In India, the European Union companies are the largest source of trade and foreign direct investments. With increasing purchasing power and a growing domestic market, India is a highlight location for investments. According to reports published by European Commission, a trading estimation of EUR 62.8 billion resulted in 2020 between India-EU. The report also states that India’s almost 50% of Multi-National Companies comprise EU companies. This constitutes roughly more than 5500 companies in India. The dynamic and diversified market has led to an increase in the trade of goods by 12.5% in the last 10 years. This led to making India, a lucrative hub for European investments. Overview On India-EU Trade Relations The business and trading relations between India and Europe have been strong. This relation attracted total FDI inflows of USD 88.32 billion in the last two decades. The bilateral trade statistics state that in 2020-21 export between these two economies was estimated at 41.36%, even during the global health crisis. In 2020-21, the majority of trading activities with India were made by Germany and UK.
Why Is India (Indian Market) Considered To Be A Potential Market?
India has been a lucrative market for foreign direct investments because of its lower operational costs, cheaper yet skilled workforce, and relatively liberal laws and regulations. These factors have made EU India’s largest trading partner, making 11.1% of the country’s total trade. The diversity in the Indian environment is one of the key factors that make the country a potential trading market. Also, various Government initiatives have ensured ease of doing business, encompassing Western India as the epicenter of EU investments.
Rising Global Middle Class In India
With the telecommunication and retailing revolution in the Indian market, the country witnessed the rising growth of the middle-class sector. From the world’s largest furniture company, IKEA, to Harley Davidson, are showing interest in the middle-class sector. The emergence of a matured middle-class sector ready to spend on international brands has intrigued IKEA to open more stores in India. There are three factors that are directly proportional to the rise of the Indian middle class are
- Increasing Purchasing Power
Digitization and a surge in income levels through multiple modes of employment have increased purchasing power of the middle-class section. Also, the ease in Government regulation in doing business has ensured the rising of many small businesses in Indian households. The awareness of different international brands has led to increasing in the purchasing power of middle-class India.
Consumerism is the social force outlined to protect consumer benefits and work against any unfair trade practices or business injustices. The strong awareness of consumerism has led to a decrease in unfair marketing practices, like advertisements of fraudulent products, adulteration, price collusion, etc. Earlier, consumers belonging to the Indian middle-class group were deprived due to a lack of transparency and awareness. However, with laws protecting consumer rights, clean marketing policies have been established.
Indian domestic market constituting urban and semi-urban populations is attracting investors from all over the world. The composition of a favorable population and increase in disposable income leads to the growth of the domestic market. Also, factors like equality in tax policies, stable demand and supply, and an increase in investment activities are responsible for the surging rate of the domestic market in India.
Government Policies To Boost EU On FDI & Trade
The Government in India has allowed 100% FDI under automatic route in a majority of the business sector. Recently, Indian and EU market players have agreed to resume a negotiation for “balanced, comprehensive, mutually beneficial and ambitious” trade agreements. They also have introduced separate negotiation agreements to protect their investment rights and geographical indications. The EU-India Trade Sub-Commission is in charge to supervise different clauses of the ongoing agreements under the 1994 Cooperation and Partnership Agreement between the EU and India.
Competitive Advantages In Indian Market
For European companies, India is an important market for trading activities. These foreign companies have been able to identify different competitive advantages that made them invest huge funds in different business sectors. The foreign companies gained and developed lucrative business in India by applying strategies like
- Committed to providing global and technological support.
- Developed an autonomous local team with high capability.
Designed and created unique products and services in response to the Indian environment. The three competitive advantages in India that made the EU become a crucial trading partner are
- Low-Cost Product Sourcing – It is a procurement strategy where EU companies have been able to take advantage of relatively cheaper labor and production costs.
- Skilled workforce – The availability of less-expensive skilled and semi-skilled labor for industrial and operational work in India has attracted trade and investment from foreign EU companies over the past 30 years.
- Advantageous geographic location and infrastructure- The diversified geographical location suitable for any industry and availability of innovative and modern infrastructure have made India a trading hotspot.
Assistance Provided By Consultancy Firm
Any European company looking for lucrative investment options in India must consider hiring the assistance of leading business consultancy firms in India like Tecnova Global. The expert team provides guidance in exploring the market to the companies that are shifting their business beyond the boundaries. By thoroughly scrutinizing the market, the professional business consultancy firms offer the best investment plans.
The understandability of a robust and diversified Indian market requires years of expertise. Companies like Tecnova have teams of resourceful professionals who use their knowledge and experience to guide foreign companies to understand the various intricacies of the domestic market. Some of the notable services offered by these consultancy firms are
- Removes entry barriers by understanding competition in the market.
- Provides clear details of Government policy and regulations and prepares documentation on behalf of the company.
- Understands technological and market trends.
- Researches market opportunity, technical barriers, pricing, and distribution mediums.
India is the potential market and will emerge as the fastest-growing economy in the world in the next 30 years. As the population is expected to grow beyond 1.7 billion, the per capita income is anticipated to increase to USD 38,000. By 2048, the middle-class Indian group will not only increase in numbers but will affect the GDP and NDP graph economically, politically and socially.
Reference
India – Trade – European Commission
Foreign Trade (Europe)
Aggregate Purchasing Power Will
News/Business Article
Tips from successful European companies in India
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