India offers a large home market that is still on track to be the third-largest economy over the next three decades. Very few large emerging nations can boast both a tested democracywitness the largest adult franchise everand an economy growing at a steady pace. Over 16 general elections, the Indian consumer is both a fractious voter and a discerning customer. This gives the Indian economy and polity a unique status within its peers. The question of democracy is settled, the focus on enterprise is fast gaining ground. The growth in Indian economy has been entrepreneurial, bringing forth both large and impressive multinationals like the Tatas as well as smaller companies like Ghari, a detergent company from Kanpur. These small and medium sized companies are strengthening and deepening the roots of the Indian economy.
However, India is seen as an emerging market, which has been emerging for a rather long time. CEOs of MNCs continue to negotiate with their Boards seeking patience where the potential is still winning the argument over profits. Indian companies, themselves emerging as MNCs, are also asking questions on how to address other growth markets, with tools sharpened in India with much diligence. Making money in India for new entrants remains an issue. Entrants have to redesign their value propositions, operating models, financial and human capital for a market that is often unforgiving. The business environment is ambiguous; tax and regulation a constantly changing equation. The recent policy framing by the government introducing more FDI in key sectors as well as taking steps towards a more balanced transfer-pricing regime are forward movements for an industry long on patience. The prize of this penance is companies who can flourish in other emerging markets; the growth vectors of todays world.
Within India, the emerging middlea segment just below the middle classhas been the focus of the new government, and is also the focus of a number of companies globally. By 2020, India will have about 600 million people in the emerging middle class. They will not only offer a $1 trillion market, but will also be a segment that is uniquely young, seeking solutions that are new, innovative and often digital. Globally, we estimate this segment to be in excess of a
$6 trillion market with over 2.3 billion people falling in this category, a full one-third of the worlds population, many residing in the BRICS countries. Much of the innovation that is already taking place in India is on the shoulders of this market. The customer in this market is aspirational; so price is a necessary but not sufficient condition to win. This was illustrated by Bajaj that introduced a larger than normal motorcycle, commonly termed the SUV of rural India, in Nigeria where it captured market share.
Domestic companies from India and international companies who have learned in India are addressing other emerging markets with success, quickening the pace of South-to-South flow of business and ideas. Indian enterprises and Indian entrepreneurs are leading the way. The success of Airtel, which was a start-up till two decades ago, transforming itself into the third-largest telecom operator globally is well known. Other companies like Motherson Sumi, a leading car parts manufacturer, have also globalised from the very beginning of their growth trajectory. India is following a tradition of business communities that went to places like Africa much before globalisation became the buzzword. After some initial bruising, large international companies are also using India as a launching pad for other emerging economies. The large R&D centres of multinationals that have sprung up in India over the past two decades, now tested, are repositioning India away from cost arbitrage to an innovation hub for emerging markets.
The world sees India both as an important market and a testing ground for emerging market innovations. India can accelerate this initial lead by recognising innovations that are being spawned in the country and help export them to other parts of the emerging world. The rebalancing the world is witnessing towards the East will then have India as an important and necessary fulcrum; a valuable forward in the BRICS team.
The author is executive director, PwC, and global lead partner, PwCs global growth markets centre