Marketing in India

India's size and economic potential offer a profitable market for selected U.S. products. An American business official faces crucial questions in deciding whether to attempt a marketing program in India: (1) whether a similar product or an acceptable substitute is manufactured in India is sufficient quantity to satisfy domestic demand, and (2) whether the product is considered a luxury item or one nonessential to the basic needs of the population or economy. If the answer to either of these questions is yes, then it may be necessary to seek another market for the product.

Since the early 1980s, the Indian government has been fairly liberal in allowing imports of raw materials and capital equipment required for production, especially in basic and export industries. Areas which generally offer the best prospects for sales of U.S. equipment and services include: oil and gas field machinery; power generation, transmission and distribution equipment; telecommunications equipment; mining and excavation machinery; computers and peripherals; metalworking equipment; printing and graphic arts equipment; medical instruments and health care equipment; chemical and petrochemical machinery; electronics industry production and test equipment; avionics and navigation equipment; shipbuilding and port maintenance equipment; pumps, valves and compressors; process control instruments; food processing and packaging equipment; alternate energy equipment, services and engineering; scientific and analytical equipment; leather processing and finishing equipment; and consulting engineer services.

India's imports are governed by a strict import licensing system which seeks to conserve foreign exchange, protect local manufacturers from outside competition, and ensure that imports are in accordance with the Indian government's economic objectives and needs. With few exceptions, import licenses are not granted for consumer goods. India's regulations governing imports are defined in its import policy, which will remain in effect for three years, beginning in 1985. Previously, the import policy was subject to revision on an annual basis.

Indian regulations do not permit foreign firms to have marketing subsidiaries in India. While representative or liaison offices are allowed, they cannot accept orders or receive income. Most U.S. companies find that a reputable aggressive Indian indent agent is essential to doing business in India. The local agent should be capable of handling all aspects of sales promotion on the part of the principal, including maintaining close contacts with private and public sector industries, securing advance information regarding requirements of end-users, providing competitive assessments, quoting and submitting bids on behalf of the principal, booking indent orders and transmitting them to the principal, answering buyers' questions, and handling details related to completing transactions. The U.S. supplier should ensure that the prospective agency has professionally qualified personnel in cases where commissioning of equipment and after-sales servicing are important considerations.

U.S. companies should support their agent by providing brochures and other technical literature required to promote sales. The U.S. principal should also be prepared to visit India periodically is order to keep the agent and end-users abreast of technical developments and to maintain personal contacts, which are an important element in successfully transacting business there. Some companies find that technical or sales seminars are useful vehicles for promoting their products during visits to India. U.S. principals should also be aware that the Indian bureaucracy moves at its own pace, and that communications within India are difficult. As a result, business transactions do not always move at the speed with which the U.S. company might be accustomed. A loss of patience can jeopardize the personal relations between the U.S. principal and its agent or client which are an important ingredient in successfully conducting business in India. The U.S. supplier should be sensitive to the difficulties of doing business and, where delays are justified, accept them as a necessary fact of life.

Since Indian trade policy normally limits import licenses to the actual user of the imported equipment, Indian agents cannot stock and sell imported equipment. One exception to this relates to spare parts. Agents are permitted to import and stock spare parts up to 3 percent of the c.i.f. value of the machinery or instruments imported through the agent during the previous ten fiscal years. In this regard, agents can act to a certain degree as distributrs.

Indian purchasers of imported equipment and materials include not only privately-owned companies, but also a wide variety of government industries which are actual users of the imported products and constitute a major portion of India's import market. Some items are produced exclusively ("canalized") by a number of government trading agencies. The practice of canalization was established to achieve economies of scale in procurements of major basic items such as metals, newsprint, bulk drugs, etc., and thus conserve foreign exchange.

The Directorate General of Supplies and Disposals (DGS&D) is responsible for the major portion of supplies and equipment required by the central government, state governments, municipalities, district boards, and various other official and quasi-official agencies. The DGS&D maintains a list of registered suppliers that is reviewed periodically to weed out firms whose performance has been unsatisfactory.

Sales to government organizations, whether they be industries or trading companies, are usually done by tender, which may be global or limited. Global invitations to tender allow bidding by suppliers worldwide. A limited tender is directed by the issuing organization to selected suppliers. This step is sometimes preceded by an invitation for prequalification of bidders, at which time the concerned government organization gathers basic information on the capabilities of the potential bidders, previous contracts, and technical and financial reliability.

Cost is usually the major consideration in procurement from abroad. In addition to the expense and freight charges associated with the imported item, imports are subject in many cases to very high rates of duty.

Indian trade policies are designed to encourage the inflow of selected technologies through licensing arrangements or direct investments. U.S. firms sometimes find that such approaches for the manufacture of their product in India can serve as an avenue to gain an export market there. In many cases, the item being manufactured under license in India cannot be produced without the import of foreign components from the U.S. partner. Firms have also found that the established sales network of the Indian partner can be useful in the marketing of allied equipment produced by the U.S. manufacturer.

COPYRIGHT 1985 U.S. Government Printing Office
COPYRIGHT 2004 Gale Group