India has an exploding population of over 1.3 billion people. The country’s population will increase over the next few decades. The population directly translates into an enormous local market, which is crucial in the global supply chain.
In the latest episode of the Emerging Markets Today podcast, Ana Paula Picasso interviews Ian Herbison, the CEO of Speyside Group, a leading global emerging markets corporate affairs and public policy specialist, and gives us more insight into India’s economic growth.
“There are immense opportunities for India in two different respects; as a high-growth domestic market of 1.3 billion people, and as a crucial cog in the global supply chain.”
Ian Herbison
The COVID-19 pandemic exposed how India and other global manufacturers over-relied on China for the supply of crucial technological equipment. China employed strict measures to curb the spread of COVID, which heavily affected the supply chain.
The geopolitical conflict between China and Taiwan and China’s tension with the rest of the western nations have affected the global supply of semiconductors.
“The global economy is digital, and one of the main components making that possible is equipment that relies heavily on semiconductors. Advanced technology is produced in Taiwan and mainland China… ”
Ian Herbison
Countries such as the USA are opting to start producing them locally. This conflict leaves a gap in the supply chain, which could be a huge opportunity for India to try and fill that gap.
An Indian company named Vedanta Limited is investing heavily in mega factories in the state of Gujarat with the aim of mass-producing semiconductors locally. Doing this will help tap into the local labor market and utilize the domestic market as their target market.
Other companies are also looking to diversify into India to build a new Silicon Valley in the country. The country’s prime minister, Modi, and his government have been focusing on the “Make in India” strategy, which provides incentives for investors to invest in the country while using products manufactured within the country. The government has invested in various infrastructural projects such as roads, rails, airports, and renewable power, which in turn has stimulated domestic economic growth.
India has big tech players in technological sectors. The government is setting up a unique national digital payment infrastructure specifically for India for easy access and at a low cost. One good example is Paytm, which has simplified bank-to-bank money transfers. In the podcast, Ian explains the fascinating events that followed it going public.
“There’s no doubt there is going to be some pain as the sectors shake out… will see consolidation in India, but out of that will emerge big, strong companies.”
Ian Herbison
Despite the favourable situation for economic growth, there are also some downsides, such as high unemployment and difficulty in doing business because different states have different laws about taxes. These tax laws mean that investors should understand the legislation and strive to build good relations at the state level.
India has a sizable domestic market compared to its east Asian neighbors, the Philippines, Malaysia, and Vietnam, which have a small domestic market. ASEAN has ensured more free trade between its member countries. India has been reluctant to join the bloc because it does not want to open up its market in sensitive sectors.
Click below to listen to the conversation with Ian Herbison, Speyside Group:
