Advantages of Investing In India and Key Hubs For Business: A Guide for International Firms
More than half of all global economic growth is now driven by emerging markets like Brazil, China, India and Russia. For foreign players, investments in BRIC countries have also offered some of the most spectacular returns over the long-term. India, in particular, remains a premier destination for global businesses as it has managed to stay ahead of China and retain the tag of the world’s fastest-growing large economy. It has also significantly improved its ranking along the ease of doing business index by leaping 23 ranks to occupy 77th position, worldwide.
In this article, we will take a quick look at some factors that work in India’s favour and shine a spotlight on key Indian cities for doing business.
Advantages of Investing In India
India houses one of the fastest growing workforces in the world, because half of its population is below the age of 25 and more than 65 percent of Indians are below the age of 35. The country also has the third largest higher education system in the world, after the U.S. and China, according to a report by the World Bank. The availability of educated, English-speaking, young talent is one of the biggest advantages that India offers.
India's long standing parliamentary democracy and liberal economic policies make it a safer destination than many emerging markets. With the BJP securing a decisive majority, Prime Minister Narendra Modi has been re-elected for a second term. A stable government at the centre further bolsters the morale of investors.
Over the past couple decades, India has built up a formidable reputation as an outsourcing hub and has proven itself as a global technology and software services provider. Not many know that the country also ranks second worldwide in farm output and 12th globally, for its factory output. These industries have collectively propelled the domestic economy to grow and become the 3rd largest in the world based on Purchasing Power Parity (PPP.)
This growth has received a further boost due to developmental initiatives like Make In India and the Smart Cities program. While Make In India is designed to foster domestic capacity building design and manufacturing across various sectors such as automobile manufacturing, aerospace and defence and the creation of renewable energy, the Smart Cities program is operational in 100 hand-picked cities. The program uses technology to improve citizen life quality along multiple parameters. The Smart Cities campaign has focused on urban issues such as access to clean drinking water, more reliable power supply, better urban transportation and waste management.
French Presence in Indian Cities
French companies in India are present across industry sectors, with representation across banking and finance, automobile manufacturing, alcoholic spirits and beverages, aerospace, travel, cosmetics, energy management, automation, construction material manufacture, IT consulting and business process outsourcing. Capgemini, Pernod Ricard, Saint Gobain, Schneider Electric, BNP Paribas, Renault, Airbus and Carlson Wagonlit Travel are all French companies that have set up shop in India.
The companies are headquartered in various Indian metros, with Airbus operating an aviation engineering centre in Bangalore, employing over a 1000 engineers, and a pilot training centre in the National Capital Region (NCR.) Renault India has achieved record-breaking popularity in the small and mid-size car segment. The company has invested in a dedicated Renault-Nissan alliance manufacturing facility in Chennai, and a design studio in Mumbai. CapGemini is headquartered out of Pune, in Maharashtra, whereas banking major BNP Paribas operates out of Mumbai.
Established Business Centres and Key Startup Hubs In India
Bangalore, Mumbai, Delhi, Pune, Chennai and Hyderabad are the most well-known urban centres and house the biggest names in business. While Mumbai is considered the financial capital of the country, with the Bombay Stock Exchange, Delhi is the political centre of the country. Bangalore and Hyderabad are both seen as technology hubs, and Bangalore is one of the most exciting centres for innovation, having spawned some of the most successful Indian startups and unicorns. The city is cosmopolitan and acts as a strong aerospace and defence base for many companies. Chennai is home to 30% of automobile manufacturing and 40% of all component manufacturing, but investors have begun to look beyond these established industrial hubs and are looking at smaller cities to establish a footprint in India.
Tier II and Tier III Cities, An Emerging Investment Destination
While state capitals and metropolitan cities like Mumbai, Bangalore, Delhi, Chennai and Hyderabad are established business hubs, infrastructure is rapidly improving in smaller towns like Surat, Agra, Nagpur, Tirupur, Rajkot and Vijayawada, as well. Increasing domestic demand has contributed to the growth of tier II and tier III cities. Industry reports predict that by 2025, tier II and III towns will account for 45 percent of India’s consumption and will add 30 percent of affluent households.
Leading the pack is Surat; the largest diamond processing hub in the world is growing at a rate of 9.2 percent year on year to become the fastest growing city in the world. Agra, in Uttar Pradesh, houses the Taj Mahal and is a hub for tourism and hospitality, with a vibrant small scale arts, handicraft and leather goods industry. Nagpur with 22,000 micro, small and medium enterprises is poised to become the next technology powerhouse with IT service giants Infosys and TCS setting up their campuses next to the international airport.
Tirupur in the Southern state of Tamil Nadu is a significant fashion garment manufacturing hub. The city has weathered changes with the introduction of India’s GST tax regime, and accounts for about 46 percent of the total cotton knitwear garment exports from the country.
Smaller cities also offer other advantages over bigger cities, with cheaper real estate and educated, more affordable talent and labor for hire, businesses can expect to reduce costs and turn profitable faster.
Whether you choose to establish a base in a recognized large Indian metropolitan city or are considering a up and coming city as your base, you will need a reliable, local partner to help you build alliances, and understand the Indian market, as an exporter or importer of products, services and goods. Do reach out to Arsha Consulting for customized advice and rely on our expertise to make this journey a fruitful one.
Preeti Prakash | Journalist