Since last February, the FIRSTonline Export Service has been proposing a series of articles dedicated to export and investment opportunities of the Italian business class in some emerging countries. As it is possible to notice when reviewing the latest releases, the country-related fact sheets have been presented so far Mexico, Turkey, Argentina, Indonesia, Russia, Kuwait, Brazil, Vietnam e Poland. Today we talk about India and soon it will be the turn of South Africa.
From the early 2000s until 2011, India's GDP had reported percentages, compared to its growth rate, between 10,5% and 6,3%. Since 2012, however, there has been a slowdown of the Asian economy (GDP growth rate around 3%) whose reasons are attributable to a reduction in exports, the contraction of private consumption, rising inflation, an increase in public spending, various subsidies and the privatization of public enterprises. Despite this decline, they still remain the economic forecasts for 2014 and 2015 are up developed by the International Monetary Fund for the Republic of India. These estimates, in fact, take into consideration how, despite losses in its national GDP, India has strengths that cannot be ignored. Consider, for example, the very vast availability of natural resources (India would produce about 87 kinds of minerals), alla diversified industrial base, to availability of skilled labor who are fluent in English (second official language of the country), to one growing middle class and the presence of lower wages compared to the same in other emerging economies (annual per capita income for Indians $3.910, for Chinese $9.040, for Brazilians $11.530, for Russians $22.720; World Bank data). Furthermore, from the point of view of foreign trade, the slowdown in GDP has not changed the country's inclination towards its trade and its opening towards other economies. India, in fact, remains a country that looks optimistically to international trade. This orientation can be seen, in particular, in two measures adopted by the Government led by the Indian National Congress party: lo strategic plan and the liberalization of some foreign FDI. The strategic plan foresees for the short to medium term the goal of doubling India's exports of goods and services as well as doubling India's share of international trade by 2020. Then, through the concession to FDI to flow into some sectors until recently inaccessible to foreign investment (such as multi-brand retail), the government has embarked on an important phase in its investment liberalization policy and it is expected that in the future there may be further concessions towards FDI as, for example, in the B2C e-commerce sector, in the railway and in the construction of industrial plants.
The bilateral relations of the largest democracy in the world with our country I've been a long time exacerbated by the diplomatic crisis broke out on February 15, 2012 due to the death of two Indian fishermen at the hands of the marines of the Enrica Lexia in the port of Kochi. However, the dispute did not particularly damage trade relations between the two countries: since 1991 trade between Italy and India has grown 12 times (according to what was reported by the InfoMercatiEsteri service of the Ministry of Foreign Affairs). Today Italy is, among the members of the European Union, the fourth largest trading partner of the Republic of India and it is not only import-export relationships that link our economies but also the investment flows which, on the Italian side, exceeded the threshold of three billion euros at the end of 2012.
The most successful exports in India concern the energy sector (31,7% oil, 3,6% coal), the precious metals (11,5% gold, 6,2% pearls and precious materials), electronics (6,7%), the machinery (6,2%) ei chemical materials (2,7%). As for exports Made in Italy:, they are led by machinery and electronic devices and followed by clothing and leather accessories. This division is also recognizable by the presence of some large Italian groups on Indian territory such as: Fiat, Carraro, Maschio Gaspardo, Ansaldo Energia, Italcementi, Benetton, Gruppo Coin, etc.
Despite the presence of these large groups, there are a number of adroitness that an entrepreneur wishing to enter the Indian market should, however, take into account, both in terms of exports and investments. In terms of exports it should be noted that there are precise restrictions to imports into the Republic of India. È It is necessary to check from time to time whether or not the exported products belong to one of the following categories: restricted goods (for which an import license is required), channeled goods (which can only be imported via specific measures or methods of transport) or prohibited goods (including some wild animals). From the point of view of IDEs it must be borne in mind that, despite the concessions to which we referred earlier, they are many sectors in which the Indian government prevents the presence of foreign investments. Our entrepreneurs cannot intervene: 1) in gambling (lottery – also online-, casino, etc.), 2) in Chit Fund (typically Indian emergency relief funds), 3) in Nidhi companies (mutual aid society), 4) in the real estate sector (including farm construction), 5) in the marketing of transfers of development rights (TDR, Transferable Development rights), 6) in the production of cigars, cigarettes and tobacco, 7) in the atomic energy sector e 8) in rail transport.
A further issue to be evaluated carefully when deciding not only to export but above all to also allocate part of the production to India concerns taxation. The corporate income tax is in fact 40% but can go up tol 42% for companies with capital exceeding 10 million rupees (INR) – around 118.000 euros – and many other taxes are claimed by the Indian government (for example, capital gains tax, about 42% and dividend distribution tax, about 16%). Avoid being exposed, at least in part, at this tax rate it is possible. First of all, it is useful to mention that India brought into force in 1995 the Convention for the avoidance of double taxation. Secondly, there is an opportunity for foreign investors to take advantage of important tax breaks through the location of some specific industries in the so-called Special Economic Zones (ZES). The ZES offer the possibility to reduce indirect taxes and take advantage of tax deductions for the first ten years of operation of new industries and also the opportunity to import duty-free materials for development (sources: Ministry of Commerce and Industry and Dezan Shira & Associates).
Sectors which can represent an important access point for Italian companies in the Indian market are, in addition to those already mentioned, renewable energies, the automotive sector and that of agri-food technologies. We also recall that, in the event of a partnership, one of the main benefits of the India-System resides in the availability of public registers to check thereliability of the Indian partner.
Of course, not all that glitters is gold. Starting from the 134th position in the Doing Business Index to get to energy shortages, India is a country that faces major difficulties on a daily basis. To those just mentioned must be added the scarce investments in research and development, corruption (94/174 of the Corruption Perceptions Index 2013), the very slow justice and the risks. About risks, those connected to thepolitical instability are to be placed in medium-high range as reported by SACE (expropriation risk 53/100, currency transfer risk 43/100, risk of political violence 60/100) and commercial risks must also be included in the same category (ranging from a minimum of 40/100 for sovereign risk to a maximum of 54/100 of banking risk).
These latest data relating to the country's weaknesses must not, however, take away from the possibility of investing and exporting to India since it must be considered that the difficulties that the Republic of India deals with on a daily basis are common to many emerging economies. And if this last point were not enough, it would be appropriate to remember that India is destined to become, by 2030 and according to UN estimates, the most populated country in the world.
