India Country Market
Insights and Opportunities
India is a story of growth and opportunity. India's sustained growth of around 8% in 2008 and growing dynamism in several of its regional markets have created wide and diverse business prospects for U.S. exporters and investors. While 2009 growth estimates are more modest, India remains one of the growing, dynamic economies in the world. The current economic downturn has not affected India to the same extent as the United States, though most Indian companies remain apprehensive and are extremely cautious with large expenditures.
Worldwide economic difficulties notwithstanding, U.S. multinationals are sold on India and are expanding and deepening their market penetration. U.S. firms with advanced and niche-market products and services are entering the market for the first time, or are replacing legacy distributors appointed in the slow-growth past with more capable and aggressive representatives. Many smaller American firms have begun to view India as a top anchor market for their products and services as well. Economic growth in India today is being rewritten by India's highly entrepreneurial and rapidly globalizing private sector.
Indian firms are investing in infrastructure projects, growing their advanced manufacturing capabilities, and inventing in new volume-based business models that tap into rising incomes and consumption in towns and rural economies across the country. Whether it is consumer goods and services, high technology and industrial goods, healthcare, or infrastructure development, Indian firms are bullish about their economy and are eager for U.S. commercial and joint venture partnerships, technologies, brands, services, and know-how. In fact, the pace of the America's trade and investment relationship with India is accelerating. In 2008, U.S. exports to India surged to $18.6 billion. Advanced technologies, including aerospace, specialized materials, information and communications technologies, electronics and flexible manufacturing systems underpinned this growth. Indian exports to the United States slowed, growing only 1% in 2008. As a result, America's overall trade deficit with India dropped by 35% (from 2006 to 2008) to $7.1 billion.
Infrastructure problems with the country's roads, railroads, ports, airports, education, power grid, and telecommunications may be the toughest obstacles for India's economy to grow to its full potential. Nonetheless, a process of liberalization in these areas has been underway, led by a more liberal environment in the information technology, airline, and telecom sectors, with increasing roles for the private sector in ports, roads and other key sectors. However, the absence of a clear policy framework has hindered critical private investment in infrastructure overall.
As India gradually opens up its markets, many tariff and non-tariff barriers remain. Multiparty coalition governments since the mid-1990s have made some progress in this regard. However, duties continue to hamper India's efforts to achieve its potential as a global economic power. In addition, India's customs tariff and excise tax system remains confusing with numerous exemptions that need to be navigated.
In terms of long-range economic forecasts, some major consultancies project that more than 400 million people, a full 40% of the population, will enter India's middle class over the next 15 to 20 years. One noted firm expects India to have and sustain the fastest growth rate in the world by 2011. Another well-known consultancy believes that India will become the 3rd largest economy in the world in 2032. India's “demographic dividend” (71% of the population is under the age of 35, and the median age is 25) will ensure that that India retains strong production and knowledge-based competitiveness for many years to come.