About the Indian Market

With a population of 1.3 billion, India is the world’s second most populous country and, with an annual population growth rate of around 1.1%, it is estimated to become the most populous country in 2024. Needless to say, the Indian market represents enormous business potential, not only due to its increasing middle class, but also from 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 and services 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 economic growth, which has averaged around 7.5% per year since 1997. The annual growth rates has been around 8-10% up through the 2000s and as a result, the disposable income of the Indian people has been steadily rising. The service sector has been the main driver of this impressive growth, accounting for nearly 60% 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 to GDP with less than 20%. Over the next years, the manufacturing sector will need to be further developed in order for India to sustain these levels of economic growth.

India has a large educated, English-speaking population. This constitutes a competitive advantage vis-à-vis other emerging markets. This advantage has for instance been utilized to export IT services to the benefit of the Indian economy. Consequently, India is often referred to 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 faces numerous  structural challenges, such as immense poverty, inadequate infrastructure, and increasing urbanization. Thus, ensuring future growth depends on the continuous implementation of reforms in the financial and infrastructure sectors, as well as further liberalizations of the trade and investment regime.

An investment in India should not be considered as short-term. It is difficult and resource intensive and it requires a robust and a long-term strategy to engage in this market. This is especially true for small- and medium-sized Danish enterprises. It is therefore necessary to consider and prepare thoroughly to find the right niches and business models, that work in this challenges but highly dynamic market.