India has still experienced a real boom in recent years, despite some setbacks: consumer spending has risen and risen enormously, owing to a steadily rising per capita income. Rapidly growing disposable income, increased availability, and the use of customer loans and credit cards support the average Indian’s propensity to follow global (usually Western-oriented) trends. This has led to a rapidly growing number of consumers, making India one of the largest markets for industrial goods and services.
What SMEs need to consider in India
India is growing faster than almost any other country in Asia. Now the government also wants to get the industry on its toes. Not only large corporations can benefit from this: between high-tech and cheap mass-produced goods, there are numerous opportunities for German medium-sized companies.
Ajay Bhargava sees India growing almost daily. Only a few years ago, his factory lay alone in an open field, not far from the southern Indian metropolis of Bangalore. Today, a large industrial area surrounds its terrain, knocked from the ground from the ground.
Bhargava manages the India subsidiary of The Herborn medium-sized company Rittal, which specialises in control cabinets. Its customers are the industrial companies of Asia’s third-largest economy. A large market that will continue to grow. “The government has a lot in its way with its “Make in India” campaign,” says Bhargava. “Even if only half of the announcements are implemented, we are still in a very good position.”
In the eyes of many Indians, the government is mainly Prime Minister Narendra Modi. For about a year, Modi has been in charge of political affairs on the subcontinent – and is seen as a hopeful for the country. With investments in infrastructure and lower corporate taxes, he wants to attract foreign investors to manufacture in India rather than import their products. The Prime Minister will also promote his “Make in India” campaign at the Hannover Messe (13-17 April).
‘Make in India’ aims to boost industry
With this campaign, the government wants to correct the perception of India as an almost exclusive service and IT location. From the point of view of the German Chamber of Commerce and Industry (DIHK), the concrete reform projects are promising for foreign investors. “In addition to the gradual opening up of previously protected industries, the reform of the rules on land acquisition and the reduction of corporation tax, more transparency in the public administration is to be ensured,” says Volker Treier, head of foreign trade at DIHK. “Part of the “Make in India” concept is the realisation of stagnant infrastructure projects, the development of special economic zones and the modernization of industry. The election of Modi has led to a mood of optimism in the country as a whole.”
A huge market, a lot of workers, and sometimes double-digit growth rates: India sounds tempting. But if you want to venture the adventure, you have to pay attention to a few things – because even in the boomcountry of India, not everything runs like lubricated.
The complicated state apparatus with the powerful states is considered difficult to reform. An opaque tax system and the regulatory madness of the numerous authorities do not make it easy to gain a foothold in India.
The expansion of infrastructure is stalling, roads are being built too slowly. India already has the second largest road network in the world. Yet little progress is being made on India’s roads during the rush hour. This is a major obstacle for the economy, as around 60 percent of goods are transported by road. And the expressways, which are important for transport, make up less than two percent of the road network.
In addition, freight trains are not a real alternative. Some of the rail network dates back to the British colonial era. In many places, sea and airports are not yet able to cope with the boom, as are power plants. Outages and delays in goods and electricity supplies are holding back the economy. Choosing the location can be crucial to success or failure in India.
“If something stops us, it’s the infrastructure,” says Rittal manager Bhargava. “Transport damage due to poor roads is one of the main reasons for customer complaints – but by no means as strong as it was 15 years ago.” In addition, electricity is regularly cut off for two hours a day. “Overall, the energy sector is crucial to the country’s success. At the moment, it may still be a reason for an investor to go to China.”