By: Christian D. de Fouloy
India today is a trillion dollar market with an enviable rate of GDP growth. India’s economy is fueled by a combination of a large services sector, a strong and diversified manufacturing base and a significant agricultural sector that continues to provide a framework for the growth of the domestic economy. The country’s resilience in weathering the recent global downturn and financial crisis has made governments, policy-makers, economists, corporate houses and fund managers believe that India can play a significant recovery of the global economy in the months and years ahead. Today, India plays an increasingly important role in global geopolitics- not only as the world’s largest democracy, but also as an economic powerhouse that is coming into its own. India is one of the most important markets for multinational companies and Indian organizations going global.
There is a strong business case to make, however, for companies in India to improve their government outreach and communications and to ensure that regulators and government leadership understand the company, its practices and how it is contributing to the local economy. Whilst in recent years India has adopted reforms to improve its regulatory environment, there remain significant challenges, notably an inefficient government bureaucracy and excessive burden of government regulation. Corruption is endemic throughout the central and local government and the private and public sectors. The Indian government recognizes that corruption is a risk to investor confidence and long-term economic growth and businesses found to be engaging in corruption practices face legal and reputational risks.
Many states, many markets….
The Indian market is very diverse. There are many different social, cultural and economic strata, unevenly distributed across the subcontinent. India’s federal structure creates large differences in regulatory environments and uneven development leads to significant income disparities. Companies need to focus on the markets within India that they are the most likely to be successful in. It is important to gain a nuanced insight into the business dynamics specific to India’s different markets. When dealing with local conditions, dependable on-ground intelligence can ensure that opportunities, priorities and concerns can be addressed appropriately.
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 and opportunities.
Bureaucracy and Politics….
The Indian bureaucracy and political class administer one of the most complex countries with a population of over 1 billion, democratic elections, many different languages [22 officially recognized languages, but around 33 different languages and 2000 dialects have been identified], and hugely differing requirements of its citizens. While structures are in a state of continuous evolution from the introverted approach of the last century towards a globalized, free market approach, there is still a high degree of public sector influence on many aspects of the economy. Anyone doing business in India has to engage with India’s many different central and state ministries, institutions and regulations. This is often a significant challenge for any company, but especially those not familiar with the country. At the same time, many bureaucrats, political decision-makers are interested in harnessing the problem-solving abilities of the private sector and are open to new suggestions, solutions and initiatives. Building a winning business in India requires an in-depth understanding of its coalition politics, dynamic market and socio-cultural fabric. It requires an understanding of a wide range of complex and continuously evolving regulatory and policy issues that are an active part of its pluralist democratic set-up. The Indian bureaucracy plays a key role in the conceptualization, change and reform of policy and regulation. At the same time, civil society plays a strong role in shaping the country’s business environment.
Unique Market Requirements….
Market dynamics, customer preferences and regulatory requirements in India are unique and far removed from those in Europe, the U.S. or elsewhere in the world. An approach to entering the Indian market has to be based on a unique strategy for the Indian market. Central to a successful Indian strategy is an adaptation to local realities.
Companies need to know how the Indian government works and what’s going on in the government so that they can take advantage of business opportunities as they emerge. They need to explain and argue their positions with regard to current government policy as relating to a particular issue and also influence it in a positive and collaborative manner.
Companies need to establish regular contacts with concerned legislators and officials at the central, state and local level and provide them with an update on their business plans and corporate direction.
It is important for a corporation to understand government requirements and, accordingly, fine-tune its products and service strategies for the Indian marketplace.
For certain influence cannot be achieved from a distance and the scope of the communications challenges especially in a country like India requires local knowledge.
The Business-Government relations in India have another stakeholder – the popular opinion which is a powerful force capable of influencing government decisions and abruptly changing them. Businesses therefore live under constant uncertainty when dealing with government decisions in India fearing a populist step taken by the government to appease its vote banks (in case their interests are threatened) might alter their entire planning. Majority of roadblocks faced by businesses while dealing with the government in India are faced by businesses while dealing with land, public contracts or natural resources as these are the areas where the government maintains a close control. The Indian political and bureaucratic system is plagued by corruption, red-tape. Businesses have to handle a complicated taxation system, largely unskilled labour force, complex policy structure and poor infrastructure to survive.
The one trick that works well in India is greasing palms. Unethical and unfair as it may sound, a bribe is by far the only trusted way of getting files moving in Indian bureaucracy. While Indian government does deal in its fair share of nepotism and favoritism, it’s really the money and other monetary gains extended to everyone in the entire web of stakeholders in a business deal that eventually get it out of the door.
Another great way of improving and maintaining good Business-Government relations in India is for businesses to actively contribute to the improvement of the living conditions of the Indian population by building infrastructure, schools, hospitals, and trying backward integration – especially for firms dealing with farmers. This helps in the following ways:
- Improving the infrastructure, though a capital intensive process, frees the organization from depending on the highly unreliable public systems like government educational institutions, public transport systems etc and gives them a more controlled, predictable and reliable business environment.
- This kind of investment also contributes to the overall improvement of the lifestyle of the common man, thereby winning the business popular support which, to some extent, reduces the chances of a public outrage against the business which might force the government to take counterproductive measures.
“Jugaad” is an Indian term used to describe a unique innovation process. Literally, “jugaad” means ” somehow get it done.” Jugaad points to the capacity of Indian firms to adapt quickly and improvise creatively to deal with limited resources. Indian culture is full of instances of people using the modest resources at their disposal to solve problems and find ways around seemingly impossible situations. Of course there are also some negatives associated with jugaad. One of them is a lack of consistency and discipline that can emerge from such informal improvisations. On the other hand, Indian people have developed the skill of finding innovative solutions wherever they can and this skill has inevitably found its way into Indian business practice. If there is one thing government affairs managers can learn from the examples of jugaad, it is that traditional methods of doing business do not work all the time. No environment is static; and the ability to adjust to changes and improvise is a valuable skill for any manager to learn.