India's meteoric economic ascent, forecasted to surpass Japan by 2030 and potentially become the world's second-largest economy by 2075, stems from multifaceted strengths. Anchored by strategic positioning, a commitment to digitalization, and demographic advantages, India stands as a tech haven amid global turmoil. Major tech firms like Apple, Microsoft, and Meta witness exponential growth in India, showcasing the country's resilience amidst global headwinds. With a burgeoning middle class and a robust supply of skilled workers, India offers a thriving market for global tech giants. Infrastructure enhancements, innovation, and an enabling policy landscape further fortify the country’s appeal, demanding nuanced strategies for successful market entry and growth. India not only beckons as a thriving market but also a crucible for global business success, offering both local and international growth opportunities.
India's emergence as an economic juggernaut garners acknowledgement not only from local enthusiasts but also from a chorus of global analysts. Recent reports from S&P Global Market Intelligence forecast India's ascent, positioning it to surpass Japan as the world's largest economy by 2030. Goldman Sachs paints an even more ambitious picture, predicting India to become the world’s second-largest economy by 2075. This surge is underpinned by India's strategic geographic location, its burgeoning influence in the Asia-Pacific region, and its robust role as a geopolitical player.
The country’s promising future is anchored by several pivotal factors: a growing workforce, the transformative influence of multinational corporations in global supply chains, and India's rapid strides in digital innovation. This convergence not only shapes India's prospects for the coming decade but also, according to Bob Sternfels of McKinsey & Company, positions it as a significant player during this century.
India's resilient tech haven amidst global headwinds
In the aftermath of the challenging global landscape following the pandemic, India is emerging as a beacon of growth for major global tech firms, as highlighted in the "Navigating the Storm" report by the World Bank in 2022. This report emphasized India's robust resilience in managing global spillovers, setting it apart from numerous other emerging markets. Recent disclosures from the Ministry of Corporate Affairs further underline a notable trend: revenue growth rates for key companies like Apple, Microsoft, and Meta in India have outpaced their global expansion rates during the financial year (FY) 2023.
Despite the tech industry's worldwide upheavals marked by project closures and substantial layoffs, India stands firm with consistent growth. Notably, India's growth, starting from a comparatively lower base, signals a promising trajectory, hinting at the country's potential to hold a more significant position in the future revenues of these companies and their category-leading peers.
Apple strategically positioned India as a pivotal manufacturing hub under its China+1 strategy, resulting in record-breaking revenue figures during FY 2023, boasting a remarkable 48 percent annual growth, soaring to US$5.9 billion. Similarly, Meta witnessed a robust 13 percent growth in gross ad revenue in India during the same fiscal year.
Meanwhile, Microsoft India reported a staggering 39 percent surge in revenue during FY 2023, surpassing the global revenue growth of the firm, which stood at a mere seven percent year-on-year for the three-month period ending on March 31, 2023.
These trends underscore India's relatively insulated economy amidst global recession concerns. The consistent upward trajectory of these global tech companies in India, despite turbulent global conditions, speaks volumes about the country's potential as a lucrative market and a stronghold for future expansions.
India’s competitive edge: What’s driving global tech companies to India?
India's economic trajectory marks it as the world's fastest-growing major economy, propelled by robust private consumption and investment. A decade of substantial foreign direct investment reflects confidence in India's long-term growth potential, buoyed by a youthful population and escalating urban household incomes.
A convergence of diverse favorable trends within India's business landscape propels this narrative, supported by multifaceted factors influencing both demand and supply, further facilitated by an enabling business environment.
Despite possessing a sizable talent pool and cost advantages in labor compared to more developed economies, global tech giants perceive heightened motivations for investing in the country at present. India is immersed in rapid digitization, emerging as a focal point for technological advancements. Notably, it boasts the title of the world's second-largest smartphone market, with inexpensive data plans and cellular devices now available to India's burgeoning middle-class consumers.
Commenting on these trends, Rohan Joseph, Vice President and Head of Global Investments & Corporate at Times Bridge, explained, “In many ways, India is a microcosm of the world. From working in India alongside top global tech companies like Uber and Airbnb, we’ve seen how India offers both a robust consumer market and an ideal context for developing and piloting cutting-edge innovations. We continue to feel strongly about our mission of bringing the world’s best ideas to India and sharing India’s best insights with the world.”
Consumer base and middle-class surge
At the heart of India's growth narrative is its vast consumer base of 1.4 billion people, driving domestic consumption and investments. A report from the Brookings Institution underscores the unprecedented growth of the global middle class, with over one billion people entering its ranks from 2015 to 2022. India's contribution to this phenomenal rise stands at 380 million, eclipsing even China's substantial addition of 350 million people. No other nation comes close to reaching even half of these figures.
The forecasted explosion in India's middle-class consumption is astonishingly significant. Starting at US$2.1 trillion in 2015, less than half of the US, India is projected to reach a whopping US$10.7 trillion by 2030, more than double the US's anticipated consumption. This trajectory positions India as the most impactful driver of global middle-class consumption growth.
Echoing similar sentiments, Frost & Sullivan's estimations also indicate a parallel expansion of the middle class. Expected to double from 28.5 percent in 2019 to an astonishing 53.8 percent by 2030, this surge, accounting for 350 million individuals within the current population, is poised to exceed the entire population of the US.
Supply-side dynamics: demographic dividend and skilled workforce
A look at India’s supply-side dynamics further reinforces this optimistic narrative. India's demographic dividend, which consists of the world's largest pool of English-speaking STEM graduates, a low dependency ratio of 31.2 percent, and a working-age population which is expected to reach 1.04 billion by 2030 , presents a significant advantage. Moreover, with robust access to finance, India’s financial market performance has been strong. With opportunities in China cooling off, investors are eyeing India as the closest alternative. The MSCI India Index, designed to measure the performance of the large and mid-cap segments of the Indian market, has surged 12 percent this year, overshadowing the 2 percent increase in the MSCI Emerging Markets Index.
Infrastructure revolution: physical and digital
Infrastructure enhancements, both physical and digital, are transforming India's landscape. Notably, the country has been consistently adding 10,000 km of highways annually, doubling the number of airports since 2014, and developing upgraded train systems to connect economic hubs efficiently. These advancements directly impact companies’ ability to operate in India and serve a widespread audience.
India's strides in digital infrastructure have significantly enhanced its global appeal. With a staggering 881.25 million internet subscribers, India ranks second in the world for internet-enabled populations, closely following China. This robust connectivity has facilitated the establishment of a pioneering digital public infrastructure, serving as a benchmark for nations worldwide. It streamlines digital payments, implements population-scale unique identity systems, and offers accessible online documentation for citizens.
Technological advancements and innovation
India's ascent in the Global Innovation Index, surging from 81st to an impressive 40th position in eight years, showcases its commitment to innovation. The country stands as the third-most sought-after investment destination for technology transactions, boasting a thriving startup ecosystem that ranks third globally. Technological advancements in internet access, cloud computing, and state-of-the-art data centers have contributed significantly to India's prominence in the global tech landscape.
Enabling policy landscape
Thriving in India's competitive landscape mandates catering to lower price points, compelling competitors to reengineer activities, production, and supply chains.
India's recent structural economic reforms have significantly improved the country's business environment by reducing regulatory burdens, enhancing compliance processes, and attracting foreign investment. These reforms eliminated over 39,000 regulations, digitized compliance procedures, relaxed restrictions on foreign investment, modernized bankruptcy and labor laws, and eliminated retroactive taxation. Consequently, India has become more appealing to businesses due to reduced costs, improved efficiency, increased access to capital, greater flexibility in operations, and enhanced certainty for investments. As a result, there has been a surge in foreign investment, an influx of multinational companies, and a burgeoning startup ecosystem in India.
Navigating India's dynamic market for global business success
Tech companies entering the Indian market have diverse motivations, from tapping into the vast untapped internet user base to capturing a significant share of the burgeoning middle-class consumer market. India presents exceptional local and global growth prospects for various organizations, provided they deeply understand the specific strengths of the Indian market they aim to leverage.
Drawing upon more than three decades of diverse experience in establishing and effectively overseeing multinational corporations, Rohit Kapur, as Managing Director - India at Dezan Shira and Associates, emphasizes, “India's vibrant business landscape beckons with immense promise, yet many falter at the outset due to failure to comprehend the intricate tapestry of India's multi-layered markets. A bespoke strategy that factors in these vital variables is essential to seamlessly navigating the multifaceted layers of our geography, income disparities, and consumer behaviors.”
Success in India pivots on prioritizing profitability and astute capital utilization instead of simply replicating models from developed nations. It's about tailoring products to meet India's unique aspirational needs, striking a balance between quality and pricing, and leveraging digitally empowered distribution channels.
Businesses globally attuned to India’s nuances not only unlock disruptive growth opportunities in a new market but also gain access to a repository of tried-and-tested innovations that can be adapted for other promising global markets.
This article is co-authored by Naina Bhardwaj and Samantha Chai.
Naina Bhardwaj is an International Business Advisor at Dezan Shira & Associates, which is a pan-Asia, multi-disciplinary professional services firm, providing market entry, legal, accounting, tax, HR, technology and operational advisory to international investors.
Samantha Chai is an Investments & Operations Manager at Times Bridge, the investment and partnerships arm of The Times Group, with a mission of bringing the world’s best ideas to India and sharing India’s best insights with the world.
