Why Dutch Companies should make Strategic Investment in Indian Manufacturing Ecosystem

The Netherlands and India enjoy close business & trade tie-ups that started with the spice trade around 400 years ago. The trade relations between the two countries are intense as around 200 Dutch companies are currently present in India including Unilever, KLM, Phillips, Rabobank, etc. An equal number of Indian companies are also present in the Netherlands. 

Over the years, India has become a natural partner for Dutch enterprises, which has also been backed by strong diplomatic relationships. Water treatment, agriculture & agritech, and healthcare are some of the major sectors where India is seeing maximum collaboration from Dutch enterprises. 

From April 2000- to March 2020, a total FDI of USD 33.75 billion entered India from the Netherlands. In FY 20, a total FDI of USD 6.5 billion has been directed towards India, making it one of the topmost European partners for India. In the coming years, many Dutch companies will continue to invest in India as it offers a large domestic market and skilled labor at affordable rates. The bilateral trade between the two nations is close to USD 12 billion and is expected to grow in an upward trajectory. 

Reasons to Shift to India

The COVID-19 pandemic had led to a colossal shift within the manufacturing and supply chain sector globally. This situation has further paved the way for India to become a global manufacturing hub. The country can tap on this opportunity with the support of its three major assets, the government's Make in India program, huge population leading to great domestic demand, and a large working-age population. This will allow India to play a crucial and a larger role in global value chains. 

The thriving Indian manufacturing sector could be the vital building block for India's prosperity and economic growth in the coming decade. The rebalancing of global value chains has provided the government of India and businesses a chance to accelerate the trajectory of the manufacturing sector and transform the country into a global industrial hub.

This will uncover new opportunities for large and small-sized dutch companies in a host of areas including but not limited to water sanitation, water treatment technology, flood mitigation technology, agriculture, horticulture, agriculture technology, affordable healthcare, etc. Netherland is a leader in the global agriculture and horticulture industry and by sharing its innovation and technologies, it can help the Indian agriculture sector double down on its production. Already both countries have signed an MOU to sign 10 centers of excellence in India, which is a positive step in this direction. 

Besides, there will be other areas for mutual collaboration such as smart city projects, food processing, digital payment technologies, etc. 

Why India is favored by Dutch Companies and other Foreign Investors

  • India has a huge population and also a younger workforce with lower wages that may fuel the country’s manufacturing sector.
  • India is transforming to industry 4.0 and the Internet of Things in asset maintenance and supply chain monitoring that has led to efficient production processes. 
  • Today more and more MNCs are looking to diversify their supply chains beyond China, and so India serves as a complementary production location.
  • India’s highly effective and rooted democratic regime ensures a stable and peaceful political environment.
  • India’s vast geography along with an independent judicial system, and well-developed administration make the country rich in resources.
  • India has a great number of skilled and educated workforce such as engineers, accountants, lawyers, and management personnel. 
  • India is one of the largest markets for manufactured goods in the world, as the country has an ever-growing consumer base.

India Gearing up for Foreign Investors

India has moved to 63rd position from 130th position on the World Bank's Ease of Doing Business Index between 2016 and 2020. The country has made notable progress in four of the index's 10 parameters that consist of: dealing with construction permits, trading across borders, resolving insolvency, and getting electricity. Though there still is a headspace for improvement, India’s attempt at enhancing the overall business environment in the country is commendable. 

India has also lowered its corporate tax for new manufacturing units to 17%, which makes it a highly favored destination in South Asia. There are plenty of attractive Product Linked Incentive (PLI) schemes in food processing, pharma, electronic appliance manufacturing, textiles, etc, which can be leveraged by international enterprises alongside indigenous companies. 

How The India Watch can Help?

The Indian market offers enormous opportunities, however, finding the apt target audience within the huge Indian market is a key while growing. Dutch investors will take time to understand how business in India works. India has many segments and submarkets having its own rules and requirements.

This is where advisories like the India Watch can come and help

  1. Help in identifying the suitable partner in India
  2. Distributor and retailer identification
  3. Custom market research and data advisory 
  4. B2B research and market analysis 
  5. Marketing and content support
  6. Strategic communication services 
  7. Retail market research 
  8. Qualitative interviews focus groups, etc 
  9. Feasibility services for new projects & ideas.
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