Now that China’s economic growth has settled into a more normal trajectory, B.C. politicians and business organizations have been talking up India as the next China.
After all, like China, it has a massive domestic market – a population of 1.2 billion people – and has experienced gross domestic product (GDP) growth of up to 10% in recent years. It also has a sizable workforce of skilled engineers, scientists and computer programmers, and a need for Canadian technology and goods.
Moreover, Narendra Modi, India’s new pro-business prime minister, has promised to transform his country, which is chronically riddled with red tape and corruption, into the next Asian tiger.
But while B.C. business leaders and economists say India’s economic growth potential is impressive, it’s no China, and the growth of business opportunities in India will grow at a much slower pace.
“India is more about the future than the present,” said Jock Finlayson, executive vice-president and chief policy officer for the Business Council of British Columbia. “I think there is a potential and it’s a huge market. I think commerce with India will grow, but it’s going to grow slowly.
At the moment, India is barely on Canada’s radar screen, and vice versa. In 2014, B.C. exports to India amounted to just $590 million – 1.6% of the province’s total, compared with 18% to China, according to BC Stats. The largest exports of B.C. products to India are copper, coal, and pulp and paper, in that order.
At 6.5%, India’s GDP growth in 2016 is expected to surpass China’s (6.3%). But as some Canadian businesses have discovered, there are barriers to doing business in India, principally red tape, tariffs and inadequate infrastructure.
Coast Clear Wood Ltd., Teal-Jones Group and Jhajj Lumber are among the B.C. lumber companies that are already engaged in trade with India.
Parm Jhajj, owner of Jhajj Lumber, was born in India but raised in Canada. His company has been trying to make inroads in the subcontinent, but has found the business climate there challenging.
The problem for his sector is a “fractured market” of small players, he said. Whereas Jhajj said he can take an order over the phone in Canada and trust the buyer to come through with the payment, that’s not the case in India.
“Any business we do there these days we do through letter of credit,” he said, adding that even that doesn’t necessarily guarantee payment.
“There’s all sorts of horror stories where people ship whatever they ship and the airtight letter of credit wasn’t quite so airtight, and all of a sudden a guy’s got half a million dollars worth of wood floating to a place far, far away and he’s not seeing his money.”
Coast Clear Wood, which has been in the vanguard when it comes to selling B.C. wood products in India, seems to have had a better experience doing business in India. The company has been selling millwork wood products there for 13 years. Even so, India still represents only 5% to 6% of the company’s sales.
Coast Clear Wood president Tom Sundher said there are three major challenges for B.C. lumber companies trying to crack the Indian market. One is that India has a centuries-old history of importing only hardwoods from places like Myanmar, Africa and Malaysia to do its own milling.
A lack of knowledge about Canadian wood products is another obstacle, something Forestry Innovation Investment is trying to address with an office that it opened in Mumbai in 2012 to promote B.C. wood products.
The biggest hurdle, though, is the cost of selling into India. Not only is it much farther than China from a shipping perspective, but duties on imports add 14.5% to the cost of Canadian wood products at the border, Sundher said. And internal taxes add even more to the delivery price.
“When I’m selling our Canadian lumber to the India customer, by the time it reaches his yard, he’s paid 22%,” Sundher said.
At an April 16 dinner attended by B.C. business and political leaders, Modi promised to address that problem by finalizing a free trade agreement with Canada by September, something Surrey Board of Trade CEO Anita Huberman described as “ambitious.”
“The second thing that he said at the dinner was that there will be major reforms, in terms of government policies and red-tape reduction, within the Indian government,” Huberman said. “Because the No. 1 issue for Canadian businesses to do business in India has been red tape. It’s been knowing who to speak to.”
Vivek Savkur, president emeritus of the Canada-India Business Council, said another barrier is simply getting back and forth. There are no direct flights between Vancouver and India, which means a business trip takes 24 hours. But he believes a free trade agreement will eventually remove many roadblocks to business.
“The doors of bilateral trade are now widely open,” he said.
When it comes to its infrastructure, India is far behind China. For some B.C. businesses, that’s a problem; for others, it’s an opportunity.
India’s electricity grid is notoriously unreliable, for example, which is a problem for the country’s flourishing wireless telecom industry.
Frequent blackouts have created a need for telecom backup power – a niche Ballard Power Systems (TSX:BLD) has been cultivating with its hydrogen fuel cell power units. At the end of April, Ballard received a $2 million order for 100 of its hydrogen fuel-cell backup power systems from the Indian telecom Reliance Jio Infocomm Ltd.
“It’s a first order,” said Ballard spokesman Guy McAree. “We are expecting that this company will be doing more deployments going ahead, probably on the order of 400 or 500 systems total.”
Huberman said there may also be opportunities for B.C. engineering companies specializing in large infrastructure projects, as well as clean-tech companies, life sciences and technology related to agriculture.
Huberman, who sits on the National Film Board, also thinks there could be opportunities for Vancouver’s film industry in Bollywood. Last year, the Indian film God Forbid was filmed, in part, in Victoria. Vancouver has a visual effects sector that might benefit from stronger ties between Bollywood and B.C.
