Are you considering setting up a business in India? Is expansion to India on the cards? Are you thinking about tapping the India market? Or are you another curious reader, interested in the India opportunity?
At Plum, we’ve been working with founders looking to build out of India and with aspiring global giants considering setting up shop in the country. It’s a market like no other — with immense untapped talent, a self-sustaining symbiotic ecosystem, and regulations that support innovation.
While it is a country on the cusp of exponential growth, how do you understand it? And more importantly, how do you realize its potential?
Read on.
India ‘is a slow trundling elephant’ that still has many hurdles, but is now a viable alternative to China. I think India stands to benefit from the decline in terms of the attractiveness of foreign direct investment and portfolio flows of China
– Veteran investor David Roche
David Roche’s quote describes how the world has traditionally viewed India. For the longest time, India has long held the promise of a young, aspirational population, backed by robust democratic and business frameworks. But historically, it has only been a promise.
Today, the narrative is changing.
From whispers in summit corridors to outlook reports by analysts, the tone has gone from indifference to optimism. Over the last few years, not only have NASDAQ-listed firms expanded to India, but local companies have made their debuts on NASDAQ.
Today, India is considered the fastest-growing economy. The world’s biggest untapped consumer and talent market. An active participant in the modern space race. A hub of tech innovation and cultural soft power. India has emerged as the world’s favourite destination for growth and business – a sentiment supported by its world-leading IPO market, burgeoning talent pool, and increasing numbers of global companies looking to expand there.
And according to Bloomberg, poised to become the world’s number one contributor to GDP growth.
The elephant is ready, and it's raring to go.
India’s growth story, like the country, is complex, diverse, and beautiful.
If you were to personalize India’s growth, you wouldn’t compare it to a lone ballet recital. It is a grand, choreographed, Bollywood number with a hundred graceful Bharatanatyam dancers moving in tandem to live music and fifteen other crew members working in the background of a vibrant set.
Success isn’t derived from a singular factor — regulation, entrepreneurial spirit, or access to capital and opportunity. It is a function of multiple jigsaw pieces, orchestrated by grit, hustle, jugaad, and luck, coming together to form the bigger picture.
We analyze six individual jigsaw pieces in this section — spanning from talent to the government to the ecosystem.
“I’m just like my country, I’m young, scrappy, and hungry — I’m not throwing away my shot” Hamilton, the Broadway Musical, 2020
In the 2000s, India was the West’s service centre — back offices, BPOs, and training centres. With the 2010s came the tech calling, characterised by skilled diaspora in the Valley and a mushrooming of software developers at home. Today, India is in its roaring 20s — with a booming startup ecosystem, MNCs setting up innovation hubs, and a strong GTM muscle.
The common thread? Talent.
Some factors influencing India’s unique position:
This video by Nirmalya Kumar might be a decade old, but it’s still just as relevant.
“We will invest for as long as we need to in order to succeed in India. I’m just super excited about the region.” Spotify founder Daniel Ek, in an interview to Mint
At the end of the financial year 2022, the price-to-book (P/B) ratio for the European consumer products giant Unilever PLC stood at six. The same number for its subsidiary in India, Hindustan Unilever, was twice that, at twelve. This difference was not because the latter was young or small — on the contrary, the Indian subsidiary is a 90-year-old company with a market cap of $76 billion.
This is not an isolated instance.
Nestle India earned a profit margin of 14.2% against that of its parent of 9.8% while generating sales-to-assets ratio of 196% against just 69% for its parent. Siemens India had a profit margin of 10.6% against 4.8% for its parent, and a sales-to-assets ratio of 91% against 51% for its parent.
Brands that get India make exponential returns on their investment.
Two more examples, from Mckinsey’s paper on the subject:
A leading beverage company entered India with a typical global business model—sole ownership of distribution, an approach that raised costs and dampened market penetration. The company’s managers quickly identified two other big challenges: India’s fragmented market demanded multiple-channel handoffs, and labour laws made organized distribution operations very expensive.
In response, the company contracted out distribution to entrepreneurs, cutting costs and raising market penetration.
A big global automobile company has become one of the largest manufacturers in India, growing at a rate of more than 40 per cent a year over the last decade, by building a local plant, setting up an R&D facility to help itself better understand what appeals to Indian customers, and hiring a well-known Indian figure as its brand ambassador.
According to NASSCOM and Zinnov, India has firmly established itself as the go-to destination for Global Capability Centres (GCCs), attracting an increasing number of global companies seeking to leverage the country’s unparalleled advantages.
The stats back it up — India currently hosts over 1600 GCCs, with an installed talent base of around 1.6 million!
“The economic returns to living in a city that’s living in the future are increasing.”Naval Ravikant
Despite India’s 8% GDP growth over the last few quarters, experts believe that the best is yet to come.
Ray Dalio’s optimism is not isolated.
Morgan Stanley research expects GDP per capita to increase from USD 2,400 in 2022 to above USD 3,600 in 10 years. According to them, India is not the next China, it is closer to the 80s USA – considering its size, underlying metrics, and drivers of growth.
The size of India’s economy is similar to where U.S. was at the beginning of 1980. In the 80s, U.S. nominal GDP expanded at ~7.6% CAGR and personal consumption expenditure (PCE) grew at ~8.1%, with some of the sub-segments even growing by more than 10% CAGR.
This drove the S&P 500 to grow 12.6% CAGR between 1980 and 1990. India is now at a similar stage, with similar GDP growth potential over the next decade.
This could be India’s decade, given the right investments in growth and ease of doing business. Which brings us to the next driver – the government and their reforms.
“To the people of India, whose representatives we are, we make an appeal to join us with faith and confidence in this great adventure. We have to build the noble mansion of free India where all her children may dwell.”Jawaharlal Nehru, Tryst With Destiny, 1947
Since the government moved away from socialism in the 90s to build a culture of innovation, entrepreneurship, and foreign investment – government reform and growth have gone hand in hand.
Key policy reforms over the last decade:
It’s just not good laws. India has 270+ SEZ zones, favourable tax laws, and a robust federal system – the State Governments are just as invested in attracting business as the Central Government.
Today, India reaps the harvests of seeds sown years — or even decades ago.
Nandan Nilekani, one of the pioneers behind Aadhar, was one of the founders of Infosys. The foundations laid by the liberalization movement paved the way for excessive foreign investment. While ruling parties have changed over the last three decades, they’ve all contributed to India’s growth and outlook today.
Have they been effective? Given that India’s position on the FDI index has moved 40 places, from 81 in 2015 to 40 in 2023 — we will let you decide. :)
“All roads lead to UPI.”Kunal Shah, Founder, CRED
Over the last decade, India has undergone a digital transformation of sorts, and crucial to that has been The India Stack.
The India Stack started with the Aadhaar digital ID scheme, which was launched in 2009 and now covers nearly the entire adult population. Atop this “identity layer” sits a “payments layer,” which includes the UPI digital money system, and a “data layer” where citizens can, for example, store official documents virtually.
To say that the country underwent a digital transformation is an understatement:
The India stack has become one of the country’s biggest exports, as well as a key driver to innovation in India.
Sopnendu Mohanty, chief fintech officer at the Monetary Authority of Singapore on UPI: “I can bet nowhere in the world does this exist at this speed, at this price point. A poor immigrant worker can now send money at small values — $10, $20 — instantly . . . This creates a massive impact at the bottom of the pyramid.”
“If I have seen further it is by standing on the shoulders of giants.”
Isaac Newton in a letter to Robert Hooke, 1675
India is no longer just a destination for companies looking to expand their operations for higher returns to low investments. The country is also home to a disproportionate number of high-quality companies, with >15% 3 year revenue growth CAGR and >15% ROIC. And operators are only too happy to share the seeds of their success.
Today, the world is looking at a formidable startup Indian ecosystem.
The country’s startup ecosystem has evolved into an enviable network with multiple epicentres transcending cities and industries.
The last few years have witnessed a mushrooming of global and local giants across segments – be it horizontal SaaS (Freshworks, Zoho), vertical SaaS (Druva, Icertis), fintech (Zerodha, CRED), e-commerce (Meesho, Myntra), agriculture (Agrostar), or even consumer gaming (MPL, Dream11).
Most of the country’s tech leaders — Kunal Shah, Nitish Mittersain, Varun Alagh, Girish Mathrubootham, Sridhar Vembu — have also become active angel investors, participating in early rounds if the idea is disruptive.
India’s startup space isn’t an ecosystem as much as it is a community of operators who learn from each other’s playbooks and a force of founders setting up on their own.
Across Bangalore, Mumbai, Chennai, Delhi, Hyderabad, and Pune, the current environment is frequented by veritable giants — and disruptors standing on their shoulders.
The good folks at Blume Ventures publish The Indus Valley Report every year, documenting and detailing trends they witness from their unique position in the Indian startup ecosystem. This video is a great explainer for folks looking for a macro and micro view into the current climate in the country.
If you want to build out of India, there could never be a better time. You have means, opportunity, capital, and ambitious talent. From space-tech to real estate, AGI to agriculture, B2B SaaS to kirana-tech — the country is your oyster.
“We’re consumers. We are byproducts of a lifestyle obsession.”
Tyler Durden, Fight Club
Most commentators discuss India’s talent and labour force. Nowadays, more commentators discuss the market and the factors that favour it. However, there is a new influence today – The Indian consumer.
With 1.4 billion people and myriad unmet needs, India’s growth is driven mainly by domestic consumption and investments. Real wages are expected to grow at 4.6%, whereas disposable income will continue to grow over 15%.
This, coupled with the mushrooming of India’s middle and upper-middle class gives the average Indian consumer considerable purchasing power.
In The Indus Valley Report, Blume Ventures defines the Indian market into three core categories – India I, India II, and India III.
India I roughly make up the same population as Mexico and constitute India’s urban, elite consumption class. This ~30m population is growing, developing indulgent and aspirational tastes — becoming the primary target for most consumer brands. However, India II and III are catching up as consumers, thanks to rapid internet penetration and access to digital banking protocols.
For the first time in a long time, the Indian consumer can play kingmaker.
To understand India’s consumer market better, we recommend Episode Three of Nikhil Kamath’s WTF podcast. In this episode, he talks to Kishore Biyani, Vidit Aatrey, and Sujeet Kumar about how they built D2C empires in India.
Kae Capital’s Natasha Malpani captures the current market and opportunity in the following breakdown — from Elevation Capital’s indepth reportage on the subject. You can read the original tweet here.
This brings us to the second section — it’s no longer just ‘build in India, built for the world’. The affluent Indian’s purchasing power, coupled with inexpensive internet, global sensibilities, and general ambition, has resulted in the emergence of three other categories.
“It’s not just about Make in India. It also needs to be about research and design in India”
Sridhar Vembu, founder of Zoho
There are four types of companies in India today.
“It has to start somewhere, it has to start sometime. What better place than here, what better time than now?”Guerrila Radio, song by Rage Against The Machine
This section is a compilation of all the resources, help, and connections you might need to build out of India. This is a living document, if you have additions to be made, let us know here.
So you’ve decided to build out of India. We’ve compiled a list of step-by-step guides to the different aspects of setting up a business, from registration and licensing to applying to different government subsidies that you might find helpful in your journey.
However, remember that these are meant to be a starting point, and aren’t prescriptive. To learn more about setting up a business, we recommend that you either check out the Ministry of Corporate Affairs, or seek professional guidance from a chartered accountant or lawyer.
Some additional reading
The most common approach for companies beginning to expand into India is to work with common hiring and payroll platforms. These firms enable you to hire people in other countries by acting as the legal local employer on your behalf. Here’s a list of common payroll providers working out of India.
In 2020, the IRDAI released a circular, making it mandatory for companies to offer their employees medical insurance. Global companies setting up in India have traditionally offered great employee health benefits to their team.
Here’s what a typical employee benefits plan looks like for global companies setting up shop in India.
Coverage for Employee, Spouse, Children, and Parent
Sum insured >INR 10,00,000
Maternity cover >INR 1,25,000
Progressive covers (LGBTQ+ coverage, infertility treatments, autism etc)
Out-patient care coverage
Generous inclusions of primary and preventive healthcare
Term life and personal accident coverage
For a deeper understanding of the state of employee health benefits in India, refer to Plum’s flagship report.
You can rely on employers on record for the most part, but it is best to enlist the help of counsel. Not only will this ensure that you have your bases covered, but it will also help you during rare cases of litigation. We’ve compiled a list of tier-one law firms you can consider working with.
While we’re on the subject of litigation, you should consider getting your firm a business insurance policy to ensure your risks and liabilities are covered.
These organisations represent the interests of trade and commerce in India, and act as an interface between issues and initiatives. We’ve compiled some of the more relevant ones in this guide.
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In April 2000, the Special Economic Zones (SEZs) Policy was announced in India. The objective was to overcome the multiplicity of controls and clearances, an absence of world-class infrastructure, and an unstable fiscal regime. Today, there are seven SEZs in India under the Central Government of India.
In addition, the country’s various State Governments have SEZs in their respective states. Today, 270+ SEZs are operational in the country, and about 64% of the SEZs are located in five states – Tamil Nadu, Telangana, Karnataka, Andhra Pradesh and Maharashtra. Access the complete list here.
India is the second largest destination for venture capital in the Asia-Pacific region. Not only have international firms expanded on their India funds, we’re also witnessing local firms thrive in the ecosystem.
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The Indian startup ecosystem is supported by network effects, and the country is rife with communities of founders, thinkers, builders, and doers — divided by function, united by a common goal to build the best products out of India.
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Every year, India generates 70000 high-quality engineering graduates and another 20000 humanities and b-school graduates. The cream of the crop study in the country’s best colleges. We’ve compiled some of the top colleges you can hire talent from — based on NIRF rankings and cultural parameters.
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The best way to describe India’s startup ecosystem is through this excerpt from The Indus Valley Report, by Blume Ventures
India’s vibrant startup ecosystem, concentrated in the eastern suburbs of Bangalore, the satellite cities of Gurgaon and Noida in National Capital Region (NCR) surrounding Delhi, the districts of Lower Parel and Andheri East — Powai belt in Mumbai, the Southern suburbs of Chennai, and scattered pockets across many other cities such as Pune, Hyderabad, Chandigarh etc., has lacked a name.
We like to use Indus Valley as a catch all moniker for the Indian startup ecosystem. It is a twist on the typical Silicon Wadi / Glen / Fen naming convention, as well as a reference to the Indus Valley Civilisation, one of the vibrant centres of the ancient world, and the ancestral civilisation of the Indian people.
We’ve built our starter guides for you to learn more about each city, their history, and what sets them apart as places to set up your business.
Each Starter Guide covers networking communities, a curated list of office spaces, popular VCs headquartered there, and lifestyle-based activities. Check them out.
A lot of what you’ve read in this piece comprises titbits from all the different things we’ve read in preparation for this piece. It’s only right that we share them with you for your perusal.
And that brings us to a close. We hope this guide has helped you understand India a little better. This is a living, breathing document, and will be updated as and when India’s economic and social outlook evolves. Consider this a V1 and if you have any recommendations, resources, or information you’d like to contribute, please fill this form, and we’ll be happy to add them.
Plum is a modern-day insurtech, providing benefits and insurance for companies that care.Our mission is to accelerate the adoption of health insurance in India by making employee health insurance and benefits accessible, affordable, and usable for employees. We also provide exclusive business insurance plans to help startups mitigate risk, enabling founders to go forth with courageous and ambitious bets.
If you’re a founder who wants to cover your team and business with the best care and benefits, visit our website.
