China, which earlier was at the forefront of businesses worldwide to set up their operations, is now out of the picture as people realise that there is too much dependency of the world on one nation. When exports and manufacturing from(in) China were put on hold, and the world was bleeding money in trade, other countries that could potentially replace China started to come into the limelight.
It included production conducive economies of South Asia like India, Vietnam and Thailand. Though all of the three territories cover the efficiency and low-cost aspect of China, India has the leverage of a broad consumer base with a population of 1.3B.
Why India could be the next big place for businesses
Even before the Covid 19 pandemic, India was gearing up to becoming the focus for companies worldwide. The regulators were/are pushing through to introduce policies to promote foreign companies to start their operations in India.
As a part of India’s US-India Strategic and Partnership Forum in 2019, nearly 200 American companies had already set out to move their operations from China to India.
Initiatives from the government like incentivising electronic manufacturers with 4-6% of their incremental sales for five years. India has so far has attracted a $1.5B investment for mobile phone manufacturing plants. Moreover, over 20 companies, including Samsung Electronics and Apple’s assembly partners, have shown interest in investing in the country.
Likewise, India has also announced similar incentives for pharmaceutical companies. And other sectors like automobiles, textiles and food are also expected to be promoted through similar means.
India is already gaining much attention from businesses to set up their units in India. And it is only going to increasingly see more companies willing to have a presence in India.
Factors that have lured companies into India include:
Here are some of the factors that could be the force for such substantial foreign investment.
Availability of Human Resource:
India has the second-largest workforce globally, with 501M workers working in the organised and unorganised sector. Such massive human resource availability makes it easier for foreign companies to deploy workers/employees in their offices and plants.
Also, the cost of employing people is comparatively lower in India, allowing access to talent at an effective cost. The labour in India, too, is significantly affordable than it is in countries like the U.S.
The Indian government, over the years, have actively supported foreign companies to invest and establish their business in India. Consequently, they have been rolling out tax exemptions, incentives and various other support mechanisms to ease their entry into India. Some of the incentives and forums mentioned above, being part of it.
Considering India is in its hyper-growth stage where its constantly focusing on increasing the employment rate and growing foreign investments, the framework for businesses wanting to do business in India is very cooperative.
Giant Consumer Market:
This is one such area where India outshines other countries that compete with it in terms of lower cost and plentiful labour; it has a vast consumer market. It opens up opportunities for companies/businesses to produce and export their products and even sell them within the territory.
For instance, in China, most businesses were only producing goods and exporting them to other countries. While India also has a broad consumer base, they can sell their products within the region.
All of the points that I just made are nothing but promising indicators of the potential inflow of foreign investment within India. We have already seen the growing interest of companies in India, and above are some factors steering this interest.
What you need to know before starting a business in India
With so many businesses turning to India already, I am sure there would be a long list exploring to set their foot into the country. If you are one of them, let me guide you through some focus areas you may want to study before taking the plunge.
It is the term that I have coined for research that you do to get a sense of what it would be like to have a business in a territory. It includes information related to raw material sourcing, production cost, viable distribution networks, etc.
Depending on the business goal you have, you will explore different areas that matter to your business. A production business will be more interested in the raw material cost and export procedure, while a company intending to sell in the market may also consider the consumer appetite of the market.
After the warming up, you would also want to gauge the level of competition that prevails in the market. A detailed study of the competitors in the market may open doors to opportunities and gaps that your business can potentially fill.
It also helps you realise the strengths and weaknesses of your competitors that will further help you enter well prepared.
Product Market Fit:
If you plan to roll out a completely new product or service, you might want to test the waters by conducting a product-market fit analysis before you go all in.
The research and surveys involved in product-market fit can be extensive, but it helps you back up the solution you have with data. It enables you to find whether there is a customer segment for what you offer or not and if your offering is a viable solution, thus enabling you to identify loopholes if any.
Mergers and Acquisitions:
This is another area that you may want to give a thought to while entering a new country. There are multiple entryways for businesses in India. You can solely establish your presence in the country, or you may merge with an existing company that might have a similar business structure as you.
It also happens that foreign companies help Indian startups with financial aid and either acquire or fund them. Likewise, there are innumerable ways to branch out; you must weigh every model to select the best for your business.
Once you have gathered the required information, you might want to have a solid strategy before taking the next steps. Ideally, this strategy should be your roadmap that helps you understand your strengths and weaknesses while guiding you through.
Further, the process of strategy formulation also helps you assess any unforeseen risk. Based on all the data like the market potential expected revenue, the estimated cost of a business etc., you should also forecast the future in your strategy document. It is everything that you need to know and do to strengthen your roots in India.
This list could go on and there will still be things that won’t get accommodated. Starting a business in a completely new territory requires you to have an impeccable understanding of the country’s incorporation laws, taxation policy, labour laws etc., along with the awareness around the explained points.
If you are looking for ways to set up a business in India, sign up for a consultation call to dive deeper into the matter. Our experts will share their expertise in the domain with you and help your business thrive.