India: The promise and possibilities for global companies

India often attracts multinationals seeking new business opportunities. What strategies will help them thrive in this compelling but unique market?

India is drawing attention as a global business hub. With a strong talent base, a large pool of consumers, and continuously improving infrastructure, the country offers many opportunities for multinational companies over the next decade. According to one estimate, India could gain up to $0.8 trillion to $1.2 trillion from trade-flow shifts by 2030 and boost the country’s GDP share for manufacturing from 16 percent in 2023 to 25 percent by 2030.¹

As with any new venture, companies that expand into India may encounter unexpected challenges. While the country’s government has strong pro-business policies, companies may need to grapple with complex regulations, labor strikes, and red tape. India’s vast consumer base, with its huge variations in product preferences and spending power, could also present hurdles for marketing and sales. Some multinational companies have thrived in India despite these obstacles, but others have reduced, or even ceased, local operations.

What factors distinguish winning multinational companies from the rest of the pack? And with the landscape changing so quickly, what is the best time for companies to expand operations within India? To answer these questions, we first reviewed the Indian market’s unique characteristics and then identified five factors that are common to winning companies: taking a long-term view, empowering the right leaders, customizing products to suit local tastes, localizing operations, and moving fast.

Although some business leaders may simply think of India as a site for low-cost operations, the country has more to offer. Consider a few other advantages, many of which are recent developments:

A growing wellspring of innovation and talent. India is home to about one-third of the world’s STEM graduates, and these employees are creating innovations that enhance electric vehicles (EVs), pharmaceuticals, and other products. The high number of STEM employees makes India a leading contender when multinationals are looking for programmers or considering sites for global IT capability centers. Overall, engineering, research, and development sourcing from India could increase in value from about $44 billion to $45 billion today to over $130 billion to $170 billion by 2030.²
Greater appeal as a manufacturing site. India has increased its share of global exports in multiple categories. In the electronics sector, for example, the value of Indian exports to the United States alone is now about $10 billion; analysts expect this to rise to $80 billion by 2030.³ For global exports, the value could reach about $1 trillion by 2030.
Historically low labor costs. India has traditionally offered competitive labor costs. Even if wages increase, Indian labor costs are likely to remain competitive because workforce participation and productivity are increasing.
Large-scale infrastructure improvements. India is undertaking many infrastructure improvements and industrial projects, such as port upgrades, with target expenditures of $1.8 trillion by 2025. These infrastructure improvements can enhance productivity and lower supply chain and utility costs.

More: https://www.mckinsey.com/industries/

About the authors

Bob Sternfels is McKinsey’s global managing partner and is based in McKinsey’s Bay Area office; Rajat Dhawan is a senior partner in the Gurugram office, where Soumyadeep Ganguly is a partner and Jayati Shah is an associate partner; and Shivanshu Gupta is a senior partner in the Bengaluru office.