India can rule world lifestyle market

Pritam Banerjee | Updated on January 15, 2018 Published on November 28, 2016

Bursting with potential There’s nothing patchy about the demand   -  OlegD/shutterstock.com

Our artisanal products are well regarded in Europe. Export promotion councils should be revamped to leverage this potential

On an average winter morning in Delhi, Jaipur, or Lucknow, local cloth and garment markets teem with Europeans. They are not tourists; they are entrepreneurs bulk-buying cloth and dress materials, fashion accessories, and furnishings for resale in Europe, at a substantial profit.

The fact that the products of India’s millennia-old artisanal entrepreneurship enters the global distribution networks thanks to these travelling businessmen acting as middlemen has an important story to tell us.

Genius denied

The high costs of doing organised business, especially cross-border, has ensured that Indian artisanal genius is constantly denied its rightful share of value the products eventually fetch from discerning consumers in wealthier countries. This also means that India misses out on the opportunity to create thousands of sustainable livelihoods that could go a long way in reducing Indian poverty.

Back of the envelope of calculations using numbers from OECD and EU statistics for household consumption patterns shows that the rough size of this market is between $600 billion and $800 billion. If India’s artisans could capture even a tenth of this market and extract a fair value from it, that is, 50 per cent of the final price of the product as opposed to the current 5-10 per cent at best, it would result in $30 billion of new exports and around six million sustainable livelihoods.

These are not small numbers. More importantly, it would engender entrepreneurship and capital accumulation in India’s smaller towns and hinterlands, and, given the right kind of support, enable eventual development of production networks and recognisable brands. Many of the ‘global’ lifestyle brands from Switzerland or Scandinavia started out as small enterprises that creatively used product differentiation to climb up the value chain.

Empower from grassroots

Empowering the inherent creativity of our artisanal genius would, therefore, be a real example of grassroots ‘startup’ India. This is where our foreign trade policy needs to take a long and hard look at their business-as-usual approach in export promotion.

The reason foreign middlemen and their agents dominate the entry of India’s artisanal products in the global market is that we do not have any comprehensive scheme that actually helps the unorganised and very small producers to export. Since the focus of our foreign trade policy is to give small fiscal ‘incentives’ to different categories of exported products, it essentially serves to equalise differences in cost and productivity vis-à-vis India’s competition at best, and balance the books of exporters with some extra margins at worst.

This is a rather lazy and unfocused approach in a world being rapidly reshaped by forces of technology and consumer choice. A ‘startup’ exporter needs complete hand-holding. She would need to be told about consumer trends and product differentiation. For example, using filigree silver to make high-end mobile-phone covers. She would need access to low-cost production centres that help with standardisation and packaging. Support on omni-channel marketing to final consumers using social media and e-commerce market places and logistics would be another key area of intervention. Also critical would be ensuring access to credit and formal banking channels.

All of these things are not a ‘one-time’ activity post exports, but an entire project approach activity pre-exports. After all, if one has already exported, logic suggests that they are already competitive and competent at some level. So how does a post-export incentive actually help competitiveness or bring those who are not competent and require hand-holding into play?

Bettering best practices

A new foreign trade policy could target artisanal entrepreneurship as the first step in developing a new paradigm of incentivising exports from India, one that helps startups and innovation, and extracting the maximum value from global value chains.

Some best practices already exist. Sweden’s export credit guarantee institution provides support with market intelligence and product placement to SMEs. A new MoU between DHL and International Trade Centre helps African SME exporters with e-commerce product placement and logistics.

A more radical model is HAX, a support and consultancy service for hardware startups that leverages the low-cost manufacturing cluster of Shenzhen to help develop and place products for global entrepreneurs. The pay-off for HAX depends on the success of the entrepreneurs they support, and thus they have a full stake in ensuring the success of the end product. HAX project teams handhold the startup right from the product conceptualisation stage to the final product placement. HAX represents a disruptive change in how a small manufacturer with the right product idea can crack the global market with very little financial resources.

Can we conceive of a foreign trade policy that would expend resources to turn our relatively cocooned and moribund export promotion councils into a ‘HAX’ for their sector? The pay-offs to the council would be tied to the export success of startup clients, and the councils would be expected to hire private sector expertise in areas ranging from product conceptualisation and design, to placement and logistics. The board of the council would have representation from both artisans and the venture capital industry. Salaries would be incentive-based, and the direct result of the export success of startups that the particular set of employees helped incubate.

Imagine doing this for India’s artisanal exports as a pilot project. Imagine the ministry of commerce working actively to create an artisanal ‘startup’ hub in Jaipur with significant seed funding, reaching out to India’s artisan groups and connecting them with a well-developed, expert venture capital community. There could be active participation from global logistics companies and e-commerce marketplaces through strategic tie-ups such as the one between DHL and International Trade Centre. In five years, we could create six million good jobs; in 10, Jaipur could become the ‘lifestyle product cluster’ of the world; in 20, the top five global lifestyle brands could be Indian.

The writer is a senior director for Corporate Public Policy, responsible for South Asia region, Deutsche Post DHL Group. The views are personal

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Published on November 28, 2016
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