouse in Asia, India is it. And all the signs are that India's rapid economic expansion will continue, making it an even more compelling option for Australian businesses looking to expand their operations into Asia.

Consider some key facts:

  • India was the world’s sixth-largest economy in 2017, with gross domestic product (GDP) of just over USD 2.5 trillion
  • On the alternative measure of purchasing power parity, India is predicted to replace the United States as the world’s second-largest economy by 2050
  • Household incomes in India are steadily increasing, creating a burgeoning population of middle-class consumers that will reach 583 million in 2025

India is currently Australia's fifth largest trading partner and our fifth biggest export market. In 2017, we exported goods and services worth about AUD $20.16 billion to India, while our imports from India totalled just over AUD $7.2 billion.

In an effort to further deepen trade links, the nations’ two governments began negotiating the Australia-India Comprehensive Economic Cooperation Agreement (CECA) in 2011. The negotiations are expected to conclude shortly, bringing to fruition another in a series of bilateral trade agreements between Australia and its key partners in the Asian region.

The implementation of CECA with India is expected to make a major contribution to further growth in trade in goods and services, as well as investment. India’s vast geographical area and diverse regions present numerous market opportunities for Australian businesses. Differing levels of wealth and development across the country create the need to import a wide range of goods and services, including food, education, financial services and infrastructure.

All signs point to strong and steady growth over the next decade, with a continuing explosion in the extent and range of business and investment opportunities.

Want to learn more? Download the India Country Starter Pack

Doing Business in India

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  • Why do business in India?

    One of the world's fastest growing economies, and one of Asia's giants.

    India is one of the world's fastest growing economies, and one of Asia's giants. It is also the largest democracy in the world and with a rapidly growing population of more than 1.3 billion, India is expected to overtake China as the world's most populous nation within a decade.

    If there is a single serious long-term rival to China as an economic powerhouse in Asia, India is it. And all the signs are that India's rapid economic expansion will continue, making it an even more compelling option for Australian businesses looking to expand their operations into Asia.

    Want to discover opportunities in other Asian countries? Expand your knowledge on doing business in China and Thailand, as well as other countries with market-leading information and insights from Asialink Business.

  • Opportunities for Australian businesses in India

    All signs point to strong and steady growth over the next decade.

    India is currently Australia's 5th largest trading partner and our fifth biggest export market. In 2017 we exported goods and services worth about $20.16 billion to India, while our imports from India totalled just over $7.2 billion. All signs point to strong and steady growth over the next decade, with a continuing explosion in the extent and range of business and investment opportunities.

    Doing business in India is not without challenges. Language and cultural barriers aside, bureaucratic red tape, and distinct and diverse markets across the country may all seem like impediments to success. These issues are compounded by a complex regulatory framework that can vary from state to state.

    But Australian businesses willing to invest the time and energy required to research opportunities and prepare for the potential obstacles could reap considerable rewards. Successive Indian governments have instituted economic liberalisation policies over the last two decades, making foreign investment and trade in the country a more attractive option than ever. 

    The following sectors of the economy are among those that present big opportunities for Australian businesses:

    • Resources and mining
    • Agriculture
    • Food and food products
    • Education
    • Information communications technology (ICT) and services
    • Biotechnology and pharmaceuticals
    • Aged care
    • Automotive
    • Rail infrastructure
    • Road infrastructure
    • Water, waste and environment
    • Tourism
    • Heritage conservation

    More information on opportunities for Australian businesses in India can be found in the Asialink Business India Country Starter Pack.

  • India's relationship with Australia

    India and Australia are negotiating the Australia-India Comprehensive Economic Cooperation Agreement (CECA).

    In an effort to further deepen trade links, India and Australia began negotiating the Australia-India Comprehensive Economic Cooperation Agreement (CECA) in 2011. The negotiations are expected to conclude soon, bringing to fruition another in a series of bilateral trade agreements between Australia and its key partners in the Asia-Pacific.

    Further information on Australia's relationship with India can be found in the Asialink Business India Country Starter Pack.

    The focus of the CECA negotiations are:

    • Expanding the import and export of goods and merchandise by addressing tax and tariff barriers as well as customs prohibitions and restrictions
    • Increasing trade in services by promoting transparency in regulations and legislation and reducing barriers to entry
    • Building investor confidence by improving existing investment protections and promoting greater transparency.

    The implementation of CECA with India is expected to make a major contribution to further growth in trade in goods and services, as well as investment. India's vast geographical area and diverse regions present numerous market opportunities for Australian businesses. Differing levels of wealth and development across the country create the need to import a wide range of goods and services, including food, education, financial services and infrastructure.

    In addition to CECA, the India Economic Strategy to 2035, launched in 2018, is focussed on transforming Australia's economic partnership with India. The intent of the strategy is to lift India into Australia's top three export markets. The vision is to make India the third largest destination in Asia for Australian outward investment, develop strategic partnerships by having India as part of the inner circle, and to have better people-to-people ties.

  • Starting your business in India

    India's business environment can be challenging.

    India's business environment can be challenging compared with Australia's. In the 2016 Australian International Business Survey (AIBS), 31% of respondents felt it was more difficult to do business in India than it was in Australia, while 39% felt it was much more difficult. A lack of understanding about local culture and business practices was identified as the main barrier to doing business in India. Other specific concerns included payment issues and a lack of understanding of local regulations.

    Detailed information on starting a business in India can be found in the Asialink Business India Country Starter Pack.

    You should develop an India strategy before deciding how to launch your business there. In particular:

    • Avoid going into India cold – get a foot in the door first.
    • Take care when selecting advisers, partners and contractors.
    • Choose a business structure based on research specific to your industry, your objectives and the product or service you are offering.
    • Be directly involved in the setting up process.
    • Allow a lot of time for bureaucracy – both filling in forms and waiting for approvals.

  • Location options in India

    Different cities and regions are becoming more specialised in their economic and business functions.

    India is a country of incredible regional diversity. There is a wide range of income levels, wealth, culture, language, education, skill levels, market preferences and consumer needs and tastes across the country.  This diversity will not only affect how you do business in a particular area, but where you choose to do business in the first place.

    In part due to this diversity, different cities and regions are becoming more specialised in their economic and business functions. Mumbai is the financial centre and Bangalore its Silicon Valley, while Pune is the automotive hub of India and also has a rapidly growing IT sector.

    More information on business locations in India can be found in the Asialink Business India Country Starter Pack.

    • Unless your product or service is specifically targeting more regional communities, it can be advantageous to set up in an urbanised area, in spite of potentially higher operating costs and more expensive labour.
    • Locations that appear at first to be cheaper may surprise you with hidden costs associated with unreliable or poor infrastructure – this could affect your supply chain.
    • Less urbanised areas also tend to have lower skilled workers and scarce management talent. Distribution systems could also be fragmented, affecting not only your outgoing distribution but also how easily your supplies and materials can get to you.
    • You could overcome some of these issues by completing part of your manufacturing process in India, then undertaking final assembly and customisation in a region that is close to your target customers' location.

  • Doing business in India

    Building good business relationships and trust is important.

    Building good business relationships and trust is important in India, so you should expect to spend plenty of time at meetings, dinners and social clubs with potential business partners.

    India is a relatively conservative society, and it is important for visitors to be respectful of societal norms and traditional values, which continue to underpin many customs and business practices. Younger Indians are less particular about decorum than older generations, but will still adhere to many traditions and conventions, especially when around superiors or elders.

    Although a strict hierarchy is adhered to, a decision maker's subordinate is capable of derailing the deal, as Indian business people and bureaucrats listen to underlings with vested interests far more than their foreign counterparts do. It is therefore important to understand the role and dynamics of all at the table, as well as those who may be absent but influential. The existence of such people can be politely investigated at dinners and drinks. 

    Positions of power and authority are highly valued and revered. At the same time, Indians are proud of being citizens of the largest democracy in the world, and consider their rights under this system paramount. Key principles of democracy, such as the right to speak freely, can become exaggerated in a business context. It is not uncommon for middle managers to seek time with the CEO to air grievances – whereas in Australia, by contrast, it might only be appropriate to share grievances with a direct superior or a human resources representative.

    As in numerous other Asian cultures, Indians like to develop a personal connection first. So try to find a connection with your Indian counterpart and make a note to remember it. For example, if he or she has a child or grandchild, remember the child's name and ask about him or her each time you see your contact.

    Australians accustomed to transparency in business will take time to adjust to the Indian style of decision and deal-making. Ensuring the most senior executive of the Australian company is available will help ensure that the needs of your company are prioritised by your Indian business partner. It also helps to try to understand what personal or corporate interests may derail the deal and start working to neutralise these where possible. 

     

    More information on doing business and business methodologies in India can be found in the Asialink Business India Country Starter Pack.

  • Business etiquette in India

    Indians are less constrained by time than Australians.
    • Be mindful of your feet and shoes. Ensure your toes or soles are not pointed towards anyone, and keep your feet flat on the ground as far as you can. If your feet or shoes touch someone else, apologise immediately. Always walk around someone or something instead of stepping over it.
    • Direct questioning is common, so don't be offended if you are asked how old you are and how much you earn. Expect to be asked about your family – and prepare to ask about your associate's family and then enquire after them when next you meet.
    • Never adopt a prescriptive tone or attitude in discussions – this will likely be met with instant resistance.

    More information on business culture in India, doing business in India, negotiating, legislative requirements and managing taxation, can be found in the Asialink Business India Country Starter Pack.

    • The need to develop and maintain relationships is essential in all contexts, including business dinners, emails, meetings and negotiations.
    • Conservative, professional attire is expected in the business setting, although this can differ depending on the season and the city. Men should generally wear a suit (with tie) and women should wear a business dress or a suit with a blouse (not low-cut and, in the case of skirts, not too short). In summer, however, it is more acceptable for men to not wear a jacket.
    • Make a concerted effort to be on time for formal business meetings, but be aware that they will not always start on time. Indians are less constrained by time than Australians, and heavy traffic may cause delays, so schedule more time than is necessary. In a first meeting, let the Indian host guide the initial stages of the conversation.
    • Business cards are essential and must be handled with respect. Make sure your card includes your name, company name, position and email address - in English, not Hindi. A website address is also helpful. If you have a higher degree such as a masters or a PhD, you may wish to disclose it on your business card, as it will earn you greater respect in India. Take plenty of cards, as it is not uncommon to give out dozens of them at a time.
    • People are valued for their titles and seniority. Show respect at all times.
    • As with much of Asia, loss of face is a relevant concept in India. Encourage harmony and maintain face by complimenting others. Never publicly criticise anyone, refer to their mistakes, show anger or disagree with a superior.
    • Trust is built through personal connections. Be open and try to remain open when you are asked about your personal life.
    • Only use your right hand for shaking hands, eating, passing items etc. The left hand is considered unclean.

  • Sales & marketing in India

    You may need to engage several agents to cover different areas.

    Most Australian firms rely on agents or distributors to represent their businesses and sell their products in international markets. The most important consideration when choosing an agent or distributor is to ensure that you can establish a close working relationship - you must be able to build high levels of trust and regular communication.

    More information on sales and marketing in India, including using agents and distributors, online sales and direct selling, can be found in the Asialink Business India Country Starter Pack.

    Many Indian agents and distributors work for trading companies that are authorised to deal in a wide range of products. Some of the larger companies have offices in other countries, along with a network of offices and affiliates in India. However, large agents and distributors sometimes manage so many products that yours may not get enough attention.

    India's size and regional diversity also mean you may need to engage several agents to cover different areas. In India, payments can only be repatriated after end-of-year tax has been paid.

    If you are going to use agents or distributors in India, make sure you have detailed and well-constructed contracts in place. As there are no laws or regulations covering agents and distributors in India, you will have to rely on contracts to define the relationship and enforcement.