Thai businesses wanting to develop a foothold in India are advised to look at opportunities in low-end segments that domestic producers have neglected, say experts.
Watcharas: Thai trade low in India
"People should not look at India as a single market of 1.2 billion consumers when 600 million people are still living below the poverty line," said Piti Srisangnam, a researcher with Thailand's International Institute for Trade and Development (ITD).
India defines poverty as earning less than 20 rupees (10 baht) per day.
People in this bracket represent a larger market than the upper and middle classes of 300 million people.
Poor people are particularly important to the small consumable goods category.
Even though margins may be low, sales will more than justify entering this market, Mr Piti said.
He said Indians perceive Thai products as reputable and of high quality, but Thai businesses lack understanding of local needs and consumption trends.
From 2000-11, India-bound investments from Thailand totalled US$92.1 million.
Despite the Thailand-India Free Trade Agreement, Thai investment accounts for only 0.06% of total foreign direct investment (FDI) in India, said ITD deputy executive director Watcharas Leelawath.
Satish Sehgal, president of the India-Thai Business Association, said: "Low investment may stem from the Thai business community's generalisation of Indian business practices."
Doing business in India requires a local partner that will handle distribution and product representation, he said.
Indian lawyers are also important as local and state laws are varied and complex.
Tharadol Thongruang, minister counsellor in the Office of Commercial Affairs at the Thai embassy in New Delhi, said Thai businesses should adopt the Japanese practice of relocating production bases.
India has high non-tariff barriers, while logistics and distribution networks and other infrastructure remain poor, he said.
A production base in India would eliminate unnecessary tariffs and reduce transport costs.
Mr Tharadol said Thai businesses should also consider opening up in secondary cities away from major metropolitan areas.
Many of these cities compete for FDI by offering incentives.
"One area that Thai businesses can look into is processing facilities for perishable goods. There is high wastage in this sector," said Mr Sehgal.