Trade opportunities in India
India is poised to become a superpower and presents burgeoning opportunities for Australian businesses with an interest in international trade.
By 2013 India will be the third largest economy in the world. In the flurry of all of the current focus on China (extensive media coverage, the resources boom, the Shanghai World Expo and Government policy on foreign investment), Australian companies shouldn’t lose sight of the significant opportunities the Sub-continent offers.
With its strong services sector (comprising 50 percent of India’s economy), particularly in knowledge-based services (IT, software and business services), India isn’t waiting for Australia to engage with it in trade.
In fact, most Indian companies are looking for opportunities to establish their business in Australia! India deserves at least the same consideration as China, and Australian companies should be exploring their options now, before it’s too late.
India’s GDP is currently US$1.3 trillion, making it the eighth largest economy in the world. However, in purchasing power parity (PPP) terms, which recognises India’s low cost base, the GDP notionally rises to three times this amount (US$3.8 trillion) which places it on a similar scale to Japan, and by 2013 it will rank just behind the USA and China.
India’s economy is growing by 8.75 percent per annum during 2010 and this GDP growth rate is expected to increase to 9-10 percent per annum for each of the next 10 years. India’s GDP will grow five times in the next 20 years, and GDP per capita will almost quadruple.
India is also one of the youngest countries in the world, with the average age of 25 likely to get younger and its working-age population will increase by 240 million over the next 20 years. With a population of 1.2 billion, a strong work ethic, high levels of education, democracy, English language skills and an entrepreneurial culture, India is poised to dominate the global economy in the next 20 years.
India’s domestic consumption, generally led by the private sector, has played a significant role in its growth and is expected to remain firm as more people enter the workforce and the emerging middle classes.
India’s wealthiest consumers (those earning US$1m or more in PPP terms) will increase by 40 million in the next 10 years. Every sector within India’s consumer market is booming, making India far less vulnerable to external shocks and pressures than other emerging markets.
The new consumers
It is the growth of India’s middle class and the massive rise in private consumption that makes it such an important export opportunity for Australian companies.
Consider the following statistics collated by McKinsey Quarterly:
* Over the next 20 years, India’s middle class will grow from 5 percent to 40 percent of the population, creating the world’s fifth-largest consumer market.
* Average household incomes will triple over the next 20 years.
* Consumer spending is expected to quadruple by 2025.
* India’s poor (the 93 percent of the population who were living on a dollar a day in 1985) have been reduced to 54 percent today, and will represent only 22 percent in 2025.
* India’s urban population will expand from 318 million to 523 million by 2025.
As Indian householders emerge from relative poverty to new affluence, their consuming spending patterns are changing, and this is where some of the most interesting opportunities arise for Australian companies.
Areas of opportunity
Education: While poorer Indian families are expected to spend some of their new disposable income on educating their children for the first time, more affluent households will seek better quality education overseas, including university degrees and vocational training.
Australia needs to counter some of the negative perceptions about the safety of Indian students in our major cities and compete aggressively for this business.
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