India will soon be the world’s No. 2 e-commerce market. A healthy 17 percent of the country’s enormous population already shops online. The U.S. and India are high-volume trade partners, and if you’re expanding your global reach through e-commerce, you should consider the subcontinent.
The U.S. Department of Commerce noted that conditions differ significantly between regions within India, and sustained success will likely depend upon a well-considered strategy. Many large corporations are already making inroads into India. With the right support, your small- or medium-sized company can find its niche.
The latest data presented by the Department of Commerce revealed a strong Indian economy. The country’s gross domestic product rose 7 percent while the rupee held steady and inflation remained low. The International Monetary Fund’s 2018 growth projection indicates India’s GDP growth will hold steady at 8 percent. In these macroeconomic terms, India’s economy is a good setting for business expansion.
With that said, there are variations between different regions and areas within India when it comes to conditions facing foreign companies. The Department of Commerce noted that policy making in India is largely decentralized, and each of India’s 29 states and seven union territories will bring its own conditions for investment and business expansion. The World Bank’s Ease of Doing Business Report ranks India 100 of 189 countries. While not a top spot, that is 30 spots higher than in the previous iteration of the study.
India’s trade relationship with the U.S. involves massive quantities of goods moving both ways. The U.S. export of goods and services to India totals $49.4 billion annually, and imports account for $76.8 billion. The trade surplus is the largest the U.S. has with any partner. The U.S. is India’s No. 1 export market, and India is the 15th biggest market for American overseas sales.
One trend worth watching for U.S. businesses is the relative strength of the rupee and the dollar. The Department of Commerce indicated that over the course of 2018, the rupee depreciated relative to the U.S. dollar. That movement made it roughly 10 percent more expensive to export goods to India. When companies take these economic indicators into account in their plans, they can move forward with workable commerce strategies for the Indian market.
India’s top companies are in the information technology, telecommunications, pharmaceutical, textile and engineering sectors. Organizations in these sectors operate at a high level in global markets, according to the Department of Commerce. These are some of the sectors that have attracted foreign direct investment (FDI). Investors are also interested in making investments in manufacturing and wholesale trade.
The status of Indian manufacturing has been directly addressed by government policies in recent years. Sensing relative weakness in local manufacturing, India’s federal government has encouraged foreign investment. The end goal is to open 100 million new jobs in manufacturing roles and boost the manufacturing sector’s gross domestic product share from 16 percent to 25 percent by 2020.
Consumers in India are increasingly using digital storefronts to connect with retailers. Companies are making aggressive pushes into the online space. Both born-digital e-commerce sellers and brick-and-mortar organizations are making pitches to online consumers, according to recent Ernst & Young studies. These organizations have seen strong internet connections reach new areas and watched smartphone ownership increase, and decided the time is right to push Indian e-commerce to the next level.
The Department of Commerce pointed out that urban areas are the most exciting markets for overseas companies making their first investments in India. These heavily populated regions are at the forefront of changing customer tastes and a general expansion in the number of potential shoppers. Ernst & Young noted that approaching city shoppers doesn’t always mean targeting the biggest metro areas: Smaller population centers can prove just as important for sales.
The E&Y survey added that while many e-commerce programs target millennial shoppers, there is value in reaching out to consumers over 30. This next age group up, from 31 to 54 years old, is made up of the biggest spenders on online orders, through younger buyers spend money online more often.
There are a few important numbers for companies to keep an eye on when they import to India. In the past, tax rates affecting the individual states within India were divergent, and the web of differing figures offered a potential barrier to trade. The Department of Commerce noted that this changed in 2017, with the Goods and Services Tax (GST) passing at a national level to give a single value for overseas private-sector companies to meet. Businesses should still be cautious when making calculations: Some commodities are still taxed at unique rates.
One of the most interesting developments in Indian e-commerce is the debut of rules designed to prevent e-commerce giants such as Amazon and Walmart from having an outsize impact on the market. Bloomberg reported that small companies complained about the incursions of the U.S. giants, and Prime Minister Narendra Modi’s government replied with tightened regulations.
As the international giants deal with the changing laws, both Amazon and Walmart are changing their tactics. Bloomberg reported that despite asking for a months-long delay to sell their accumulated inventory, the two giants have been shut out of the market on schedule. The new rules in question prevent Amazon and Walmart’s Flipkart service from creating exclusive seller agreements, offering hugely discounted prices or owning business interests in online merchants that use their websites.
With some of the largest U.S. companies coming into conflict with the government, it may still be an advantageous time for smaller companies to investigate the market in India. While the intended beneficiaries of the new law are local companies, other online sellers might find the market is friendlier with less competition from Amazon and Walmart.
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Small- and medium-sized organizations may find exciting new opportunities in the India market. The conditions are promising for retail expansion, with digital services reaching ever-larger percentages of the population and consumers embracing smartphones as shopping tools. With the federal government pushing for simplified commerce and large-scale companies struggling to gain a foothold, there are wide-open opportunities for businesses that do their research and match their products and services to consumer needs and preferences.