Home / Support available for UK companies setting up in India
Project part-financed by the European Union
The population of India is estimated to be about 1.1 billion which makes India the second most populous country in the world after China. India's population rose by 21.34% between 1991 and 2001 and the population is very young (compared to China).
India is a country of contrasts with 500 million people mainly in rural communities on US$1 per day but with 300 million in the Indian middle class.
The luxury goods market is estimated to be worth US$434 M pa. India has an 8% GNP growth year on year (despite the poor infrastructure) and whichever sector you look at growth rates are impressive. There are, for example, one million new mobile phone subscribers per week. There is a major target of the Commonwealth Games in 2010. During the Aviation Forum that we attended in Delhi we heard that the government has approved an investment of US$9 Billion to upgrade six metro and 35 non metro airports by the start of the games.
For UK companies going to India there is a western business culture and English is widely used. The Indian people are also very hospitable and interested to talk to UK visitors. The Indian middle class businessmen we meet will usually have travelled to the UK and may well have relatives here.
India though can be a culture shock as you drive through third world poverty to your 5-star hotel, and extreme care has to be taken to avoid a stomach upset, which can be debilitating.
Setting up a business in India has become faster and easier in the last two to three years. It takes around 35 days to register a company in Mumbai – less than half the time of two years ago, although the timings and costs vary from state to state. There are 11 procedures for starting a business, which can be bureaucratic, but there is a current e-governance initiative to enable registration on line through the Ministry of Company Affairs (MCA) website.
From a practical viewpoint the experience seems to be that for a UK company setting up for the first time it is very complicated. This can be eased by knowing the right contacts, which may just be other UK companies that can share their experience of establishing a business.
It is well known that wages and salaries are low in India, which is the attraction for companies setting up. However, recruiting staff can be very time consuming. One company we met went through 1000 CV’s to recruit 25 staff. When Indian railways advertised some new jobs seven million people applied. The CV’s can also all be excellent as someone else has written them!
The other word that arises regularly is “attrition” (staff turnover). Companies find that staff turnover is very high amongst highly educated, young, ambitious individuals. In the major cities this is a serious problem with average term of employment 12 months, but sometimes less than 6 months. Cities such as Bangalore are overheated with wage rates, and traffic so it was useful to visit Chennai as an increasing number of companies are setting up in the state of Tamil Nadu. The state has been successful in attracting big names such as Dell, Nokia, Nissan, Renault and Hyundai. The Tamil Nadu Guidance Bureau is keen to point to the advantages here including the port facilities, communications (the largest broadband width in India) and a surplus of power supplies.
In Chennai we met UK companies that had established businesses here and they discussed the spread of salaries from an entry level call centre person on £1,300 – 1,400 pa, through to technical architects on £20,000 pa. It was pointed out too that salary is only one factor as the true cost is about productivity, training and management time.
Another issue that was raised is office culture. Hierarchy and the caste system are important to Indians but this can prove a major issue in an office where you want everyone to work together and “multi task”. Therefore having a UK manager based at the Indian operation to reinforce UK business culture and for the client contact is essential.
At UK Trade & Investment (UKTI) I we have some good staff in the major cities. The teams are subdivided with trade advisors each taking a different sector focus.
For companies wanting to use a consultant for market research, location studies, finding partners, advising on tax issues or facilitating the establishment of a business we met several who all seem professional and have references from UK clients.
There is no doubt that India is a country with a huge potential for UK exporters and companies interested in establishing a subsidiary or joint venture. We are already seeing more enquiries from Yorkshire companies about India than even China in the last 12 months. Indian companies are also interested in setting up in the UK so there will also be inward investment opportunities for the region in the next few years.
