According to some estimates, India is poised on the precipice of a tech explosion many are comparing to their own Industrial Revolution.
The Indian tech sector
The Indian tech sector, in some ways, is a microcosm of those in the West with a few critical advantages. Marked by a consistent 8% year-over-year growth rate, 2023 revenues for the Indian tech industry will likely break past $245B.
Right now, India boasts:
• 25,000 tech-based startups with more than $24B in annual funding. The country ranks as the third-largest startup hub globally.
• A mature software market of over 2,000 companies – half of which are SaaS firms and best-suited for a borderless digital marketplace. Analysts project the SaaS market breaking past a $1T gross valuation by 2030.
• More than 150,000 tech patents filed since 2015, and an ever-growing national R&D spend.
But these stats, impressive as they are, are just a tiny slice of the overall opportunity. The second largest country by gross population globally, behind China, India is on track to become the largest by a wide margin in less than three years.
Source: Barron's
Despite the startup and tech explosion, the market remains largely untapped, with as much as 65% of that massive population designated as youths, or under 35, and 50% of the total population is under 25. Representing both a labor pool and consumer base, the unrivaled growth of India’s tech sector will only increase as urbanization means more of that youth pool is moving from rural areas to burgeoning cities – alongside all the tech trappings as we see in Silicon Valley and other developed hubs.
And that’s only internalized growth. Learning from the pandemic, many developed and Western countries are fleeing China and moving their tech manufacturing base for computers, smartphones, and similar hardware products to India. Indian tech manufacturing spaces are growing a reputation as more reliable and less subject to the whims of eager government initiatives.
What have big tech firms done in India so far?
Many of the largest tech companies see the writing on the wall.
Underwriting a massive investment directly in Indian startups and in efforts to capture market share, companies like Amazon, Meta, Alphabet, and more are pouring money into the country as fast as possible while cutting costs at home – underlining executive emphasis on the Indian market.
A driver of that expansionary push is based on a peripheral population factor. While the country’s growth is critical in driving consumer capture, these firms combine that with the lack of Chinese reliability on novel fronts beyond manufacturing.
Security laws within China make tech firms subject to Party whims, and they’re constantly in a position of shaky standing no matter their approach. Many also object on a moral basis based on apparent Party overreach in data collection demanded of them or free speech issues.
India, likewise, fundamentally mistrusts Chinese tech and banned TikTok and other Chinese apps in 2020 amid political disputes. This ban created a vacuum that existing Western tech firms were too happy to rush to fill. For instance, India is where Google's YouTube, first experimented with its YouTube Shorts, which is similar to TikTok's short-video format.
Advantages in India
Demographic boom aside, the rising youthful human capital is well-positioned for a tech revolution. An entire generation, particularly those in urban cores, are increasingly monolingual and sticking to English as the lingua franca for school, work, and socialization.
English proficiency gets the labor market participants’ foot in the door with tech firms or venture capital, but the real hook is the digital skill the population displays. With 1.6M deemed “digitally skilled,” meaning a quantifiable STEM-style hard technical skill beyond basic computer proficiency, tech firms are snatching up Indian graduates as fast as universities can produce them.
What are the next opportunities for big tech in India?
The burgeoning labor pool is doubtless the most significant opportunity for big tech in India, both as labor arbitrage and in sourcing talent to drive innovation.
Not because it’s cheaper to outsource, as the old paradigm dictated. The underlying cause is that Indian youth's digital skill surpasses that of Westerners, providing much-needed glue to hold Western tech together. Debjani Ghosh, President of the National Association of Software and Services Companies, says that the “United States excels in cutting-edge R&D while India has the talent available to plug the gap between supply and demand in digital skills.”
Taken as a whole, this means that, in an increasingly globalized and digitized world, more tech firms face India as both prime labor and consumer market they expect will surpass those at home – quickly.
Hurdles to overcome
As big tech moves into India, the primary drivers of instability seem to be cultural. Apple, moving to pivot manufacturing away from China to India, reported in February 2023 that “there is no sense of urgency in Indian operations,” slowing the planned transition.
Facing a breakneck pace expected in the West, this cultural clash may be the first of many hurdles tech must overcome to pivot into India successfully.
Other hurdles are much the same as in past years – sanitation, regional dispersal, and lack of laborer education reign high on the list of tech struggles in a move to Indian markets. But these firms are banking on their investment in the country and economy, numbering in the tens of billions, to pay off.
Conclusion
Ultimately, the confluence of factors – a vast untapped market, a digitally skilled workforce, and a supportive ecosystem – make India one of the most compelling opportunities for big tech growth in the coming years.
