The pace and scale of digital transformation in India has inspired tech giants and start-ups to build and robustly invest in the country. The rewards are outsized - as companies who have cracked the India code discovered to their delight, notwithstanding the gloomy predictions from some so-called pundits.
In 2018, as soon as Indian Prime Minister Narendra Modi declared at the World Economic Forum in Davos that India's economy will double to $5 trillion by 2025, economists and investors welcomed the ambitious direction the world's fifth largest economy was taking in raising the country's global prospects and stature.
It was a golden invitation to major companies and investors around the globe to be a part of the success of the world's fastest growing large economy and democracy.
But examining the reactions to the bold announcement, Harvard professor and management guru Vijay Govindarajan found that the debate unfolding in India was quite different: “You have the media pointing out the country's shallow middle class, growing inequality and joblessness, and a trail of multinationals frustrated by the lack of China-like success in India... While India remains a challenging market, there are at least three reasons global firms cannot overlook the country without consequences,” he observed in an analysis co-authored with Ravi Venkatesan for Harvard Business Review.
The reasons cited by Govindarajan in 2018 included a dramatic growth in infrastructure spending, backed by a strong emerging middle class and a tech startup boom across the country.
More than two years down the line, the reasons why FDIs have gained traction and global investors and companies remain bullish on India are basically the same - never mind the domestic experts.
India's massive infrastructure spending spree to boost its airports, cities, hotels, ports, highways, bridges, hospitals, power plants and renewable energy capacity have transformed several critical sectors. For instance, India expanded its solar generating capacity eightfold since 2014 and achieved the target of 20GW of capacity four years ahead of schedule. Similarly, in the start-up space, especially in the aftermath of the Covid-19 pandemic, there is an acute demand for leveraging technology to solve India's unique problems - from the major shortage of hospital beds and medical professionals in the healthcare sector to the arenas of financial services, education and justice. Huge opportunities for tech startups in these sectors have attracted a number of innovative tech companies to the Indian market in the past few years.
While the rush of tech start-ups to invest and set up shop in India is surely encouraging, it has been eclipsed by massive investments from tech giants into the country - providing yet another reason for investors to cheer for brand India.
An affirmation of the same came earlier this week when Google became the latest US technology giant to invest in Indian conglomerate Reliance Industries' digital business, agreeing to pay $4.5 billion for a 7.7 per cent stake in Jio Platforms. With this investment, Reliance Jio has raised about $20.2 billion in the past four months - more than what the entire Indian startup ecosystem raised last year. In April, Facebook said it would invest $5.7 billion for a 9.99 per cent stake in Jio Telecom, making it the Indian mobile operator's largest minority shareholder.
Why did Google follow the lead of Facebook, Intel and Qualcomm to invest in Reliance Jio in particular, and companies like Microsoft, MasterCard and Walmart to pump money into India in general
For one, Reliance owner Mukesh Ambani said the two companies will develop low-cost Android phones for 4G and 5G networks - effectively thwarting Huawei's 5G entry plans into India. And Ambani acknowledged that Google, like Jio, “is a force for change and innovation”.
But probe further, and the deeper reasons why global companies are making a beeline to grow their investments in India bely the narrative perpetuated by a section of the media and some experts.
As Google CEO Sundar Pichai put it while explaining why the company will invest about $10 billion in India over the next five to seven years: “The pace and scale of digital transformation in India is hugely inspiring for us and reinforces our view that building products for India first helps us build better products for users everywhere.”
Indeed, a report by consultancy firm PwC found earlier this year that with the number of internet users in India seen rising to more than 850 million by 2022, US technology companies see India as a key strategic market for future growth. In keeping with the same trend, Reliance announced in January that it would launch a grocery delivery service across the country that would compete with Amazon, while Mastercard has reiterated that it remains committed to invest $1 billion in India over the next five years despite ongoing Covid-19 challenges.
“Mastercard remains bullish in this market and completely relentless in the way we commit ourselves to the growth potential of the Indian market. The current Covid-19 situation may have led to volume contraction, but in general, we don't see a long-term impact whatsoever from digital payments standpoint brought about by Covid-19. If anything, consumers will become more savvy and smarter and pay more heed to new forms of payments that are more convenient and more safe. There will only be more digital payments,” Vikas Varma, Mastercard's Chief Operating Officer for South Asia told BusinessLine last month.
The sentiments reflect exactly why India's Commerce and Industry Minister Piyush Goyal, speaking at the India Global Week organised by India Inc last week, said India was always open for business and ready to make things happen for global investors - and even ready begin the process for a Free Trade Agreement with the UK if needed in 48 hours!
The bold business sentiment that India has managed to uphold even as other countries battle economic Armageddon has helped it stand out as a destination of opportunities and relative stability amid the stormy global investment climate.
Last year, after interacting with 42 CEOs of top global companies at the Bloomberg Global Business Forum, Prime Minister Modi said they were all bullish about their companies' future in India as they lauded the government's pro-growth policies and his focus on providing a conducive business environment and ensure ease of doing business.
“We are there to help support the pro-growth agenda that says consistency in rules and regulations, ease of doing business... The bank's clients and customers tell me they are more and more interested [in India] so I think that bodes well for the country going forward,” said Bank of America CEO Brian Moynihan.
Shell CEO Ben van Beurden said Modi had a very “strong and impassionate 'Come to India' speech” and his four D's of democracy, demography, demand and decisiveness were extremely powerful arguments to invest in India.
“We think India is not just an important market for us, it's the 5th most important and we think it's going to become the third most important. We are very excited about continuing to invest in the country and be in line with the growth agenda for the government,” said Coca Cola Chairman and CEO James Quincey.
Former IBM CEO Ginni Rometty, lavishing praise on the Indian Prime Minister as an “authentic leader who genuinely listens to everyone's input,” said: “His firm intent to continue to help with the ease of doing business is a win-win for both India and IBM.”
If all the world's top CEOs, companies and investors feel that India is the land of mega opportunities - even amid the Covid-19 pandemic - the credit certainly goes to the Modi government for delivering despite several on-the-ground constraints. The rewards of investing in India are outsized - as the start-ups and business giants who have cracked the code discovered to their delight. Common sense thus demands that investors forget the so-called doomsday experts and follow the money to reap a long-term bonanza in India.