India: elephant or tiger?

Will Clark, regional director for UK & Ireland, NAFTA and Australasia at Atradius explains why doing business with Asia’s new powerhouse offers huge potential to UK companies as India tries to turn itself in to a true global economy.

India has often been portrayed as an elephant: large, lumbering and slow. However, with the economy growing at around 8% a year and restrictions on foreign direct investment lifted, investment banks have started to talk about India as another Asian “tiger”. India’s growth potential now far outruns the traditional associated sectors of technology and outsourcing.

The balance of world power is clearly shifting. We in the West need to recognise that in one way or another, the Asian economies are likely to dominate the 21st century.

Whether we see this as an opportunity or a threat is almost irrelevant: it’s happening. We should accept it and prepare for it.

Integral to successfully doing business with India is being able to better understand India’s personality and culture as well as the infrastructural and regulatory problems associated with doing business in this vast country.

Among the best methods for doing this include:

Being very precise and make sure your business partners or clients understand what it is you want. In India, when you ask for something, you will get exactly what you asked for. Few Indians will question instructions – even if they appear foolish – that come from someone more senior than them. Many Westerners fall foul of this, as they are taken too literally. Asking them to repeat what you have said to them, in their own words, can help you be sure that your instructions have been understood correctly.

Don’t expect straight talking. Indians are extremely polite and giving offence is anathema. This makes it very hard for an Indian to say “no”. As a result, the word “yes” covers a myriad of meanings, up to and including “no”. Body language adds to this confusion as the head gestures for yes and no are virtually reversed. Have an Indian ally in meetings; but be sure in advance that they are willing to be honest at the risk of offending you!

Time in India is one of the most difficult concepts for a Westerner to grasp. For example the Indian word “kal” can mean an unspecified time in the future but can also mean yesterday. Equally, business meetings rarely start on time and can be subject to last-minute rearrangements or even cancellation. Best advice is to be punctual but accept delays or changes as part of the overall process.

The standard of English in India is one of the country’s major commercial advantages on the global stage. Most business can be conducted in English. However, there are very real differences between English in the UK and Indian English. Words can have very different meanings; for example a “rascal” is, to a Brit, an endearing term for a naughty child. In India it is a serious criminal!

Expect to negotiate on everything. Indians are consummate negotiators but with very different rules of engagement that those used in the West. Again, an Indian ally adept at interpreting the more subtle nuances is invaluable. The general by-words for successful negotiations are: patience, tenacity and steadfastness.

Never refuse a gift in India: the giver will assume you think they’re offering you a bribe!

The Indian banking system is robust and largely now standardised. However, nearly half of all trading transactions are still all-cash deals. For foreign companies, letters of credit are the most popular form of payment, and do afford exporters a level of protection, but paperwork is onerous and if it is not presented in exactly the right way, then expect payment delays. Sixty per cent of UK letters of credit to India are rejected at first presentation.

Infrastructure issues and opaque trading procedures can mean unexplained delays in getting products to where you want them. It is important to ensure contract terms are as tight as possible and that goods are not released until cash is exchanged for documents.

Consider some kind of credit insurance to give you peace of mind if all of the above fails.

Whether you believe in India’s tiger potential or still think of it more as an elephant, hopefully these tips will provide insight and practical advice to help UK businesses decide whether and how to do business in India.