Old school economic journalists in India like to parallel the change in the country’s attitude towards foreign trade to the often-silly quirks of its oversized bureaucracy.
Prior to India’s 1991 economic reforms, the person in charge of imports and exports was the "comptroller". As the country’s economy progressed, the title changed.
"They decided he had to go on to be the director of foreign trade because [a director] aids foreign trade," said T.S. Vishwanath, erstwhile journalist and now the head of International Trade Policy at the Confederation of Indian Industry (CII), a trade association.
"The handbook used to come in a red color and now it comes in green. So you see the mindset change we have gone through."
Once a protectionist behemoth, over the past 15 years India has opened up to outside investment, dismantling its high wall of tariffs and regulations brick by brick.
For foreign companies, this means more access to what consultancy McKinsey predicts could be the world’s fifth-largest consumer market by 2025. Throughout the 1990s, the biggest beneficiaries were the big US and European multinationals, not only because of their willingness to invest but also because they could leverage themselves into a market starved of consumer goods.
One example of this is the telecoms industry. Some restrictions still apply to service providers, as they do in most countries, with foreign companies limited to 75% stakes. However, telecom infrastructure providers fall under an automatic route system that allows for 100% foreign direct investment (FDI). China’s Huawei has directly benefited from this, said Chief Technology and Marketing Officer Ramdev Sharma.
"There is a need for stakeholders in the industry… to work together and create a system where the end user benefits."
In 2001, the government liberalized a host of industries, extending the automatic route system to all but a small list of sectors. It also increased the allowed maximums of FDI in industries such as defence, mass transport, private banking, some media, petroleum pipelines and e-commerce.
Last year, 100% FDI was allowed for brewing, industrial explosives, hazardous chemicals, greenfield airports, wholesale trading, coal mining and power trading.
As part of the latest budget, released on February 28, the government committed to cutting peak duties on nonagricultural products to 10% from 12.5%. Duties for chemicals and plastics as well as medical equipment are to be reduced to 7.5% from the same 12.5%. The government also reduced excise duties on petrol and diesel from 8% to 6%.
The sudden openness is a drastic change for Indian companies.
"In India most of the time, most companies would focus on the domestic market. The domestic market makes up a major part of their production. We are very domestic oriented," said Vishwanath.
"[But] we understand that 10 years from now you are not going to have every country producing everything. There will be a change in the way production patterns happen across continents."