India's Unique Value Proposition
 
India, the world's fastest growing free-market democracy, presents lucrative and diverse opportunities for multinationals and smaller manufacturers and marketers with the right products, services, and commitment. India's infrastructure, transportation, energy, environmental, health care, high-tech and defense sector requirements for equipment and services will exceed tens of billions of dollars in the mid-term as the Indian economy globalizes and expands.
Despite financial turmoil, India's basic premise remains buoyant, and the country is poised to emerge as one of the largest economies in the world. Signs of improvement in economic fundamentals are already visible as inflation has come down, liquidity conditions are improving and industrial production has gone up. India's value proposition is reflected in its favorable investment policy, banking and financial services infrastructure, extensive pool of qualified engineers and scientists, youthful demographics, affluent and rising middle class, transformation of rural India, and growing demand for consumer goods. In this second in a series of articles I will describe India's unique value proposition. Future articles will describe the challenges and critical success factors for operating in India.
Favorable Regulatory Environment
Unlike many big emerging markets, India has a sophisticated commercial and legal code. Like the others, India has placed economic progress at the heart of its national policies, and in just the last few years it has succeeded in opening its economy to the rest of the world beyond anything that most observers would have imagined possible in so short a time.
India has taken positive steps towards liberalizing and introducing private investment and competition in multiple industry sectors. Its proximity to growing Asian markets makes India an attractive production and distribution destination for companies worldwide. Over the past decade, the evolution of knowledge sectors such as pharmaceuticals, biotech, and information technology (IT) services has led to the creation of patent laws.
In February 2009, the government of India announced detailed guidelines on liberal and investor-friendly foreign investment policy. Business entities with less than 50% foreign ownership will be considered domestic and allowed to invest downstream in all sectors, without limitations, seemingly giving foreign investors indirect access even to sensitive sectors such as retailing and insurance.
Strong Banking and Financial Infrastructure
Already, several major global players such as HSBC, Citibank, Standard Chartered and GE Money have built a presence in the country. A growing trend in recent years has been the signing of partnerships or the creation of joint ventures between foreign institutions in the credit and debit card payment industry and local Indian banks looking to expand their credit and debit cards offerings. In April 2009, the Reserve Bank of India (RBI) lifted restrictions on the activities of foreign banks making it easier for multinational players to open branches and acquire domestic banks.
Availability of Knowledge Workers
The durability of India's competitive advantage in terms of the size of its skilled workforce is secure because of its favorable demographics and strong tertiary education sector. It has a highly educated workforce with two million college graduates a year all of whom speak English. It has excellent international data communications links and good internet access in the major cities. The Indian Institutes of Technology or IITs, as they are known around the globe, have a long history of turning out top engineers. Thousands of their graduates have flourished in the global technology marketplace, with a good portion landing in California's bay area. Many have also stayed home or returned to India to help fuel the world's fastest-growing tech economy.
Companies such as ABB, Honeywell and Siemens in electrical and electronic products; Cummins, DaimlerChrysler and Toyota Motor in auto components and engineering; and Degussa as well as Rohm and Hass in specialty chemicals operate in skill-intensive industries requiring advanced technical expertise, areas in which India is likely to become a primary sourcing and manufacturing base.
Favorable Demographics
India's population, which until quite recently was seen as a potential liability, is proving to be its greatest asset. The number of Indians in the working-age group of 15-64 years is forecast to rise from 63% of the population in 2006 to 68% by 2026. India will enjoy a growing working-age population at a time when other countries (including China) will face increasing dependency ratios due to aging populations. Already one fifth of the world's population under 24 years old lives in India.
The boom in the services sector helped create a relatively affluent middle class, estimated to be 300 million strong. Rising incomes and increased access to credit have led to much higher spending on consumer durables such as cars, phones and other electronic items. About 40% of India's high-income urban population lives in Mumbai, Delhi, Calcutta, Chennai and Bangalore. India's middle class is well educated, world traveled, tech savvy and extremely brand conscious. Price sensitivity is non-existent in this market segment.
Transformation of Rural India
Large areas of rural India have been transformed into a distinctively "rurban" landscape, where farm, factory and office exist side-by-side. Increased purchasing power means that India's 557,137 villages are a large new market. Approximately 70% of radios, bicycles, mechanical watches, soap and cosmetics are sold and purchased in rural India. Fifty percent of motorcycles, wrist watches, televisions, cassette recorders, bicycles, electric irons and packaged tea are also marketed and purchased in rural India. More than 70 million mobile phone subscribers live in rural areas. The industry anticipates compound average annual growth of 18.4% per year until 2012, by which time there should be over 100 million rural subscribers.
According to McKinsey reports, India's growing market for consumer goods could reach $400 billion by 2010, making it one of the five largest in the world. Clothing stores, convenience stores and financial-services retailers are eagerly establishing their base in these metro areas to cater to 20 or 25 of the largest cities with populations greater than a million each. ( linda )16 Jan,2012

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