India faces uncertainty in seeking to replicate China's success

By Wang Jiamei Source:Global Times Published: 2019/12/23 22:51:53

Illustration: Luo Xuan/GT

Chinese companies are definitely investing much more in India than they were a decade ago, but their hopes of replicating China's business success in India may be less certain.

As of December 11, Chinese investment in India reached $8 billion, compared with less than $200 million a decade ago, according to Bengaluru-based tracker Tracxn. Moreover, Chinese internet companies have been particularly keen on Indian start-ups. A recent report from Mumbai-based investment firm Iron Pillar showed that two of China's internet giants, Alibaba and Tencent, have taken stakes in almost half of the 31 Indian unicorns so far.

China is the world's largest mobile payment market, while the number of India's internet users is surging. The development lag between the two neighbors in terms of internet commercialization means that Chinese technology companies are eager to bring their successful experience to India. 

On the surface, their ambitions are totally justified given the similarities between the two countries, like high growth rates and large populations. Despite the recent GDP growth slip, it is believed that the Indian economy still has the potential for sustained high growth in the medium to long term. Meanwhile, India's 1.3 billion population indicates a potential massive consumer market and abundant labor supply.

Yet, it seems doubtful whether India will become the next China. A large population doesn't necessarily mean that what happened to the Chinese market can be directly copied in India. There are challenges and difficulties ahead for Chinese investors, especially tech companies, to make their India businesses as prosperous as those in China.

For instance, despite a huge population, it is hard to see India as a single market. The country has 22 official languages and nearly 100 popularly used ones. Each of the 28 Indian states has its own languages. According to statistics, the Indian census of 1961 recognized an astonishing 1,652 different languages and dialects. Moreover, the lines of caste and religious diversity have made the market even more fractured. A fragmented environment is no easy place for any internet company focused on social communications or content.

Although India is one of the world's fastest-growing emerging economies, inequality is also rising fast. The top 10 percent of the Indian population holds 77 percent of the total national wealth, and 73 percent of the wealth generated in 2017 went to the richest 1 percent. In most predictions about the Indian market, a group of middle-class consumers is expected to emerge soon to support the new economic boom and a spending spree, but does such a group really exist amid widening wealth gaps? Although India has a mobile internet population of nearly 500 million, about 400 million of them are still too poor to shop online. In that sense, the future of India's consumption growth and consumer technology sector remains uncertain.

For Chinese investors, it is risky to overlook the complexities of the Indian market simply based on the assumption that India will be the next China.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn

Posted in: COLUMNISTS

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