/ciol/media/agency_attachments/c0E28gS06GM3VmrXNw5G.png)
Follow UsShailendra Bhatnagar
NEW DELHI: India and China, among the world's fastest growing economies, are often referred to as competitors, but a growing number of Indian firms are expanding their presence in China to benefit from sizzling growth.
Indian software exporters, auto parts makers and smokestack companies are making a beeline to China in a bid to diversify revenue streams and take advantage of the Asian giant's world class manufacturing infrastructure and low wages.
"The combined size of the market is more than 2.3 billion people which gives huge economies of scale, and it makes every sense for Indian and Chinese companies to work in tandem," T.K. Bhaumik, senior advisor for trade policy at the Confederation of Indian Industry, told Reuters.
"Both economies have inherent advantages in manufacturing R&D and enough complimentary skills to work together."
India's largest software services exporter Tata Consultancy Services Ltd. plans to increase its workforce in China to 1,000 people from 200 in the next 18-24 months, offering IT services and support to its global clients and domestic Chinese firms.
"There is a big commercial pull for entering China. The major thing that is exciting for us is that global firms that we work with are expanding their presence in China," said Phiroz Vandrevala, executive vice president at TCS.
TCS is General Electric Co.'s largest offshore IT services provider. And GE and telecoms giant Motorola Inc., both in TCS's list of top 20 clients, are making deeper inroads into China.
Apart from servicing existing clientele, the $12.5 billion Indian software sector sees huge potential in China's exploding domestic market. Vandrevala says TCS is focussing its energies on China's galloping wireless market, the world's largest.
MORE GAINS
Indian software firms are also looking to China as a window to the markets of South Korea, Asia's third-largest economy, and Japan, the world's second-largest market for software services.
"The expansion in China is also a springboard into Japan and Korea," says Vandrevala. Indian companies have also benefitted from China's hands-on, positive approach to foreign investment.
"Setting up a factory in China is easy," said A. Natarajan, vice president at Sundram Fasteners Ltd. "Bureaucratic delays are not there and the government is industry friendly."
Sundram Fasteners is India's largest maker of nuts and bolts and the firm supplies fasteners to nearly all Indian auto companies and exports to global firms like General Motors.
Natarajan, based in Zhejiang Province, oversaw the setting up of a $5 million factory that is initially geared up to make 6,000 tonnes of high tensile fasteners.
"The demand is quite huge here," Natarajan said.
The two-way trade between India and China, now at about $10 billion a year, is expected to jump further in the medium term, analysts say.
Even as Indian companies raise their profile in China, there is a growing band of global firms that are taking advantage of world class skills and plentiful workforce in both countries.
"For us, (developing software in India) offers a significant cost advantage. If you look at the education, the expertise is certainly there," Steve Fitz, president of Asia Pacific at EMC, the world's biggest maker of corporate data storage products.
EMC Corp opened its first software development centre in Asia in Bangalore, India's technology capital, and the unit has grown to 200 people from 25 in the last 18 months.
Fitz said EMC was also planning an R&D unit in China.
"The thing China offers from an R&D standpoint is it has very good infrastructure. The one thing it doesn't have is the English language capability. But they're closing that gap pretty fast."
(Additional reporting by Doug Young in HONG KONG)