The Coronavirus Pandemic has affected economies all around the globe causing damaging losses across sectors and turning sentiment bearish in the investor community. While nations have taken extraordinary measures to support their economies, there is a limit to the stimulus a government can provide. While the markets struggle to stay afloat, there are several opportunities that are up for grabs as we move ahead with a gradual re-opening of the economy.
Prime Minister Narendra Modi recently floated the concept of ‘Vocal for Local’ and ‘Aatmanirbhar Bharat’ in one of his addresses to the nation. The ‘Vocal for Local’ pitch encourages Indian brands to develop products and services which would not only compete with global brands at home turf but also make headways in the global economy. The pitch has been welcomed by all sections of the society on the backdrop of the Coronavirus and the recent frictions with the neighbouring nations.
It is no secret that India heavily relies on foreign imports for a plethora of products and services. Taking advantage of our generous economic policies and loopholes in the system, foreign brands have taken market leadership status across many critical segments in the economy. For Instance, Chinese brands had 74% of the Indian Smartphone Market by the 4th Quarter of 2019, with Xiaomi a brand which only set foot in India in 2014, taking away a market share of 30%. This sheer dominance had rendered previous market leaders such as Micromax almost irrelevant over the majority of the last 5 years.
Praveen Sinha Pincap MD feels Vocal for Local will tilt the scales and favour Indian brands who dare to innovate and take advantage of the new rules of the game. Last month, the Confederation of All India Traders (CAIT), which claims to represent 7 crore traders, stated that they had identified at least 3000 product categories which India imports heavily from China and other countries, but can be replaced by Indian substitutes. The CAIT has requested all their partners and stakeholders to not sell and stop importing these products. The CAIT also requested Indian celebrities to stop endorsing brands from hostile countries in its pitch for self-reliance and supporting local brands.
A recent study conducted by Mumbai based Indian Institute of Human Brands found that 84% of the respondents did not want celebrities to endorse Chinese brands, in the wake of the Galwan valley clashes. In a survey conducted by Local circles, an online community platform representing 29000 start-ups and SMES, 87% of the respondents said they would boycott such brands over Indian brands in the coming years.
The public sentiment has swayed and this feels like a watershed moment in the history of the Indian Economy. In 1991, India opened up it’s economy for the world and 3 decades later, we are beginning to realize that it’s time our brands lock horns with the best and emerge as global players. But are our brands ready to take up this opportunity? What are the challenges that face the Indian brands at present?
Another survey revealed that 83% of the Indians buy imported goods because they are the cheapest options available in the market. In an economy where wealth distribution is uneven and the majority of the population falls under low and middle income groups, value for money is the utmost priority for the quintessential Indian buyer. Because, Indian brands could not compete in price, they lost out to foreign players in several key segments. Then comes the difference in actual or perceived quality. Be it Chinese, American or Korean goods, the quality of imported goods are not necessarily always better than the Indian counterparts, but their perception is always better than the local goods. Their technological superiority and marketing machinery gives them an edge over the Indian players who are competing in the market.
The Chinese government under it’s vision – ‘Made in China 2025’ has invested hundreds of billions of dollars into their economy to provide direct funding, low interest loans, tax breaks and export subsidies to rejuvenate the country’s private sector. They also have controversial policies like forced transfer agreements; under which foreign companies are forced to enter into joint ventures to invest in China and share their sensitive intellectual property with their Chinese partners. This allows Chinese companies easy access to cutting edge technologies by skipping the innovation process and then replicating IPs into brand new clones of western origins. Praveen Sinha feels India’s policy makers can take a leaf out of China’s playbook by drafting policies which finally incentivise and strengthen our local companies. Availability of loans at attractive lending rates, export subsidies and reduced taxes would be a much needed boost in the post-COVID economy. NBFC’s are a key source of liquidity for cash-starved MSMEs in the current crisis, and Praveen Sinha welcomes Finance Minister Nirmala Sitharaman’s allocation of a huge chunk of the recent economic stimulus to this sector. He however adds that stimulus can only ensure that these enterprises can stay afloat in the short term, but there is the urgent need of more complimentary financial packages to set the wheels in motion for an ‘Aatmanirbhar Bharat’
The final challenge according to Praveen Sinha is consistency – the need to deliver with each release and stay relevant in an extremely competitive market. Today, Indian corporates like ITC, Tata and Reliance are successful because they have consistently delivered quality products across a variety of segments at competitive rates, matching their foreign competitors at every step of the game.
Companies cannot take the current sentiment for granted and deliver substandard products. They will have to overperform and emerge as the default choice of the consumer, which is easier said than done. The economy has slowly started to move and only those who are willing to take maximum advantage of favorable sentiments and opportunities will be rewarded, concludes Sinha.