India-Selling and buying

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Published: 06 Oct 2008 17:41:46 PST

Distributing a product

Distribution network

There has been a significant expansion in distribution channels in India. The total number of retail distribution outlets in the country is estimated at over 12 million.

Most Indian manufacturers use the traditional three-tier selling and distribution structure: redistribution stockists, wholesalers and retailers. However, with the advent of shopping malls in the retail sector, manufacturers are now ready to supply directly to large retail outlets at discounted prices.

India still does not allow foreign direct investment in retailing, so foreign companies need to partner with local companies to enter the market. For more information on FDI & Retail sector, visit the site: Ministry of Commerce.

Reaching the consumers

Indian retail market size is estimated at USD180 billion and organized retailing is likely to grow rapidly: 30-50% annually during the next five years. Currently, the volume of organized retailing is very small compared to the size of the market.

Selling to the firms

The size of the market and its growth rate in recent years encouraged lots of investors to invest in India. In 1991 an open policy concerning FDI (Foreign Direct Investment) with an annual "target of USD 10 billions of FDI" was set up by the government.

Market access procedures

Commercial policy

- Import Licensing: Though India has eliminated its import licensing requirements for most consumer goods, certain products like motorcycles and vehicles still require import licenses.
- Anti-dumping and countervailing measures: Such measures are imposed from time-to-time to protect the domestic manufacturers from dumping.
- Export subsidies and domestic support: Several export subsidies and other domestic support is provided to several industries to make them competitive internationally.
- Procurement: The Indian government allows a price preference for local suppliers in government contracts and generally discriminates against foreign suppliers.
- Service barriers: There are still some restrictions for foreign companies to enter some service-oriented sectors like insurance, banking, securities, motion pictures, accounting, construction, architecture and engineering, retailing, legal services, express delivery services and telecommunication.
- Other barriers: Equity restrictions and other trade-related investment measures are in place to give an unfair advantage to domestic companies.

For the most current information on India’s Prohibited Import List, please see: www.exim.indiamart.com/freedlist/prohibited.html

Import procedures and custom duties

Applicable to imports from those countries with which India has signed special Trade Agreements. For details on Trade Agreements, visit the site of Ministry of Commerce.

Import taxes (excluding consumer taxes)

Education Cess: This is chargeable at 2% on the aggregate of customs duties. It has been introduced as a special interim measure to raise special resources for investment in education.

Identifying a supplier

Business directories: Yellow Pages Indian Yellow Pages Indiamart
Domestic Trade Agencies and their representations abroad: Federation of Indian Chambers of Commerce and Industry (FICCI)
Confederation of Indian Industry (CII)
Federation of Indian Export Organizations (FIEO)
Federation of Indian Micro and Small & Medium Enterprises
Ministry of Corporate Affairs
Directorate General of Foreign Trade

Organizing goods transport

By sea: The sea transport handles 90% of the international transportation of goods from or to India. There are 11 important ports along the 5,560 km of Indian coasts (181 ports in total) which handle about 215 million tons of goods a year. The main ports are: Bombay, Calcutta, Chennai and Kulpi in West Bengal.
The river traffic is important, in particular on the Ganges, Brahmaputra, Narmada and Godovari.
By air: Most big regional cities are daily served, either by Indian Airlines, or by private airlines. The conditions of transportation are correct. From India, a 10 USD airport tax must be paid.
By road: The road network exceeds 3 million km of roads, of which 52,000 km of highways is in a bad state but handles 60% of interurban ground traffic of goods and passengers. Various projects for the improvement of road infrastructure are currently in process with the support of the World Bank which is one of the main money providers of India as well as the Bank for Asian Development.
By rail: There is a rail network of 107,000 km length, of which 12,000 km is electrified. It connects all Indian cities, but the capacity to transport goods is weak. A project for the development of the rail network is in progress. The national company, which runs the whole rail network, is Indian Railways. They transported 410 Mt of goods in 1997. The main goods transported by rail are coal, cement, iron ore and cereals.
Useful resources: Ports in India: Kolkata, Paradip, Visakhapatnam, Chennai, Ennore, Cochin, New Mangalore, Mormugao, Mumbai, Kandla