The trend you cannot possibly ignore

October 25, 2010
Cochin, Kerala State, India

India is, without doubt, one of the most intriguing countries in the world; the culture, the food, the history, the mysticism, and the beautiful landscape all make for a very compelling place to visit.

From an economic perspective, it’s also very compelling. We all know the story of India’s rising middle class– together with China, Russia, Brazil, Indonesia, and Africa, there will be roughly 1 billion new consumers in the world over the next decade, more than in the US and European Union combined.

This is a trend that simply cannot be ignored by investors or entrepreneurs, and India’s middle class will comprise one of the largest shares of this new demographic, along with China.

India is vastly different than China, though; in India, there is no government forcibly evicting people from their homes to make way for a new airport, no government-backed empty cities, no centrally planned regulations to cool the real estate market, and no controlled population movements.

As such, what takes months in China may take years in India.

Moreover, India has a fair set of challenges; sectarianism is rampant… there are over a dozen languages and scores of ethnic and sub-ethnic groups in the country, and this has given rise to secessionist groups and some violent attacks across the country.

India’s rapid social transformation is also causing problems. Once a deeply traditional and conservative society, India is now eschewing old conventions like marriage, modesty, and the antiquated role of women.

Perhaps the greatest challenge that India faces, though, is its rampant and shocking poverty, which goes hand in hand with its newfound wealth.

To give you an example, Bombay is home to more billionaires than San Francisco or Tokyo, yet simultaneously home to one of the largest slums on the planet. Poverty and prosperity are next-door neighbors, and the wealth gap is no more apparent in the world than in India.

(as an aside, many locals will still say “Bombay” instead of Mumbai when speaking to a westerner– the Maharashtrians don’t need those Hindi-speaking bureaucrats in Delhi telling them what to name their own city…)

Despite pockets of immense wealth in India, the country’s GDP per capita is less than $1,000. Considering that it took 15-years to reach this number from the time when the government started liberalizing the economy in the 1990s, it’s going to take a long time for India to just catch up to Eastern Europe.

This leaves a lot of room for growth; in fact, India’s middle class perhaps has the most growth potential among the BRIC nations in terms of population. While China’s tier-3 cities are already booming, India’s tier-2 cities are just getting started. This spells opportunity for entrepreneurs.

Doing business here is anything but traditional, though. Perhaps one of the most striking things about India is how self-contained it is– excluding certain luxury goods, Indians are not the least bit obsessed with western culture; they have their own music, movies, websites, food, etc.

Foreigners who succeed here don’t try to cram western products and services down Indians’ throats; instead, they adapt products and services to match the culture’s taste. This is a no-brainer for any international expansion, but India takes a lot more study than, say, Brazil, Russia, or the Philippines.

Given the hundreds of millions of potential consumers with discretionary income, however, the time and effort invested would be well worth it.

Coincidentally, I was having lunch with a friend of mine in London some weeks ago– he’s working on a large venture with one of the UK’s biggest media companies.

He told me that the company would be excited to generate 10 million new subscribers over the next decade… and that the equivalent media company in India will probably generate that many new subscribers by next summer.

Given the difference in growth potential, he wondered out loud, “what the bloody hell am I doing in London?”

About the Author

Simon Black is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.