Culture Class: India
In this article, we explore the opportunities and business culture in India. With negotiations ongoing with regard to a trade agreement, how can you make the most of the world's fifth-largest economy?
India on the Rise
The important question to answer first is, why should businesses see India as an opportunity?
Firstly, as mentioned above, India is currently the world's fifth largest economy. However, by 2050, India is expected to become the 3rd largest global economy behind only China and United States, with a 6.8% share of the global economy.
Estimates suggest that, by 2050, the South Asia region will double its current share of global GDP (4% to 8%) and global imports (3% to 7%). This rise will be led by India.
India is classed as a member of the 'E7 group' which is made up of the seven largest emerging economies (which at the time of research included Russia). Research suggests that by 2050, the E7's global share of imports will be equal to that of the demand of the current G7.
Also by 2050, the South Asia region (led by India) will have a middle-class of approximately over 50 million. Due to the UK being classed as a 'very high' income country, UK businesses tend to specialise in goods and services tailored for high income markets, suggesting that Indian demand may only grow over the coming decades.
When looking specifically at the UK's specialist sectors, over 80% of the growth in global import demand is expected to come from just 29 countries, of which India is one.
How does India trade with the world?
So we've already demonstrated how India as a country is growing into a global superpower of international trade. But, which sectors and products are most productive and important for India's international trade.
Through figures reported in the latest Trade & Investment Factsheet released on Gov.uk, we are able to have a look at the top goods traded between India and the world which you can see in the above tables.
So how does this translate to the top exports and imports between the UK and India specifically?
In the UK, non-ferrous metals worth £3.5billion, makes up 41.7% of all UK goods exported to India. Financially, the next largest exports are metal ores & scrap and mechanical power generators which make up £833m and £670m worth of trade respectively. The top five exports to India by financial worth are rounded off by beverages and, general industrial machinery.
In terms of imports into the UK from India, refined oil was the largest financially, accounting for £1.4bn. Clothing was the only other commodity imported which was over the £1bn mark. The next three largest imports are telecoms & sound equipment, mechanical power generators and medicinal & pharmaceutical products.
With regards to services, the sector accounted for 44% of all trade between the UK and India (£15 billion) in the four quarters up to the end of Q3 2022.
Of the £6.5 billion worth of services that were exported, over 50% (59.4% in total) was accounted for by the travel sector. The second largest sector financially was the 'other business services' which accounted for 12.8% of all services exported. Other key sectors to date include the transportation, intellectual property and telecommunications, computer & information services.
With regards to imports from India, Travel was the third largest sector accounting for just under £1 billion or 11.4%. The top sector was 'other business services' which accounted for 67.6% of all services imported.
Alongside the two above mentioned sectors were telecommunications, computer & information services, transportation and financial sector.
Overall, India has seen a movement towards reducing barriers for international businesses and individuals to set-up and grow in India. Nothing demonstrates this better than the fact that the World Bank’s Ease of Doing Business statistics (which rank every country on ease of doing business) saw India drastically jump from 142nd in the world in 2014, to 63rd by 2019. By being placed 63rd in the world, it makes India the highest ranked country out of the eight which are deemed by the World Bank to be classed as in the South Asia region.
UK - India Trade Relationship
Latest trade figures demonstrate that trade between the UK and India is currently on the rise. In the four quarters to the end of Q3 2022, the total trade in goods and services between UK and India was £34 billion. This represented an increase of 51.7% when compared to the four quarters to end of Q3 2021.
As some may expect, our trade with India is disproportionately reliable on imports (with importing accounting for 56.5% of total trade with India). However, it may be surprising to learn that it was exports to India that grew at a greater rate, year on year between 2021 and 2022 with increases of 75.5% and 37.3% respectively. Of this 75.5% increase in exports, there was a remarkable jump of 101.2% in exports of goods (alongside a 50.9% increase in services).
In the North East specifically, we accounted for 3.2% of the total goods exported to India from the UK (financially worth £140 million). In terms of imports, the North East accounted for only 2.5% of the total goods imported (£200 million). In fact, in 2021, the North East was one of only four UK regions to account for a larger UK share (percentage wise) of the exports to India than the imports from India.
In total, India is the UK’s 12th largest trading partner. As trade negotiations continue on a UK-India trade agreement, and relatively recent deals such as the Air India, Airbus and Rolls-Royce deal show, it seems likely that UK-India trade will continue to rise.
As such, now seems like a perfect opportunity to have a closer look at cultural aspects within India and how to make the most of the business opportunities.
India Culture
Culturally, India is an immensely rich and diverse country with numerous languages, climates traditions, history and unique cultures within the larger picture of India as a whole. Some say that India is almost as diverse as the whole of Europe. As such, no business can think of India as a one-size fits all nation. There is no single cultural rule that works in all regions of India.
Businesses need to understand this before they dive straight into trading with India. Learn from the cultural aspects and information in this article, but ensure you also learn from your business relations in India and be prepared to continue to learn and develop. Building those personal relationships will always be one of the most important steps to take, regardless of where you are looking to trade in India.
Get your greeting right in business meetings
Making the right first impression can be vital in business. Follow these simple steps ensure you make the best first impression to a potential business partner:
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Always greet the most senior person first
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Usually people will make an introduction via a handshake. However, in some cases, you may use the namaste (press your palms together with fingers pointing upwards accompanied by a small bow)
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Business cards are usually exchanged during the first meeting. When exchanging business cards, use your right hand and ensure the text is facing your business partner. Some people will take this opportunity to study your business card to check your title and name and try to find out any further information about you
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Don’t try to talk business immediately. Most meetings will start with small talk at the beginning potentially including questions about family
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Unless someone specifies otherwise, always try to address someone using their formal title. For example, if they are a Professor or Doctor make sure that you include the title when you address the relevant person
Similarities with the UK
English is one of India's official languages and is largely spoken in the business world. Also, India shares a common legal system with the UK.
Don't just say "no"
In India, using the word “no” can portray offence so, for some people, they will try to avoid using the word at all.
As such, you might hear phrases like “we shall see” or “yes, but it might be difficult” when in all likelihood, they actually mean no. For you, that means that you need to have greater awareness of what they are saying and, importantly, their body language. Sometimes reading between the lines can be a key skill when conducting business in India.
Negotiations can take time
As with any business meeting, prepare and plan to be punctual to any business meeting you have in India or with an Indian business partner. However, saying this, don’t be surprised if the meeting starts late and, certainly, if it finishes late. Interruptions can occur and (once you’ve factored in time for small talk) business negotiations can be slow compared to English standards.
Also, during negotiations, there can be many rounds of discussions and back-and-forth before any decisions are made. Again, this can be normal procedure and businesses shouldn’t expect decisions to be made hastily.
Being forceful and direct will not help (it may in fact hinder) so be prepared to take the necessary time because, it may all be worthwhile in the end. For example, trust and business relationships are as important in India as statistical information.
Taking the time to engage and understand your business partner can certainly pay off in the long run.
The importance of hierarchy
Generally speaking, Indian businesses follow a very clear hierarchical structure with the decision making very much only a responsibility for those at the top of the business.
As such, when you require a decision from a potential business partner, make sure you are speaking to someone with the appropriate authority to make the necessary decision. It is very unlikely that any decisions would be made without the relevant people in the room. So, it will be important for you to have a relationship with those who you will be contacting the majority of the time but, make sure that when a decision is needed, you have the relevant people in the room!
Opportunities are there, make the most of them
In such a vibrant upward protectory country as India, there are always going to be opportunities for UK businesses to capitalise on this fantastic, up-and-coming middle-class population.
The Department for Business & Trade (previously the Department for International Trade) have identified the following sectors as having key opportunities within India:
Technology
As India becomes one of the most data-rich countries in the world, there are opportunities for UK businesses to take advantage of this new global technology start up hub. India has some of the lowest mobile data costs in the world. In particular, the telecoms market can provide fantastic opportunities for UK businesses along with analytics, AI and cyber security.
Fintech
India boasts a strong Fintech market due to the fact that it receives strong government support and currently has an impressive fintech growth and adoption rate. Digital payments and SME lending is helping to drive this sector to new heights. The demand for digital onboarding, lending, wealth management and linked technology offers great opportunities for UK businesses who can try to benefit from India’s impressively high rate of expected return on fintech projects (29% compared to 2017 global average of 20%).
Automotive
Some of the UK’s most household names in automation (such as JCB, Jaguar and Land Rover) are already present in India. As India is the fourth largest automobile market it is easy to see why it is such a good opportunity. Also, with the Indian Government introducing an ambitious target for all cars to be electric by 2030, there is an opportunity for new innovation and technology.
To Conclude
Over recent years we've seen some of the world's biggest companies move and strengthen their base in India. Take Apple for example, who moved roughly 20% of its China-based manufacturing to India. Except for a decline during the Covid-19 hit 2020, UK-India trade has seen a consistent rise since 2012.
Though importing from India currently dominates export numbers, there are signs that restraints to conducting business in India are easing and subsequently becoming more of an appealing market to UK businesses. By the year 2030, South Asia as a region is expected to add a further 35-40 million individuals into the global middle class bracket.
Over the next three decades we will see a movement as the global economic centre shifts from Europe and heads further east. As such, India will offer not only opportunities for importers but also UK exporters looking to benefit from new, upcoming markets. Alongside the ongoing UK-India trade negotiations, there are likely to be even more reasons to trade with India over the coming months.
However, never underestimate the size of India and the scale of cultural differences even in this one country.
One size does not fit all, but hopefully you now have a solid basis in which to build upon and take your first steps into trading with India. Plus, never forget the invaluable support you can receive from services such as Department for Business & Trade.
Start your trade with India on the right foot and you may be able to watch your business flourish in a South Asia market.
