Despite its disadvantages ( outlined in Insight into India: part I ), India presents several opportunities as well.

Opportunities for sourcing companies
As India's basket of production increases, retailers, brands and importers can explore specific opportunities suited to their business. A single-point of advice to them would be to "go beyond the obvious." Whether you have sourced from India previously or not, do not be limited to your past image of what the Indian supply base can produce.

Prompt your suppliers to show you something new in terms of product type, fabric developments etc during each meeting. The structure of the Indian supply base will certainly offer you the possibility of flexible and small production runs, and the possibility of experimenting with new products

A large base of European and American customers is already served from India, with almost 70 per cent of apparel exports headed to the US and EU. Even as these companies are growing their sourcing from India, other customers are also starting to build up their presence, directly or through indirect relationships.
Even while the sun sets on the quota regime Indian exporters are also targeting non-quota market, including Australia, Japan, West Asia, South Africa and Latin America.

Opportunities for consumer brands
India has one of the largest and one of the fastest growing economies in the world. It has averaged an annual GDP growth rate of over 6 per cent over the last several years, and this is improving the overall prosperity of the population. The consumer market was already relatively well-developed which is improving further with favourable factors such as rationalisation of taxes, reduced import tariffs, and a growing young segment that is willing to spend more.

International brands already present in the market include Benetton, Lacoste, Levi Strauss, Crocodile, Dockers, Lee, Wrangler, Nike, Reebok, Adidas, Zegna, and Marks & Spencer. There is also a boom in retail development: organised retailing projected to grow from a 0.8 per cent share to 5 per cent by 2005, of a $170 billion market (in absolute terms) [a $935 billion market, in PPP terms]. This is being enabled by development of retail infrastructure such as mall space.

For example, when the Indian car industry was de-regulated in 1993 it had only three major car models, whereas now it includes Suzuki, Honda, Toyota, General Motors (Opel-Vauxhall, Chevrolet / Subaru), Ford, Daimler-Chrysler (Mercedes), Hyundai, Volkswagen (Škoda), Mitsubishi etc and new Indian manufacturers as well. However, though the Indian car market sells around 580,000 units a year and cars in the C-segment or higher are growing, only 10,000 Mercedes-Benz have reportedly been sold in the last 8 years.

The lesson is that, while the consumer market is sizeable and certainly growing, it is important that each company carries out a structured assessment of the potential for its products, before beginning to build any expectations.

Opportunities for industrial suppliers and tertiary suppliers
As the industry grows, opportunities for suppliers to the industry are also growing. This includes raw material manufacturers (fibre, yarn, fabric, trims) and machinery manufacturers. India appears to be a competitive and sustainable hub of production globally, and therefore manufacture-suppliers are investing in India as a growing market.

Import duties have been brought down for industrial supplies, and are likely to come down even further. For example, while a few years ago the import duty on manufacturing equipment was 25 per cent, this has been reduced to 5 per cent. India is also an emerging market for used and refurbished machinery.

In fabrics, while duties are still high for sale in the domestic market, the duty-levels are as low as a fifth of what they were a few years ago. The government is committed to bringing tariffs down further in compliance with the WTO framework. Also, fabrics can be imported free of duty if they are made up into garments and re-exported.

The government is trying to balance between the interests of domestic fabric manufacturers who wish to keep competition out and apparel manufacturers who want to have access to a wide variety of fabrics from the most economical sources. However, over time significant reduction is likely in import duties on fabrics and other raw materials as the apparel industry grows and domestic raw material manufacturers also improve their capabilities.

Specific opportunities for industrial suppliers include wool, manmade fibre fabrics (especially functional fabrics, such as protective fabrics), industrial textiles, geo-textiles, products for medical applications, accessories and trims.

Indian yarn and fabric companies are also importing raw material to achieve product variety. For example, India does not produce significant quantities of apparel-grade wool and is now the third largest customer for Australia, with companies such as Raymond, VXL and Reid & Taylor producing world-class worsted suiting fabrics. Similarly, many companies have imported speciality yarns from Europe and the Far East to achieve greater variety in their knitwear ranges.

Opportunities also exist for tertiary suppliers for support products such as labels, software, hardware (eg barcode scanning equipment, testing and inspection equipment), with the growing need for improving standardisation and quality levels. This is also an area where customers (retailers and brands) are a driving force, as they are asking their factories to upgrade their capabilities.

Services are another area for growth. The immediate opportunities for service providers (logistics, technical, consulting, legal and finance) are arising out of the growing need for improvement of standards, productivity and compliance and an increasing willingness among Indian factories to invest in services.

Opportunities for investment
Foreign Direct Investment (FDI) is on the up-trend, and has been for several years. Policies related to foreign investment have been fairly transparent, though the process is not always easy. India has a structured, multi-tiered administrative, political and legal system that would be familiar in nature to European and American investors.

FDI in the apparel and textile industry has been recently opened up, as liberalisation has gathered steam. Manufacturing is a thrust area for the Indian government, as Indian industry and the government see foreign companies more as partners in building domestic manufacturing capabilities rather than a threat to Indian businesses. Following this through, the central government as well as various states are executing schemes such as integrated textile and apparel parks.

Although direct investment in retail remains closed to FDI as of now, companies have found alternative structures through which they can approach Indian consumers (examples include Levi Strauss, Marks & Spencer, Royal Sporting House, adidas, Nike and Reebok in fashion products). There is certainly a broader opportunity to "grow the market from inside" as companies can freely set up fully-owned sourcing (liaison) offices, as well as marketing operations.

Other than sourcing liaison offices, a number of companies are already present in India through joint ventures, strategic alliances and other forms of relationship, as shown in the table below.

Strategy and execution
As with any new market or supply base, companies need to study the environment carefully, but even more so in the case of India due to its diversity and size. A number of problems that companies have faced when entering India have arisen out of inaccurate interpretation of the information collected during earlier stages, rather than anything else. Typical mistakes include wrong estimation of market volume as mentioned earlier, pricing and distribution structure.

Pricing is a critical factor. While there are consumer segments or industrial customer segments that can pay prices comparable to the more developed western markets, by and large India remains a price-sensitive market, with real income levels far below USA or Europe. While companies may not want to substantially discount products in India that they would sell elsewhere for higher prices, they do need to develop products to fit the needs of the Indian market in terms of pricing and features.

Similarly, in the area of distribution, while India was a relatively closed economy between the 70s and early 90s, it has had its own well-developed framework for marketing and distribution of consumer and industrial products. Rather than expecting to recreate their European or American experiences, companies need to look at the needs and capabilities of the distribution framework in India. Be open to exploring different forms of ownership and control rather than remaining wedded to a single way of doing business.

And, finally, after you have selected an appropriate market segment, set up the appropriate structures with realistic expectations from the market. The last word of advice would be: "sustain your efforts - patience pays." India is a long-term, sustainable market and supply base, rather than a bubble that you need to capture quickly!