Mark Twain accurately summed up the strategic importance of India in the world when he said that “India is the cradle of the human race, the birthplace of human speech, the mother of history, the grandmother of legend, and the great grand mother of tradition. Our most valuable and most astrictive materials in the history of man are treasured up in India only!”
But it is India’s growth in the last 18 years that has drawn the most attention from the international community. It’s an economic story like no other emerging market or Bollywood story can accurately portray. Faced with a balance of payments crisis in 1991, sweeping economic reforms led to the subsequent boom that has culminated in annual growth at nearly 10 per cent over the last three years.
India today stands on the brink of becoming a global superpower. With a population of 1.1 billion people and having just surpassed Japan to become the world’s third largest economy, India is filled with a new sense of excitement, dynamism and hope.
The stats
When discussing the economic revitalisation of the world’s largest democracy the statistics are always mind boggling.
- A middle class of 400 million (larger than the entire population of the United States) and growing
- Second largest recipient of Foreign Direct Investment in the world since 2005
- Market value of listed companies now in excess of US$ 1 trillion thus making India a member of the elite trillion dollar club
- Largest road network in the world
- Two of the ten biggest cities in the world, Mumbai and Delhi, are in India
- Over 5000 daily and 16 000 weekly newspapers
- Indian universities and colleges enrol 4 million students a year which produce 200 000 engineers and 60 000 MBA graduates every year
Economic pundits who talk about the growth of India often speak about the large Indian multinationals which fuel this growth. However India’s economic growth is not solely driven by large multinationals who invest even more year on year, but by the spirit and ‘chutzpah’ of people on the ground.
The people
The magic of India rests in its people. And the magic has just started. With half the population under the age of 25, young people in India are working harder, demanding better and spending . Spend more than three days in Mumbai and the pace at which this economy is moving reveals itself. It is then that one realises that no textbook, university lecture or newspaper article can ever encapsulate the incredible growth of this tiger economy. When VS Naipul wrote there is little subtlety to India, it was an understatement. From the street traders in Marine Drive to the boardrooms and offices of the richest men in the world, the sheer pace at which India is growing is incredible. In the words of the ‘self styled’ Richard Branson of India, Vijay Mallya, "You rarely find a country with an acknowledged consumer class of more than 300m people, and an economy growing at 9 per cent a year. It would be quite idiotic to ignore the opportunity."
The attraction
India's commercial attraction lies in its immense domestic market, high growth rate, huge economies of scale in some sectors, the quality of management and labour, low-cost manufacturing capacity, and a large and rapidly growing middle class. R Ravimohan, managing director and chief executive of Crisil, India's premier ratings agency, says "The important thing is to identify where you want to invest: in the class market, or the mass market. Let me give you an example. When mobile telephone companies started here, it was thought of as something to aim at the class market, the elite, so they charged premium rates. Then Reliance went into the same business using a mass-market model and turned it upside down. They had very low charges - but they got 20 million customers." Reliance's model now prevails in the Indian mobile market, which has some of the lowest tariffs in the world - and the third-largest number of subscribers.”
Even the world’s largest chain of fast food restaurants, McDonalds, initially entered India with the wrong strategy. After dismal sales in the first few months the company quickly realised that the traditional menus utilised around the world would not cut it in India and in a matter of weeks menus were transformed to accommodate for McAloo tikka and McVeggie burgers. The company has not looked back.
- Abdullah Verachia is adjunct faculty at the Gordon Institute of Business Science, University of Pretoria, and Director and Business Division Head at Frontier Advisory
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