“India is superior to all emerging markets”: 5 things to consider if you want to expand your business there

Antoine van Agtmael coined the term “emerging markets” forty years ago. At the time, he was working for the International Finance Corporation (IFC) and was looking for a term for an investment idea that would open up to key developing countries. Since then, the term “emerging markets” has been frequently used to describe diverse economies characterized by dynamism, progress and opportunity.

China: a leading example

In recent years, China has epitomized the concept of an emerging market for many investors and entrepreneurs. As the world’s second-largest economy and an upper-middle-income country, China has been a magnet for investment. Despite setbacks caused by prolonged COVID-19 lockdowns and restrictions, the Chinese economy has rebounded from 3% growth in 2022 to 5.2% in 2023, with growth projected at 4.5% in 2024. This recovery is expected to have positive regional spillovers.

China’s rapid economic transformation from an agrarian society to a more urbanized and industrialized nation began in the late 1970s. This period of rapid growth saw the economy often grow by more than 10% per year, dramatically expanding the middle class. Currently, the Chinese stock market accounts for more than a quarter of the MSCI Emerging Markets Index.

However, China’s economy has recently faced challenges. Eric Freedman, chief investment officer at US Bank Wealth Management, says, “The housing market is still in a slump. Also, if you look at the core demand from a consumer perspective, it’s just not there.” China’s trade activity has also been under pressure, particularly after President Joe Biden announced new tariffs on electric vehicles, advanced batteries, and other tech-related products in May 2024. While these tariffs may impact the Chinese economy, they also affect U.S. consumers through their inflationary effects.

India: A Viable Alternative

Given China’s economic woes, investors are increasingly viewing India as an attractive alternative. India stands out amid global economic uncertainties due to its strong macroeconomic fundamentals, fiscal discipline, high savings rate, robust domestic demand and political stability. The Indian government has consistently prioritized capital spending, particularly on infrastructure, to boost growth and improve competitiveness.

India’s growing middle class and changing consumption habits have strengthened the Indian economy, which relies on domestic consumption. According to the International Monetary Fund (IMF), India’s nominal GDP is expected to reach $3.76 trillion in 2023 and $5.57 trillion by 2028. By 2047, an EY report estimates that the Indian economy will reach $26 trillion, with a per capita GDP of over $15,000.

The Indian market, with over a billion potential customers, is very attractive for companies. Mark Matthews, Managing Director of Julius Baer, ​​highlights India’s long-term investment potential: “China is not a good market for long-term investment, and if you invested $100 in India 30 years ago, it would be worth about $1,800 today. On the other hand, $100 in China would be worth about $150 today, which indicates that China is a destroyer of capital.”

Growing Your Business in India: Key Considerations

Despite its attractiveness, starting a business in India presents several challenges. According to an article in Entrepreneur, Artis Rozentals, who recently expanded his business to India, emphasizes the importance of thorough research and reliable local representation to navigate the bureaucracy effectively.

Here are five essential considerations for growing your business in India:

1. Prepare for bureaucracy

Despite India’s efforts to modernise, bureaucracy remains prevalent. The process of registering a business involves a lot of paperwork and lengthy procedures, including opening a bank account. This complexity is partly due to measures taken to combat fraudulent companies registered during the COVID-19 pandemic.

Indian authorities often require physical documents and permits involving physical stamps, which are rarely used elsewhere. In addition, the government requires detailed documents to verify ownership and residency.

2. Find reliable local partners

Indian law requires that at least one company director be an Indian citizen, which requires trustworthy local partners. A local representative is essential to handle meetings and documents in person. Working with local representatives can be beneficial if a significant physical presence in India is not immediately required. Their office can serve as a registered address for a monthly fee. When working with Indian partners, it is essential to consider cultural differences. Frequent follow-ups may be necessary and delays during holidays should be anticipated.

3. Harness the power of word of mouth

Indian customers are known for spreading the word about their useful products and services. If your product resonates with the Indian market, word-of-mouth can generate significant traction. Once you have established a substantial Indian user base, ask for case studies and success stories for your marketing materials. Implementing a reseller program can also harness the power of word-of-mouth while generating revenue.

4. Collect information from your dealers

Reseller programs in India have been critical to acquiring large customers and driving growth. Actively seeking feedback from resellers provides valuable insights into the Indian market. Artis Rozentals shares several lessons learned from working with Indian resellers:

• Building relationships:In India, strong relationships are highly valued. Dealers must have confidence in the product before promoting it.
• Prove your worth:Indians are cautious when it comes to adopting new products. It is essential to demonstrate the value of your product.
• Avoid conflicts with resellers:If you are also selling directly in India, take into account pricing, negotiations and territorial considerations to avoid competition with your resellers.

5. Choose the right city

Given India’s size, choosing the most suitable city to set up your business is as crucial as choosing the most suitable European country. Location is particularly important during the initial setup and registration process. Once established, the physical location becomes less critical.