Indian firms are upbeat on local and global opportunities, according to a new HSBC survey of over 8500 companies globally: ‘Navigator: Now, next and how for business’.
The survey data shows that an overwhelming majority (96%) of Indian businesses have a positive outlook on the global trading environment. A similar majority (97%) of Indian businesses are optimistic about India’s growth prospects while 94% of Indian firms are upbeat about the growth prospects for their own company. Indian companies are significantly more optimistic about each of these than the global average of global trading environment (78%), market (76%) and for their own company (77%).
Greater use of technology (41%), increasing demand for their products (34%) and growth of e-commerce (33%) are the three key drivers of growth of trade for Indian firms as per the survey. Optimism amongst Indian firms about growth prospects of their own company is largely driven by an expectation of global economic growth (46%), introduction of new technologies (38%) and consumer confidence (34%).
The survey data shows that the top three current trading partners for Indian firms are the USA, UK and China. Going forward, they expect that key markets for their expansion will be the USA, Australia and Canada.
One development that is worrying Indian businesses is the threat of protectionism. A clear majority of respondents (81%) reported that governments in foreign markets were becoming more protectionist, which was far above the global average (63%). On the other hand, Indian respondents do not necessarily believe that regulations are always negative for their business. Although just under a third (31%) feel that complex approval systems make it harder to do business, nearly two in five firms say that regulations are increasing the competitiveness of their business and just under a third believe that it increases the value of their business.
Around two-thirds (67%) of Indian firms expect industry or sector specific free trade agreements to have a positive impact on their businesses in the next three years. This corresponds with the view that regulations in other markets raise the cost of raw materials (a factor identified by 33% of respondents) and create barriers to physically setting up office in those markets (31% of respondents). Businesses appear most confident about the positive impact of India’s free trade agreement with ASEAN. Interestingly, a quarter of firms feel that Brexit will create opportunities for them outside and inside of the EU.
Diversification into other products/services (37%) and expansion to other markets (35%) in addition to increased spend on R&D/ technology (33%) are the major changes companies have made in the last two years. This has been done with the intention of attracting new customers (41%), driving product innovation (40%) and driving growth (38%). Growing market share is the key factor in setting the future direction for two in five (40%) Indian businesses. More than a third of businesses focus on productivity/skills development (37%) and long term growth (35%).
Rajat Verma, Head of Commercial Banking, HSBC India said, “Global trends point towards a rise in protectionist sentiment. While this is a concern, we believe that India will continue to hold its position as one of the fastest growing economies globally and hence, present long term growth opportunities. It is important for companies to stay abreast of the changing trade policy landscape and adjust business strategies as required.”
Globally, the survey reveals that businesses are upbeat about their prospects, encouraged by customer demand and favourable economic conditions, but are revising their strategies as protectionism dents the outlook for international trade. Moreover, political headwinds are gaining strength as 63% of firms globally think governments are becoming more protective of their home economies, up 2% since the first quarter of 2018. Reflecting these uncertainties, many companies are turning their attention to intra-regional rather than inter-regional trading opportunities.
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