India to shine among emerging markets

Supply chain executives, who surveyed for the 2017 Agility Emerging Markets Logistics Index picked India as the emerging market with the most logistics potential and the country where their companies were most likely to invest. The survey of more than 800 logistics executives offers an annual snapshot of industry sentiment to go with the Index rankings of the world’s 50 leading emerging markets by size, business conditions, infrastructure and transport connections. India climbed to No. 2 in the 2017 Index, switching spots with United Arab Emirates. China, the world’s second-largest economy, again topped the rankings. “It’s remarkable to see a country this size growing at better than 7 percent a year. Goods & Services Tax (GST) reform has the potential to be a game-changer,” said Detlev Janik, South Asia CEO of Agility Global Integrated Logistics. Reji John speaks with Janik to understand key highlights of the survey. Edited excerpts.

What you think are the major highlights of this year’s index and how are they different from the previous indices?

India has sort of shot up the ranks in the last few years. We are optimistic about India. I have been here for the past 13 years and there have been many ups and downs. India’s economic development and explosive growth are massive and I think that comes through in the survey too. If you look at the methodology of this survey you notice that market size and market compatibility play an important part. The infrastructure has improved dramatically and is viewed very positively. China is still very much ahead. But I think India is viewed as a major opportunity because again size of the market is huge. India has 1.3 billion people and given the size of the economy and size of the market, it still grows at 7 percent which I think is massive. And therefore you see India shooting up the ranks. We also see willingness by the government to change, to improve taxation, regulations and investment environment. So I think that leads to an improved perspective of India as a logistics market and as an opportunity.

What factors make India significantly ahead of other emerging markets?

Perception is always a strong element and in India we have seen the euphoria about its growth. I still remember when I came in 2004; India was shining and then a few years later India was not shining so much anymore. I think India has market size and that itself is a big opportunity. Therefore, regardless of the environment this is an opportunity and people perceive it as an opportunity. Then if you look at the other side there is infrastructure, which we all know is still lacking in certain parts. The condition of the road is poor, at times ports are congested. Probably if you ask somebody who looks at India from outside that would be a negative impression. Then it is the market compatibility. Can we do business here and I think that is something which gets easier as the expectation clearly is that it will continue to get easier. And the easier it gets for a foreign company to do business here, the more positive the outlook. Growing market is a fact but the willingness of the government to change the regulatory environment is something that drives the perception into positive territory.

What’s your assessment of how India’s business environment is changing in comparison to China?

The growth has slowed, but it has slowed from a very high base. So the percentage number is probably declining a little bit but you see the underline base factor, which I think is still growing very quickly. China of course continues to be very attractive. On the other hand how easy is it really for a foreign company to do business in China? I am not sure and that’s a personal perspective. I would rather be in India than in China. However in China, if you want to get something done the bureaucracy has the means of getting it through in a very disciplined and focused manner which is something you probably don’t find in India. Here we work with a slightly more cumbersome bureaucracy. Perhaps that is the cost you pay for being in a democratic market like India. So it’s something which is particular to India. But by and large I think if you go in India with an open mind and yes with open eyes it is not difficult to do business. I am not saying it’s easy but it’s not difficult. You know what you are getting into and if you take the realistic account of it then the Indian market is compatible to what you are trying to do.

How do you see the impact of global slow down on your volumes in India and China?

For us no but then we look at a very myopic point of view of an international forwarder our volumes has not come down, our business had not been affected yet. Sometimes you have certain trade lanes which are growing and certain trade lanes which are declining but our business is growing. May be our import and export in China aren't growing as fast as they used to be, but the import into China is growing dramatically so that offsets our lower export volumes. So in that sense our business is not being effected.

Is globalisation slowing down and how e-commerce is playing a key role in facilitating borderless trade?

E-commerce has been game changer in China more than anywhere else and because of the exposure of the consumption facilitated by the e-commerce you have much higher flow of imports into China now than it used to have. China is growing up and I think China is maturing and that changes a little bit the way trade flows goes. Beyond that I think there is more general perception that globalisation is slowing down because people talk about protectionism and the fact that distribution is unequal. So like I said your small world of international freight forwarders we haven't noticed that, but we all read the newspapers. I think the risk of globalisation slowing down is pretty much there.

Impact of geopolitical events and how they impact global trade?

We are still pretty optimistic about our business. Our shareholders think and convey the message that they are confident, optimistic about our business. I think if you look at Agility as a company, we have a very heavy emphasis on emerging markets and they will continue to grow. Would Brexit have an impact? I can’t really predict, being European myself, but if I may be allowed to say in my personal opinion the British will be most affected by the Brexit, because Europe is the effect of life and just like many other things you can’t put the genie back into the bottle. You can’t turn the time back. We are not leaving in the 60s anymore so I don’t see that as a particular risk. Actions by the president of the United States and how they will impact global trade is very difficult to predict. The rhetoric of course is not very conducive towards an open global trade. However, global trade will continue to grow because there is a rising aspirations among people across emerging markets. In many countries as people become more affluent and want to consume products from across borders and that to a large extent will drive our business.