Now's the Time for an India Strategy

In 1602 when Sir James Lancaster arrived in India, commanding the first trading expedition of the East India Company, the economy of the Indian subcontinent dwarfed that of the British Isles. What many people in the West don't realize is that, except for the last 500 years, this has always been the case. What even fewer realize is it likely will be true again. A huge, educated, and motivated population with access to capital—such as India's—will demand a strong economy, and India is reclaiming its traditional role as an economic power.

Considering the bright future that lies ahead for India, now is a good time for companies to develop their supply chain strategies for serving the country. India's 7% growth rate for its gross domestic product (GDP) may not be as attention-grabbing as China's. But India is the second fastest-growing economy in the world, and it is more diversified. Its burgeoning middle class is employed in a wide variety of business services, leading some experts to believe that India will be more resilient in the current economic downturn than China.

India's government has begun implementing tax-law changes that will make delivering goods to consumers and businesses much more efficient, making products more affordable and spurring demand. The government also is gradually lowering barriers to foreign direct investment, and soon retailers will be able to operate in India by taking majority positions in Indian subsidiaries.

Although India offers a huge growing market for outside products, setting up a distribution network there presents a host of challenges in areas ranging from infrastructure to human resources, from warehouse site selection to hiring a trustworthy trucker. These challenges shouldn't discourage companies from expanding into the country. Rather, they should simply motivate firms to start their planning now. Based on our experiences in India, we believe that if a company starts to navigate the obstacles now, it will be well-positioned to reap the benefits when government regulation and economic reforms finally align behind this very large consumer economy.

To read the full article, visit CSCMP's Supply Chain Quarterly.