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Labourers work inside an iron factory on the outskirts of Jammu November 12, 2012. Canadian businesses could do more to take advantage of India’s great growth prospects. (MUKESH GUPTA/REUTERS)
Labourers work inside an iron factory on the outskirts of Jammu November 12, 2012. Canadian businesses could do more to take advantage of India’s great growth prospects. (MUKESH GUPTA/REUTERS)

Canadian exporters need to find India’s sweet spots Add to ...

Wayne Gretzky famously described how he was taught to “skate to where the puck is going, not where it has been.” Gretzky – to many, Canada’s greatest export – was talking about hockey, but the same principle applies to Canada’s trade. Many Canadian companies are still skating to where the puck has been, and missing many of the places where it is going.

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India, for example, accounts for less than 1 per cent of Canada’s trade and investment, according to official estimates. Yet, India accounts for 7 per cent of the world economy today. It is expected to rise to 11 per cent by 2030 and to 18 per cent – almost one-fifth – of the world economy by 2060, according to OECD estimates.

So how do more Canadian companies actually start taking advantage of opportunities in fast-growth markets such as India? A good starting point is to identify sectors of the Indian economy that land in the “sweet spot” – they are sizable, dynamic, fast-growing, and present relatively few barriers to Canadian businesses.

A new Conference Board study, “The Hottest Markets for Canadian Companies in India,” finds many fast-growing, sizable, profitable, dynamic sectors. But despite two decades of economic reform, much of India’s economy remains relatively closed to foreign activity. So the study’s final list of hottest markets includes only those fast-growth sectors that are relatively open to Canadian business.

The final list includes eight Indian service sectors, 10 manufacturing sectors, and eight resources or agricultural sectors. In many of these hot markets, Canada has demonstrated international commercial strengths.

These industries include:

  • Infrastructure and related activities. India has massive infrastructure needs and plans. This sector is relatively open to foreign activities. Canadian companies that, for example, provide engineering and design services, or machinery or equipment, can take advantage.
  • The auto sector and supply chain. Canada has expertise in all aspects of the auto sector. India’s auto sector is massive, growing at a dramatic pace, and is relatively open to investment and trade (though there are still tariffs and other barriers). Expertise and products developed for the U.S. market can be adapted to India’s needs.
  • Services. Canada has demonstrated international commercial strengths in services. In fact, key services have been Canada’s fastest-growing exports over the past decade. India’s services sector is massive. Hot sectors include telecommunications and banking, both areas of Canadian strength. The services sectors are more closed to foreign investment than manufacturing, though the government has recently announced “big bang” reforms in a range of services such as retail, airlines, insurance and broadcasting.

Doing business in India can be extremely difficult. India ranks toward the bottom of the World Bank’s ease-of-doing-business measure – number 132 out of 185. And India is geographically distant, compared with the large economy next door in the U.S.

The challenges in India are tremendous, but so are the long-term opportunities. India’s growth prospects are far above the meagre rates seen in Canada’s traditional trade partners. With a free-trade deal in the works, and an investor protection agreement negotiated (though on hold on India’s side), Canada has started toward removing barriers for its companies in India.

The gap between Canada’s current trade profile and where it needs to go is wide. But Canadian companies have demonstrated strengths that they could adapt and apply to fast-growth markets such as India. In other words, Canadian businesses know how to skate. More of them need to skate to where the puck is going.

Danielle Goldfarb is Associate Director of the Global Commerce Centre at the Conference Board of Canada.

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