Australian agribusinesses: explore India, says BDO’s MacMillan

Australia agribusinesses with an appetite to explore new horizons should consider India as a legitimate export destination, argues BDO’s executive director of international business Cameron MacMillan. MacMillan’s advice comes ahead of an expected free trade agreement between Australia and India later this year. Before joining accountancy group BDO, MacMillan was state manager for the Australian Trade Commission (Austrade) in Queensland.

When it comes to trade with Australia, China often rates highest on the export radar — as do free trade partners like Korea and Japan — however the country’s attention is increasingly turning to India as the new horizon agribusinesses should steer towards.

India’s demand for food such as dairy, cereals, and fruit and vegetables is experiencing significant growth, and with a population of more than 1.2 billion people, the demand for these products presents an exciting proposition for agricultural exporters.

Facing the ever-growing challenge of feeding its large and fast growing population — many of whom are reliant on food imports — India is looking to other countries with different expertise to help them cope with the demand. This level of demand is also presenting opportunities for other agricultural commodities into India.

While Australia doesn’t have the population challenges like a nation such as India does, it does have the challenges of growing food under difficult conditions and moving output over long distances.

With negotiations already underway to secure Australia’s 11th free trade agreement (FTA)— which could be confirmed as soon as 2016 — local businesses should start reaching out to begin early discussions with Indian trade partners.

What are the opportunities?

A number of opportunities lie dormant on the Indian subcontinent and Australian businesses with the foresight and ability to fill a gap in the supply chain could share in significant windfalls.

In more specific markets like canola oil, oats and malting barley, there now lies a demand where emerging opportunities are presenting themselves.

In particular, a huge prospect lies within grain storage and processed food imports but also the associated experience of growing and handling products such as these is highly sought-after.

To give some context, India has recently attracted international attention with its plan to build another series of grain storage silos, the second in a portfolio of projects to build 2 million tonnes of suitable grain storage.

Currently, India reports annual losses of around 10 per cent of its cereal crop production due to a lack of modern storage and handling infrastructure.

India: open for business

The election of new Indian Prime Minister Narendra Modi in 2014 has boosted business confidence across the country.  Prime Minister Modi is known for his pro-business sentiment and willingness to open the gates to international trade.

Combine this with positive economic growth and conditions for international business, India is ripe for opportunity.

Australian agribusiness is, and is likely to continue being, one of the key beneficiaries of this increased momentum and this presents a great opportunity for agricultural commodity exporters.

Among India’s massive population lies a distinct rising middle-income group of consumers.

This group is expected to double over the next 10 years and with this comes a distinct increase in purchasing power and their spending on consumption related items results in mounting import demands into the country.

Tips and tricks

While it’s easy to be swept up in the excitement new opportunities can bring, it’s important to remain focused on doing your international business properly.

There are also a number of business negotiation practices and cultural considerations to take on board before engaging with the Indian market.

For example, for the most part, Indian businesspeople possess strong English skills and follow accepted practices of negotiation. But it’s important to remember their emphasis on punctuality may be different to what you’re used to.

So those thinking of going down the India path need to be suitablly prepared as it can still require some complex navigation, and in some cases the rule of law is still very grey. Those entering the market and doing business in India need to be aware of their procurement practices, changing regulations and bureaucratic burden.

I can’t emphasise enough the importance conducting proper and strict due diligence and seeking professional assistance when setting up in India.  It’s also important to get to know a local partner on the ground in India or investigate the types of assistance that may be available to you from your home nation, particularly during the set-up period.