Experts Share Insight on Challenges and Rewards of Doing Business in India

September 21, 2015

India, which will have the world’s largest population within the next decade, boasts a strong and growing economy that is increasingly important in driving world economic growth. But it’s also a country that presents many challenges for businesses operating there. Some 250 School of Business students gathered in September to sample Indian food, listen to Indian music and hear from panelists representing the aviation, health care and power industries about the highs and lows of doing business in such a vital part of the world.

One would think the aviation industry in India would be booming. The sheer number of people, combined with the growing middle class and the small amount of airplanes servicing the population, looks good on paper. “The potential opportunity in aviation in India is huge!” said panelist Sanjay Aggarwal, who ran two airlines in India and today is the co-founder of SAR Trilogy Management, an aviation management and investment firm.

But in reality, airlines are losing money big time, hampered by government policies. The government-owned oil companies charge a 25 percent sales tax, banks charge 12 percent interest and the country’s airports charge among the world’s highest fees. The depreciating rupee, meantime, further raises costs.

A silver lining, Aggarwal said, is government policy changes to allow direct foreign investment into Indian carriers and remove Air India’s right of first refusal so other airlines can fly desired routes.

The health care industry also faces challenges in India, said Prasanna Jayakar, chairman of the Brain Institute at Nicklaus Children’s Hospital. In a country that spends only 4 percent of GDP on health care, access is a major problem. “You can have the best health care team, but a local village system that doesn’t allow you to penetrate is a significant problem,” Jayakar said.

Mortality from diseases like diabetes and cancer is a real threat even though many patients could have been cured by simple treatments. In rural areas, the greatest dangers are preventable diseases like HIV and malaria. India’s infant mortality rate is three times China’s and seven times that of the U.S.

That said, recent infrastructure improvements are alleviating obstacles to access, and the country has managed to offer certain high-quality services at a fraction of the cost, raising hopes for a medical tourism industry. Jayakar spoke of an epilepsy procedure that costs $100,000 locally but less than $5,000 in India.

Sandeep Chakravarty, vice president for sales and marketing for CG Power USA, explained how his India-based company chose to globalize. At one time, the company manufactured government-dictated products and sold them at government-set prices without competition. In the early 2000s, amid a changing landscape, the company decided to focus on improving quality and expanding beyond India through acquisitions.

“We succeeded in growing the company, which could not have happened in India itself,” Chakravarty said.

CG Power now has 43 factories, with half of them (and 30 percent of their workforce) outside India. The biggest challenge now? “Managing things from India,” Chakravarty said. “When we started off, we had a hands-off approach and didn’t realize the subtle difference of how they were going to see things."
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