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Global Business Prospects: Why So Many Companies Are Invested In India’s Economy

India is the single largest democracy in the world, and has enjoyed explosive growth over the last decade. With a population of over 1.2 billion, and the sixth largest land mass, India is poised to become an economic powerhouse in the coming decades. One economist predicts India’s growth will outpace China’s by 2015, and new Prime Minister Modi seeks to fundamentally revolutionize India by cutting bureaucracy and reinvesting more in the infrastructure.

This makes India a major player in the global industry, more so than ever before.

Global Business Prospects: Why So Many Companies Are Invested In India's Economy

The Keys

India’s infrastructure will remain one of the keys to success. Transportation and telecommunications, especially, are among two of the highest priority. Without these, it is difficult for India’s economy to grow jobs, especially in the technology and manufacturing industries. Technology and call centers are two sectors which have fueled India’s explosion of growth, while manufacturing has slumped in recent years. India’s service sector, on the other hand, has been the second fastest growing service sector in the world.

Inflation has been another concern, albeit one that is stabilizing. President Modi has been hailed for his economic policies in the past, and has brought inflation to stabilizing levels. Inflation has been a problem in previous years, but with Modi at the reins, the general consensus is that he will be able to not only maintain the inflation rate, but increase foreign direct investment.

The Result

An increase in FDI can help grease the wheels of internal investment in the country’s infrastructure, and the combination of these two can greatly benefit the Indian economy down the road. Because global investment demands place heavy emphasis on infrastructure and inflation, Modi’s plan is to maintain these two in order to maximize investor benefit – thus making the country more attractive. 

Additionally, the tourism industry has flourished recently, with a 9% growth year over year in June, compared to a 2.5% the previous June. While tourism itself is not enough to significantly impact the GDP single-handedly, it is a good indicator of investment and interest internationally. As interest increases, tourism usually precedes FDI, especially for site visits. 

A Helping Hand?

Facebook COO Sheryl Sandberg said “”We look to India to contribute to our global business… we also look to India to develop our business. Every company I meet with here talks about the possibilities of growth because you can’t be here and not feel possibilities for growth. We are really willing to invest here because the returns are so great to our global and local business.” Facebook has committed to investing in India as a country because of the potential, and has helped develop infrastructure using the country’s engineering talent and existing telecom partners. 

Perhaps most commonly helpful to American investors, India has a massive call center and virtual worker sector.  India remains the number one country in the world for overall BPO (Business Process Outsourcing), though the Philippines recently surpassed them in call centers. However, as continuous improvements and growth reshape the competitive landscape, India is poised to remain the number one overall BPO (especially including IT) and regain the number one spot in call centers. This makes India even more competitive, as the country is taking efforts to increase investment.

Why India?

It is this exponential growth that compels a plethora of businesses (59% of which are American businesses) to open contact centers in India. Moreover, as another article spells out in more detail, outsourcing is not the terrible stigma politicians make it out to be – and involves a lot more than another country doing work that Americans simply don’t want to. Not only is it in the business’s best interest, but many countries are selling their products on the foreign market as well.

At the same time, it’s becoming easier than ever for merchants based out of India to conduct business on an international scale.  Innovative e-commerce services like Shopify  offer Indian businesses a streamlined interface for mobile credit card processing, keeping the markets all over the world competitive.

The stigma of call centers taking American jobs flatly neglects the obvious fact that outsourcing workers – people who work in said call centers – must also eat, shave, drive cars, buy electronics, and  generally consume goods much in the same manner as Americans. While the demographics are different, consumption is consumption worldwide – and someone has to provide those goods, either domestically or internationally. This also provides a market for American made products and services. Moreover, the cheaper costs passed down makes American goods less expensive.

Opening a call center isn’t so much a novel concept as it is a cost-savings effort – but the bottom line is ultimately what matters, and in today’s tightening economy, customers are more price savvy than a decade ago. To meet this demand, business owners have to either cut costs or reduce their profit margin. Thus, to maintain the profit margin, lower costs have to come from somewhere in order for Americans to enjoy the cheap goods the market craves. It is here, in India, that many are capable of opening a call center, or having an IT outsourcing wing, that enables many companies to perform the same services for less. Not only does this keep competition up and prices down, it allows business owners to pay the American counterparts higher pay and salaries.

Conclusion

Outsourcing has been given a bad name by politicians looking to score political points. But this does not negate the fact that economists – who use hard data and reason, rather than emotional pandering – have used outsourcing as an ideal model in order to capitalize on “comparative advantage” for centuries. Dating back to Adam Smith’s invisible hand theory, free market companies have generally gone with the lowest bidder capable of providing the service. Whether it’s American, Chinese, or Indian is irrelevant. 

Anyone who disagrees need only look at their cell phone (or computer, vehicle, clothes, etc.) We live in a globally competitive market, and the best way to maintain competition is to embrace the global benefits.

Images: ”HYDERABAD INDIA – August 29 : Hyderabad is fifth largest contributor city to India’s GDP with US$74 billion . On August 29,2012 Hyderabad, India./ Shutterstock.com

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Dave Landry Jr. is a small business owner and entrepreneur located in Venice, California. He hopes you enjoy this article and encourages you to reach out to him on Facebook or Google+!

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Comments
  • Thanks for sharing this info Dave. It’s very interesting how India does this so well.




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