Economy

The problem with India

Written by Kara Aaserud

When journalists received a press release January 10 warning of another evening of gridlock on Toronto highways, they might have been nonplussed if not for the purported cause: an airport-bound motorcade led by Ontario Premier Dalton McGuinty.

Conservative MPP Tim Hudak issued the satirical alert as part of a media campaign condemning the Liberal government’s recent 12-day trade mission to India. Comprised of entrepreneurs, bureaucrats and Liberal politicians, the mission’s 100-plus delegates not only talked business with their Indian counterparts, but also made numerous side trips to tourist destinations such as the Taj Mahal. Total cost to taxpayers, including a mini-mission to Pakistan: $2 million.

While Ontario voters can fret over the cost of the mission, entrepreneurs across Canada should consider its timing: while India has enjoyed phenomenal economic growth over the past decade, many of its largest business centres—including several on McGuinty’s tour—are being overcrowded with foreign businesses.

“India’s window is closing very quickly,” says Angel Mehta, Toronto-based CEO of Sterling-Hoffman Management Consultants, an executive search firm that employs 50 in Canada and 200 in Hyderabad.

By “offshoring” market research, basic accounting work, collections and graphic design to workers in India, Mehta has cut his staffing costs in half. But cheap Indian labour could soon be a luxury of the past, thanks to increasing competition from talent-hungry, well-capitalized multinationals such as IBM Corp., Dell Inc. and American Express Co. “The wage inflation is out of control,” Mehta exclaims. “Every talented person has multiple job offers. It’s like Silicon Valley in the ’90s, times 100.”

Toronto entrepreneur Nathon Gunn is aware of the same challenges. Still, the CEO of Bitcasters, a mixed-media production company, joined the Ontario trade mission to meet potential partners in a Bollywood version of the firm’s online game, Hollywood Tycoon. By understanding Indian culture just enough to market his product effectively and leveraging the many one-on-ones facilitated by the mission, he came home to an inbox filled with e-mail from interested parties. “The big windows may have closed, but in a place like India, there are new windows opening every day,” says Gunn. “Small to medium-sized businesses are innovative and better able to scour the grassroots for those opportunities.”

Although Canadian merchandise exports to India doubled to $1.1 billion between 2000 and 2005, Canada’s share of India’s imports actually declined over the same period.

“Canadian firms need to step up their efforts to penetrate the Indian market and adopt long-term views on the potential that exists there,” says Marvin Hough, Export Development Corp.’s vice-president for Asia. In other words, book your passage to India soon—and don’t get stuck behind any motorcades.

Originally appeared on PROFITguide.com