EXECUTIVE SUMMARY
- India's robust economy, especially its evolving retail sector, offers Hong Kong companies unprecedented opportunities.
- On the product side, the potential for exports of Hong Kong eyewear, furniture, gifts and premiums, selected consumer electronics, timepieces, and toys to India seems promising, whereas the export potential for jewellery and textile products (made of natural fibres) may be less impressive.
- On the services side, India can offer a niche for Hong Kong logistics services (i.e. international freight forwarding) and infrastructure and real estate services. However, the Indian market for information technology and design services remains difficult for Hong Kong companies.
- In spite of the increasing volume of its international trade, India is still one of the world's most frequent users of anti-dumping measures against imports. Hong Kong companies should be aware of the risk of protectionist measures.
- Marketplace diversities and a less-than-desirable infrastructure are evident challenges for foreign traders. On the whole, India remains a difficult market for Hong Kong companies, albeit with enormous potential.
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With globalization on course and Asia emerging as another engine for growth, alongside Europe and North America, China and India are fascinating the world with their vigorous economic growth.
Hong Kong companies have already benefited extensively from China's economic miracle - Hong Kong is China's leading entrepot (about 22% of China's foreign trade); as of end-2004, China accounted for 29% of Hong Kong's cumulative direct investment inflow. Now with India also on a rising tide, it seems logical for Hong Kong companies to take a closer look at the Indian market.
Unlike European countries where higher-income earners will soon be retiring, India's demographics are dominated by younger cohorts (50% of India's population is below the age of 30). Hong Kong companies aiming at fashionable and branded items can expect sustainable demand from India's "young and restless" consumers.
On the other hand, India is not a "no-sweat" market - diversities in Indian marketplaces have made the country one of the world's most complicated markets. An unorganized segment, which is made up of 12 million "mom and pop" retail outlets, dominates 97% of India's retail sector. In addition, problems such as red tape and corruption, aggressive protectionist measures and counterfeit products are not uncommon. Cautious optimism seems to be the right attitude when accessing the enormous India market.
In selling goods to India, Hong Kong companies need to distinguish themselves from other overseas competitors. Although labels, such as "made in Hong Kong" or "Hong Kong style", do not currently have many Indian admirers, Hong Kong products highlighted with internationally recognized brands (not necessarily the top tier) can still convey the message that "Hong Kong is different".
While branding would be a good start, a classy label with excessive pricing would be a definite misstep. For an emerging market like India, the key to effective penetration is good quality at affordable prices.
The service sector as a whole constitutes a significant part of the Indian economy (54% of India's GDP) with individual service industries considered India's strengths (e.g. information technology). Pooling these strengths via an Indian business partner can be a viable access strategy for Hong Kong companies, but an ex-ante due diligence exercise supported by a clear exit mechanism and reliable legal advice would also help minimize the risks of a "wrong marriage" with an Indian partner.
This new report is available at TDC's Retail Outlets. It can also be purchased through the TDC Bookshop section in the TDC's trade portal: www.tdctrade.com.
