What Makes India Such a Promising Overseas Market?

The story of China’s transformation from a global afterthought to one of the world’s primary economic growth engines is well-known. Now that Chinese labor costs have risen and its rapid growth rate has cooled somewhat, business leaders are focusing on the next great growth opportunity: India.

Much like China, India began liberalizing its economy a few decades ago, allowing the forces of globalization to spike economic growth, boost manufacturing and create a new, larger and more prosperous class of workers. Those developments have now created a situation where India’s economic growth rate is consistently among the world’s best, with GDP growth recently topping seven percent.

Although there are some significant considerations and caveats investors and businesses should pay attention to, there are few overseas markets with the same kind of potential as India.

India’s Growth Potential

With a population of more than 1.3 billion and an emerging middle class, India’s consumer market is massive—and expected to triple in size by 2025. Consulting firm McKinsey lists five primary developments that will spur growth and create new opportunities that global business leaders can explore. These include the following:

  • A drastic reduction in poverty and subsequent rise in standards of living
  • Ongoing urbanization (India will soon have 69 cities with more than 1 million residents)
  • An untapped manufacturing base, as India’s manufacturing sector has lagged China’s in terms of development
  • New technologies that will improve healthcare, productivity and delivery of basic services
  • The emergence of women (only 24 percent of women are in the workforce, as opposed to the 40 percent global average)

Moreover, under the leadership of Prime Minister Narendra Modi, India’s government has pursued a series of business-friendly, pro-entrepreneur policies. These moves include a more welcoming posture toward foreign investment, substantial improvements to national infrastructure and industry deregulation. This pro-business model has earned Prime Minister Modi comparisons to politicians such as Ronald Reagan and Margaret Thatcher, and likely heralds a new era in cooperation between the Indian political structure and business interests, both global and domestic.

These are the key underlying factors poised to help India create the world’s fastest-growing economy—and by extension, a rich environment for businesses and investors.

Some Considerations

Although the larger macroeconomic, systemic and political trends all point to continued growth in India, there are some considerations of which investors and business leaders should be cognizant.
First, economic growth is projected to taper off in the coming year. The Indian government expects overall growth to drop to 7.1 percent—a half point lower than the previous year previous.

Moreover, some economists have questioned the validity of government-issued growth figures, believing the true rate of GDP growth to be closer to five or six percent. Other concerns moving forward include persistent corruption, a slow-moving bureaucratic structure, the rather slow pace of many economic reforms and political uncertainty. Many of Prime Minister Modi’s signature pro-business reforms could be endangered by the outcome of upcoming Indian elections.

The Takeaway

Despite the slow pace of economic reforms and other longstanding concerns, India’s booming growth rate and rapidly expanding consumer class make it a nearly unrivaled overseas market for growth. Business leaders and investors should continue to explore opportunities in India with confidence.