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India as a market

Below you find a brief overview of India as a market. In the sub-menues you find economic numbers and key figures, specific information on framework conditions and barriers, and lastly, information about sectors in focus.

With a population of 1.2 billion people India is the world’s second most populous country and with an annual population growth rate of around 1.4 pct. it is estimated to be the most populous country by 2050. Needless to say, the Indian market represents enormous business potential, not only to its increasing middle class, but also to the 2/3 of the population who still resides in rural areas. Despite an income of below or around the poverty line, this Bottom of the Pyramid (BOP) segment has an enormous aggregated purchasing power waiting to be served by foreign firms who adjust their products to the needs of the Indian consumers.

In the early 1990s India initiated gradual economic liberalization, including industrial deregulation, privatization of state-owned enterprises, and reduced controls on foreign trade and investment. These reforms have served to accelerate the country's growth, which has averaged 7 pct. per year since 1997. The annual growth rate has been around 8-10 pct. up through the 2000s and along with the rapid economic growth the disposable income of the Indian people has been rising as well. The service sector has been the main source of economic growth, accounting for nearly 60 pct. of India's output while only employing around 1/3 of the workforce. The agricultural sector, on the other hand, employs more than half of the workforce, but contributes with less than 20 pct. to GDP. Over the next years the manufacturing sector will need to be developed in order for India to maintain economic growth.

India has a large educated, English-speaking population, which constitutes a competitive advantage vis-à-vis other emerging markets. This advantage has for instance been utilised to export IT services to the benefit of the Indian economy. Consequently, many nowadays speak of India as “the world’s back office”.

India was not hit as hard by the global financial crisis as other countries mainly due to strong domestic demand. However, over the past couple of years India has been adversely affected by the declining demand on the world market, and the Euro crisis, which has resulted in declining growth rates. Moreover, India's structural challenges are numerous and include immense poverty, inadequate infrastructure, and increasing urbanisation. Thus, ensuring future growth depends on the continuous implementation of reforms in the finance and infrastructure sectors as well as further liberalizations of the trade and investment climate.

Investment in India should not be considered as short-term. It is difficult and resource intensive and it requires robustness and a long-term strategy to engage in the market. Particularly for small- and medium-sized Danish enterprises, it is therefore necessary to consider and prepare thoroughly to find the right niches and business models.

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