Export to India, as a business, is still in its infancy. Hari Yellina has explored the options and found it to be a new and exciting opportunity as well as being commercially viable. He discusses the details of the business as well as the pitfalls and gains of working across two countries and cultures
Hari Yellina came to Australia on a business visa 12 years ago. Back then things were quite different. John Howard was Prime Minister, the economy was booming and the number of Indians coming here as international students was increasing every year. There were many businesses that were dependent on this group and Yellina saw the opportunity here.
After a year as an IT consultant, Yellina decided to set up a software company. He opened a car yard and was an investor in a number of service stations and restaurants.
Soon, he found a niche in the finance market for small businesses that he could fill. As this built up, he was exploring other options, one of them the development of a real estate portfolio but there was another opportunity in the horizon. He came across the idea of being a bridge between the farmers in Victoria, NSW, NT, WA, Tasmania and Queensland and the labourers they needed to work on their farms.
This was good business but changes in the government and policies meant the steady stream of Indian students dried up. This was when he decided to give the export market a real go.
India already has a fairly high import bill and it grows every year. According to WTO statistics, the figure is as high as $500 billion and this places us in the top ten countries in the world.
The large population and the younger generation’s appetite for better products are making export a viable option as a business.
“Twenty years ago, most of the imports concentrated on fuel, gold and iron and not as much on the food. This has changed. In my opinion, export is a growth industry. The products may change but export, as an industry will only grow. Australia is one of the highest quality produce in the world. We have as much land as the US and, unlike the US, an export market that is yet to be utilised,” says Yellina.
Australia has a fairly robust export industry and has mainly concentrated on the mineral sector in recent years.
“Eighty-three per cent of Australia’s merchandise exports to India come from just three commodities — coal (which alone accounts for 57 per cent), gold (27 per cent) and copper ores and concentrates.Current trade between Australia and India is worth about $2.7 billion, with a surplus in Australia’s favour,” says Yellina.
So there are many other areas that are untapped as far as business opportunities go. Food is one such sector. Yellina finds that quality of produce from Australia is high and overseas markets are many. “Food exports to India is its infancy and its import is becoming a necessity in India.The main reason (for the low level of import) is the high barriers that India maintains on imports of agricultural products (and to imports of many manufactured goods).”
He explains that rising incomes and a growing population are pushing up demand for farmed produce faster than supply, turning the country into a major importer.
“It’s not that India does not produce enough food. Our lack of technology and infrastructure means that about 1/3 of the produce is rotten even before it reaches the wholesale market. Indian farmers can’t afford cold storages. Western farmers have their own storage facilities and can hold onto their produce till its time to sell them,” says Yellina.
India needs a lot of protein too as a substitute for meat and dairy products. The future health of India will be based on protein consumption by its youth. However, according to Yellina, India has wasted precious years ignoring the need to train and educate farmers about protein-based crops. “In India, most of the crops are rice or wheat. They have almost forgotten we need pulses and protein as well,” he says.
“In India, around 65 – 70 per cent of the north Indians are vegetarian and in the south, around 30 per cent. We depend on nuts and pulses for protein,” says Yellina, adding that the demand from the rapidly expanding middle-class has caught the government unawares.
“Cable TV and other private network television has penetrated to the villages and educated people about health standards.” This means that a demand for different variety of food is coming not only from larger cities but also villages.
The biggest challenge though is infrastructure, which Yellina says can sometimes be devastating for business.
“Last year, I was exporting grapes to India. It was an easy ride to ship it. However, once it reached Mumbai, the container was in the water awaiting clearance for 10 days, just because of sub-standard processing and lack of infrastructure,” he says. “Once the fruit arrived, it then took us two days to find a cold storage. Every day, until we found storage, we had to check the temperature of the cold storage as we didn’t trust the person who ran it. You also have to factor in the energy shortages, which are rampant,” he adds.
Yellina feels the Indian government has to take drastic measures if India is not to turn into a Singapore, which imports virtually everything. There are many factors which prevent India from becoming a food producing powerhouse in spite of many factors going in its favour. Small and fragmented land holdings, inadequate irrigation facilities, depleted soils and lack for storage for food being some of the main ones.
Yellina mentions that there are no government subsidies to importing fresh produce and the import duties are astronomical – as much as 50 per cent.
“Pulse imports into India do not at present attract any duties so as to ensure local availability of imported pulses at competitive prices. This is a welcome move from the Indian government as our population is highly dependent on pulses for protein intake,” he says.
He compares the two markets in Australia – import and export. “We have 300 importers (small and big) for a population of around 100,000 but we don’t even find a handful of Indian exporters for a market of 1.2 billion. Maybe we should learn to export to a growth market.”
He feels that lifestyle is a huge contributing factor. “One of the main reasons is that the vast majority of exporters need to spend time in farming towns which are very far from cities. Most Indians like to live in cities and do the same business that everyone else does. We have around 150 Indian groceries and 700 Indian restaurants in Melbourne. I have yet to see one fresh fruit shop which is solely owned by Indians.”
The Indian economy will continue to offer opportunities for marketing food products in the years to come. As the domestic food processing industry is not yet well developed, there is significant potential to be exploited by processed food manufacturers elsewhere in the world.
“An entry into the Indian market has to be carefully orchestrated to ensure that it is a win-win situation for all stakeholders — Australian exporters, Indian importers, distributors, retailers and most importantly the Indian consumer,” says Yellina.