India Entry Strategy

India remains one of the world’s fastest growing major economies although it faces challenges common to many other countries such as inflationary pressures, commodity price volatility, and supply chain disruptions in the aftermath of the COVID-19 pandemic and Russia’s ongoing war in Ukraine. The United States-India relationship remains resilient, with total trade in goods and services topping $191 billion in 2022, almost double the amount recorded in 2014. India’s economy grew at 7.2 percent over the April 1, 2022-March 31, 2023, India’s fiscal year (IFY), with growth particularly strong, at 8-9 percent, in the five states of southern India (Telangana, Andhra Pradesh, Tamil Nadu, Karnataka, and Kerala). The five southern states of India account for 30 percent of India’s GDP; Maharashtra and Goa account for another 20 percent of India’s GDP. The IMF projects India’s economy will grow by 6.3 percent over the 2023-2024 fiscal year, higher than the global average.

Indian government FDI initiatives are concentrated in sectors such as information technology services, software, business services, pharmaceuticals, and industrial equipment. U.S. stock of FDI reached $103 billion during IFY22-23, and the U.S. remained the largest single source of FDI in India for the second consecutive year.

Following a minor decline of Indian-origin foreign direct investment (FDI) into the United States in 2020, total stock of Indian FDI in the United States reached $14.4 billion in 2021. India’s direct investment in the United States sustains more than 72,000 U.S. jobs.

India is the United States’ ninth-largest trading partner, with U.S. goods and services worth $73.1 billion sold to India in 2022. The United States maintained its position as India’s largest trading partner, with $118.8 billion of imported goods and services. The United States is expected to continue its trade deficit with India in 2023. India partnered with the United States and eleven other countries to launch the Indo-Pacific Economic Framework for Prosperity in May 2022, a high-standard agreement that aims to produce benefits that fuel economic activity and investment, promote sustainable and inclusive economic growth, and benefit workers and consumers.

A wide array of U.S. companies are active participants in the Indian market, across most sectors. However, the Indian government’s focus on fostering “self-reliance” as a means of bolstering domestic businesses and employment present challenges for U.S. enterprises seeking to sell their goods and services within India. This is particularly evident in Indian government procurement, where heavy preference is given to domestically produced options. As part of its self-reliance initiative, India has introduced various market access barriers in the form of tariffs and taxes, localization requirements, indigenous standard mandates, labeling practices, price controls, and import restrictions.

Despite market access concerns, India remains an attractive destination for many U.S. exporters. Many Indian conglomerates stand on par with their international counterparts in sophistication of operations and market prominence. In sectors like information technology, telecommunications, pharmaceuticals, textiles, and engineering, Indian companies are renowned for their ability to innovate and compete. U.S. companies operating in India emphasize that success requires a long-term planning horizon and the ability to adapt strategy to regional conditions. While complex and challenging, the Indian market offers significant opportunities for U.S. companies.

Market Overview

High Tariffs and Protectionist Policies

When doing business in India, U.S. exporters and investors often encounter non-transparent or unpredictable regulations and tariffs. Likewise, U.S. goods and services in some sectors have limited access to the market. India has the highest average applied tariff of any G20 country, and some of the highest bound tariff rates among WTO members.

Price Sensitivity

Indian companies and consumers are quite price sensitive. U.S. companies must evaluate whether they can sell at prices that Indians are willing to pay and may need to adjust their pricing models accordingly. For example, some consumer-packaged goods companies make their products in smaller sizes or with fewer features to reflect price sensitivities of Indian customers.

Infrastructure

India has significant infrastructure development needs, and improvements in this sector are vital to the country’s economic growth. India’s roads, railways, seaports, and airports are often congested and inefficient, creating capacity constraints that could stymie future economic growth. Infrastructure projects in India are often delayed, a function of gaps in the regulatory framework and inefficiencies in the project approval process. India has ambitious infrastructure development goals for airports and inland waterways, in part to offset weaknesses in traditional rail and road infrastructure. Intermodal logistics is another focus area addressing first and last mile connectivity. India has devoted a growing portion of its public purse to infrastructure development and plans to execute these initiatives largely through a public-private partnership model. However, projects are often late and over budget.

Market Challenges

The following sectors provide growth opportunities for foreign  companies in the Indian market:

• Civil Aviation

• Defense

• Education

• Chemicals

• Energy

• Environmental Technologies

• Healthcare

• Information and Communication Technology

• Travel and Tourism

• Safety and Security

Market Opportunities

India’s digital economy is expanding rapidly, fueled by initiatives such as Digital India, Make in India, and Startup India. These programs focus on building digital infrastructure, promoting innovation, and empowering citizens. The National Digital Communication Policy (NDCP) 2018 further supports this growth by advancing digital infrastructure and expanding broadband access.

India’s digital landscape is thriving, thanks to its young, tech-savvy population. As of mid-2024, there are over 650 million smartphone users, and internet subscribers have surpassed 950 million. This widespread adoption is driving growth in e-commerce, digital payments, and fintech, along with significant investments in AI and blockchain technologies. The telecom sector is also evolving, with the expansion of 4G and the ongoing rollout of 5G networks. 4G has significantly improved internet speeds and connectivity in both urban and rural areas, while 5G is expected to further enhance network performance, support advanced applications, and propel future technological advancements. India has already begun rolling out 5G services in major cities, with plans for a wider rollout soon.

India’s digital economy boasts major players like Indian IT giants Infosys - US$19 billion in 2024, Tata Consultancy Services (TCS) - US$29 billion in 2024, and Wipro - US$11 billion in 2024, alongside U.S. companies such as Microsoft, Oracle, IBM, Google, and Amazon. In e-commerce, Flipkart (owned by Walmart), Amazon, and Reliance Jiomart are leading the way. Digital payments are dominated by Paytm, PhonePe, Google Pay, and BharatPe. Digital payment methods, supported by systems like the Unified Payments Interface (UPI), are gaining popularity due to government initiatives and a growing consumer preference for cashless transactions. In telecommunications, Reliance Jio, Airtel, and Vodafone Idea are key players in advancing 4G and 5G connectivity. India’s digital economy is projected to reach a trillion-dollar valuation in the coming years, fueled by expanding internet access, improved digital infrastructure, a focus on rural areas, data privacy regulations, and skills development. The National Artificial Intelligence Mission aims to position India as a global leader in AI and technology innovation, further encouraging entrepreneurship and technology-driven ventures.

India’s digital economy is poised for significant growth, propelled by robust government support, technological advancements, and rising digital adoption across various industries.

Digital Trade Opportunities

Digital technologies are instrumental in boosting productivity, efficiency, and functionality across various industries. For U.S. companies, aligning these technologies and understanding the supportive policies and ongoing projects in India can unlock substantial business opportunities.

i. Communications and Networking Technologies: India’s progress in 5G and future 6G technologies presents substantial opportunities for U.S. companies specializing in network infrastructure, equipment, and services. The National Digital Communications Policy (NDCP) 2018 supports the deployment of 5G and ORAN technologies, leading to significant investments in digital infrastructure. U.S. companies can capitalize on these developments by providing cutting-edge technologies and services, meeting the increasing demand for high-speed broadband, and contributing to the expansion of India’s digital capabilities.

ii. Advanced Computing: India’s growing digital infrastructure offers significant opportunities for U.S. companies specializing in advanced computing, particularly in cloud and quantum computing. As businesses and government agencies in India migrate to cloud solutions, U.S. firms can provide essential cloud infrastructure, platforms, and services, further supported by the Digital India Program’s focus on enhancing digital infrastructure.

In quantum computing, the National Quantum Mission creates opportunities for U.S. companies to engage in collaborative research and development. By participating in these initiatives, U.S. firms can contribute to advancements in quantum technology while establishing a strong presence in an evolving and high-growth market.

iii. Advanced and Networked Sensing and Signature Management: The rapidly growing Internet of Things (IoT) sector in India, projected to reach $9 billion by 2025, offers significant opportunities for U.S. companies specializing in IoT solutions and sensors. The Smart Cities Mission in India, with over 8,000 multi-sectoral projects, provides an ideal platform for deploying advanced IoT technologies in urban management, creating numerous avenues for U.S. firms to contribute their expertise.

In the field of signature management, the DPDP Act of 2023 introduces stringent data protection requirements, driving the demand for advanced technologies to secure data transmission and enhance cyber defense. U.S. cybersecurity companies can engage in global initiatives aimed at improving data protection and safeguarding critical infrastructure, addressing the growing need for sophisticated security solutions.

iv. Human-Machine Interfaces: The increasing adoption of Augmented Reality (AR) and Virtual Reality (VR) in education, training, and entertainment presents significant opportunities for U.S. companies specializing in these technologies. India’s National Education Policy (NEP) 2020 supports the integration of AR/VR technologies into educational settings. As AR/VR becomes increasingly prevalent in educational and professional environments, U.S. firms have a prime opportunity to supply AR/VR hardware and content, capitalizing on India’s commitment to modernizing its education system and expanding digital learning resources.

Additionally, the growing interest in health and fitness wearables creates opportunities for U.S. companies to innovate and collaborate on wearable tech projects as well.

v. AI: India’s push to become a global AI leader presents valuable opportunities for U.S. firms to offer AI solutions, consulting services, and engage in R&D collaborations. The IndiaAI mission intends to develop a robust AI infrastructure, including over 10,000 Graphics Processing Units (GPUs) and indigenous AI models. U.S. companies can participate in initiatives like AI4Bharat and Digital India AI Research Labs to collaborate on cutting-edge AI projects and leverage India’s growing AI ecosystem for business expansion and market entry.

vi. Other Technologies: U.S. companies can also find opportunities within India’s ICT sector, which is supported by the National Information Technology Policy that promotes IT infrastructure development. There are opportunities in expanding fiber optic networks and improving internet connectivity, where U.S. firms can contribute to projects focused on increasing broadband access.

ii. Financial Technologies (Fintech)

a. Digital Payments: India’s Fintech sector is a global leader, driven by digital payments and the UPI. The digital economy is expected to contribute to one-fifth of GDP by 2026. Companies offering advanced payment solutions, cross-border platforms, and blockchain-based financial services can tap into this market.

b. Lending and Credit Scoring: The rise of digital lending platforms creates opportunities for companies specializing in AI-driven credit scoring and risk assessment tools.

iii. Cybersecurity

a. Data Protection: With increased digital transactions and cloud services, data protection is critical. Companies providing solutions for data encryption, threat detection, and incident response have substantial opportunities.

b. Cybersecurity-as-a-Service: Indian SMEs are increasingly outsourcing their cybersecurity needs, creating opportunities for global managed security service providers.

c. Compliance Solutions: New regulations like the DPDP Act create a growing need for tools and services ensuring compliance.

iv. Internet of Things (IoT)

a. Smart Cities: The Smart Cities Mission drives IoT adoption, offering opportunities for companies providing smart infrastructure, traffic management, and energy efficiency solutions.

b. Agritech: IoT in agriculture focuses on precision farming, supply chain management, and monitoring solutions. Companies specializing in IoT for agriculture can benefit from partnerships and market entry.

c. Healthcare: The rise of IoT in healthcare, particularly remote monitoring and telemedicine, presents opportunities for companies with expertise in IoT-based healthcare solutions.

More info - India Market Overview - https://www.trade.gov/knowledge-product/exporting-india-market-overview

Digital Economy