Doing business in India
The Indian Opportunity
India’s current annual growth rate is in excess of 8%, and is is expected to be the third largest economy by 2025. with a 17%-share of global GDP. However, its population of over 1.1 billion has an average age of only 25 years. Today, one can witness a very strong entrepreneurial spirit in the Indian economy, with creativity, drive and an almost boundless ambition.
Yet the country faces enormous challenges. It is struggling with a large energy deficit and rapidly rising demand.
Electricity Deficit
In 2008, India had a base load power deficit of 10% (84 TWh) and peak load deficit of 12.7% (over 15 GW). The resultant frequent electricity shortages cost the country an estimated 6% of GDP. 400 million Indians still do not have access to electricity. Hundreds of millions more only have access to a very unsatisfactory power supply. Every 1% rise of GDP requires a 1.48% increase in electricity supply, but it is only 0.73% at present. To sustain the projected growth rate, India needs to have around 300GW (double the current installed capacity) by 2017 and approximately another 400GW by 2030.
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Although the Indian economy is expected to grow at more than 8% over the next years, with reforms on a fast-track, the economy will only grow faster. This will create greater opportunities for international companies. There is significant focus by the government in the areas of power and infrastructure and these areas hold special potential in the coming years.
The role of renewable energy
At present, renewable energy amounts for around 3.5% of the electricity generation. This is set to increase, as renewable energy is ideally placed to close the peak power gap, provide more political and economic energy security and supply power in remote locations. At the same time, the heavy subsidies for fossil fuels (especially petroleum products) will become increasingly unviable as prices rise and climate considerations become more pertinent. The National Action Plan on Climate Change targets 15% of renewable power generation by 2020. This will require an installed capacity of renewable power of more then 100 GW (as opposed to 16 GW in 2010).
Investing in the Indian renewable energy market
It is important for international companies to understand the Indian market and with its high degree of diversity and dynamism, idiosyncratic customer preferences and distinct cultural influences. With languages and customs changing every 100 kilometres, business is about addressing local requirements and preferences.
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An international company looking to supply to the Indian market needs to be acutely aware of the position of its product in the Indian context. Being price competitive is often the single most important selling proposition for the Indian customer. At the same time, there are very attractive niche markets with a willingness to pay more for brand or quality. An international company needs to precisely understand the price-point at which it can be successful in India. Reaching this price often requires adapting products and localising business processes.
Business networks in India can be complex and are often governed by socio-economic considerations. Most players operate in close-knit and well-guarded networks and are generally weary of outside interests. Trust, confidence and a need to interact first-hand are essential for outside players to gain access to opportunities. With a strong presence in the market, BRIDGE TO INDIA has developed the credibility and access required to be successful in India.
Innovation is the cornerstone of success with businesses and products constantly adapting to keep pace with rising incomes and changing trends. A young and ambitious population has embraced entrepreneurship with most players willing to take high risks in order to enjoy significant returns.
A series of reforms over the past decade have ensured a business climate favourable to foreign investment in India. With the government embarking on a large-scale plan to boost public infrastructure and services, the past few years have seen major policy announcements in favour of renewable energy. Indian businesses too have quickly learnt to embrace foreign companies and are keen to do business with them. They are acutely aware of their advantage in terms of local knowledge and networks while understanding the necessity of foreign investment and technological expertise.
Central to a successful India strategy is an adaptation to local realities. With its experience and expertise, BRIDGE TO INDIA helps international companies to develop such a strategy in the spirit of entrepreneurship: This vast market requires and merits an innovative and customized approach.
