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Mexico India trade can surpass Mexico’s trade with European Union

IndMex / Advocacy  / Mexico India trade can surpass Mexico’s trade with European Union
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8 Sep

Mexico India trade can surpass Mexico’s trade with European Union

Mexico India bi-lateral trade has the potential to surpass Mexico’s trade with entire European Union. Yes, this means Mexico’s trade with Germany, UK, France and Spain – combined.

At $7.9 trillion USD, India is world’s third largest economy in terms of purchasing power parity.[1] It is also world’s fastest growing large economy. India’s economy grew by 7.9% year-over-year in first three months of 2016 – faster than China in terms of annual Gross Domestic Product (GDP) growth.[2] At 1.2 billion people, India’s population is more than twice the size of EU. And unlike EU countries where the population is aging, more than 50% of Indians are below the age of 25.[3] According to the International Monetary Fund (IMF), this ‘demographic dividend’ alone can add up to 2 percent in annual GDP growth with targeted government policies. [4]

India_population_chart

 

India’s current Prime Minister – Mr. Narendra Modi, who will arrive in Mexico City on June 8 for a short business trip, comprehends the potential and aspirations of his young nation. Since coming to power two years back, his government has initiated slew of measures to restore the rule of law, attract foreign investments, and improve on ease of doing business ranking. Modi government has focused on improving India’s ailing infrastructure by allocating significant resources to building highways, rail roads, and power generation plants. To stimulate job growth, and impart necessary skill sets, the government has initiated ambitious programs such as ‘Make in India’, ‘Digital India’, and ‘Skill India’.

Prime Minister Modi personally traveled to 26 countries in 2015 to build strategic alliances, and attract foreign investments.[5] His efforts appear to be paying off as India replaced China as top FDI destination in 2015 attracting $63 billion USD according to the Financial Times.[6] In comparison, Mexico received $28 billion USD in foreign direct investment in 2015.

Considering the size and growth potential, the CEOs of big multinational companies – like Apple, Microsoft, Facebook, Alibaba, and Amazon, routinely visit India hoping to expand businesses and influence government policies. Tim Cook, Apple’s CEO, on a recent four-day trip to India boasted that Apple intends to be in India for next thousand years.[7] Apple wants Indian government to waive 30% local sourcing requirement for its retail stores. India currently mandates foreign companies to source 30% raw materials locally in single-brand retail. Similarly, Amazon is eyeing for a share of India’s online shopping or e-commerce market which has grown exponentially with the rise of internet users.

timcook_pmmodi_big                                    Cinépolis

Mexican businesses interested in expanding to Indian market can look up to the success of Morelia, Michoacán based Cinépolis which first started operations in 2009. Today going to Cinépolis, which operates 240 screens across 32 cities, is considered a fashion statement among urban, upper-income Indians. The Mexican multiplex chain expects to open 400 screens across India by the end of 2017.[8]

Mexican companies can compete for a market share in India’s food processing, aerospace and auto-parts manufacturing, designer clothing and accessories, gems and jewelry, home remodeling, restaurant and hotel chain industries. There is a huge potential for joint ventures in mining, tourism, textiles, IT, pharmaceuticals, and renewable energy sectors.

Mexican businesses can succeed in India if they familiarize with the existing government policies and regulations, concentrate on few urban centers around major cities – preferably in western and southern states, learn cultural norms, and adept their products according to the needs of India consumers.

Of course, it is challenging for foreign companies to do business in India. Compared to Mexico, India is slow in opening its economy to the outside world. Its tariff rates are among the highest in the world. It restricts amount of FDI in key sectors such as multi-brand retail, and it has stringent requirements for rules of origin and local sourcing. The businesses will need to learn negotiating with its entrenched, lethargic, and often corrupt bureaucracy. The business friendliness of Indian states varies depending on its ruling political class.

The geographic distance, language barrier, absence of pressing urgency, and lack of familiarity has characterized Mexico-India relationships till now. The new generation of entrepreneurs from Mexico and India should take up the challenge of breaking conventional barriers, and strive to enhance trade relations with India. It will bring people of both countries together, and reap rich benefits for those involved.

 

References

[1] List of countries by GDP (PPP). Retrieved from https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

[2] GDP jumps 7.9% in January-March 2016, beats analysts’ estimates. Retrieved from http://timesofindia.indiatimes.com/india/GDP-jumps-7-9-in-January-March-2016-beats-analysts-estimates/articleshow/52522184.cms

[3] Note to India’s leaders: your 150m young people are calling for change. Retrieved from http://www.theguardian.com/commentisfree/2014/apr/08/india-leaders-young-people-change-2014-elections

[4] “Demographic Dividend: Advantage India”. Retrieved from

http://www.mbarendezvous.com/general-awareness/demographic-dividend-advantage-india/

[5] Mapping PM Modi’s foreign trips: 26 countries in 2015, 3 so far in 2016; Now off to Iran. Retrieved from http://indianexpress.com/article/india/india-news-india/mapping-pm-modis-foreign-trips-in-2015-15-countries-and-now-russia/

[6] India replaces China as top FDI destination in 2015: Report. Retrieved from http://articles.economictimes.indiatimes.com/2016-04-21/news/72508700_1_fdi-report-cent-fdi-fdi

[7] Apple is in India for next thousand years: Tim Cook. Retrieved from http://economictimes.indiatimes.com/magazines/panache/apple-is-in-india-for-next-thousand-years-tim-cook/articleshow/52370895.cms

[8] Cinepolis India to invest Rs 400 crores to open 160 more screens by 2017.  Retrieved from http://articles.economictimes.indiatimes.com/2016-05-24/news/73315365_1_500-screens-cinepolis-india-mexican-multiplex-chain-cinepolis

 

 

 

 

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