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Event Summary:
Summary by
Alex Kwong
Speaker:
Douglas Goold, CIC Senior Fellow
Thursday, 11 March, 2010
Aird and Berlis, LLP, Brookfield Place
181 Bay Street, Suite 1800
Compared to China, interest in India has not been as strong in recent years but the situation is changing due to India's growing economic and geopolitical importance. Mr. Douglas Goold reports that the business potential of the Indian market is huge, but it will not be an easy undertaking.
Since the introduction of market reforms in the early 1990s, the Indian economy has overcome the so-called "Hindu Rate of Growth" of 1-3% to recent rates of 7-9%. Interestingly, the Finance Minster in chare of the initial reforms, Dr. Manmohan Singh, is the current Prime Minster. The economic growth has changed Canadian perspective of India as a place for business opportunities as opposed to a recipient of Canadian foreign aid. In fact, not only has Canadian aid ended, India itself sends $1 billion worth of aid to Afghanistan. Mr. Goold provides 2 examples of the great potential of the Indian market;
- In the Indian 11th 5-Year Plan, infrastructure spending has been allocated $514 billion with 20km of roads being paved everyday.
- In the cell-phone market, the monthly subscription rate of new users is 19.1 million.
For Canadian businesses, winning just a fraction of that demand will create opportunities not found in North America. Mr. Goold adds, Sunlife Financial has an ongoing partnership in India and after 9 years, it sells four times as much insurance in India as in Canada and it has over 160,000 agents there as opposed to 3,500 in Canada.
Aside from the sheer size of its economy, India's other advantages includes the presence of a democratic political system and the rule of law. As much advertised in the media, the Indian workforce has considerable Information Technology knowledge and there is a strong sense of entrepreneurship within it business class. However, the disadvantages presented by the scale of India’s poverty levels and inequality will present challenges. In fact, India ranks 134 on the United Nations Human Development Index, just before Congo and below all the other so-called BRIC countries.
Indian also ranks poorly on the ease of doing business and corruption is a prevailing issue. Mr. Goold noted these are similar problems encountered in all developing countries. Canadian companies will have to accept India as it is and adjust to circumstances if they want to take advantage of the vast opportunities present. For example, McCain Foods spent 8 years developing the perfect potato for the Indian market. It was a long process, but it was able to become McDonald’s sole supplier for the country.
Mr. Goold predicts continued growth in Canadian-Indian business relations for the following reasons;
- Increased support from the Federal government. In fact, the Export and Development Bank of Canada has $1.4 billion in funds available either to loan to Indian companies to purchase Canadian goods or to finance deals.
- Growing interest from some of Canada’s largest companies such as RIM, Fairmount Hotels and Brookfield Asset Management.
- Ongoing reforms in India to further open up its market.
The signing of the US – India nuclear agreement has led to improved relations with the West signalling its growing geopolitical importance. Many view India as a counter-balance to China in the region, but India needs to resolve its various territorial disputes before it can play a bigger role. Relations with China have been stressed at times due to border disputes, but trade between the two nations is growing. India’s relations with Pakistan were improving, but the 2008 Mumbai attacks destroyed a lot of goodwill between the two nations, which was the intentions of the attackers. The fear is should a similar attack take place again, India's patience will run out.
Mr. Goold stated that at this point in time, it is unclear whether India has the desire to become a world-power and if it does, what it plans to do as one.
Highlights from the Question & Answer portion:
- In response to a question about the role of the Indian Diaspora in Canada; Mr. Goold responded that it is less active than its counter-part in the US in promoting stronger ties with India. The Canadian Indian Diaspora is not as united as it is divided among those living in Western and Eastern Canada and with divisions between the different cultural and religious members of the Diaspora. However, Mr. Goold sees the trend reversing with the Diaspora becoming more active in future years.
- There was a good discussion on the need for Canadians to be very careful to apply our own values on a foreign country like India. In response to a question about the urban slums in India, Mr. Goold replied that the issues behind the slums are much more complicated than it seems. It is not the lack of employment, there is actually a labour shortage in rural India, but people only want to work in the urban areas.
- During a discussion on Canada’s strategy to improve business relations, Mr. Goold stated that there are a lot of government resources in India and it is growing. For instance, the Canadian trade mission in India is second in size only to the one based in the US. Due to out-dated accounting excluding exchanges of services and intermediate goods from trade numbers, actual trade volume between Canada and India are much higher than it seems. However, Mr. Goold stated Canada needs to improve its brand recognition as most Indians think RIM is a US company, Bata is an Indian one, and the only Canadian company they recognize is Nortel.
- A surprising fact arose in the discussion about the potential for increased trade in natural resources. Due to the location of most of Australia’s major ports on its east coast, the distance required to transport resources to India is actually not that much further than that required if shipped from British Columbia.
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