India will pass China as the world’s most populous country sometime in 2023. No longer will it be necessary to refer to India as “the world’s largest democracy.” It’ll be the world’s largest nation, full stop.
This means India will very soon be the world’s largest market for nascent and established businesses alike.
From a business perspective, India has far more economic upside than China, which is now firmly among the ranks of upper-middle-income countries. China’s unfavorable demographics could well set it up for a larger-scale repeat of the “Japanese experience” in the coming years: years of stagnant growth due to an aging and eventually shrinking population. India, by contrast, has a much younger population that looks set to grow for decades to come, and its relatively low (but rising) per-capita income offers unbounded opportunity to sell to its swelling middle class.
This is just the start. Whether you’re proud to call India your home or an outsider only now getting your head around its potential, follow along as we review seven compelling arguments for starting or expanding a business in India right now.
- It Has a Robust, Homegrown Business Finance Ecosystem
India’s robust financial services sector includes a growing crop of prominent homegrown or locally owned-and-operated firms with granular market knowledge and unique perspectives that complement — but don’t always mirror — those of big international banks like Citigroup or BNP Paribas.
The momentum is abundantly clear in the venture capital and private equity spaces. Indian PE firms like Westbridge Capital, which split from Sequoia Capital India (a subsidiary of the U.S.-based venture capital giant) in 2011, are flexing their muscles in a big way. In just four years following its spinoff, Westbridge raised and deployed more than $2 billion, a stunning sum for an Indian private equity firm at the time.
- Its Startup Economy Is Booming
India’s vibrant business finance industry supports a humming startup economy. In 2020, the country had an estimated 26,000 early-stage enterprises, of which 26 were “unicorns” with valuations greater than $1 billion. Some $36 billion flowed into the space in 2021 alone, and despite a modest (and expected) comedown, 2022 turned out quite strong as well.
This is a boon not just for nascent and established businesses that need to raise funds themselves, but for firms looking ahead to potential in-country partnerships, acquisition targets, or eventual buyers.
- It’s Geographically Vast and Diverse
We’ve already touched on India’s massive (and swelling) population, but its vast geography and cultural diversity are assets as well. From a business perspective, it’s best thought of as a collection of interconnected but distinct markets rather than a unified whole. This makes it fertile ground for niche businesses and mass-market enterprises alike.
- Its Consumer Base Is Increasingly Affluent
Aside from a modest dip during the lockdowns of 2020, the 10-year chart of Indian total personal disposable income shows unchecked growth. Yes, income inequality remains a significant barrier to broadly shared prosperity here, but the average Indian consumer is far better off today than they were in 2013. And as every entrepreneur knows, it’s better to share in a growing pie than to fight over the crumbs.
- It’s a Hub for Digital Innovation
India is in the midst of an unprecedented digital transformation. Despite real hurdles to widespread broadband adoption and access, the country’s core digital sectors (IT-BPM, electronics manufacturing, and digital communications) are growing significantly faster than GDP. McKinsey projects that by 2025, those sectors could account for $250 billion, $130 billion, and $55 billion, respectively, in economic output — up to 10% of GDP.
This is fantastic news for digital startups and for emergent firms eager to partner with them — and for any Indian firms that depend on cutting-edge digital technologies.
- It Lacks Significant Geopolitical Baggage
From a geopolitical standpoint, India is poised to get along nicely in a multipolar world. It enjoys good trading relations with most neighbors in South Asia, Southeast Asia, and the Middle East, as well as developed economies like the European Union, the United States, and Australia. And in recognition that the trade system is truly global, it’s overcoming long-standing reservations about exploring areas of shared interest with the other three BRICs economies.
The Future Is Bright for India’s Economy
That’s an understatement. India is the world’s most dynamic large economy right now, and that’s unlikely to change anytime soon given the country’s favorable fundamentals. The “bear case” for India simply doesn’t hold water.
That’s not to say money falls from trees in India. Starting or expanding a business is difficult anywhere, no matter how favorable the demographic trends or friendly the regulatory environment. But if you’re willing to work hard, you’ll find opportunities aplenty here.
