A Hub for Investment and Innovation
India is one of the world's largest economies and a global hub for innovative startups. As the country undergoes rapid urbanisation, more business opportunities are emerging for Swedish companies.
India is the world's largest democracy with a population of 1.4 billion people. Forecasts suggest that the country will be the world's third-largest economy by 2030. Structural reforms and investments continue to drive economic growth and social transformation, creating a solid foundation for India.
Rapid Development
India’s strengths lie in its ability to continually adapt to the everchanging geopolitical situation while also leveraging the benefits of positive demographic changes, digitalisation, and steady governance.
India has also made significant advancements in technological infrastructure, including improved internet connectivity, cloud computing services, and data centres. This infrastructure supports the growth and scalability of innovative technology companies.
By capitalising on these trends and aligning with India's vision for sustainable and inclusive development, Swedish businesses can unlock tremendous potential and contribute to the country's economic success.
Enormous market potential
Trade relations between Sweden and India date back almost 300 years. In recent years, India has become somewhat of a global hub for innovative startups, and leading Swedish companies have learned to seize the opportunities. Today, there are over 280 registered Swedish companies in India, indirectly employing over 2.2 million people. The enormous market potential has also led to a favourable business climate for companies looking to establish a presence, making India an important hub for the rest of the region.
Both countries have signed dedicated MoUs in several areas including health, science and technology, energy, environment and urban development, defence, space, and MSMEs for promotion of research and development cooperation and introduction of sustainable technologies.
challenges
While the potential is vast, challenges still exist in India and Swedish companies need to be aware that bureaucracy, corruption, protection of intellectual property, and a certain level of resistance towards foreign investments exists.
How we can help your company
Business Sweden has been helping Swedish companies increase their sales in India for more than 25 years. From our two offices in Bengaluru and New Delhi, we can help you plan your internationalisation within your selected business segments, find suitable partners, and provide advice on the local business culture, to name a few of our common services.
Sofia Högman
Trade & Invest Commissioner IndiaBest areas to invest in
The key contributors include India's geopolitical strategic alignment, cost advantages, government initiatives, and strategic location.
- Geopolitical Strategic Alignment: As trade wars between the USA and China, the Taiwan crises, and the invasion of Ukraine force global companies to explore new sourcing models driven by friend-shoring and regionalisation, India proves to be an attractive alternative for American, Japanese, and European companies to adjust their supply chain strategies.
- Cost Advantages: India continues to have significant cost advantages in the Asian region, including lower labour, land, and utility costs, and favourable corporate tax rates, along with a rising domestic market supported by a massive population. This makes India an attractive destination for manufacturers looking to tap into the growing domestic demand.
- Government Initiatives: The Indian government is focused on incentives and programmes like Make in India, Digital India, and Skill India to promote domestic manufacturing and attract foreign investments in manufacturing.
- Strategic Location: Adding to this list is India's strategic location, making it an attractive destination for procurement and logistics. India is strategically located between Europe, Africa, and the Middle East, providing easy access to these markets.
Finally, the country's young, English-speaking, and skilled workforce (70% under 35 years), rising domestic market (total population now the largest in the world with over 1.4 billion people and a growing middle class now equal in number to the EU, 500 million people), a stable political environment, and improved ease of doing business also contribute to making it attractive. India has made significant progress in improving its ranking in this area. The government has introduced several reforms to simplify procedures, reduce bureaucratic hurdles, and improve the business environment, leading to India jumping over 80 positions in the Ease of Doing Business ranking.
India offers attractive investment opportunities in sectors including defense, space, digital market, aviation, railways, ports, renewable energy, and healthcare.
Risks and Challenges in India
India is known for its complex bureaucratic procedures, which can be time-consuming and frustrating for foreign companies. The legal system can be slow and cumbersome, and enforcing contracts and resolving disputes can be time-consuming and costly.
Regarding costs, India has a complex tax system that can be difficult for foreign companies to navigate, including multiple layers of taxes and varying tax rates in different states.
The Indian system, often accused of protectionist policies in certain sectors, can make it challenging for foreign companies to enter and compete in the Indian market due to high import tariffs.
Although India's demographic dividend is enormous, it can be challenging to find and retain qualified employees in India, especially in certain sectors like IT and technology, as well as skilled blue-collar workers. There can be significant skill gaps, and it is important to be prepared to provide extensive on-the-job training.
Given the size of the country, it can be difficult to determine where to establish a business. Additionally, the land acquisition process itself can be tricky and expensive if you don't know how. Obtaining factory licenses and permits takes time.
Cultural Differences to Consider in India
Socially, cultural differences also pose a set of challenges. India has a unique cultural and social context that can be challenging for foreign companies to navigate, including differences in language, business practices, and social norms. Time is another concept that has a more flexible stance in India, often referred to as IST (Indian Standard Time) or Indian Stretchable Time. Indians tend to talk around the subject and assume that one understands from the context, whereas in Sweden we are used to getting straight to the point. Leadership structures differ, with hierarchy being very different from what we are used to in Sweden, and the perception of quality also plays a significant role. Relationships are very long-term, and it is not uncommon for business meetings to start with a discussion about the well-being of the family.
Summary
In summary, while there are enormous opportunities for foreign companies in India, it is important to be aware of these challenges and to work with experienced local partners to navigate the complexities of doing business in India.
