There is no doubt that India has tremendous potential as a growing market for both developed and developing nations. In fact, the current global economic slowdown has forced many Western companies to re-think their strategies for investing in India. There are many reasons why this is happening. One is the sheer complexity of the Indian economy with its intricate set of rules and regulations. Another is the widespread perception across the world that Indian growth prospects are far more optimistic than those in the West.
So what can be done about this perception? On one hand, there is the argument that Indian markets offer too many opportunities to foreign companies to invest in. It is claimed that the Indian economy has just under two hundred thousand businesses, and this number is growing very fast. Besides, the government’s focus on improving market penetration for smaller players has resulted in increased competition within the industry. Western companies can easily improve their market penetration by taking advantage of the government’s willingness to promote local manufacturing and distribution, and by helping develop infrastructure in the market.
On the other hand, Indian markets offer too few potential customers. This may not be a problem for companies dealing in consumer products, but it could become a significant impediment for companies dealing in high-end merchandise. Indian consumers are largely price sensitive. Therefore, even if a company can reduce its costs by producing its goods at lower cost, it may still have to face significant competition from companies that have lower fixed costs, and who have higher marketing and product management budgets. What’s more, it’s important to note that even if there are some genuine obstacles such as inefficient distribution systems and disorganization within the Indian market, these problems are likely to improve as the economy becomes more mature over the next few years.
Still, even if Indian markets don’t offer much of a competitive advantage to Western companies right now, they should be able to compensate for this deficit in the future with increased sales, and a greater ability to attract investment from the global financial institutions. In fact, given India’s increasingly attractive location – it lies in the Western portion of the South Asian region – the country stands to benefit both from its proximity to the global market, and from the increasing prosperity of the South Asian countries such as India, Bangladesh, and Sri Lanka. Given this, India is quickly becoming one of the major choices of global investors. In fact, the government’s recently announced ‘Make in India’ policy will encourage even larger foreign companies to invest in the country. As a result, India is set to experience a rapid burst of growth in the years ahead.
So, what does this mean for Western companies looking to invest in India? The most important thing to realize is that right now, there are no clear signals that the Indian market will soon be ready to accept larger foreign investment. However, it’s also unlikely that the current global economic situation will allow large multinational companies to invest at full tilt into any one country. If you’re planning to invest in India, the best advice is to wait and watch.
There is every possibility that the Indian market will remain an untapped minefield over the next decade. The future of the world economy remains highly uncertain at this point in time, but it’s also true that the Indian economy has come so far in recent years that it will take some time for the market to catch up with all the new developments. But despite the current challenges, India still offers enormous opportunity for companies looking to expand their business footprint and attract investment from international markets. Over the next decade, India has the potential to become a developed market – one that can rival the advanced economies of Europe and America – meaning that if you want to invest in India you stand to benefit not just from the political stability and good economy, but also from the opportunities that are present in one of the fastest growing but least leveraged economies in the world.