Let's go beyond three seas: how to set up and run a business in India

Based on the results of the first five months of 2023, Russia entered the top 3 trading partners of India for the first time. We learned about how to start and do business with this country from Dmitry Pangin, the founder of the Indian fintech service Penenza.com.

Dmitry has been implementing a fintech project in Bangalore, India since 2022, has managed to immerse himself in the realities of local life, culture and business, and has personally held hundreds of negotiations with local entrepreneurs. Before going to India, Dmitry tried to get an idea of the country from open sources. “Much of what I learned about India while in Russia turned out to be untrue,” — admits Dmitry.

Land of countries: myths and truth about India

Initially, Dmitry was sure that everyone in India spoke English. “In fact, it turned out that only white-collar workers and IT workers speak the English we are used to, and most Indians use Hinglish, which has a completely different pronunciation, grammar, and meaning of words,” &ldash; expert shared.

Two and a half dozen languages are widely used in different states of the country. They are very different and people from different parts of India do not understand each other. For example, in Bangalore, Kannada is spoken, but only about 40% of residents speak Hindi, the main language of the capital region. The remaining 60% cannot fully communicate with those who grew up in Delhi.

It is also generally accepted that India is a rather poor country. In general, this is true, given that more than 40% of Indians are engaged in agriculture, which can still hardly be called highly productive. Moreover, about 10% of the population belongs to the middle class, which is comparable to the entire population of Russia. “In the cities there are many centers of crystallization of prosperous life with comfortable areas, swimming pools, tennis courts. Yes, behind the fences of these oases everything is different, but there are a lot of them, and everyone strives to live like this,” — says the expert.

Another myth was the widespread casteism. Dmitry did not notice it either at the everyday or business level: “If you come to do business, especially IT, most likely you will not intersect with the concept of caste in any form.”

Before you start working with India, it is best to get to know the country personally. The reality is definitely not the same as in Bollywood films, and sometimes different from what entrepreneurs who have moved there say. Nevertheless, reading their notes is also useful.

Representatives of Russian business are welcome here

Indians treat Europeans well, including Russians. “It’s prestigious to communicate with foreigners here, so doors open to our compatriots that are closed or difficult to access for natives of India. This helps a lot in business: important people from politics, oligarchs will easily agree to meet a Russian and discuss a possible partnership. anyone,” — notes Dmitry.

Any contacts here are established more easily and quickly through personal face-to-face meetings. Recommendations are also of great importance; they immediately increase the level of trust. Without a recommendation, it’s easy to get from your partners something other than what you agreed on. The fact is that Indians have lived in a very competitive environment since childhood — their country has overtaken China in population. To succeed, you have to stand out, so entrepreneurs — however, like everywhere else — present themselves in an extremely favorable light. They may exaggerate their capabilities or keep silent about something that you would like to know before concluding a contract.

In addition, unlike Russia, financial statements of enterprises are not published in India. Except that sometimes scattered information about paid VAT is posted on the state portal. This makes it difficult to conduct a market analysis and understand the size of the company you plan to work with. “If your local acquaintance introduced you to his friend, acquaintance or relative, there is a high probability that your cooperation with him will contain fewer blind spots and surprises,” — Dmitry clarifies.

To find your way around, you need a guide

India has a lot of its own specifics that are unusual for us. This also applies to the banking sector. Here, any interaction with the bank — contact with specific people: “If you don’t know your manager, you won’t be able to do anything other than basic things like processing a payment. And then in half the cases strange questions arise that are unclear how to solve.”

With legislation, on the contrary, everything is simpler than in Russia. In India, English law is applied, the procedures for concluding transactions and the contracts themselves are not so complex. There is less state control over foreign economic activity, so almost any local company is ready to sell abroad, unlike Russian business. They don’t see a fundamental difference in where to supply their products — to a neighboring state or another country.

You will still have to understand the nuances of traditions, legislation and procedures. The most successful option — Hire a local representative for this, who will also help you make contacts. “You need to choose such an employee very carefully.” remember the competitive environment! For one vacancy in the first couple of days you can receive five hundred responses, this should not be surprising, it’s just the way it is here: everyone responds to everything.”

Bargaining skills: standing your ground

Indians and Russians have very different reactions to new business opportunities. Keep this in mind when you start negotiating: your objection handling skills may not be useful in India.

«Our people constantly doubt, they never need anything, everything is cool as it is. And here you still don’t have time to really say anything before the potential buyer already says: “Oh, great, I’ll use this this way and that way, my sales will immediately triple!” The person sits inspired, and you puzzledly clarify: “Are you sure you can use our product?” Do you have everything for this?” This situation is also a consequence of cultural characteristics,” — says Dmitry. India — a country of early adopters (or early adopters), here there are about 30% of them, and in the high-tech sector there are even 49%.

Nevertheless, you should not think that if a potential partner showed enthusiasm at the first meeting, then the deal will definitely go through. The partner will try to find benefits from using your product, find out the smallest details, compare you with competitors — and may eventually refuse.

If negotiations reach the conclusion of an agreement, bargaining will certainly begin when discussing the price. This is a fundamental point, again due to the competitive environment: it is important for a local entrepreneur to get the most favorable conditions, better than those of competitors. “And this is where the main thing is— be determined not to make unilateral concessions. If you still agree to something, be sure to ask for something in return: “Okay, I’ll give a discount, but then take five times more or pay in advance.” Or pack it yourself. Or delivery at your expense”. Otherwise, the partners will think that they can push more and more,” — Dmitry shares his experience.

We made a deal — keep your finger on the pulse

If you have entered into an agreement with a contractor, you should not relax. Indian contractors are sometimes so eager to cooperate that they are ready to sign up for any conditions. This is not always a deliberate deception — It’s just that many entrepreneurs believe that they can set up the process “for you,” but something goes wrong. “If the terms of the contract are violated, filing lawsuits is not an option. Unlike Russian practice, in India the courts are not a tool for solving business problems, but rather a way to establish justice in the long term. Very long-term,” — the expert comments.

Dmitry advises calling your partners every day and asking how things are going, and reminding them of themselves. Some tasks should generally be performed virtually live: “This is especially true for IT specialists: we call, identify the problem, and work directly online for several hours. Then the cooperation is very effective.”

Special conditions — from Russian importers of Indian products

Many Russian companies are already working with India: trade turnover in the first half of 2023 amounted to almost $33.5 billion, which is 2.9 times more than in the same period in 2022. At the same time, there is an impressive imbalance in favor of Russia: the volume of Indian supplies to our country is only $1.9 billion. “Now everyone who is ready to import something to us from India is in a privileged position. The entire Indian bureaucracy, all Russian financial institutions are ready to help them. Usually the Russian Federation tries to support exports, but this unusual situation has arisen.”

It is due to the fact that the Indian rupee — A partially convertible currency, its exchange is possible only within India. At the end of 2022, six Russian banks received permission to open accounts in rupees, but at the moment mutual settlements in the national currencies of our countries have not yet been established. As a result, a large amount of money from Russian exporters accumulates in India, which is difficult to withdraw from the country.

Experts say that they can either be invested in India or withdrawn in different ways through intermediary companies. Some domestic organizations purchasing goods from India thus benefit about another 10% of the supply cost. “According to my estimates, this ratio of imports and exports between our countries and, accordingly, super comfortable conditions for Russian buyers in India will remain for several more years,” — Dmitry summed up.

Checklist: what you need to work successfully in India

• Study as much information as possible about the realities of the state and even the city where you plan to work.
• Find a local representative you can trust with important questions.
• Establish personal acquaintances with potential partners, managers of banks and other organizations.
• Defend your interests when discussing the price, do not give a discount just like that.
• Keep in touch with partners and monitor every stage of cooperation.
• Remember the difficulties with withdrawing money from the country. Think about cooperation with other Russian companies in India.