15
Sep

In a recently concluded seminar conducted by IE India club, several industry veterans discussed about the emergence of a quiet yet burgeoning trade relationship between India and Spain. The occasion was also graced by the presence of Indian ambassador to Spain – His Excellency Mr.Sunil Lal and Dean of IE Business School – Mr. Santiago  Iñiguez de Onzoño. The seminar was an astounding success, highlighted by the fact that there are growing synergies between India and Spain in terms of bilateral trade and perhaps we are witnessing a defining moment in the history of the two countries. The presentation was followed by a highly interactive Q&A session, between IE students and the speakers.

Mr. Alan D Silva, Partner, PwC, Spain

Mr. Oscar Vía Ozalla, General Director International Development, Isolux Corsán

Mr. Guillermo Falco – Head Client Services, Southern Europe, Banking and Capital Markets at Infosys Technologies

Counselor to the Indian Ambassador in Spain, Mr. Jayant Khobragade

Indian Ambassador to Spain, His Excellency Mr.Sunil Lal

Dean of IE Business Schoo,l Mr. Santiago  Iñiguez de Onzoño

Current Scenario

With an annual bilateral trade involving $5 Billion, trade partnership between India and Spain has been an unprecedented success story. In recent times, where we have been witnessing an increasing volatility in Euro zone and an imminent global financial crisis, a story like this comes as a breath of fresh air and needs worth mentioning. Notwithstanding all the economic turmoil of recent past, the Indo-Spanish trade is poised to grow at around 20% in the coming years. In a recent survey published by Indian embassy in Madrid, trade balance between the two countries has hovered around $2000 Million mark year-on-year: a clear indication of growing interest of Spain to seek new partners in emerging economies like India and also an indication of Indian Government’s persistence of continuing with economic liberalization policy that started about two decades ago.  Presently, there are around ten major Spanish companies working in India. Sectors where tie-up and expansions are happening in Indian market are consumer goods, travel, tourism, energy, banking, construction and retail, with renewable energy being most dominant among them. Some of the well-known Spanish companies in India are Acciona (Wind energy), Gamesa (10% of wind energy projects in India) – in a joint venture with Caparo, a London based company and Inditex (with its brand Zara and Mango). On the other side, Indian companies have also entered the Spanish market in Pharmaceuticals, IT Services, Energy and automobile industries. Financial sector has been identified as major growth area of India. Apart from these, following sectors have been identified as, priority sectors where Indo-Spanish joint ventures can happen in the future: Infrastructure, energy, agriculture, automobile components, information Technology, pharmaceuticals, textile and tourism.

What does India offer to Spain and rest of the world?

After years of stagnation due to Socialist policies, Indian economy breathed a new lease of life in early 90s, when the then finance minister (Dr. Manmohan Singh) introduced sweeping reforms in various sectors. In the following years, Indian economy has witnessed huge spells of GDP growth (almost touching double digit in 2000s and currently estimated to be 8.8% for 2011), increasing interest of multinationals to invest in the country, resulting in rising levels of living standards. Conditions for doing business for international companies remain positive.  Following figures, as presented by one of our guests (Mr. Alan D Silva, Partner in PwC, Spain) indicate that India continues to be one of the most favored destinations for multinationals. With receding confidence in developed economies, India has potential to emerge as an important partner for alleviating the trade imbalances and providing attractive investment incentives:

  • India is 4th largest economy in the world in terms of PPP
  • 70% of foreign investments are making profits
  • 84% plan to expand 
  • 91% perceive new opportunities for investments
  • 60% of the companies are obtaining better margins in their businesses in India than their average in their global businesses
  • 220 of Fortune 500 are present in the Indian market
  • Indian Economy: Service: 58%, Agriculture: 20%, Industry: 19%
  • Forex reserves in India: $320 Billion
  • FDI attractiveness: among top 5 in the world
  • As per BCG study, banking sector will be third largest in the world in next 14 years
  • Growth of India is based on internal demand
  • India ranks among highest in consumer confidence

In addition to the factors mentioned above, India’s favorable demographics as compared to other emerging economies can provide a huge impact in predicting growth for the future. As the world order slowly shifts from Service based to Knowledge based, India will be in a position to provide a huge supply of ‘Knowledge Workers’ in the age group of 25-35 years. High-income countries like Spain will face an upward demand for skilled workers. With dwindling population growth in west, the shortage of skills shall be compensated by demographics of Indian population, which will pave way for larger business partnerships with Indian companies.

What Spain offers to India? – A case study on Isolux Corsán, India

Isolux is a multi-national company working in 25 countries in the areas of Construction, Environment, Energy and is one of the biggest trade partners with India. It works with a global strategy of being a local company, when doing business abroad and prefers to call itself as a global company headquartered in Spain.  It also focuses on a product / service portfolio for Middle East market by using India as its operations hub. Its success in doing business in India can serve as a template for all the future partnerships.

Mr. Oscar Vía Ozalla, General Director International Development, Isolux Corsán attended the seminar and provided detailed insights on his experience of working in India and the benefits his company reaped out of the partnership with Indian Government.  The highlight of the presentation was the fact that Indian market currently represents second largest revenue source for Isolux (14%- next only to Spain) and it is anticipated that India will become the largest revenue generator for the company by 2013 (15% of its revenues). The company has been prequalified in 55 construction projects across India.  He further pointed out that for Isolux, “Country Analysis” is paramount in making investment decisions. This includes political, economical and monetary factors and also ability to invest in local currency, which is essential for a self-sustainable financing. Isolux started its operations in 2003, set up representative office to analyze market and looked for partnership. Eventually they entered into a 50-50 JV with Consoma (50-50) in 2007.

How Spain can reap benefits from Indian IT Services – A case study on Infosys, Spain

The success stories about Indian IT services firms have been oft repeated everywhere in broader business contexts. Infosys is one of the biggest Indian IT giants and is seeking to position itself as a Global software and consulting service provider. In fact, it has pioneered the first global delivery model, which has helped large corporations all over the world in the last decade, to save a lion’s share of their IT costs and with right quality. Infosys has a 97% repeat business rate with its customers. It has been growing at a CAGR of 56% in European market.

Spain has been one of the late entrants in the IT outsourcing business and the Indian IT conglomerates offer a huge opportunity for the Spanish markets. With local economy plunged deep into crisis, corporations across Spain will need to rethink their business strategies and cut down their costs. Indian IT service industry, with its huge experience with US and other European customers are well suited to serve the purpose.

Mr. Guillermo Falco – Head Client Services, Southern Europe, Banking and Capital Markets at Infosys Technologies, provided some interesting details about the company’s strategy in Spain. Infosys has been one of the early movers among Indian software companies in Spain. Not surprisingly, they have repeated their success here as well. For Spanish banks, Infosys created a software factory in Spanish language and operated on a 5:95 onshore-offshore model, which effectively translates into a more than 50% cost savings for its customers.

Current and Future Challenges

Despite the booming business relations between the two countries, Indian companies expanding into Spain and vice versa, need to be aware of the language barriers and the cultural differences that exist between the two countries.

English is the business language used in India and the focus on learning Spanish for business is almost non-existent. However, English is now the second language taught in Spanish schools (moving from French), which implies that language would cease to be a big barrier in the near future.

Cultural sensitization is a topic, which can be dealt easily, if identified and recognized in time. All the experts on the panel agreed that the best way to enter either market is through Joint Ventures in a specific industry as a testing ground. The lessons learnt from these ventures can serve as a benchmark for doing business with each other. For example, Isolux first entered the Indian Market with a JV with Consoma and started working in the Roadway construction sector. This helped them understand the local market and test waters for entering into the Power transmission business and explore other avenues of engagement. Infosys clients were pleasantly surprised with the result and quality of deliverables provided by a company in a non-Spanish speaking country, which not only helped Infosys to retain existing clients but also served as a precedent for new clients.

Concluding Remarks

All the speakers in the seminar unanimously agreed on encouraging more synergies between two of the culturally disparate, yet market oriented countries. At a time, when corporations across the world are increasingly facing non-market, unforeseen challenges such as global warming, European crisis, growing distrust among citizens over Governance, their survival and sustenance will invariably depend upon seeking new opportunities. Evidently, value creation will require increased mobility and collaboration between India and Spain. Furthermore, both the countries offer each other complementary expertise (e.g. Spain in renewable Energy and India in Knowledge sourcing), which will go a long way in defining a long-lasting relationship.

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