With a population of about 1.366 billion, India has become one of the most rapidly rising economic powerhouses in the world. With several economic reforms such as the GST, expected to deliver reliable growth long term, and India already holding 6.7% of the world’s gross domestic product, ranking third globally, the country is well-positioned for a rewarding time.

Of course, this has also naturally made the country a hub for both local and international businesses. Industries like outsourcing, telecommunications, construction, education, and retail are flourishing, but there are opportunities in every industry. For India, and businesses making use of the country’s resources, the future looks bright. Let’s now look at why India is an eyecatcher for international businesses and some challenges they face. 

Why India is at the forefront

Large youth population with low labor rates

One of the most important factors that organizations consider when setting up a business in India is the abundance of the population aged under 25, combined with the relatively low labor rates, especially when compared to other Asian markets like Singapore. Considering that even the least progressive aspect of the Indian labor force – participation of women, is getting better, India can be one of the best countries to recruit cost-efficient, skilled, or unskilled labor. Even during the pandemic, there was a labor participation increase which has become a major attraction for international businesses. 

Ease of Business and Governmental Policies

In recent years, the national government has brought in major Foreign Direct Investments (FDIs). There has also been a major push towards manufacturing locally within India. With the government looking for ways to incentivize further economic growth, expect it to only get easier for foreign entities to commence and continue their businesses in India. India has jumped over 30 spots within the last decade to number 63, in the Ease of Doing business ranking, according to the World Bank’s Doing Business report – 2020.

Excellent eCommerce options

India, over the course of the last few years, has witnessed a major smartphone revolution and seen even the poorest getting their hands on a working internet connection. Coupled with sufficient infrastructure, eCommerce has ruled the nation for quite some time now and can prove to be an excellent testing ground, before actually setting up shop in India. 

It’s why it was easier for international businesses to push their products and services into the market, especially during the time of the COVID-19 pandemic. Digital payments, UPI (Unified Payment Interface), and the exciting trend of neobanks are becoming extremely common, and can further increase the ease of doing business. 

Strategic Location

India has one of the largest shorelines in the world, and is bang in the middle of major trade routes, acting as a central hub connecting the western and eastern countries. Surrounded by the massive Indian Ocean, the Arabian Sea, and The Bay of Bengal, naval routes for a wide number of Asian countries including Indonesia, Singapore, Myanmar, Thailand among many others; India has become a huge marketplace in between. 

India also shares borders with Pakistan, Bangladesh, Nepal Bhutan, and China and can offer alluring international business routes to major countries and markets across the world. 

The Challenges

Doing business in India does come with its share of challenges though. When doing business in such a large developing country, challenges are to be expected and should be fully analyzed before setting up an international business in the country. 

Socio-Cultural Differences

Though India is one single country, the nation prides its intrinsic diversity. There are over 22 languages spoken in the country and a wide cultural difference as we move from region to region. Each state has a distinct economic and political view, and these differences have to be carefully accounted for in any major business policy.

Infrastructural Challenges

Infrastructure has to be one of the biggest challenges posed by doing business in India. Although it contains one of the largest railway networks, has airports connecting major cities, and state-of-the-art harbors and ports, they can still seem inadequate for a country of its size. Indian roadways is another area in which the country can certainly do better. While there are routes connecting every major city, due to the expansive population, traffic and associated delays are definitely to be expected when doing business in India.

Regardless of the challenges posed by this huge nation, the advantages far outweigh them, and doing business in India has definitely been a pleasurable and profitable experience.