India's population is not only very large, it is also very young. In recent years, pioneering companies from the off-shoring, outsourcing and call center sectors in particular have helped the middle class to grow. To keep it that way, the government is investing in new jobs, because 1 million young people want to enter the workplace every month. For this purpose, the Modi government launched the "Make-in-India" campaign in 2014. In concrete terms, it aims to bring foreign companies to India to boost investment, promote the transfer of technology and know-how and thereby create as many new jobs as possible.
According to Ineichen, Indian consumers are extremely price sensitive: “As the middle class grows, quality is becoming increasingly important in certain areas, but Swiss products are generally in the high-price segment. The steep import duties due to the lack of a free trade agreement don’t make things any better.” Although the aforementioned free trade agreement has been under negotiation for years, the Indian consultant considers the prospects of a successful conclusion in the near future to be slim. Nevertheless, quality awareness is likely to grow and Indian consumers are aware of the quality, reliability and durability of Swiss products. Interior materials for apartments and houses are an example of this awareness. Real estate prices in India are very high and the desire to furnish a home or condominium accordingly is growing steadily.
Focus on renewable energy
The S-GE consultant considers the energy sector as another industry offering highly attractive opportunities. Huge problems with air and environmental pollution are creating incentives to abandon fossil fuels. The focus is on renewable energies Ineichen:
Great progress has already been made in the solar sector, but other renewable energies and energy management are in high demand. Everything relating to cleantech, which of course includes recycling, is a currently hot topic in India.
Investments in railways and subway systems
Ineichen has identified another growth area in the rail and subway sector. India operates the second largest railway network in the world. As this network still largely dates back to British colonial times, the need for modernization, redevelopment and expansion is huge. In addition, the government wants every city with over 2 million inhabitants to have a subway system. “Many cities are planning to build or expand their subway systems in the near future. This means the prospects for suppliers of railway infrastructure or rolling stock are good,” says the India consultant, summarizing the initial situation. The ports and airports also have some catching up to do.
Potential in the food and food processing sector
“We also see huge potential for the food and food processing sector,” adds Ineichen. Unfortunately, the fact is that a large proportion of the harvests in India today never reach the consumer. There is often a lack of technology to process foodstuffs or entire cold chains are inadequate, leading to a double-digit percentage loss in production. The prospects are also good in the healthcare system, for example. Here too, there is a considerable backlog demand in the national healthcare system, and for wealthy Indians there are private clinics that want and need cutting-edge technology and medical equipment.
Major population centers are a good starting point for Swiss exporters
Geographically, the growth potential for exporters is mainly concentrated in major population centers such as Mumbai, New Delhi and Bangalore. Rural India is predominantly agricultural and is not especially attractive for foreign companies owing to its lack of purchasing power. Ineichen has also observed that many Swiss companies that have established themselves in India use the country's relatively central location as a springboard for other Asian markets.
A marathon, not a sprint
India’s bureaucracy is still a stumbling block and the usual suspects, such as corruption, are rife. However India is moving in the right direction. “But, it’s moving at a leisurely and often faltering pace, like that of the Indian elephants used as working animals,” smiles Ineichen. There are good and groundbreaking approaches for improvement, however, such as the “e-government” initiative, which is using modern technologies to reduce bureaucracy. Another aspect is important to the India consultant: the vast majority of Swiss companies are very well prepared for their market entry in India and have realistic business plans. However, they are almost always wrong in their estimates of the time required: “India takes patience and more time than planned - including a lot of senior management time, especially in the initial phase. “The Indian market is a tough nut to crack.” Dry spells have to be expected, which generally last longer than in many other Asian countries. Swiss companies need staying power. India is a marathon, not a sprint. While there are exceptions, such as in the aerospace sector, the companies he is aware of have practically all experienced a dry spell of at least 3 to 5 years, says Ineichen.
Despite countless challenges, Ineichen firmly believes in the potential and opportunities for Swiss companies in India in the medium and long term. India is set to become the world’s most populous country in the near future and the demographic conditions and the need to catch up form a unique combination for the country’s economic growth. According to Ineichen, the CEO of a Swiss company recently summed this up very well.
For our company, the question was never ‘whether’ to enter the Indian market, but ‘when’.