| I wish to start this particular contribution by admitting how much I am personally relishing the rapid growth in India's stock across the world. Not a week passes when I do not see evidence of the rapid transformation of India's position in the world economic order. Late last week, it manifested in an interaction with several leading European business leaders who were on an exploratory visit to India under the auspices of the trade mission of a leading European county. This week, it has been a first for me to meet a number of leading financial and legal services businesses in Europe who are representing their (European) clients' interests to explore the opportunities of doing business with India. Each of these interactions reflected a newly acquired admiration for the economic renaissance of India and a keen desire to participate in the growing Indian market opportunities. |
| Without professing to have any serious understanding of the fine art of political and economic diplomacy, I am tempted to believe that India can take advantage of this very favourable wind of goodwill and in the process, not only win many more new friends but also generate more business opportunities for everyone. What it needs is a more pragmatic, more confident approach in our trade and commerce policy. |
| Like in India, small businesses engaged in agri and non-agri products remain very important for most developing and developed countries. However, the difference between such businesses operating in (Western) developed regions like the EU and the US versus those operating in developing ones like India is that those in the West have moved beyond relatively low-quality, basic goods to more sophisticated, higher-quality, high-design-content (where applicable) ones. Unfortunately for these Western businesses, they are operating in relatively slow-growth, very mature markets with aging populations that tend to spend more of their money on lifestyle services rather than merchandise. Emerging markets like India (and China) offer hope and excitement to tens of thousands of such small and medium businesses but they do not have the resources""financial and managerial""of the major multinationals like Unilever and Nestle and LVMH and Diageo and others to tap the opportunity. |
| Concurrently, emerging markets like India are themselves undergoing a rapid transformation in consumer aspiration and lifestyle, as well as in the distribution channels and retail networks. India is finally beginning to see the emergence of a powerful consuming class across all socio-economic segments ranging from the ultra-affluent to affluent to middle- and lower-income groups. The upper-income group consumers are now willing to try and use a wider range of higher-quality consumer goods ranging from international foods and beverages, clothing and home textiles, home decoration items, furniture, leather goods, kitchenware and tableware, etc. to list a few. |
| Further, till now, distribution channels for relatively premium consumer products were practically non-existent, be it the availability of modern supermarkets or large format department stores and specialty store chains. The start of the revolution in the retail sector will ensure that within five years, hundreds of Indian cities will see thousands of new-generation retail outlets catering for different socio-economic strata of consumers. With this, the availability of shelf space for a wider range of consumer goods will increase dramatically. |
| Hence, I would like to make a case for India becoming more liberal in encouraging imports of a wider range of finished consumer products and, in the process, discard the mindset of the past that was largely based on the belief that India should only focus on exports at any cost while keeping its own market closed or highly restricted from imports so as to "protect" the local producers. As things stand today, the cost of manufacturing of most consumer goods in the developed countries is significantly high compared to India. Demographic trends in most of these countries will ensure further shortages of labour, thereby leading to further escalation of production costs. Thus, India can afford to take a very liberal view of imports from developed countries since they can only address a relatively small (high affluence) consumer group. India should start with negotiating a preferential trade agreement with the EU and US""a deal extremely liberal (in terms of tariff and non-tariff barriers) for imports of EU-origin/U S-origin finished manufactured consumer goods (all categories including processed food products, textiles and clothing, and other products), in lieu of a reciprocal treatment for Indian-origin products. It is my belief that India will not see more than $5-6 billion worth of annual additional imports in the near future. Most of this value may also potentially be offset with higher exports as well. |
| The benefits of such a strategy would be far-reaching. An increased availability of more diverse and potentially higher-quality/more fashionable products will not only serve the emerging needs of the affluent Indian consumer but will also provide an impetus to the local producers to diversify their product mix and upgrade quality. At the same time, India will benefit from getting thousands of new lobbyists comprising small and medium enterprise owners in the developed countries, who will find India a new, highly welcome, market, and thereby generate even more goodwill for India around the world. |
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