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2024年6月4日

Basic Knowledge] Explanation of the necessary preparation for business advancement in India.

India is a hot market with many overseas corporate bases and startup companies. The Japanese stock market has also been actively moving into India in recent years, and many companies may be considering India as a candidate for an overseas base.


In this article, we will address the following questions for those considering business expansion in India.


What is the current state of the Indian economy?

What are the advantages of doing business in India for Japanese companies?

Are there any culture gaps to keep in mind?"


We will introduce basic information useful for Japanese companies expanding their business in India, so please refer to this article.



Basic Information for Business Development in India

Let's start with basic information about India.

Area

Approximately 3,287,000 square kilometers

Population

Approximately 1.4 billion people

Official Languages

Hindi, English (and 21 other languages)

Religion

Hinduism (79.8%)

Islam (14.2%)

Christianity (2.3%)

Sikh (1.7%)

Buddhist (0.7%)

Jainism (0.4%)

Major Industries

Agriculture, industry, IT industry

引用:外務省「インド基礎データ


Reference: Ministry of Foreign Affairs, "Basic Data on India".


India is a republic in South Asia and possesses the world's seventh largest land area. It is approximately nine times the size of Japan, and with a population expected to continue to grow, the country has good prospects for economic growth.


It is a multilingual and multireligious country, and each state is characterized by different ethnic groups and religions. Since different ethnic groups speak different languages, India is a multilingual country with 21 recognized languages in addition to the official languages.


India takes advantage of its vast land area, 42% of which is used for agriculture. More than half of the working population is engaged in agriculture, a trend that is responsible for about 20% of GDP. Manufacturing (industry), which accounts for about 16% of GDP, is also thriving, with the auto parts industry in particular attracting attention.


In recent years, the IT industry has also been increasing its share of GDP, and currently accounts for about 8% of the country's GDP.


Advantages of Doing Business in India] Growing Indian Economy

The Indian market is attracting attention from all over the world, and many unicorn companies and other startups in the IT industry are developing their business in India. The advantages of doing business in India are as follows


  1. Demographic dividend and abundant human resources

  2. Steady growth rate

  3. Growth of IT-related industries


We will explain each of these in detail, so let's first look at the current state of the Indian economy and its attractiveness.


The arrival of the demographic dividend period and abundant human resources

India is in a "demographic dividend period," and the percentage of the working population is on the rise.


The United Nations Department of Economic and Social Affairs estimates that by mid-2023, India's total population will have surpassed that of China to rank first in the world. Forty percent of this population is younger than 25 years old, and more than 60% of the total population is of an age where a sufficient labor force can be expected. This is a promising environment, the exact opposite of Japan's aging society.


The abundance of a young population also means that there is demand for a wide variety of products and services. In addition, young local businesspeople tend to be fluent in English and have new values that are not bound by old customs. This is also an attractive place to find the right people for development and IT projects.


Steady growth rate

The fact that India's economy continues to grow at a steady rate is another major attraction for business expansion. India's real GDP has continued to rise since 1970, and by 2023 it will rank fifth in the world economic rankings.


Over the 11-year period from 2003 to 2014, it grew at an average annual rate of 8.3%, and is projected to continue growing at an average annual rate of more than 6.5% over the next 10 years. In addition, domestic private final consumption expenditures (personal consumption) increased by 7.5% from 2022 to 2023.


Furthermore, by 2029, India is expected to overtake Japan to become the world's third largest economy, and its GDP is said to reach the 10 trillion dollar level by 2035.


Reference: Nippon Keidanren "To Seize Business Opportunities in India" / Digima~Digima~"Summary of Basic Knowledge about Business in India - Three pieces of information you should know when entering the Indian market".


Growth of IT-Related Industries

Around 1980, the Indian government began to focus on software development, which led to the training of IT engineers and the attraction of foreign IT companies to Bangalore. Bangalore has been called the "Silicon Valley of India" because of the concentration of engineers returning from the U.S. to Bangalore.


One of the main reasons for the growth of the IT industry in India is the 12-hour time difference between India and the United States.


This time difference has given birth to an efficient routine of "work thrown from the U.S. to India is ready the next morning. Another boost is the fact that many locals are fluent in English.


Another reason is that the IT business, a new light industry, was less affected by the caste system in India. The industry has been attracting attention from young people as a stable job that they can choose regardless of their status, and this has led to the development of the industry by attracting excellent human resources.


Points to Note: What You Need to Know Before Doing Business in India

Finally, there are three things that companies considering doing business in India should know at a minimum.


  1. Unique culture and ethnicity

  2. Gaps in business etiquette and culture

  3. Weakness of infrastructure


It would not be an exaggeration to say that understanding the above and being able to take proper countermeasures in advance can make the difference between success and failure after entering the Indian market. It is important to be aware of the disadvantages and precautions of doing business in India, and to have a flexible attitude to deal with them.


Unique culture and ethnicity

First, it is necessary to understand the impact of the caste system on the market. India is home to a wide variety of languages and religions, which requires different approaches in different regions. In addition, it will be important to be aware of marketing that emphasizes religious values.


For example, India has its own "caste system," a class system. Today, it is gradually becoming less formalized, and many younger segments of the population have a new set of values. However, restrictions and discrimination against occupations and marriage partners still exist, and the influence of values on status remains.


Gaps in business etiquette and culture

There is a gap between Japanese and Indian daily customs, including gestures, and it is easy for discrepancies to arise in communication. It is important to be respectful of the other's culture and consider business manners and customs.


For example, in India, a gesture of assent is expressed by "head tilted to the side. However, in Japan, this gesture is used as a questioning gesture, so it is easy to cause discrepancies in communication.


In India, there is also the value of the left hand as the "unclean hand. It is good manners to avoid using the left hand when interacting with others, such as when shaking hands, handing business cards, or giving things to others. Left-handed people, for example, should be very careful not to use their left hand.


Weakness of infrastructure

It is important to note that means of transportation, such as roads and railroads, and lifelines, such as water and electricity, are lagging behind. In particular, the fragility of the electric power infrastructure due to power shortages can cause various problems and disadvantages.


Therefore, it will be important to emphasize market research in advance and risk management in the event of trouble. For example, the following measures are effective


  • Notify business partners of the fragility of the Internet environment.

  • Prepare for power shortages and blackouts by setting up your own power generation facilities.


Since the Modi administration took office in 2014, India has been aggressively investing in infrastructure, increasing the distance of roads by 1.5 times and doubling the number of airports in the nine years to 2023. In addition, the country has increased its water supply and drinking water coverage from 34% to 68%, with the goal of achieving 100% coverage by 2025.


Therefore, there are high expectations for future infrastructure development.


Conclusion

India, with its remarkable economic growth, is an attractive business market for Japanese companies. However, it is also a country of various languages, ethnicities, and religions, so it is necessary to understand its unique culture and the gap between Japan and India.


Our strength is that we can provide the information and support necessary for overseas expansion from the perspective of a digital marketing professional. We can contribute as a partner to your overseas expansion from a variety of perspectives, including language, law, and localization.


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