• Industry: Special Focus Groups, India Business Desk
  • Type: Business and industry issue
  • Date: 12/10/2010

Whatever one says of India is true. The opposite is also true 

“As Western economies begin to recover from the financial crisis, the recession is virtually forgotten in India. After a six-month pause from September 2008, India’s growth began to recover rapidly.”

The primary driver of this growth has been a booming domestic market, fuelled by increasing earnings and consumption by a rising middle class and increased urbanisation. This growth translates into demand for products and services across the board but particularly in infrastructure, energy, education and homeland security.


Investment in infrastructure constituted 6.5% of Gross Domestic Product (GDP) in 2009 and is expected to increase to 9.3% by 2012. The Government is working towards removing policy, regulatory and institutional bottlenecks to encourage speedy implementation of projects, including:


  • 80 000 MW of new power generation
  • 130 000 km of new rural roads, plus highways and expressways
  • Redevelopment of ports and airports
  • 8 500 km of new railway lines and modernisation of 22 railway stations
  • Increased focus on renewables.


The demand for education is also growing as India’s young population require skills to enable them to find gainful employment outside the agricultural sector. The Indian higher education market currently stands at US$50 billion per annum with a student base of 450 million, but the country needs investment of around US$100 billion over the next five years to meet this demand. This opens numerous opportunities for foreign universities and vocational institutes in India.


India’s defence needs are also growing significantly. The Government wants to modernise the ageing equipment of its forces and is expected to spend over US$100 billion over the next three years and another US$120 billion between 2012 and 2017. Here is an opportunity, not only for the larger players in the industry, but also for small and medium-sized equipment and components suppliers.


Despite the significant opening up of the Indian economy over the past 18 years, the regulatory environment can be confusing. While the general direction is clear with sectors of the economy increasingly opening up for foreign investment, progress is uneven and can be frustrating.


A joint venture partner is often an asset to a company trying to reduce the risk of an unknown geography and to more efficiently assimilate the market’s nuances. The need for a partner depends on many factors, ranging from regulatory constraints to the ability to assemble a competent management team. In sectors such as retail and insurance, a joint venture partner is virtually a necessity to enter the Indian market.


As Indian employee strength grows and India-origin managers proliferate in global corporations, cultural issues will likely present challenges and opportunities. To the Western businessperson, India presents an experience like few other countries. The English language and the common law system and terminology are easily understood. Indian business leaders, many middle managers and technical personnel understand the West very well.


However, there are aspects of the Indian psyche that take time to understand. India has a rich philosophical tradition that infuses the way its people and institutions behave and business interactions should account for this. For example, Indians take pride in working for their organisations. They are very loyal to employers who show care for their employees. This creates unique competitive advantages for the Indian corporations that have fostered strong cultures.


It has been said about India that whatever one says about it is true, and the opposite is also true. Great opportunities come with equally great challenges. Motivated and hard-working people are assets, but the infrastructure and some regulatory constraints can be frustrating. The business atmosphere is stimulating and electric, yet nothing is as easy as it seems.



Neeraj Shah
Corporate Finance
Head of the Indian
Business Desk
Tel: +27 (0)11 647 7825