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UPS Snapshot for Small Businesses: India

Why India for Small Businesses?

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India's tourism slogan, "Incredible India," is an understatement. The world's second-fastest growing economy, India is home to nearly 1.2 billion diverse people who speak more than 20 languages. The South Asian sub-continent is also home to some of the world's biggest metropolises, which are international hubs of culture, cuisine, finance, technology and filmmaking.

For U.S. small businesses, India offers tremendous opportunity. According to McKinsey, India's consumer market is expected to quadruple over the next 20 years, growing to become the world's largest by 2025. Even amid the global economic downturn, the International Monetary Fund predicts India's economy will grow by 6.5 percent in 2010.

The U.S. Commercial Service, which helps American companies export to India, says that now is the time for companies to begin exporting around the world. With the potential for a sustained growth of 8 percent to 10 percent over the next couple of years, India is only going to be a more competitive market in the years ahead.

We hope that this edition of UPS Snapshot for Small Businesses will inspire you to unlock your potential in one of the world's most incredible countries.

Dan Brutto
President, UPS International

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India: Key Facts and Figures

Population:   

  • 1,156,897,766 (July 2009 est.) 

Age structure:  

  • 0-14 years: 30.5 percent (male 187,197,389/female 165,285,592)
  • 15-64 years: 64.3 percent (male 384,131,994/female 359,795,835)
  • 65 years and over: 5.2 percent (male 28,816,115/female 31,670,841) (2009 est.) 

Median Age:  

  • Total: 25.3 years
  • Male: 24.9 years
  • Female: 25.8 years (2009 est.) 

Life Expectancy at Birth:   

  • Total population: 66.09 years
  • Male: 65.13 years
  • Female: 67.17 years (2009 est.) 

Population Growth Rate:  

  • 1.407 percent (2009 est.) 

Ethnic Groups:  

  • Indo-Aryan: 72 percent
  • Dravidian: 25 percent
  • Mongoloid and other: 3 percent

Official Language:

  • Hindi is the national language and primary tongue of 41 percent of the population. In addition, there are 14 other official languages: Bengali, Telugu, Marathi, Tamil, Urdu, Gujarati, Malayalam, Kannada, Oriya, Punjabi, Assamese, Kashmiri, Sindhi, and Sanskrit.
  • English enjoys associate status, but is the most important language for national, political and commercial communication.

Literacy:  (Age 15 and over are able to read and write)

  • 61 percent

Area:

  • 3.29 million sq. km

Government:

  • Government type: Federal Republic 
  • Capital: New Delhi
  • Other major cities: Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad and Pune

GDP (purchasing power parity):   

  • $3.561 trillion (2009 est.) 

GDP (official exchange rate):  

  • $1.095 trillion (2009 est.) 

GDP (real growth rate):   

  • 6.5 percent (2009 est.) 

GDP (per capita ):   

  • $3,100 (2009 est.) 

GDP (composition by sector):  

  • Agriculture: 15.8 percent
  • Industry: 25.8 percent
  • Services: 58.4 percent (2009 est.)

Exports:

  • $165 billion
  • Petroleum products, precious stones, machinery, iron and steel, chemicals, vehicles and apparel.

Imports:

  • $253.9 billion
  • Crude oil, precious stones, machinery, fertilizer, iron and steel and chemicals.

Labor Force:   

  • 467 million (2009 est.) 

Unemployment Rate:   

  • 10.7 percent (2009 est.)

Natural Resources:  

  • Coal (fourth-largest reserves in the world)
  • Iron ore
  • Manganese
  • Mica
  • Bauxite
  • Titanium ore
  • Chromite
  • Natural gas
  • Diamonds
  • Petroleum
  • Limestone
  • Arable land

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Small Business Trailblazers

PBD Worldwide

Picking the right partner is critical

Steve Hochradel

What? PBD distributes education media, such as books and DVDs, to schools and professional development centers around the world.

Where? Accounting for approximately US$4 million in annual sales, India is Georgia-based PBD's third-largest market.

Who? Steve Hochradel, assistant vice president, distribution.

Please give us an overview of your company's business in India. How did you start doing business there?
PBD is a fulfillment house. We manage warehouses of textbooks, CD ROMs and DVDs, and ship them to our customers, which are professional education centers, in India's main cities. We started doing business in India because our customers needed us to be there. In the last two years, professional development centers have been growing in India along with the nation's workforce. To handle this demand, we partnered with UPS, which has a strong presence in India, to help ship our orders.

What do you consider to be the biggest benefit of doing business in India?
India offers great growth opportunities, and it's easier to do business there than in many other international markets. India has a high population of English speakers, which makes it easy to enter the market, negotiate with vendors and partners, and set up operations. You also don't have to worry about producing a product line in multiple languages. It's a great, important opportunity market for your business.

What are some of the obstacles you have faced in India?
When setting up shop in any new market, you have to adapt to a different way of doing business. In India, business tends to go at a slower pace. Things just take longer. It's important to account for that so neither you nor your customers are surprised.

What advice would you offer other businesses to help them manage their shipping costs?
Call someone who's already set up in India. You need a partner who understands the specific challenges of shipping in the market. Because we picked a partner we'd already been working with, we've been shielded from a lot of the problems or issues out there. But beyond avoiding issues, having the right shipper can help you improve your customer service, giving your business a competitive edge.

Based on your experience, what general advice would you offer companies that are thinking about doing business in India? 
Get to know the market. There's a wealth of information available online that can help you with the ins and outs of doing business in India, and teach you the right way to negotiate with prospective partners, which is really important.

For more information on exporting to India, visit www.export.gov/india/index.asp

 

Minding Your Manners: Business Etiquette in India

In India, one size doesn't fit all. The sub-continent is a melting pot of nearly 1.2 billion people who hail from different religions and speak different languages. Despite these vast regional differences, there is some common etiquette that's important to follow to make your business operates smoothly in India.

What's in a Name?

  • Address a person using the appropriate prefix (Mr., Mrs., or Miss) or professional title, unless asked by the person to refer to his or her first name.
  • After marriage, women normally adopt the husband's family name in northern India and first name in southern India. However, there is an increasing trend among educated professional women to keep their maiden name.
  • The names of several Indian cities have changed: e.g., Bombay is now Mumbai, Madras is Chennai. But many people do refer to the cities by the former names, so feel free to follow your host's lead.

Business Basics

  • Different states in India have different official languages. However, English is the language of international commerce.
  • Indian meeting etiquette requires a handshake greeting. However, Indians themselves use Namaste, the gesture where the palms are brought together at chest level with a slight bow of the head. Using Namaste is a sign of understanding Indian etiquette.
  • Business cards should be exchanged at the first meeting. Be sure to receive and give with your right hand and ensure the card is put away respectfully, not simply pushed into a trouser pocket.

It is seen as a sign of respect to have the business card translated into Hindi on one side.

  • Doing business in India involves building relationships. It is vital that good business relationships are based on trust.
  • Meetings should be scheduled in writing and confirmed by phone. Punctuality is crucial, although it is important to be flexible because family responsibilities often take precedence over business.
  • When entering a meeting, always approach and greet the most senior figure first.
  • Avoid talking about personal matters at the beginning of a business meeting. Instead, appropriate topics of discussion include the latest business news in India, the fortunes of the Bombay Stock Exchange, politics or cricket.

The Art of Negotiations

  • Do not be confrontational or forceful, and make sure criticism and disagreements are expressed diplomatically.
  • Avoid saying "no" in business discussions. It is considered rude. Instead, most Indian businesspeople use terms such as "we'll see," "I will try," or "possibly" to indicate "no."
  • When terms are agreed upon, a celebration meal is customary.

What to Wear

  • Normal business attire for men is a neutral-colored suit and tie. However, since India has a warm climate, a full-sleeved shirt with a tie is also acceptable.
  • Pant suits or long skirts, which cover the knees, are acceptable attire for foreign women. A Salwar suit, traditional Indian dress consisting of loose trousers and a long tunic, is also acceptable business dress for women.
  • Outside the office, jeans with a short-sleeved shirt are acceptable casual wear for both men and women at social gatherings.
  • However, if a foreigner wears an Indian costume – Kurta pajama for men and sari or Salwar suit for women – it is appreciated, and seen as a gesture of friendship.

Outside the Office

  • Business lunches are preferable to dinners in India. These meals are organized in either high-class restaurants or five-star hotels.
  • If a business associate invites you to a meal, it is customary to arrive a few minutes late unless it is an official function.
  • Traditional Indian food is eaten with the hands. When it is necessary to use your hands, use only your right hand, as the left hand is considered unclean.
  • Drinking alcohol is prohibited among Muslims, Sikhs and other Indian communities.

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The Export Experts

Lola Gulomova is from the Department of Commerce's U.S. Commercial Service in New Delhi, which helps companies enter international markets with services including market research, trade events and advocacy.

Why should U.S. companies consider doing business in India?
India has a huge, growing middle class that will be an important market for all businesses. Quite frankly, your competitors will be here tomorrow. So you'll have a tremendous advantage if you get here today. Most of all, India is a friendly place for Americans to do business. In general, Indians are highly educated and very interested in U.S. companies.

What is the biggest mistake you see U.S. businesses make when they go to India?
U.S. companies often don't have enough patience – setting up a business here takes time. India's economy is growing faster than its infrastructure. So you can't expect things to happen just as they would in the United States. A long-term strategy is critical.

What is important for U.S. companies to know before they go?
India has four distinct regions; it does not have a monolithic culture. U.S. businesses must realize how diverse India is and do their homework before they go. One size will not fit all. Don't just think "India is growing and we have to be there." A well thought-out strategy is vital.

Distribution and supply chain management also are critical. Traffic is heavy and roads between major cities aren't always good, so moving products can be slow – and expensive. Having a good partner to help you set up a solid distribution network is essential. 

What do U.S. companies need to know about selling to Indian consumers?
Indian consumers tend to be very price-sensitive. They want the best products at the best prices. American companies need to examine their pricing strategies very carefully to make a profit, without pricing themselves out of the market.

What cultural missteps should U.S. businesses be wary of?
Indians are informed and well-educated. You will do well if you approach them as peers; never talk down to anyone. Good topics of conversation include family and culture, such as Bollywood movies or cricket. If you take the time to learn about the culture, that will generate a lot of good faith. And finding this information is easy. There are many English-language Indian Web sites, such as The Times of India and hinduonnet.com.

Also, understand that Indians don't like to say – or hear – the word, "no." If they are reluctant to agree to something, they will say, "maybe" or "God willing." American companies should interpret this as a firm "no."

What is the most important advice you would offer U.S. companies considering coming to India? 
Before you set up shop, visit India. There are 29 states, all with their own regulations and ways of doing business. Choose where you're going to go carefully, do your homework, and think strategically about what your approach is going to be.  Then find good partners and resources that will help you succeed.

U.S. Commercial Service offices in India can help your company develop a market entry strategy.  USCS offices are in seven cities across India covering all sectors. For more information, log onto www.buyusa.gov.

 

Shipping Essentials

Mark Khambatta, UPS's managing director in India, offers some logistics advice to help U.S. companies spread their wings to India.

Is it difficult and expensive for U.S. businesses to ship to India?
It's a myth that shipping from the United States to India is difficult. Today, it's very simple, fast and less expensive than it was even a few years ago. Customs tariffs and duties have decreased dramatically. And goods from the United States can be shipped to India just as quickly as goods from the EU, even though the EU is closer. UPS, for example, offers a two-day transit time to ship goods or documents from the United States to India.

Are there shipping challenges that U.S. businesses need to know?
Shipping within India – especially to rural areas – can be challenging. Smaller towns don't have airports, and roads are often in poor condition. This means that sometimes it can take longer to ship products within India than between India and the United States. What's more, intra-India shipping can be expensive. Most states have an entry tax, called octroi, which businesses must pay to transport goods through that state. To understand these unforeseen costs – and avoid them, if possible – it is critical for U.S. companies to work with a shipping partner that knows how to navigate intra-India shipping hurdles.

How should U.S. businesses choose a shipping partner?
There are three key questions that businesses should ask a prospective shipping partner in India:

  • Can you manage my entire supply chain? I advise against choosing a partner that can import, but asks you to outsource delivery. Likewise, don't go with a consultant who handles in-market-only shipping. In either case, you won't have control of your entire supply chain, which means you cannot make the most informed decisions.
  • How much will shipping cost, door-to-door? When you start doing business in a new market, it's critical to minimize costly surprises, such as unexpected taxes and duties. Find a shipper that can give your shipment's total cost, or landed cost, which includes duties and taxes. UPS offers a tool called UPS TradeAbility® that calculates a shipment's complete landed cost.
  • Will I be able to track my shipment? Knowing where your shipments are at all times is essential to keep an eye on costs and avoid delays that disappoint your customers. Make sure you pick a shipper that enables you to track your shipments throughout the process; that way, you'll control your shipping rather than it controlling you.

What is UPS doing to help its customers navigate shipping hurdles in India?
UPS is dedicated to being a partner to U.S. companies doing business in India. Our goal is to give customers the most reliable services in the market and the widest range of shipping choices. Specific steps we take include flying our own aircraft to and from India so we can avoid delays common with companies that rely on commercial carriers. Through a successful joint venture with Jetair, India's premier domestic cargo airline, we offer our customers flights to 26 cities within India. And for intra-India shipping, we've forged an alliance with Air Freight Ltd., which gives us access to 200 cities through what's arguably the strongest ground network in the country. Finally, our proprietary technology allows customers to track their packages at any time, get customs information, and calculate total shipping costs – so companies have a handle on their business.

What advice would you offer U.S. businesses seeking to set up shop in India?
If you are seriously considering doing business in India, you must come here first. Visit the city or cities where you're considering setting up operations so you can better assess the business climate and consumer appetite. Most of all, understand that the potential to grow your business in India is as vast as the nation itself. If you pick the right partners, you can plant seeds today for a fruitful, long-term business.  

 

Magnificent Mumbai

Known to many as Bombay, Mumbai is India's bustling financial capital. Once a stronghold for the East India Company, a bastion of commerce under the British Empire, Mumbai has long been an international trade hub. On the shores of the Arabian Sea, Mumbai is home to India's busiest port and contributes to approximately 40 percent of India's foreign trade.

Today, Mumbai is home to an estimated 15 million people and is an epicenter of commerce and culture. The Bombay Stock Exchange, the oldest stock exchange in Asia and the world's largest in terms of the number of listed companies, is here. In addition to financial services, other large industries in Mumbai include film, textiles, plastics, chemicals, pharmaceuticals and shipping.

Mumbai's most important festival is Diwali, a Hindu festival of lights. Held in November, Diwali celebrates the victory of good over evil and light over darkness. It is a time when business associates exchange small gifts and boxes of sweets or dried fruits. It is considered especially promising to start a new business or seal a deal at this time.

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Culture Corner

Hooray for Bollywood!

One of Mumbai's most famous exports is Bollywood, a massive film industry that is arguably the world's largest, churning out as many as 900 Hindi-language films per year. The name, Bollywood, is a combination of Bombay and Hollywood, and it is a fast-growing international phenomenon.

Bollywood films are known to be musical extravaganzas. They are colorful, elaborate and melodramatic, drawing from classic, epic Indian storytelling. They often are several hours long, and usually focus on a star-crossed love story.

Film has a long history in India. Silent movies were made in India in the 1920s, and when sound arrived, Bollywood movies were called "Bombay Talkies." International recognition came in the 1950s with the arrival of Satyajit Ray and his classic film, Pather Panchali, which won accolades at the Cannes Film Festival.

Today, top Bollywood stars include Aishwariya Rai, Shahrukh Khan and Amitabh Bachchan. Westerners can begin to get to know this film genre through English-language, Bollywood-style movies including Monsoon Wedding and Bride and Prejudice, an adaptation of Jane Austen's classic, Pride and Prejudice.

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