How India is driving new opportunities for global businesses

India has a rich history of industrial growth and innovation. The nation’s industrial sector, once centred around textiles and agriculture, has rapidly evolved into a diverse ecosystem that includes advanced sectors such as information technology, pharmaceuticals, and automotive. This dynamic shift reflects India’s growing prominence on the global stage and its increased competitiveness in the world economy. In an increasingly interconnected and globalized world, a nation’s competitiveness is paramount to attracting businesses, investments, and talent, and India is making all the right strides towards bolstering its industrial competitiveness.

Morgan Stanley predicts a significant shift in the global order as India emerges as the world’s third-largest economy, surpassing Japan and Germany by 2027. The country is also expected to secure the third-largest stock market position in the coming years. These developments offer a remarkable opportunity for investors and companies to tap into India’s growing power and potential. Morgan Stanley’s estimates indicate that India’s GDP could more than double from its current value of $3.5 trillion to exceed $7.5 trillion by 2031. Moreover, projections suggest a substantial rise in India’s per capita income from $2,000 to approximately $5,000 within the same timeframe. This transformative shift is driven by three influential factors: accelerated financialization, a shift towards clean energy, and a digital revolution.

Policy landscape: Ease of doing business in India

India has undertaken extensive policy reforms over the past decades to foster a business-friendly environment. From liberalisation measures that opened the economy to foreign investments in the 1990s to recent initiatives simplifying regulations and dismantling bureaucratic barriers, India is committed to enhancing the ease of doing business. This approach has resulted in India’s notable rise in World Bank’s Ease of Doing Business rankings, currently standing at an impressive 63rd position, up from 142nd in 2014. Moreover, over 39,000 compliances have been reduced, and more than 3,400 legal provisions have been decriminalised. These efforts aim to streamline processes and reduce unnecessary regulatory burdens, making it easier for businesses to operate and thrive in the country.

Examples of successful foreign businesses in India, such as Amazon, Google, and IKEA, demonstrate the effectiveness of these policies. These companies have not only navigated the Indian business landscape successfully but have also flourished, reaping benefits from the large consumer base and a conducive policy environment.

India’s commitment to a conducive business environment extends to its legal framework. Several reforms have been implemented to attract foreign direct investments (FDIs), from liberalizing FDI norms in various sectors to simplifying procedures. The country’s robust intellectual property (IP) laws also provide necessary protections to foreign business interests, fostering an environment that encourages innovation while protecting proprietary rights.

Human capital: India’s highly skilled workforce

India’s human capital is one of its strongest assets. With high educational attainment levels and a vast pool of skilled labour, India is reaping its demographic dividend. The availability of a large, young, English-speaking workforce is particularly attractive to foreign businesses. This factor has been instrumental in establishing India as a preferred outsourcing destination for businesses around the world, providing cost-effective, high-quality solutions in areas such as IT, customer service, and R&D.

What initially started as a cost advantage has now evolved into a significant source of highly skilled talent and cutting-edge innovation. Global corporations have recognised the immense value of India’s demographic dividend and have established more than 1,500 Global Capability Centres (GCCs) in the country as of September 2022. These GCCs represent some of the largest companies in their respective industries.

Collectively, the GCCs employed around 1.3 million individuals as of FY2021, and it is projected that this number will reach approximately 2-3 million by 2025. For many major global corporations, India is either the primary or the second-largest geographical hub for their workforce. In fact, India accounts for over 45% of all GCCs established outside of their home countries.

Furthermore, a significant portion, ranging from 50 per cent to 70 per cent of the global technology and operations workforce is based in India’s GCCs. This showcases the central role played by India in these corporations’ global operations, highlighting the country’s expertise and capability in these crucial areas.

Technological advancements and innovation

India has emerged as a global technology hub, with a thriving IT and software services sector that’s pivotal to its industrial competitiveness. Indian companies have shown an impressive track record in delivering advanced tech solutions to global clients. Further, the country’s contribution to emerging technologies such as artificial intelligence, blockchain, and data analytics is noteworthy, and it continues to innovate at the intersection of technology and business.

Over the past two decades, India’s services exports have exhibited robust growth, expanding by 14%. In the fiscal year 2021-22, these exports reached a significant milestone, amounting to US$254.5 billion. A substantial portion of these services exports can be attributed to the Information Technology (IT) Services and Business Process Outsourcing (BPO) sectors, which accounted for US$157 billion in 2021-22. This growth has been driven not only by Indian-based IT companies but also by global corporations leveraging Indian talent through their capability centers in the country.

India has a significant opportunity to establish itself as a powerhouse in the platform and product domain. The Indian IT services sector is undergoing a transformation as it moves towards platform- based solutions. Additionally, the Indian Business to Business (B2B) Software as a Service (SaaS) ecosystem has developed its distinctive playbook, contributing to the growth and innovation in the sector.

The impact of these developments is already visible, as India has witnessed the emergence of its first billion-dollar product company. Moreover, the country boasts over 20 B2B SaaS unicorns, indicating the strength and potential of the ecosystem. These successes are fostering the growth of a robust and dynamic environment that has the potential to nurture Hyperscalers over the next two decades.

Moreover, with the recent roll out of 5G technology, India stands on the brink of a digital revolution that promises to further cement its position as a global industrial powerhouse. The advent of 5G technology is predicted to have a greater impact on the global economy compared to previous iterations of wireless technology. Global investment in the 5G industrial chain over 2020-2035 is likely to reach $3.5 trillion. Among the various economies, the Indian economy is expected to be at the forefront of this transformation with manufacturing sector reaping the maximum benefit of this internet revolution.

India’s rich resource pool: A treasure trove for businesses

India’s vast resource pool presents strategic advantages to businesses. Its abundant natural resources, including minerals and a diverse agricultural landscape, offer opportunities to various industries. Coupled with a consumer base of over a billion people, the implications for businesses are immense. Digital transformation has further helped leverage these resources, with digital payments, e- commerce, and remote services becoming mainstream.

India’s infrastructure development, while a work in progress, has seen significant improvements in recent years, with massive investments in transportation networks, logistics, and connectivity. These developments not only facilitate smooth business operations but also enhance competitiveness by reducing costs and increasing efficiency.

India’s G20 presidency: A showcase of diversity and global influence

India, the world’s largest democracy, seizes an exceptional opportunity through the G20 to showcase its progress across economics, science, technology, space exploration, innovation, and entrepreneurship. Hosting over 200 G20-related meetings across 56 vibrant locations, India’s Presidency is recognized worldwide as an unprecedented chance brimming with potential. Guided by Vasudhaiva Kutumbakam (“the world is one family”), India aspires to foster peace, inclusive development, and sustainability. Advocating for Global South empowerment, India aims to challenge discrimination, foster resource equity, and promote a democratic world order for improved living conditions.

With strong macroeconomic fundamentals, robust public finances, remarkable growth in markets and exports, and a determined commitment to climate leadership, India shines as a beacon of hope on the global stage. The nation’s commitment to fostering a business-friendly environment is commendable, and the continued efforts towards infrastructure and digital development promise an even brighter future. As India continues its journey of industrial competitiveness, foreign businesses stand to benefit greatly from exploring the opportunities this emerging global hub has to offer.

The author is chairman and managing director, Apollo International Limited and Apollo Supply Chain. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.

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