Entering the Indian Market
There are many keys to market entry success in Indian market. However, India exports subject to the general rules for market entry are available on the EAS export handbook “exports Yes!” (See. In particular, “the entry into target markets: how to avoid stupid mistakes”).
Enterprise Estonia supports Estonian Companies to enter into Indian market by providing them well structured high quality information about the India Market, prevailing regulations on exports and systematic market entry process.
Export Strategy Development
India leapfrogged into the 77th rank in the World Bank’s latest Ease of Doing Business rankings (2019), jumping 23 notches from 2018. With economic reforms expected to rise, opportunities for Estonian businesses are growing across a range of sectors.
Why you should consider India in your export strategy?
- Rapidly growing consumer class; Few years ago business was largely confined to Mumbai, Delhi and Bangalore but has now spread further many smaller cities.
- Government high spending on Infrastructure
- Smart Cities programme: India has pledged $120billion to make its cities ‘smart.
- Digital India: New national goal set to make India a 5 trillion dollar economy by the year 2025.
While developing your export strategy, regardless of your experience of other foreign markets, it is important to recognise the uniqueness of the Indian market and to be prepared to offer products or solutions that are tailored to it.
It is of utmost importance to identify the target market and find partners who know the local market well and are completely acquainted with procedural issues.
Some of the important points for market entry in India are:
- understanding the diverse market and strategies toward specific regions and income groups (i.e., target segments);
- crafting offerings according to the target group in order to gain early acceptance; considering the large informal sector in your planning;
- approaching the market consistently;
- obtaining mandatory licenses and approvals;
- understanding that import procedures are one of the key issues for first-time exports to India. Proper documentation and understanding of the Indian import procedures will help to ensure smooth entry of products into the Indian market.
Ways to enter the market
It is very important for foreign companies to consider right route of entry to do business in the Indian market which depends upon multiple factors such as their term of business plan-short/long-term business, nature of business activity, size of investment, tax & legal liabilities. One must carefully weigh the advantages and drawbacks of each route to market, which can range from direct and indirect export to establishing a local business presence or acquiring an existing company in India.
Direct and Indirect Export:
Exporting to India involves lesser risk on the part of producer and involves selling directly to an importer or distributor in India (direct export) or selling to a local third-party distributor that purchases goods and resells them to an Indian importer (indirect export). While direct and indirect export allows companies to avoid some of the challenges and risks associated with navigating international shipping and billing, clearing customs and complying with national and Indian export/import procedures.
One of the most significant drawbacks to serving the Indian market strictly through export is that companies have little to no control over how their product and brand is marketed to Indian consumers. Similarly, serving the Indian market from afar prevents businesses from acquiring a thorough understanding of the Indian market and anticipating changes in consumer demands and tastes.
Establishing a local presence:
On the other hand, establishing a local business presence in India involves more risk; both financial and legal, than direct or indirect export. However, this mode provides foreign companies with more direct control over operations, finances, and ultimately how a product or brand is showcased and marketed to consumers. Depending upon a foreign company’s size and desired level of commitment, options for market entry can be as follows:
- Establishing an office of a foreign company in India
- Liaison Office/Representative Office
- Branch Office
- Project Office
- Partnership Firm / Proprietary Concern
INCORPORATED INDIAN ENTITIES
Subject to the Indian Foreign Direct Investment (FDI) policy, a prospective foreign investor can consider the following options for setting up an incorporated Indian entity:
- Indian Limited Liability Company
- Wholly Owned Subsidiary
- Joint Venture Company
- Limited Liability Partnership (“LLP”).
INVESTMENT IN INDIAN COMPANIES
Foreign entities with long term business objectives in mind (both manufacturing and services sector), often choose to establish their presence through the WOS or a JVC route as it provides longevity, flexibility and a stronger legal foundation to do business in India.
Protection of the Intellectual Property
If you wish to enter the Indian market or are already doing business in India, it is recommended that you apply to protect your IP rights in India as soon as practically possible, and that you always do this through Indian attorneys with expertise in IP rights.
Trade marks, copyrights, patents, and designs are granted under the authority of the Office of the Controller General of Patents, Designs & Trade Marks (also known as Intellectual Property India), operating under the Department of Industrial Policy & Promotion.
If you do not have a business entity in India, a lawyer based in India must be used to file an IP application on your behalf. As well, the Intellectual Property India website provides a list of Indian patent and trade mark agents. Documents for an IP application can be submitted in English or in Hindi.
India offers several ways to enforce your rights against unauthorised use, including customs seizures and civil litigation.
- All types of IP may be protected by the Indian Central Board of Excise and Customs which acts to prevent the import of allegedly infringing goods into India, as long as the IP has been registered or granted by the appropriate IP office. Registration is for a period of at least one year.
- Civil suits are possible for all types of IP infringement. Relief may include temporary or permanent injunction, damages or accounting of profits, delivery up of goods and/or legal costs.
- India’s Copyright Act (PDF version) and Trade Marks Act provide for penalties including imprisonment for a period of up to 3 years, as well as a fine of up to 200,000 rupees.
Finding Business Contacts
There are multiple ways to look out for business contacts in India.
One such way is to identify the leading trade portals of India such as India Mart and Trade India, where one can easily find B2B leads for their businesses upon free registration of their businesses. There are also some specialised services offered by them upon payment of nominal fees.
You can look out for B2B events specially directed towards European markets organised by apex chambers of commerce of India such as FICCI, CII, ASSOCHAM AND NASSCOM. Indian Trade Portal also gives you updates on latest news and upcoming events across India. If you are looking for events directed to a specific Industry in India; there are various Industry associations in India which can provide detailed information. Government of India has also made directory of importers and exporters accesible to public in general. Directorate General of Commercial Intelligence and Statistics, Ministry of Commerce and Industry, Govt. of India provides detailed list of Indian Companies.
If you are looking to expore the eccomerce opportunities in India. Here are the 2 leading avenues which should not be missed Amazon India and Flipkart
India also host numerous international trade shows. It is advisable to participate/visit the exhibitions. However, you should check the post show reports of previous editions of the show to understand its quality and assess its usefulness to your business. The details of the upcoming shows can be seen from 10times.
Some proven shows across various categories are as below:
Export Partners Background Check
It is very important to have complete information of the Indian Partner before you get into any agreement with them. Ministry of Corporate Affairs, India helps you to get the required information like directors name and DIN number, Company formation date, Share capital, email address, address etc by just filling in the company name. Be sure to check the company details from the website. Government of India has also set up Serious Fraud Investigation Office (SFIO) to investigate corporate frauds in the light of instances of vanishing companies, plantation companies and stock market scams.
When crafting a relationship with third-party distributors in India, due diligence reports on potential partners should include the following information:
- Company and personnel information, especially that related to directors and shareholders
- Corporate structure
- Financial information and status
- Whether or not the potential agent handles similar product lines, possibly resulting in a conflict of interest
- Whether the agent has adequate transportation and storage facilities
- Licenses, permits, approvals, and specific statutory compliance
- Any previous court orders or litigation issues against the distributor in question
- Proof of insurance
- References from previous clients and partners
- India is a vast country and there are many Indias within India. India is a multilingual, multi-ethnic and pluralistic society, and vast cultural differences can be seen between North and South India. Visitors should plan their itineraries with this in mind and maximise the number of meetings in each city.
- Buyers in India are of a frugal and value-oriented nature and will only invest in high-end products and services if there is a clear and demonstrable return on their investment. Business conversations open in a relaxed and friendly manner, and the ubiquitous and culturally significant glass of water appears on all tables at all times, often shortly followed by “chai” – a sweet and spicy milk tea.
- Indian businesses are often very hierarchically structured. In negotiations, decisions are generally made at the highest of levels. Therefore, unless the company director, owner or a very senior manager is present at a meeting, a decision is not likely to occur at that stage.
- Indians will base their decisions on trust and intuition as much as on statistics and data, so be mindful of the importance of a good working relationship. Take the time to engage in small talk and get to know your prospective partner.
- Indians place importance on and a prefer using formal titles. So if you are meeting a doctor or a professor they may expect or appreciate being addressed by their given title. The exception of course if they indicate otherwise. Using a Mr. or Mrs. when addressing a colleague or someone senior is preferred. Women in the workplace are often addressed as Madam and men as Sir.
- Indian business people do not generally think in euros. US dollars are more easily understood in conversation.
- Hindi is the national language along with 22 official languages. English is the predominant language amongst the business community.
Rules and regulations
The Directorate General of Foreign Trade (DGFT) of the Ministry of Commerce is involved in the foreign trade regulation and promotion. DGFT maintains a list of restricted and prohibited items for imports and is updated regularly in their Website.
India maintains a nontariff regulation on three categories of products:
- banned or prohibited items (e.g., tallow, fat, and oils of animal origin);
- restricted items that require an import license (e.g., livestock products and certain chemicals);
- “canalized” items (e.g., some pharmaceuticals) importable only by government trading monopolies and subject to cabinet approval regarding import timing and quantity.
For purposes of entry requirements, India has distinguished between goods that are new, and those that are secondhand, remanufactured, refurbished, or reconditioned. India allows imports of secondhand capital goods by the end users without an import license, provided the goods have a residual life of five years.
Standards, testing, labeling & certification
- The Bureau of Indian Standards (BIS): BIS Certification is a means for providing third party guarantee of quality, safety and reliability of products to the customer. BIS Certification is voluntary in nature; however, the Government of India has made BIS certification mandatory for certain products taking into consideration public health.
- Food Safety and Standards Authority of India (FSSAI),: FSSAI has been created for laying down science based standards for articles of food and to regulate their manufacture, storage, distribution, sale and import to ensure availability of safe and wholesome food for human consumption.
- The Central Drugs Standard Control Organisation(CDSCO): CDSCO is a licensing authority, a regulatory agency which approves any new chemical entity (drug) which is to be imported to India. Any entry of cosmetic/medical/pharmaceutical product requires prior approval from CDSCO.
- Commercial Invoice: The invoice must contain details such as: Country of Origin, Consignee´s Name, Number and Date of letter of Credit and import license number, terms of payment, name of carrier, number and description and identifying marks of outer containers.
- Bill of Lading
- Packing List
- Certificate of Origin
Customs and Taxes
The classification of the imports and exports of the goods are governed by the Customs Act of 1962 and Customs Tariff act of 1975. The act contains two schedules, and specifies the nomenclature that is based on the Harmonized Commodity Description and Coding System as “HS” and also contains description of goods chargeable to import duty. It is also called as the “Tariff Schedule” or the “Indian Customs Tariff.
In 2018, Indian Government in cooperation with the Federation of Indian Exporters (FIEO) debuted its India Trade Portal and publishes applied tariffs and other customs duty rates applicable to imports. The India Trade Portal provides information on the latest tariff and duty rates by Harmonized System codes.
India also maintains the web-based Indian Customs Electronic Commerce/Electronic Data Interchange Gateway, known as ICEGATE. It provides options for calculating duty rates, electronic filing of certain import declarations and shipping bills (export goods declarations), electronic payment, and online verification of import and export licenses.
- Components of Customs duty in India:
- Basic Customs Duty
- Social Welfare Charge (Introduced in 2018 in place of education cess; 10% of the value of goods)
- GST Compensation Cess (On Notified Goods)
- Anti Dumping Duty (On Notified Goods from certain countries)
- Safeguard Duty (On Notified Goods)
- Customs Handling Fees (1% customs handling fee)
And you finally arrive to Total Duty
There is also an agreement between The Republic Of India And The Republic Of Estonia For The Avoidance Of Double Taxation And The Prevention Of Fiscal Evasion With Respect To Taxes On Income.
National portals in India
- Directorate General of Foreign Trade https://dgft.gov.in
- Indian Trade portal https://www.indiantradeportal.in/
- Ministry of Commerce https://commerce.gov.in/
- India Customs http://www.cbic.gov.in
- Export Import Data Bank https://commerce-app.gov.in/eidb/
- Doing Business in India (Austrade)
- Exporting to India Guide (Enterprise Ireland)
- India Country Commercial Guide (U.S. Department of Commerce)
- European Commission Export Access Database (MADB)
- Eurostat India EU Trade Statistics
- Europe India Center for Business and Industry
- EU-India Intellectual Property Cooperation
Websites of institutions of the Republic of Estonia:
Other sources of information