The Indian economy has flourished over the past decade, with remarkable statistics illustrating its upward trajectory. According to RBI data, Q1 of FY24-25 anticipates a robust GDP growth of 6.7%, emphasizing India’s ascent towards its ambitious goal of becoming a US$ 5 trillion economy by FY26-27. Deloitte reports a significant reduction in India’s current account deficit (CAD) to 1.9% of GDP in 2023, with projections aiming for further decline this fiscal year. Notably, India’s foreign exchange reserves surged to US$568 billion in 2023, boosting its economic growth and elevating bilateral trade with the US to a global strategic partnership.
Prime Minister Narendra Modi’s recent visit to the US further cemented the Indo-Pacific alignment, as he outlined collaborative initiatives during a joint session of the US Congress. Key announcements in this India-US partnership spanned telecommunications, technology, semiconductor industry, defense partnership, and space exploration highlighting the depth of India-US cooperation. For instance, Micron Technology’s pledge of $2.75 billion investment over five years to train 60,000 Indian engineers signifies a pivotal stride towards fostering technological expertise and innovation within India.
As US businesses seek to channel global competitiveness and expand their market reach, India emerges as an ideal destination, boasting the world’s fastest-growing economy and a rising youth demographic. Leveraging India’s vast market potential and booming workforce, US companies can explore various entry avenues, from licensing and joint ventures to franchising for doing business in India. Alternatively, establishing a remote team in India offers a strategic approach to market penetration, facilitated by an employer of record (EOR) to streamline recruitment and onboarding processes while enabling businesses to focus on core operations.
What is the Trade Relationship Between the US and India?
India’s prowess in global trade is remarkable. With strategic free trade agreements inked with ASEAN countries and South Korea, and ongoing negotiations with key players like Australia, the EU, New Zealand, MERCOSUR, and South Africa, India’s economic footprint is expanding rapidly. Notably, substantial tariff reductions on Indian exports have catalyzed this growth. The trajectory of the India-US trade relationship mirrors a rapid rise in recent years. Corporate giants such as Google and Amazon have pledged significant investments across various sectors in India,
capitalizing on the nation’s digitization drive. Google’s staggering commitment of US$ 10 billion to India’s digitization fund, alongside Amazon’s pledge to double its investments to US$ 15 billion by 2030, and Amazon Web Services’ planned investment of US$ 12.7 billion, symbolizes a new era of economic collaboration and job creation, projected to generate over 130,000 employment opportunities and increased business in India.
Beyond economic growth, the vibrant Indian diaspora in the US, comprising 4 million individuals, strengthens bilateral ties and fosters a productive environment for collaborative ventures and job creation between India-US.
Moreover, industry biggies like Adobe Inc., Apple, HP, IBM, and J.P. Morgan, among others, have established themselves in the Indian market for over two decades, with plans to expand further into tier 2 and tier 3 cities. This dynamic landscape announces India’s emergence as a prime destination for global investment and marks its pivotal role in the evolving global economic growth.
What Business is in High Demand in India?
Over the past two decades, numerous industries in India have witnessed a surge in demand, fueled by a multitude of factors such as robust economic growth, evolving consumer preferences, and rapid technological advancements. Among the sectors poised for substantial growth and demand in India are:
- E-commerce: With the increasing penetration of internet accessibility and an expanding consumer demographic, e-commerce platforms are experiencing unmatched growth and prosperity in India. The online retail and services domain has undergone remarkable expansion, fueled by convenience, competitive pricing, and a plethora of options available to consumers.
Indeed, the market dynamics forecast a robust trajectory, with the e-commerce sector poised to reach a staggering market size of USD 112.93 billion by the fiscal year 2024, exhibiting a compelling Compound Annual Growth Rate (CAGR) of 21.5%. These numbers not only signify growth but also signify a profound transformation in the nation’s commercial landscape, speaking volumes about the evolving preferences and behaviors of Indian consumers. - Healthcare and wellness: The healthcare sector in India is expanding rapidly, driven by increasing healthcare awareness, and rising healthcare expenditure. This growth has sparked a surge in demand for healthcare services, medical equipment, pharmaceuticals, and wellness products. Furthermore, the rise in disposable income has heightened people’s focus on health and fitness, leading to significant investments in resources like personal coaches and popular fitness apps such as HealthifyMe and Fitbit, which have now become integral to many lifestyles. Projections indicate a steady Compound Annual Growth Rate (CAGR) of 17.31% from 2024 to 2028, emphasizing the resilience and potential of India’s healthcare industry and offering promising opportunities for stakeholders and investors alike.
- Technology and IT services: India’s renowned IT industry stands as a significant contributor to the nation’s economy, perpetually evolving amidst the rapid integration of digital technologies. The rising demand for software development, IT services, cybersecurity solutions, and digital transformation signifies its pivotal role in India’s economic landscape. Projections indicate that by 2024, the IT industry is poised to reach an astounding US $26.45 billion, exhibiting a robust CAGR of 12.98% for the period spanning 2024-2028. Dominated by key sectors such as business process outsourcing, IT consulting and implementation, and IT outsourcing, India’s IT market continues to lead innovation and excellence on the global stage.
- Renewable energy: India’s unfaltering commitment to renewable energy targets and the united efforts to curb carbon emissions have catalyzed a surge in demand for sustainable energy solutions like solar power, wind energy, and energy storage systems. Notably, India has triumphantly established a renewable energy capacity exceeding 180.79 gigawatts as of December 2023, pushing it to the forefront as the 4th leading nation globally in renewable power capacity.
- Education and edTech: The education sector in India is experiencing a transformative wave driven by technology-based learning solutions. There’s a rising demand for online education platforms, skill development programs, and vocational training, boosting the Edtech industry’s projected worth to US $10.4 billion by 2025, as per Statista reports. With 881.25 million internet subscribers and 700 million smartphone users, India’s digital landscape is primed for exponential growth. This union of technology and education promises to redefine learning experiences and empower learners nationwide.
- Food and beverage: Amidst shifting consumer preferences and evolving lifestyle trends, the growing desire for healthy, organic food products, convenient ready-to-eat meals, and specialty beverages has become increasingly popular. According to the Economic Times, the F&B sector is estimated to account for approximately 3% of India’s GDP and two-thirds of the nation’s entire retail market. This robust industry landscape in India presents lucrative prospects for both domestic enterprises and international stakeholders as well.
- Logistics and transportation: As the Indian economic growth continues, the growing need for streamlined logistics and transportation services becomes increasingly apparent to facilitate the seamless flow of goods across the nation. The rapid expansion of e-commerce further propels the demand for sophisticated last-mile delivery solutions and robust logistics infrastructure.
Why is India a Good Place to Start a Business?
High Market Potential
India’s vast and diverse market, home to over 1.3 billion people, presents unparalleled business opportunities worldwide. This expansive consumer base spans numerous sectors and industries, promising boundless potential for growth and innovation. Already surpassing economic powerhouses like Japan and Germany, India is poised to ascend further, aiming to claim the title of the third-largest stock market by 2030 and the third-largest global economy by 2027.
Growing Infrastructure and Business Environment
India’s commitment to infrastructure development is worth noting, with substantial investments pouring into vital sectors such as transportation, telecommunications, and energy. This surge in infrastructure not only fosters connectivity but also streamlines business operations. Furthermore, governmental reforms aimed at enhancing the ease of doing business in India increasingly enticing for entrepreneurs. In a promising turn of events, the Ministry of Commerce and Industry reports that all eight significant sectors of India’s infrastructure economy experienced robust growth in 2023. Notably, industries like electricity, coal, cement, and steel exhibited double-digit expansions, ensuring India’s steady growth toward economic prosperity.
Availability of Resources
India boasts an abundance of diverse resources, spanning from its pool of skilled manpower to an array of raw materials. With access to a vast talent pool across multiple sectors including technology, engineering, healthcare, and beyond, India stands as a homeland of opportunity. Furthermore, in 2023, India’s exports of raw materials rose to an impressive US $62.26 billion, marking a notable 9.43% increase from the preceding year. This dynamic growth further glorifies India’s multifaceted geography, which enables businesses to tap into rich resources, driving innovation and economic prosperity.
Low-cost Workforce
India’s renowned competitive edge lies in its workforce costs, which outshine those of many other nations. Having a vast reservoir of skilled and cost-effective workers, undoubtedly doing business in India stands as an appealing option, aiming to minimize operational expenses without compromising on quality output.
Tried and Tested Business Models
India has demonstrated remarkable potential in developing diverse business paradigms over time, such as outsourcing and Employer of Record (EOR) services. The outsourcing sector has been popular in India’s economic landscape for the past decade and has seen multinational enterprises leveraging the nation’s skilled workforce and cost efficiencies drastically. Adjacently, the EOR framework is swiftly emerging as a robust employment solution, steadily firming its foothold in the market. EOR services provide a streamlined approach for enterprises to broaden their footprint in India without the necessity of establishing a legal entity, thereby mitigating the complexities and risks associated with traditional expansion strategies.
Conclusion
In wrapping up this discussion, it’s important to address the flourishing dynamic between India-US in terms of trade relations. The robust trajectory of India’s economy significantly enhances the attractiveness of the Indian market for US companies seeking business expansion opportunities. With India’s rapid economic growth and growing consumer base, the prospects for US companies to establish a presence, foster growth, and thrive within the Indian market are more compelling than ever. As both nations continue to foster bilateral trade ties and strengthen diplomatic relations, the potential for mutually beneficial partnerships and collaborations between Indian and US enterprises is bound to escalate. Therefore, seizing the opportunities presented by India’s rising economy can yield substantial rewards for US businesses looking to extend their reach and capitalize on emerging markets.
