India: What’s next for the world’s most populous country? Four challenges to doing business in India and how to approach them

Here is a piece of advice for businesses in the European Union and in Latin America: To access Indian potential, build bridges where you can. International flows with India are currently limited in these regions (see their relative weight in the table), consider approaching India via its top connections, like the United States.

Remember that while India is more globally connected than it used to be (moving up two rungs in the ranking over the past two years), and its international flows are distributed across various countries, its international flows still account for a relatively small proportion of its total economic activity.

Challenge #2: In a world of increasing fragmentation, India is on trend

One important element of international connectedness is trade. Rising geopolitical turbulence is prompting trade restrictions that have impacted flows of goods and services, and countries – including India – are being challenged by this trend. The World Trade Organization (WTO) is among the organizations positing that trade restrictions have increased recently due to economic uncertainty caused by the COVID-19 pandemic and the war in Ukraine as well as food security crises.

In terms of international trade, Global Trade Alert’s data shows that protectionist measures have been inching up since its baseline year of 2008, with a pronounced recent surge starting in 2019. Again, India is on trend; as data shows, the country has also been implementing more protectionist than liberalizing measures in the last few years.

That said, the government of India has also adopted measures to encourage foreign trade, such as the Foreign Trade Policy (FTP) 2023, focused on facilitating export permits, increasing exports at grassroots level, and encouraging cross-border trade. To do this, India has also sought to sign free trade deals, most recently with Australia, the United Arab Emirates, and Mauritius. While the problem is that protectionist measures are still outnumbering the liberalizing ones, savvy businesses should seek out opportunities where India is opening up and leverage recently signed free trade deals to explore new pathways to enter the country.

Challenge #3: Accelerating India’s digital transformation

India’s growth in the coming years will be defined by another important theme – digital. The IMD World Digital Competitiveness Ranking evaluates countries based on their digital infrastructure and capabilities, assessing them on the following factors: “future readiness, knowledge, and technology.” As per the 2023 report, India has slipped a few spots to rank 40th out of 64 nations (down from 37th in 2022). The report lists two of India’s main challenges in 2023 as accelerating its digital transformation and mobilizing its resources for infrastructure development.