During a visit to India, Jeff Bezos, the founder of Amazon, said, “I predict that the 21st century is going to be the Indian century. The dynamism, the energy… everywhere I go here, I meet people who are working [on] self-improvement and growth.” The modern state of India gained independence from the United Kingdom in 1947. India is currently the world’s most populous democracy. Today, the country is the second largest nation in the world by population and the seventh largest country by land mass. India has experienced rapid economic and demographic growth over the last decade. In fact, the United Nations recently said the country “is set to surpass China as the world's most populous country in 2023.” By all accounts, India is a rising superpower that will profoundly reshape the globe in the 21st century.

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YEAR-IN REVIEW

India and the United Kingdom are currently in talks to forge a free-trade deal between the two countries. In a recent statement, the current UK Prime Minister, Boris Johnson, said talks could wrap by October. According to Johnson, the deal “could double [the UK’s] trade and investments [in India] by the end of the decade.”

In early July, Boris Johnson announced he would resign as Prime Minister “once a successor is chosen, after senior members of his government turned against him and urged him to stand down following a series of scandals.” It is unclear how Johnson’s political troubles and/or a new prime minister will impact the ongoing negotiations with India.

India’s relationship with the west has been strained in recent months due the Russian invasion of Ukraine. India notably abstained from a vote in the United Nations to condemn the unjustified invasion. India’s foreign secretary, Harsh Vardhan Shringla, later clarified, “Prime Minister Modi’s [perspective on it] - which is that the Russia-Ukraine war should end immediately.” Analysts note that the Russian invasion has put India in a difficult position. India has maintained a “long-standing friendship” with Russia. During the Cold War, “India practiced nonalignment, where it sought to avoid becoming entangled in the superpower conflicts and maintain its sovereignty.” The country “has walked a careful tightrope since Russia launched its war” since India currently buys more than half of its military hardware from Russia. From the West’s perspective, one of the major goals of this bilateral free trade with the UK is to decrease India’s reliance on Russian military equipment. “Johnson said Britain would support India’s goal of building its own fighter jets, to reduce expensive imports of military equipment.”

Despite India’s deep relationship with Russia, India will continue to play a major role in counterbalancing China. “India is a member of the “Quad” (along with the US, Australia, and Japan), an informal alliance that came about years ago but which both the Trump and Biden administrations have sought to strengthen.” This alliance of powerful Indo-Pacific democracies is officially designed to foster “regional cooperation” and “the vision of a free and open Indo-Pacific.” Unofficially, the alliance hopes to curb China’s growing aggression in the region.

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GOVERNMENT

Domestically, the country has largely flourished under Prime Minister Narendra Modi. Over the last seven years, the country has grown its total GDP by 40%. Prime Minister Narendra Modi, who was first elected in 2014, and his Hindu nationalist party won a landslide reelection victory in 2019. His party enjoys widespread support in India; however, some analysts suggest Modi’s political victories have come at the cost of “polarizing the electorate along ethno-religious lines.”

When India gained independence from the United Kingdom, the country was partitioned primarily along religious lines. The primarily Muslim regions of Pakistan and Bangledesh were split from the rest of the Hindu-majority India. Suddenly, millions of Muslims and Hindus found themselves on the “wrong” side of the border. The partition resulted in one of the largest mass migrations in history accompanied by widespread violence and human suffering.

This history deeply impacts modern Indian politics. Today, India is 79.8% Hindu. Muslims represent just 14.2% of the population. Other religious communities like Christians, Sikhs, and Buddhists represent less than 6% of the population. As a result, it is incredibly difficult to fairly represent these diverse religious communities found within India. The lopsided religious makeup of the country creates an environment where powerful Hindu governments can effectively ignore ethnic and religious minorities. “In the five years of Modi’s first term in power, hate crime against Muslims soared; data shows that some 90% of religious hate crimes in the last decade have occurred since Modi came to power.” Critics of the Modi administration say his “government suppresses dissent [and is] growing increasingly intolerant of ethnic and religious minorities.” By defining the nation in explicitly Hindu religious terms, Modi “relegates Muslims and Christians to second-class citizens.” Protests sparked across the country in 2019 after the death of Tabrez Ansari, who “was beaten for hours until he died at the hands of a Hindu mob in the eastern state of Jharkhand.” In a viral video from the incident, Ansari “is seen crying and begging for mercy.”

As the nation takes an increasingly important role on the international stage, India’s political leaders will need to fight the temptation to succumb to majoritarian political platforms that unfairly discriminate against the religious and ethnic communities within the country.

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BUSINESS RISKS

PROTECTIONIST TARIFFS

International companies operating in India often “face non-transparent and often unpredictable regulatory and tariff regimes.” This significantly increases the cost of doing business in India.  “India has the highest average applied tariff of any G20 country, and some of the highest bound tariff rates among World Trade Organization members.”

INFRASTRUCTURE CONSTRAINTS

India is a rapidly emerging market, and its existing infrastructure can't keep pace with the country’s economic growth. “India’s congested road transportation infrastructure, inordinate delays in railway freight movement, inefficient and long turnaround time at ports, and fast-growing but highly concentrated airport sector all contribute to significant capacity constraints that, if not addressed, may stymie economic growth.” India is working to address these issues, but “infrastructure projects in India often suffer from delays in completion, mainly due to an inadequate regulatory framework and inefficiency in the project approval process.”

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BUSINESS OPPORTUNITIES

THE GROWING MIDDLE CLASS

India is set to dramatically expand its middle class over the next decade. According to the World Economic Forum, “nearly 80% of households in 2030 will be middle-income, up from about 50% today.” Analysts say India’s middle class “will drive 75% of consumer spending in 2030.”

YOUNGER POPULATION

India is one of the youngest countries in the world. Roughly “62.5% of India’s working age population is aged between 15 and 59 years, ensuring that India will have a demographic advantage all the way to 2055.” India’s large population of working age individuals “offers both a workforce as well as a market” to companies looking to expand into the Indian market. “The surge in the young, working population presents multiple unique and interesting possibilities for India’s future, in terms of economic growth [and] social mobility.”

India is a significant emerging market. The country poised for strong economic growth over the next century. The International Monetary Fund “predicts that by 2027 India will be the world’s fifth-largest economy, with a GDP of roughly $5 trillion.” At CASTUS, we have experience growing brands across the globe. We understand the critical data that needs to be identified when planning for an international expansion. Our team provides strategic direction that streamlines the expansion process and optimizes resources to help your business succeed. Schedule your no-obligation consultation with our team of experts today.

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