India is emerging as an attractive market for Canadian agricultural exports, but there are a few hurdles to keep in mind, participants in a recent business forum were told.
While the rest of the world is struggling to spring back from a recession, India’s projected growth for 2011-12 is 8.75 per cent to 9.25 per cent compared to China’s seven per cent.
The country’s wealth is continuing to grow which is in part responsible for the explosion of retail and commercial food outlets, said Ann Kavanagh from Agri-Food Canada at the recent India Business Forum held at the legislature.
“India is a huge global economy. They are ranked 11th right now. They are the second-fastest-growing economy,” said Kavanagh.
A growing middle and upper income group along with an increase in education in healthy nutritional foods is fuelling people’s curiosity in foreign foods, she noted. The world’s second-most-populated country after China, the average age in India is only 29. “They have a huge consumption and market size for food. Thirtyone per cent of the average consumer’s wallet goes into paying for food.”
Despite this, growth in India is the least developed amongst the world’s major developing countries. Currently India lags 20 years behind ASEAN and 10 years behind China. Kavanagh said that the four main reasons for India’s current position on the economic scale are: lack of technology, infrastructure weaknesses, corruption costs and inefficiencies within government systems.
ARCHAIC TRADING SYSTEM
Government policy that protects the archaic trading system and the unique Indian culture are reasons why entering the market can be time and cost consuming. Western producers must be prepared to deal with tax and duty regulations and political instability.
It also has lower standards for health and safety practices. Importers of products must be aware of improper handling including damage, insects, humidity, heat and theft.
As well, India is behind many other countries when it comes to transportation and basic infrastructure. Refrigeration trucks as well as electric supply for cool or cold distribution and storage is limited.
For those who are looking to export to India, the best prospects for the next five years are edible oils (crude and refined), pulses, cocoa-based ingredients, fruit juices in bulk, fish and seafood, starches and rolled oats.
In India, agriculture production has suffered from a lack of investment, lack of incentives for growth, water scarcity and low yields. To meet demands India has to export agriculture products such as pulses and canola from Canada.
Canada is currently the top yellow pea supplier to India. Imports of Canadian pulses witnessed significant growth during the past five years, reaching a record $539 million in 2009.
India is the fourth-largest edible oil economy after the U.S., China and Brazil. India’s vegetable oil imports have doubled in the past five years (imports opened up in 1994). India imported a record 9.24 million tons of vegetable oil during 2009-10 oil year ended in October 2010.
While India has been pegged for the last couple of years as a key market for expanding exports, one must not overlook the country’s shortfalls, she warned. That is not to say that companies cannot successfully do business in India.
“Competition is already active in India. I have been there for eight years and they have already been bombarded. It is very, very aggressive. Other countries are much more aggressive than Canadians. We are much too passive and we are not getting out there enough. You’ll find your competition from other countries have been there before you,” said Bonnie de Moissac, of Manitoba Trade.
But she said Canada is a well-respected supplier. “This is a really good time to have a Canadian product or Canadian service. We are very well respected coming out of the recession.”
TOP AGRI-FOOD EXPORTS FROM CANADA TO INDIA IN 2010
Pulses ($393 million) Oilseeds/seeds
($5.2 million) Food residues/fodder
($1.6 million) Fats and oils ($912K) Products of animal origin
($653K) Source: Agriculture and