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A Focus on Building Economic Ties with India
“Don’t put all your eggs in one basket”
Miguel de Cervantes Saavedra, a Spanish novelist, is believed to have coined this popular proverb, which is so relevant in a personal as in a business context. Labor’s trade diversification plan is a prudent step for Australia to start giving serious consideration to other geographies – so as to say spreading eggs in different baskets – to enhance stronger trade and investment with emerging economies like India, one of Australia’s most important partners in the Indo-Pacific region.
Recent years have seen remarkable growth in the trading relationship between India and Australia, fuelled by the many complementarities between the two economies. Two-way trade in goods and services has grown in value from $13.6 billion in 2007 to $24.3 billion in 2020. An interim agreement, the Australia-India Economic Cooperation and Trade Agreement was signed by the then Australian Minister for Trade, Tourism and Investment, Dan Tehan, and India’s Minister of Commerce & Industry, Consumer Affairs & Food & Public Distribution and Textiles, Minister Piyush Goyal on 2 April 2022.
Image source: 2022’s High Growth Economies (Statista)
Although there are similarities between both countries like the love for cricket, both two of the biggest democracies in the Asia-Pacific region, both having English as the official language and their Commonwealth legacy, there are many cultural and social differences which, at times, are deterrent in pursuing effective trade and investment objectives.
For instance, most Australian businesses have a flat hierarchy as opposed to the layered structures in India. The key challenge for Australian businesses will be to designate their officers at the appropriate level so they can effectively communicate with their Indian counterparts. To illustrate with an example: a “Manager” in Australia is considered a senior position but in India, this designation sits many levels below, technically with no decision-making powers. Consequently, an Australian “Manager” trying to establish communication with an Indian “Manager” will unlikely result in any positive outcome. Moreover, an Australian “Manager” will not be able to effectively get an audience with a “President” or a decision maker of an Indian company.
Another culturally tricky area to navigate is the concept of “No”, so uncommon in India. Australian businesses may be getting positive responses, contrary to the not so positive intention of the interaction. This is largely driven by India’s relationship-driven culture, where “No” is considered impolite, making it ever so difficult for an Australian business to judge whether a “Yes” is actually a “Yes” or if it is a “No”. Similarly hiding or not bringing to notice a challenging situation will be a common encounter by Australians, also attributable to Indian culture. In this context, Indians may have only good intentions to try to resolve these challenges behind closed doors, but the issues are at risk of going unnoticed to the Australian counterpart and not being successfully addressed on time. This is why it is essential for visitors to evaluate all commitments made and conduct due diligence on both sides to avoid any confusion or conflict further down the track.
Australian employees generally enjoy an enviable work-life balance, with 38-hour work weeks and work-free weekends. This also means that they usually don’t get any official (work-related) calls during their personal time. Contrary to the situation in India, where employees are putting significantly more hours a week and business calls are expected outside of ‘standard’ work hours. Accordingly, Indian businesses will expect immediate answers even during ‘personal time’ which may need consideration by Australians wanting to do business in India.
Business negotiation can also be a little time consuming as the culture of haggling (not only at the markets but attributable to every aspect of life and business) will be difficult for many. Most Indians will like to ensure they negotiate the ‘best’ deal and for that, they will bargain hard. Economies of scale is another crucial point if doing business in India – success for Australian businesses could be in the form of revaluation of their products or services whereas success in the Indian context could be based on a high-volume, low margin model. With India being a very price sensitive market, the key to success may lie in thinking out-of-the-box and designing a bespoke innovative business model that allows to bring down the price substantially.
Organisations like Austrade (Australian Trade and Investment Commission), TIQ (Trade and Investment Queensland) and other state government agencies with in-market presence are a great support for Australian businesses seeking culturally relevant business guidance. Similarly, institutions like Asialink Business and the Australia-India Chamber of Commerce play a crucial role to forge a strong business connection between both countries.
Image source: India country/economic fact sheet (DFAT)
FURTHER READING
India and Australia: Beyond the three Cs (The Lowy Institute)
Doing business in India – for Australian exporters (Austrade)
India | Australian Government Department of Foreign Affairs
Author: Jinendra Khara, Head of Partnerships and Memberships at Professionals in International Trade (PIT). Jinendra brings over two decades of Asian and Australian work experience specialising in trade, investment attraction and international education space having worked with the University of Queensland (UQ), the Australian Trade and Investment Commission (Austrade), Tata Motors and his current role at Redland City Council. A native Hindi and Gujarati speaker, Jinendra is fully fluent in English. He has specialised in establishing a strong ecosystem of collaboration built on cultivating sustainable and mutually beneficial relationships founded by working in partnership with others to meet shared objectives.